20-F

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As filed with the Securities and Exchange Commission on April 9, 2004

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-16429

ABB Ltd
(Exact name of registrant as specified in its charter)

Switzerland

(Jurisdiction of incorporation or organization)

Affolternstrasse 44

CH-8050 Zurich

Switzerland

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
American Depositary Shares, each representing one Registered Share	New York Stock Exchange
Registered Shares, par value CHF 2.50	New York Stock Exchange*

*

Listed on the New York Stock Exchange not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock
as of the close of the period covered by the annual report: 2,070,314,947 Registered Shares

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    ý        No    o

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17    o        Item 18    ý

TABLE OF CONTENTS

		Page
Item 1.	Identity of Directors, Senior Management and Advisers	4
Item 2.	Offer Statistics and Expected Timetable	4
Item 3.	Key Information	4
Item 4.	Information on the Company	20
Item 5.	Operating and Financial Review and Prospects	49
Item 6.	Directors, Senior Management and Employees	119
Item 7.	Major Shareholders and Related Party Transactions	132
Item 8.	Financial Information	135
Item 9.	The Offer and Listing	137
Item 10.	Additional Information	142
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	160
Item 12.	Description of Securities Other than Equity Securities	162
Item 13.	Defaults, Dividend Arrearages and Delinquencies	162
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	162
Item 15.	Controls and Procedures	162
Item 16A.	Audit Committee Financial Expert	162
Item 16B.	Code of Ethics	162
Item 16C.	Principal Accountant Fees and Services	162
Item 17.	Financial Statements	163
Item 18.	Financial Statements	163
Item 19.	Exhibits	164

INTRODUCTION

        ABB Ltd is a corporation organized under the laws of Switzerland. In this annual report, "the ABB Group," "ABB," "we," "our" and "us" refer to ABB Ltd and its consolidated subsidiaries (unless the context otherwise requires). We also use these terms to refer to ABB Asea Brown Boveri Ltd and its subsidiaries prior to the establishment of ABB Ltd as the holding company for the entire ABB Group in 1999, as described in this annual report under "Item 4. Information on the Company—Introduction—History of the ABB Group." Our American Depositary Shares (each representing one of our registered shares) are referred to as "ADSs." The registered shares of ABB Ltd are referred to as "shares."

        Our principal corporate offices are located at Affolternstrasse 44, CH-8050 Zurich, Switzerland, telephone number +1-41-43-317-7111.

FINANCIAL AND OTHER INFORMATION

        ABB Ltd has prepared its statutory unconsolidated financial statements in accordance with the Swiss Federal Code of Obligations. The consolidated financial statements of ABB Ltd, including the notes thereto, as of December 31, 2003, 2002 and 2001 and for the years then ended (our "Consolidated Financial Statements") have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").

        In this annual report: (i) "$," "U.S. dollars" and "USD" refer to the lawful currency of the United States of America; (ii) "CHF" and "Swiss francs" refer to the lawful currency of Switzerland; (iii) "€" and "euro" refer to the lawful currency of the participating member states of the European Union (the "EU"); (iv) "SEK" and "Swedish krona" refer to the lawful currency of Sweden; (v) "£," "sterling," "pounds sterling" and "GBP" refer to the lawful currency of the United Kingdom; and (vi) "Norwegian krone" refers to the lawful currency of Norway.

        Except as otherwise stated, all monetary amounts in this annual report are presented in U.S. dollars. Where specifically indicated, amounts in Swiss francs have been translated into U.S. dollars. These translations are provided for convenience only, and they are not representations that the Swiss franc could be converted into U.S. dollars at the rate indicated. These translations have been made using the noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2003, unless otherwise indicated. The noon buying rate for Swiss francs on December 31, 2003 was $1.00 = CHF 1.2380. The noon buying rate for Swiss francs on April 8, 2004 was $1.00 = CHF 1.2829.

        In May 2001, we effected a share split in a four-for-one ratio to reduce the nominal value of our shares from CHF 10 each to CHF 2.50 each. For more information about the share split, see "Item 10. Additional Information—Description of Share Capital and Articles of Incorporation—The Share Split." Unless otherwise noted, all share figures in this annual report reflect the share split.

FORWARD-LOOKING STATEMENTS

        This annual report includes forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes," "estimates," "anticipates," "expects," "intends," "may," "will," or "should" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this annual report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, dispositions, strategies and the countries and industry in which we operate.

1

        These forward-looking statements include, but are not limited to the following:

•

statements in "Item 3. Key Information—Dividends and Dividend Policy" regarding our policy on future dividend payments;



•

statements in "Item 5. Operating and Financial Review and Prospects" and "Item 8. Financial Information—Legal Proceedings" regarding the expected outcome of our Combustion Engineering subsidiary's pre-packaged plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code and the outcome of certain compliance matters under review;



•

statements in "Item 3. Key Information—Risk Factors," "Item 4. Information on the Company" and "Item 5. Operating and Financial Review and Prospects" regarding our management objectives and the timing of intended disposals; and



•

statements in "Item 5. Operating and Financial Review and Prospects" regarding our management objectives, as well as trends in results, prices, volumes, operations, margins and overall market trends.

        By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that the actual results of our operations, financial condition and liquidity, and the development of the countries and the industries in which we operate may differ materially from those described in or suggested by the forward-looking statements contained in this annual report. In addition, even if our results of operations, financial condition and liquidity, and the development of the countries and the industries in which we operate, are consistent with the forward-looking statements contained in this annual report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from our expectations are contained in cautionary statements in this annual report and include, without limitation, the following:

•

We are subject to ongoing litigation and potentially substantial liabilities arising out of asbestos claims from discontinued operations.



•

If we are not able to comply with the covenants contained in our new $1 billion credit facility, our financial position may be adversely affected.



•

Our ability to bid for large contracts depends on our ability to obtain performance guarantees from financial institutions.



•

We have retained performance guarantees related to our divested power generation business.



•

We have retained liability for environmental remediation costs relating to businesses that we sold in 2000, and we could be required to make payments in respect of these retained liabilities in excess of established reserves.



•

Bidding on large, long-term fixed price projects exposes our businesses to risk of loss.



•

We may continue to experience losses under some long-term contracts.



•

We operate in very competitive markets and could be adversely affected if we fail to keep pace with technological changes.



•

Industry consolidation could result in more powerful competitors and fewer customers.

2

•

Our business is affected by the global economic and political climate. A major terrorist event or prolonged military action could adversely affect our business, financial condition and results of operations.



•

We are subject to environmental laws and regulations in the countries in which we operate. We incur costs to comply with such regulations, and our ongoing operations may expose us to environmental liabilities.



•

We may be the subject of product liability claims.



•

Our operations in emerging markets expose us to risks associated with conditions in those markets.



•

Our Oil, Gas and Petrochemicals business may experience losses if the oil and gas industry generally experiences a downturn.



•

Our international operations expose us to the risk of fluctuations in currency exchange rates.



•

We may encounter difficulty in managing our business due to the global nature of our operations.



•

Our reputation and our ability to do business may be impaired by corrupt behavior by any of our employees or agents or those of our subsidiaries.

        We urge you to read the sections of this annual report entitled "Item 3. Key Information—Risk Factors," "Item 4. Information on the Company" and "Item 5. Operating and Financial Review and Prospects" for a more complete discussion of the factors that could affect our future performance and the countries and industries in which we operate. In light of these risks, uncertainties and assumptions, the forward-looking circumstances described in this annual report and the assumptions underlying them may not occur.

        Except as required by law or applicable stock exchange rules or regulations, we undertake no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this annual report.

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

        Not applicable.

Item 2. Offer Statistics and Expected Timetable

        Not applicable.

Item 3. Key Information

SELECTED FINANCIAL DATA

        The following table presents our selected financial and operating information at the dates and for each of the periods indicated. You should read the following information together with the information contained in "Item 5. Operating and Financial Review and Prospects," as well as our Consolidated Financial Statements and the notes thereto, included elsewhere in this annual report.

        Our selected financial data are presented in the following tables in accordance with U.S. GAAP and have been derived from our published consolidated financial statements.

        Our consolidated financial statements as of and for each of the years ended December 31, 2003, 2002 and 2001 were audited by Ernst & Young Ltd., except for the 2002 and 2001 consolidated financial statements of ABB Holdings Inc., a wholly owned subsidiary, the 2003, 2002 and 2001 financial statements of Jorf Lasfar Energy Company, a corporation in which we have a 50% interest, the 2002 and 2001 consolidated financial statements of Swedish Export Credit Corporation, in which we had a 35% interest as of December 31, 2002, and the 2001 financial statements of Scandinavian Reinsurance Company Limited, a wholly owned subsidiary, which were audited by other independent auditors.

        Our consolidated financial statements as of and for each of the years ended December 31, 2000 and 1999, before reclassifications for operations discontinued in 2003, were audited jointly by Ernst & Young Ltd. and KPMG Klynveld Peat Marwick Goerdeler SA. The reclassifications that were applied to reclassify amounts related to operations discontinued in 2003 reflected in the Consolidated Financial Statements as of December 31, 2001, 2000 and 1999 and for each of the years ended December 31, 2000 and 1999 have not been audited.

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INCOME STATEMENT DATA⁽¹⁾:

		Year ended December 31,
		2003		2002		2001		2000		1999
		(audited)		(audited)		(audited)		(unaudited)		(unaudited)
		($ in millions except per share data)
Revenues		18,795		17,466		18,334		18,487		20,001
Cost of sales		(14,080	)	(13,067	)	(13,539	)	(13,503	)	(14,382	)
Gross profit		4,715		4,399		4,795		4,984		5,619
Selling, general and administrative expenses		(3,830	)	(3,954	)	(3,929	)	(4,001	)	(4,656	)
Amortization expense(2)		(40	)	(41	)	(188	)	(185	)	(164	)
Other income (expense), net(3)		(189	)	(58	)	(161	)	265		91
Earnings before interest and taxes		656		346		517		1,063		890
Interest and dividend income		144		189		348		386		511
Interest and other finance expense		(554	)	(315	)	(571	)	(453	)	(631	)
Income from continuing operations before taxes and minority interest		246		220		294		996		770
Provision for taxes		(78	)	(74	)	(87	)	(264	)	(196	)
Minority interest		(82	)	(71	)	(36	)	(40	)	(27	)
Income from continuing operations		86		75		171		692		547
Income (loss) from discontinued operations, net of tax(4)		(853	)	(858	)	(837	)	751		813
Cumulative effect of change in accounting principles (SFAS 133), net of tax(5)		—		—		(63	)	—		—
Net income (loss)		(767	)	(783	)	(729	)	1,443		1,360
Basic earnings (loss) per share(6):
	Income from continuing operations	0.07		0.07		0.15		0.59		0.46
	Net income (loss)	(0.63	)	(0.70	)	(0.64	)	1.22		1.15
Diluted earnings (loss) per share(6):
	Income (loss) from continuing operations	0.07		(0.10	)	0.15		0.58		0.46
	Net income (loss)	(0.63	)	(0.83	)	(0.64	)	1.22		1.15

BALANCE SHEET DATA⁽¹⁾:

	December 31,
	2003	2002	2001		2000		1999
	(audited)	(audited)	(unaudited)		(unaudited)		(unaudited)
	($ in millions)
Cash and equivalents	4,669	2,336	2,311		1,185		1,364
Marketable securities	473	589	1,229		2,340		2,981
Total assets	30,413	29,533	32,305		30,962		30,613
Long-term borrowings	6,290	5,358	4,999		3,760		3,018
Total debt(7)	7,887	7,928	9,700		7,280		6,334
Capital stock and additional paid-in capital	3,067	2,027	2,028		2,082		2,071
Total stockholders' equity	3,026	1,013	1,975	(9)	5,171	(9)	4,271
Net operating assets(8)	9,686	9,826	9,478		10,612		9,863

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CASH FLOW DATA⁽¹⁾:

	Year ended December 31,
	2003		2002		2001		2000		1999
	(audited)		(audited)		(audited)		(audited)		(unaudited)
	($ in millions)
Net cash provided by (used in) operating activities	(161	)	19		1,983		747		371
Net cash provided by (used in) investing activities	754		2,651		(1,218	)	(489	)	(109	)
Net cash provided by (used in) financing activities	1,591		(2,812	)	677		(392	)	(1,187	)

OTHER FINANCIAL AND OPERATING DATA⁽¹⁾:

	Year ended December 31,
	2003	2002	2001	2000		1999
	(audited)	(audited)	(audited)	(unaudited)		(unaudited)
	($ in millions)
Purchases of property, plant and equipment	547	602	761	553	(9)	839
Depreciation and amortization(4)	585	611	787	836	(9)	795
Research and development	613	547	590	657		820
Order-related development(10)	317	248	404	554		770

⁽¹⁾

In June 1999, ABB Ltd issued approximately 295 million registered shares (1,180 million, as adjusted for the share split) to the stockholders of ABB AB, a Swedish publicly listed company, and ABB AG, a Swiss publicly listed company. Preparatory to this transaction, ABB AG declared a special dividend such that, as a result, neither ABB AB nor ABB AG had operations or assets other than their respective 50% ownership interests in ABB Asea Brown Boveri Ltd. In exchange, the stockholders of ABB AB and ABB AG tendered all issued shares of the two companies except for 3% of total issued ABB AB stock. The stockholders of ABB AB who did not tender their shares for ABB Ltd shares received cash of $438 million in return for their shares of ABB AB and the equivalent number of registered shares of ABB Ltd (approximately 20 million) were sold to third parties, resulting in a total of approximately 1,200 million issued shares of ABB Ltd as of June 28, 1999. These transactions resulted in ABB Ltd being the single parent entity for the ABB Group.

⁽²⁾

Includes goodwill amortization of $148 million, $147 million and $131 million in 2001, 2000 and 1999, respectively. In accordance with the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, after January 1, 2002, goodwill is no longer amortized but is charged to operations when specified tests indicate that the goodwill is impaired. For additional information, see Note 2 to the Consolidated Financial Statements.

⁽³⁾

During 2003, 2002, 2001, 2000 and 1999, we incurred restructuring charges and related asset write-downs of $325 million, $270 million, $221 million, $192 million and $141 million, respectively, relating to a number of restructuring initiatives throughout the world. The restructuring costs incurred in 2002, 2001, 2000 and 1999 were accrued in the respective periods pursuant to the requirements of EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The restructuring costs incurred in 2003 were accrued pursuant to the requirements of Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities.

⁽⁴⁾

In 2003 and 2002, we recorded losses of $496 million and $127 million, respectively, relating to our Oil, Gas and Petrochemicals businesses. In 2003, 2002 and 2001, we recorded charges of $145 million, $420 million and $470 million, respectively, related to the retained asbestos liability of our disposed power generation segment. During 2000, we recorded gains on the disposal of our power generation segment, which included our investment in ABB ALSTOM POWER NV and our nuclear business, which were partly offset by a $70 million provision related to our retained asbestos liability, a $300 million provision for estimated environmental remediation costs, $136 million of accumulated foreign currency translation losses and operating losses associated with these businesses. In 1999, we recorded a gain on the formation of a joint venture with ALSTOM S.A., ABB ALSTOM POWER NV, as well as a gain on the disposal of our transportation segment, offset by a $300 million provision related to our retained asbestos liability and contract loss provisions of $560 million. As a result, our Consolidated Financial Statements present the net assets

6

and results of operations of these segments, including charges incurred subsequent to the disposals, as discontinued operations. For additional information, see "Item 5. Operating and Financial Review and Prospects" and Note 18 to the Consolidated Financial Statements.

Prior to 2001, we estimated certain reserves for unpaid claims and expenses in our Insurance business by calculating the present value of funds required to pay losses at future dates. As of 2001, the timing and amount of future claims payments have become more uncertain. Therefore, the discounted value can no longer be reliably estimated. Instead, we now show the expected future claims at full face value, resulting in a net charge of $295 million in income (loss) from discontinued operations, net of tax in the 2001 Consolidated Income Statement. For additional information, see "Item 5. Operating and Financial Review and Prospects" and Note 3 to the Consolidated Financial Statements.

⁽⁵⁾

We accounted for the adoption of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as a change in accounting principle. Based on our outstanding derivatives at January 1, 2001, we recognized the cumulative effect of the accounting change as a loss in the Consolidated Income Statement. For additional information, see Note 2 to the Consolidated Financial Statements.

⁽⁶⁾

The number of shares and earnings per share data in the Consolidated Financial Statements have been presented as if ABB Ltd shares had been issued for all periods presented and as if the four-for-one split of ABB Ltd shares in May 2001 had occurred as of the earliest period presented.

Basic earnings (loss) per share is calculated by dividing income (loss) by the weighted average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing income (loss) by the weighted average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised and that any proceeds from such exercises were used to acquire shares of our stock at the average market price during the year or the period the securities were outstanding, if shorter. Potentially dilutive securities comprise: outstanding written call options, if dilutive; the securities issued under our management incentive plan, to the extent the average market price of our stock exceeded the exercise prices of such instruments; shares issuable in relation to outstanding convertible bonds, if dilutive; and outstanding written put options, for which net share settlement at average market price of our stock was assumed, if dilutive (see Notes 2, 22 and 24 to the Consolidated Financial Statements).

⁽⁷⁾

Total debt, also referred to as total borrowings, is equal to the sum of short-term borrowings and long-term borrowings.

⁽⁸⁾

Net operating assets is calculated based upon total assets (excluding cash and equivalents, marketable securities, current loans receivable, taxes and deferred charges) less total liabilities (excluding borrowings, taxes, provisions and pension-related liabilities).

⁽⁹⁾

Audited.

⁽¹⁰⁾

Order-related development activities are customer- and project-specific development efforts that we undertake to develop or adapt equipment and systems to the unique needs of our customers in connection with specific orders or projects. Order-related development amounts are initially recorded in inventories as part of the work in progress of a contract and then are reflected in cost of sales at the time revenue is recognized in accordance with our accounting policies.

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DIVIDENDS AND DIVIDEND POLICY

        Payment of dividends is subject to general business conditions, the ABB Group's current and expected financial condition and performance and other relevant factors including growth opportunities.

        Dividends may be paid only if ABB Ltd has sufficient distributable profits from previous fiscal years or sufficient free reserves to allow the distribution of a dividend. In addition, at least 5% of ABB Ltd's annual net profits must be retained and booked as general legal reserves, unless these reserves already amount to 20% of ABB Ltd's nominal share capital. As a holding company, ABB Ltd's main sources of income are dividend, interest and debt payments from its subsidiaries. At December 31, 2003, of the CHF 8,942 million of stockholders' equity recorded in the unconsolidated statutory financial statements of ABB Ltd prepared in accordance with Swiss law, CHF 5,176 million was share capital, CHF 2,192 million was restricted, CHF 1,533 million was unrestricted and CHF 41 million was available for distribution.

        The declaration of any dividend proposed by the board of directors of ABB Ltd requires approval at a general meeting of shareholders. In addition, the statutory auditors must confirm that the dividend proposal of the board of directors conforms to statutory law and the articles of incorporation of ABB Ltd. In practice, the shareholders' meeting usually approves dividends as proposed by the board of directors, if the board of directors' proposal is confirmed by the statutory auditors.

        Dividends are usually due and payable no earlier than three trading days after the shareholders' resolution. Dividends for which no payment has been requested within five years after the due date accrue to ABB Ltd and are allocated to its free reserves. For information about the deduction of withholding taxes from dividend payments, see "Item 10. Additional Information—Taxation."

        We have established a dividend access facility for shareholders who are resident in Sweden under which these shareholders may register with Värdepapperscentralen VPC AB (Sweden) ("VPC"), as holder of up to 600,004,716 shares, and receive dividends in Swedish kronor equivalent to the dividend paid in Swiss francs without deduction of Swiss withholding tax. For further information, see "Item 10. Additional Information—Taxation."

        Because ABB Ltd pays cash dividends, if any, in Swiss francs (subject to the exception for certain shareholders in Sweden described above), exchange rate fluctuations will affect the U.S. dollar amounts received by holders of ADSs upon conversion of those cash dividends by Citibank, N.A., the depositary, in accordance with the Amended and Restated Deposit Agreement dated May 7, 2001.

        The following table sets forth in Swiss francs and in U.S. dollars (translated at the noon buying rate on December 31, 2003) the dividend paid per share with respect to the years ended December 31, 2002, 2001, 2000 and 1999. The board of directors has proposed that no dividend be paid with respect to the year ended December 31, 2003.

	Dividend per share
Year ended December 31,	(CHF)	($)
2002	—	—
2001	—	—
2000	0.75	0.61
1999	0.75	0.61

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RISK FACTORS

You should carefully consider all of the information set forth in this annual report and the following description of risks and uncertainties that we currently believe may exist. Our business, financial condition or results of operations could be adversely affected by any of these risks. Additional risks of which we are unaware or that we currently deem immaterial may also impair our business operations. This annual report also contains forward-looking statements that involve risks and uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those described below and elsewhere in this annual report. See "Forward-Looking Statements."

We are subject to ongoing litigation and potentially substantial liabilities arising out of asbestos claims from discontinued operations.

        When we sold our 50% interest in ALSTOM POWER NV, formerly ABB ALSTOM POWER NV ("ALSTOM POWER"), to ALSTOM S.A. ("ALSTOM") in May 2000, we retained ownership of Combustion Engineering Inc. ("Combustion Engineering"), a subsidiary that had conducted part of our discontinued power generation business and that now owns commercial real estate that it leases to third parties. Together with other third parties, Combustion Engineering is a co-defendant in numerous lawsuits in the United States in which the plaintiffs claim damages for personal injury arising from exposure to asbestos in equipment or materials that Combustion Engineering allegedly supplied or was responsible for, primarily during the early 1970s and before. Other ABB Group entities have sometimes been named as defendants in asbestos claims. These entities include ABB Lummus Global Inc. ("Lummus") (which is part of our Oil, Gas and Petrochemicals business and was formerly a subsidiary of Combustion Engineering) and Basic Incorporated ("Basic") (which is currently a subsidiary of Asea Brown Boveri Inc. and was formerly a subsidiary of Combustion Engineering).

The creation of the CE Settlement Trust and the pursuit of a pre-packaged bankruptcy plan.

        In October 2002, we and Combustion Engineering determined that it was likely that the expected asbestos-related costs of Combustion Engineering would exceed the value of its assets ($812 million as of September 30, 2002 and $828 million as of December 31, 2002) if its historical settlement patterns continued into the future. We and Combustion Engineering determined to resolve the asbestos liability of Combustion Engineering and its affiliates by reorganizing Combustion Engineering under Chapter 11, the principal business reorganization chapter of the U.S. Bankruptcy Code. We and Combustion Engineering determined to structure the Chapter 11 reorganization as a "pre-packaged plan," in which acceptances of the plan would be solicited prior to the filing of the Chapter 11 case, thus reducing the duration and expense of the bankruptcy proceedings.

        On November 22, 2002, Combustion Engineering and the asbestos claimants' representatives entered into an agreement for settling open asbestos-related personal injury claims that had been lodged against Combustion Engineering prior to November 15, 2002 (the "Master Settlement Agreement"). Combustion Engineering also agreed, pursuant to the Master Settlement Agreement, to form and fund a CE Settlement Trust (the "CE Settlement Trust") to fund and administer the payment of asbestos-related personal injury claims settled under the Master Settlement Agreement. See "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Asbestos Liability."

        On January 17, 2003, we announced that we and Combustion Engineering had reached an agreement on a proposed pre-packaged plan with certain representatives of asbestos claimants with existing asbestos-related personal injury claims against Combustion Engineering (encompassing claimants who had lodged claims prior to November 15, 2002 and claimants who

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had lodged claims after that date and were not eligible to participate in the Master Settlement Agreement), and with the proposed representative of persons who may be entitled to bring asbestos-related personal injury claims in the future. The pre-packaged plan provides for the creation of a trust, the Asbestos PI Trust, which is separate and distinct from the CE Settlement Trust, and addresses "Asbestos PI Trust Claims," which consist of present and future asbestos-related personal injury claims (including the claims previously settled pursuant to the Master Settlement Agreement only to the extent of any unpaid portions thereof) that arise directly or indirectly from any act, omission, products or operations of Combustion Engineering, Lummus or Basic. If the pre-packaged plan ultimately becomes effective, a channelling injunction would be issued under the U.S. Bankruptcy Code pursuant to which the Asbestos PI Trust Claims against ABB Ltd and its affiliates (including Combustion Engineering, Lummus and Basic), would be channelled to the Asbestos PI Trust. This would mean that the sole recourse of a holder of an Asbestos PI Trust Claim would be to the Asbestos PI Trust and such holder would be barred from asserting such a claim against ABB Ltd and its affiliates (including Combustion Engineering, Lummus and Basic). A preliminary injunction is currently in force.

The bankruptcy litigation and appeal process.

        The pre-packaged plan, including the channelling order, will become effective when the U.S. Bankruptcy Court recommends the issuance of a confirmation order (which occurred on July 10, 2003), the confirmation order is entered by the U.S. District Court (which occurred on August 8, 2003) and has become a final order that is not subject to appeal, and the other conditions to the effectiveness of the pre-packaged plan have been satisfied.

        On June 23, 2003, the U.S. Bankruptcy Court issued an Order Approving the Disclosure Statement but Recommending Withholding of Confirmation of the Plan of Reorganization for Combustion Engineering for Ten Days (the "Ruling") and related findings of fact. See "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Asbestos Liability." On July 10, 2003, the U.S. Bankruptcy Court issued a Supplemental and Amendatory Order Making Additional Findings and Recommending Confirmation of Plan of Reorganization (the "Supplemental Ruling"). The Supplemental Ruling recommended to the U.S. District Court, among other things, that the pre-packaged plan be confirmed.

        Following the issuance of the Supplemental Ruling, interested parties had a period during which they could appeal the Ruling and the Supplemental Ruling. This appeal period expired on July 24, 2003. A number of interested parties, including a small number of asbestos claimants and certain insurance companies which historically have provided insurance coverage to Combustion Engineering, Basic and Lummus, filed appeals based on various objections to the Plan, as described in "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Asbestos Liability."

        The U.S. District Court held a hearing on July 31, 2003 with respect to the appeals and entered its confirmation order on August 8, 2003. The U.S. Federal Third Circuit Court of Appeals granted a motion for expedition of appeals and ordered that all briefs were to be filed by October 7, 2003. The Circuit Court has set June 3, 2004 as the date for the hearing. We cannot be certain of the duration or outcome of the appeal process. Regardless of whether or not the pre-packaged plan becomes effective, the Master Settlement Agreement, which settles the amount of and provides for the partial payment on approximately 110,000 asbestos claims, remains effective. See "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Asbestos Liability" and Note 18 to our Consolidated Financial Statements.

Ongoing exposure.

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        Based on our expectation that the pre-packaged plan ultimately will become effective, we have recorded a provision of $813 million as of December 31, 2003, reflected in our Consolidated Balance Sheet, for resolution of the asbestos-related personal injury claims against Combustion Engineering, Lummus and Basic. Nonetheless, we cannot be certain of the duration of the asbestos-related litigation process, its outcome or its eventual cost to us. In particular, ongoing asbestos-related litigation resulting from a prolonged appeals process may hinder our ability to raise funds through capital markets transactions or otherwise, thereby limiting our ability to reduce our indebtedness. If the confirmation of the pre-packaged plan is later overturned, our ultimate liability for the resolution of asbestos-related personal injury claims and our reserves related thereto might change in a manner that would be uncertain and could have a material adverse impact on our business, consolidated financial condition, results of operations and cash flows.

        For further information on the asbestos-related personal injury litigation, see "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Asbestos Liability."

If we are not able to comply with the covenants contained in our new $1 billion credit facility, our financial position may be adversely affected.

        We entered into a three-year $1 billion credit facility on November 17, 2003. The new credit facility became available in December 2003. It contains certain financial covenants in respect of minimum interest coverage, maximum net leverage and a minimum level of consolidated net worth, as well as specific negative pledges. If we are unable to comply with the covenants in the new credit facility, we may be required to renegotiate the facility with our lenders or to replace it in order not to default under it. We can offer no assurance that we would be able to renegotiate or replace the facility on terms that are acceptable to us, if at all. At December 31, 2003 and March 31, 2004, nothing was drawn under the new facility and we currently do not intend to draw on it. See "Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Credit Facilities."

Our ability to bid for large contracts depends on our ability to obtain performance guarantees from financial institutions.

        In the normal course of our business and in accordance with industry practice, we provide performance guarantees on large projects, including long-term operation and maintenance contracts, which guarantee our own performance. These guarantees may include guarantees that a project will be completed or that a project or particular equipment will achieve defined performance criteria. If we fail to attain the defined criteria, we must make payments in cash or in kind. Performance guarantees frequently are requested in relation to bids for large projects, both in our core power and automation businesses and in our Oil, Gas and Petrochemicals business.

        Some customers will require that performance guarantees be issued by a financial institution in the form of a letter of credit, surety bond or other financial guarantee. If we cannot obtain such a guarantee from a financial institution on reasonable terms, we could be prevented from bidding on or obtaining the contract or our costs would be higher, which would reduce the profitability of the contract. Financial institutions will consider our credit ratings and financial position in the guarantee approval process. Our current credit rating and financial position do not prevent us from obtaining such guarantees from financial institutions, but they can make the process more difficult or expensive. Although our ability to obtain such guarantees has significantly improved in a number of countries in recent months, if we find that we cannot obtain sufficient guarantees from financial institutions in the future, there could be a material impact on our business, financial condition, results of operations or liquidity.

We have retained performance guarantees related to our divested power generation business.

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        We have retained performance guarantees related to the power generation business that we contributed to the former ABB ALSTOM POWER joint venture. The guarantees primarily consist of performance guarantees, advance payment guarantees, product warranty guarantees and other miscellaneous guarantees under certain contracts such as indemnification for personal injuries and property damages, taxes and compliance with labor laws, environmental laws and patents. The guarantees have maturity dates ranging from one to ten years and in some cases have no definite expiry. ALSTOM and its subsidiaries have primary responsibility for performing the obligations that are the subject of the guarantees. In connection with the sale to ALSTOM of our interest in the joint venture in May 2000, ALSTOM, (the parent company), and ALSTOM POWER (the former joint venture entity) have undertaken jointly and severally to fully indemnify us and hold us harmless against any claims arising under these guarantees. Due to the nature of product warranty guarantees and certain other guarantees, we are unable to develop an estimate of the maximum potential amount of future payments for these guarantees. Our best estimate of the total maximum potential exposure under all quantifiable guarantees we issued on behalf of our former power generation business was approximately $1.2 billion as of December 31, 2003. This maximum potential exposure, as required by Financial Accounting Standards Board Interpretation No. 45 ("FIN 45"), is based on the original guarantee or contract amount and does not reflect any discounting of our assessment of actual exposure under the guarantees.

        As of December 31, 2003, no losses have been recognized in connection with the guarantees relating to the divested power generation business. We have not concluded that a loss is probable under these guarantees and, therefore, we have not recorded a provision as of December 31, 2003. However, if we are required to fund payments under these guarantees following a failure of the divested power generation business to perform its obligations, and if ALSTOM is unable to fulfill its undertaking to indemnify us, we could incur material losses. See "Item 5. Operating and Financial Review and Prospects—Contractual Obligations and Commercial Commitments—Commercial Commitments—Commitments Relating to Disposed Businesses."

We have retained liability for environmental remediation costs relating to businesses that we sold in 2000, and we could be required to make payments in respect of these retained liabilities in excess of established reserves.

        We retained liability for environmental remediation costs at two sites in the United States that were operated by our nuclear technology business, which we sold in April 2000 to British Nuclear Fuels plc ("BNFL"). We have retained all environmental liabilities associated with our Combustion Engineering subsidiary's Windsor, Connecticut facility and a portion of the liabilities associated with our ABB C-E Nuclear Power, Inc. subsidiary's Hematite, Missouri facility. The primary environmental liabilities associated with these sites relate to the costs of remediating radiological and chemical contamination upon decommissioning the facilities. Based on information that BNFL has made publicly available, we believe remediation may take until 2013 at the Hematite site and until 2008 at the Windsor site. At the Windsor site, we believe that a significant portion of such remediation costs will be the responsibility of the U.S. government pursuant to federal law, although the exact amount of such responsibility cannot reasonably be estimated. In connection with the sale of the nuclear business in April 2000, we established a reserve of $300 million in respect of estimated remediation costs related to these facilities. Expenditures charged to the remediation reserve were $6 million, $12 million and $6 million during 2003, 2002 and 2001, respectively. It is possible that we could be required to make expenditures in excess of the reserve, in a range of amounts that cannot reasonably be estimated. See "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Environmental."

Bidding on large, long-term fixed price projects exposes our businesses to risk of loss.

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        Approximately 8% of the total U.S. dollar amount of orders booked in 2003 were "large orders," which we define as orders from third parties involving at least $15 million worth of products or systems. Portions of our business involve orders related to long-term projects that can take many months or even years to complete. Additionally, such projects are typically performed on a fixed price or turnkey basis and are awarded on a competitive bidding basis. We may expend significant resources, both in management time as well as money, on bidding for projects that we are not awarded.

        Risks are inherent in fixed-priced contracts because of the possibility of underbidding and the fact that we assume substantially all of the risks associated with completing the project and the post-completion warranty obligations. We also assume the project's technical risk, meaning that we must tailor our products and systems to satisfy the technical requirements of a project even though, at the time we are awarded the project, we may not have previously produced such a product or system. The revenue, cost and gross profit realized on such contracts can vary, sometimes substantially, from our original projections because of changes in conditions, including but not limited to:

•

unanticipated technical problems with the equipment being supplied or developed by us which may require that we spend our own money to remedy the problem;



•

changes in the cost of components, materials or labor;



•

difficulties in obtaining required governmental permits or approvals;



•

project modifications creating unanticipated costs;



•

delays caused by local weather conditions; and



•

suppliers' or subcontractors' failure to perform.

        These risks are exacerbated if the duration of the project is long-term because there is an increased risk that the circumstances upon which we originally bid and developed a price will change in a manner that increases our costs. In addition, we sometimes bear the risk of delays caused by unexpected conditions or events. Our long-term, fixed-price projects often make us subject to penalties if we cannot complete portions of the project in accordance with agreed-upon time limits. Therefore, losses can result from performing large, long-term projects on a fixed-price or turnkey basis. For example, in 2003 the operating income of our Oil, Gas and Petrochemicals business was adversely affected by cost overruns amounting to $443 million, primarily relating to four large, long-term, fixed-price projects in the downstream business which had been contracted prior to 2002.

        In connection with large, long-term projects, we routinely undertake substantial customer- and project-specific development efforts. In 2003 and 2002, we incurred order-related development expenditures of approximately $317 million and $248 million, respectively. Order-related development amounts are initially recorded in inventories as part of the work in progress of a contract and then are reflected in cost of sales at the time revenue is recognized in accordance with our accounting policies. To the extent that revenues on these projects cannot be recognized, we would not recover the order-related development expenditures. Additionally, to the extent that order-related development expenditures in a specific project exceed expectations, the profit margin on that project will be adversely affected.

We may continue to experience losses under some long-term contracts.

        In several of our businesses, including the downstream business of our Oil, Gas and Petrochemicals division, the remaining portions of our Building Systems business and certain businesses within our Power Technologies and Automation Technologies divisions, we continue to

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be party to long-term, fixed price contracts. Some of these contracts have resulted in losses due to, among other things, our inability to make proper estimates during the tendering process and weaknesses in project execution that have caused cost overruns. In 2002, the Oil, Gas and Petrochemicals business reported losses from cost overruns amounting to approximately $224 million. To address the weaknesses that we believed contributed to these losses, in 2002 we adopted a selective bidding approach aimed at reducing project risks and securing better margins. However, our new approach may not be successful and, in any event, we have in 2003 and may continue in the future to experience losses on the contracts we entered into prior to adopting our new approach until they expire or are terminated. For example, in 2003 the operating income of our Oil, Gas and Petrochemicals business was adversely affected by cost overruns amounting to $443 million, primarily relating to four large, long-term, fixed-price projects in the downstream business which had been contracted prior to 2002.

We operate in very competitive markets and could be adversely affected if we fail to keep pace with technological changes.

        We operate in very competitive environments in several specific respects, including product performance, developing integrated systems and applications that address the business challenges faced by our customers, pricing, new product introduction time and customer service. The relative importance of these factors differs across the geographic markets and product areas that we serve. The markets for our products and services are characterized by evolving industry standards (particularly for our automation technology products and systems), rapidly changing technology (in both our power and automation businesses) and increased competition as a result of deregulation (particularly for our power technology products and systems). For example, for a number of years power transmission and distribution providers throughout the world have been undergoing substantial deregulation and privatization. This has increased their need for timely product and service innovations that increase efficiency and allow them to compete in a deregulated environment. Additionally, the continual development of advanced technologies for new products and product enhancements is an important way in which we maintain acceptable pricing levels. If we fail to keep pace with technological changes in the industrial sectors that we serve, we may experience price erosion and lower margins.

        The principal competitors for our automation technology products and services include Emerson Electric Co., Honeywell International, Inc., Invensys plc, Schneider Electric S.A. and Siemens AG. We primarily compete with Areva S.A. (which acquired ALSTOM's transmission and distribution division in January 2004), Schneider Electric SA and Siemens AG in sales of our power technology products and systems to our utilities customers. The principal competitors with our Oil, Gas and Petrochemicals business include Aker Kvaerner ASA, Bechtel Group, Inc., Cooper Cameron Corporation, FMC Technologies, Inc., Fluor Corporation, Halliburton Company and Technip-Coflexip S.A. All of our competitors are sophisticated companies with significant resources that may develop products and services that are superior to our products and services or may adapt more quickly than we do to new technologies, industry changes or evolving customer requirements. Our failure to anticipate or respond quickly to technological developments or customer requirements could adversely affect our business, results of operations, financial condition and liquidity.

Industry consolidation could result in more powerful competitors and fewer customers.

        Competitors of all of our business divisions are consolidating. In particular, the automation industry is undergoing consolidation that is reducing the number but increasing the size of companies that compete with us. As our competitors consolidate, they likely will increase their market share, gain economies of scale that enhance their ability to compete with us and/or acquire additional products and technologies that could displace our product offerings.

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        Our customer base also is undergoing consolidation. Consolidation among our customers' industries (such as the marine and cruise industry, the automotive, aluminum, steel, pulp and paper, pharmaceutical industries and the oil and gas industry) could affect our customers and their relationships with us. If one of our competitors' customers acquires any of our customers, we may lose its business. Additionally, as our customers become larger and more concentrated, they could exert pricing pressure on all suppliers, including ABB. For example, in an industry such as power transmission, which historically has consisted of large and concentrated customers such as utilities, price competition can be a factor in determining which products and services will be selected by a customer.

Our business is affected by the global economic and political climate. A major terrorist event or prolonged military action could adversely affect our business, financial condition and results of operations.

        Our business has been adversely affected by the global economic downturn, particularly by depressed economic conditions in Europe and the United States. The business environment is influenced by numerous political uncertainties, which will continue to affect the global economy and the international capital markets. The threat of a major terrorist attack and the fear of prolonged military action have exacerbated volatility in the financial markets and caused consumer, corporate and financial confidence to weaken. As a result, many companies have experienced difficulties in achieving their revenue goals and have cancelled or delayed investments, expansions and recruitment.

        In periods of slow growth or decline, our customers are more likely to decrease expenditures on the types of products and systems we supply and we are more likely to experience decreased revenues as a result. Although we expect continued growth in Asia, investments by our customers in Europe and the Americas may continue to be weak. Our Power Technologies division is affected mainly by the level of investments by utilities, and our Automation Technologies division is affected by conditions in a broad range of industries, including the automotive, pharmaceutical, pulp and paper, metals and minerals and manufacturing and consumer industries. Our Oil, Gas and Petrochemicals business is affected by conditions in the oil, gas and petrochemicals industry. If the current global economic and political climate fails to improve, this could have a material adverse effect on our business, financial condition, results of operations and liquidity.

We are subject to environmental laws and regulations in the countries in which we operate. We incur costs to comply with such regulations, and our ongoing operations may expose us to environmental liabilities.

        Our operations are subject to U.S., European and other laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Our manufacturing facilities use and produce paint residues, solvents, metals, oils and related residues. We use petroleum-based insulation in transformers, PVC resin to manufacture PVC cable and chloroparafine as a flame retardant. We use inorganic lead as a counterweight in robots that we produce. These are considered to be hazardous substances in many jurisdictions in which we operate. We may be subject to liabilities for environmental contamination if we do not comply with applicable laws regulating such hazardous substances, and such liabilities can be substantial. All of our manufacturing operations are subject to ongoing compliance costs in respect of environmental matters and the associated capital expenditure requirements.

        In addition, we may be subject to significant fines and penalties if we do not comply with environmental laws and regulations including those referred to above. Some environmental laws provide for joint and several strict liability for remediation of releases of hazardous substances, which could result in our liability for environmental damage without regard to our negligence or fault. Such laws and regulations could expose us to liability arising out of the conduct of operations

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or conditions caused by others, or for our acts which were in compliance with all applicable laws at the time the acts were performed. Additionally, we may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances. Changes in the environmental laws and regulations, or claims for damages to persons, property, natural resources or the environment, could result in substantial costs and liabilities to us.

We may be the subject of product liability claims.

        A malfunction in or the inadequate design of products, systems and services that we design and manufacture could result in product liability claims. Additionally, we may be subject to product liability claims for the improper installation of products and systems designed and manufactured by others.

        Product liability claims against us typically involve claims of personal injury or property damage. If the claimant runs a commercial business, claims are often made also for financial losses arising from interruption of operations consequential to property damage. Because of our broad offering of products, these claims arise in different contexts, including the following:

•

If our power technology products and systems are defective, there is a substantial risk of fires, explosions and power surges and significant damage to electricity generating, transmission and distribution facilities.



•

If our automation technology products and systems are defective, our customers could suffer significant damage to facilities that rely on these products and systems to properly monitor and control their manufacturing processes.



•

Our Oil, Gas and Petrochemicals business makes and installs equipment and systems used in oil and gas exploration, production and refining. These products handle petroleum-based substances which can be highly combustible and which can result in significant fires or explosions if we improperly design, manufacture or install equipment.

        If a very large product liability claim were sustained, our insurance protection might not be adequate or sufficient to cover such a claim in terms of paying any awards or settlements, and/or paying for our defense costs. If a litigant were successful against us, a lack or insufficiency of insurance coverage could result in an adverse effect on our business, financial condition, results of operations and liquidity. Additionally, a well-publicized actual or perceived problem could adversely affect our market reputation which could result in a decline in demand for our products.

Our operations in emerging markets expose us to risks associated with conditions in those markets.

        An increasing amount of our operations are conducted in the emerging markets of Latin America, Asia, the Middle East and Africa. In 2003, approximately 30% of our consolidated revenues were generated from these emerging markets. Operations in emerging markets present risks that are not encountered in countries with well-established economic and political systems, including:

•

economic instability, which could make it difficult for us to anticipate future business conditions in these markets, cause delays in the placement of orders for projects that we have been awarded and subject us to volatile markets;



•

political or social instability, which makes our customers less willing to make investments in such regions and complicates our dealings with governments regarding permits or other regulatory matters, local businesses and workforces;

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•

boycotts and embargoes that may be imposed by the international community on countries in which we operate, which could adversely affect the ability of our operations in those countries to obtain the materials necessary to fulfill contracts and our ability to pursue business or establish operations in those countries;



•

significant fluctuations in interest rates and currency exchange rates;



•

the imposition of unexpected taxes or other payments on our revenues in these markets; and



•

the introduction of exchange controls and other restrictions by foreign governments.

        In addition, the legal and regulatory systems of the emerging markets identified above are less developed and less well-enforced than in industrialized countries. Therefore, our ability to protect our contractual and other legal rights in those regions could be limited. We cannot offer any assurance that our exposure to conditions in emerging markets will not adversely affect our business, financial condition, results of operations and liquidity.

Our Oil, Gas and Petrochemicals business may experience losses if the oil and gas industry generally experiences a downturn.

        Our Oil, Gas and Petrochemicals business, which we intend to divest, depends on the condition of the oil and gas industry and particularly on capital expenditure budgets of the companies engaged in the exploration, development and production of oil and gas. Our upstream oil and gas activities are substantially dependent on the condition of the offshore exploration and development market. The prices of oil and gas and their uncertainty in the future, along with forecasted growth in world oil and gas demand, will strongly influence the extent of offshore exploration and development activities. Offshore oil and gas field capital expenditures also are influenced by the sale and expiration dates of offshore leases, the discovery rate of new oil and gas reserves in offshore areas, local and international political and economic conditions, environmental regulation, coordination by the Organization of Petroleum Exporting Countries, the ability of oil and gas companies to access or generate capital and the cost of such capital. Similarly, our businesses that provide products, systems and services to the downstream refining and petrochemical industry are affected by capital expenditure budgets of our customers, which are, in turn, affected by refinery margins and prices for petrochemical products such as ethylene and polypropylene. In 2003, the Oil, Gas and Petrochemicals business generated revenues of $3,374 million. These revenues are contained in the results of discontinued operations, reflecting our intention to sell this business. An adverse effect on the financial results of this division could have a material adverse effect on our consolidated results of operations.

Our international operations expose us to the risk of fluctuations in currency exchange rates.

        Currency Translation Risk.    The results of operations and financial position of most of our non-U.S. subsidiaries are reported in the currencies of countries in which those subsidiaries reside. That financial information is then translated into U.S. dollars at the applicable exchange rates for inclusion in our Consolidated Financial Statements. In 2003, approximately 78% of our consolidated revenues were generated in local currencies and translated into U.S. dollars. Of that amount, the following percentages were reported in the following local currencies:

•

Euro, approximately 32%;



•

Swedish krona, approximately 9%;



•

Swiss franc, approximately 5%;



•

Norwegian krone, approximately 6%; and

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•

Pound sterling, approximately 3%.

        The exchange rates between these currencies and the U.S. dollar fluctuate substantially, which has a significant translation effect on our reported consolidated results of operations and financial position. In 2003 as in 2002, the U.S. dollar continued to depreciate against most of the currencies in which our subsidiaries reported results of operations, which represented a reversal of the appreciation of the U.S. dollar against these currencies in 2001. In particular, in 2003 the U.S. dollar weakened by approximately 20% (2002: 6%) against the euro, 16% (2002: 8%) against the Swiss franc, 14% (2002: 13%) against the Norwegian krone and 20% (2002: 7%) against the Swedish krona. This resulted in an increase of reported revenues and earnings before interest and taxes when consolidated and translated in U.S. dollars of 12% and 8%, respectively, when based on average annual exchange rates of 2003 compared to average annual exchange rates of 2002. The resulting increase of reported revenues and earnings before interest and taxes when consolidated and translated into U.S. dollars was 3% and 4%, respectively, when based on average annual exchange rates of 2002 compared to average annual exchange rates of 2001.

        Currency Transaction Risk.    Currency risk exposure also affects our operations when our sales are denominated in currencies that are different from those in which our manufacturing costs are incurred. In this case, if after the time that the parties agree on a price, the value of the currency in which the purchase price is to be paid weakens relative to the currency in which we incur manufacturing costs, there would be a negative impact on the profit margin for any such transaction. This transaction risk may exist regardless of whether or not there is also a translation risk as described above.

        Currency exchange rate fluctuations in those currencies in which we incur our principal manufacturing expenses (the euro, Swedish krona and Swiss franc) may distort competition between us and our competitors whose costs are incurred in other currencies. If our principal currencies appreciate in value against such other currencies, our competitiveness may be weakened. For further information on our currency translation and transaction risk, see "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Currency Fluctuations and Foreign Exchange Risk."

We may encounter difficulty in managing our business due to the global nature of our operations.

        We operate in approximately 100 countries around the world and employ approximately 116,000 people. As of December 31, 2003, approximately 61% of our employees were located in Europe, approximately 16% in the Americas, approximately 13% in Asia and approximately 10% in the Middle East and Africa. In order to manage our day-to-day operations, we must overcome cultural and language barriers and assimilate different business practices. In addition, we are required to create compensation programs, employment policies and other administrative programs that comply with the laws of multiple countries. We also must communicate and monitor group-wide standards and directives across our global network. Our failure to successfully manage our geographically diverse operations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with group-wide standards and procedures.

Our reputation and our ability to do business may be impaired by corrupt behavior by any of our employees or agents or those of our subsidiaries.

        While we and our subsidiaries are committed to conducting business in a legal and ethical manner, there is a risk that our employees or agents may take actions that violate either the U.S. Foreign Corrupt Practices Act or legislation promulgated pursuant to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions or other applicable anti-corruption regulations. These actions could result in monetary penalties against us

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or our subsidiaries and could damage our reputation and, therefore, our ability to do business. In addition to the risks that arise in countries that have experienced governmental corruption, there is also a risk that we will not be able to ensure that our internal control policies and procedures will protect us from fraud or other criminal acts committed by our employees.

        In 2000, our internal audit group discovered during a regular compliance follow-up that several employees in the London region of our Manufacturing and Consumer Industries division (the business of which is now part of our Automation Technologies division) had intentionally concealed losses in 1999 and part of 2000 arising from contracts for which revenues were insufficient to cover costs. We believe that these activities were isolated in the London region of this division and did not extend to other operations. As a result of our investigation, we terminated the individuals involved and replaced the local management in the London region. If we had not discovered these activities, our net income for 1999 and 2000 would have been overstated by $30 million and $10 million, respectively. In 2001, we identified and recorded additional costs of approximately $25 million relating to these activities.

        During 2002 and 2003, we undertook an investigation of potentially improper business conduct within our Oil, Gas and Petrochemical division. In such internal investigations, we uncovered a limited number of improper payments by some of our employees and agents in the upstream business in Africa, Central Asia, and South America, which we voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission. The payments, which violated our internal policies on business ethics, were made in order to obtain from local officials confidential information and commercial advantages, including with respect to contracts on which we were bidding. We have hired outside counsel and auditors (other than our auditors) to assist us in a compliance review to determine whether other instances of improper payments exist. The compliance review is being conducted jointly with the purchaser of the upstream part of the Oil, Gas and Petrochemicals business and with the purchaser's outside counsel and auditors, and satisfactory completion and disposition of the matters under review is a condition to the completion of the sale of this portion of the business. For more information, see "Item 5. Operating and Financial Review and Prospects—Acquisitions, Investments and Divestitures—Divestitures—Pending Divestitures" and "Item 8. Financial Information—Legal Proceedings."

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Item 4. Information on the Company

INTRODUCTION

        We are a global provider of power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. We serve electric, gas and water utilities, as well as industrial and commercial customers, with a broad range of products, systems and services for power transmission, distribution and power plant automation. We also deliver automation systems for measurement, control, motion, protection and plant optimization across a full range of industries. We apply our expertise to develop creative ways of integrating our products and systems with our customers' business processes to enhance their productivity and efficiency.

History of the ABB Group

        The ABB Group was formed in 1988 through a merger between Asea AB and BBC Brown Boveri AG. Initially founded in 1883, Asea AB was a major participant in the introduction of electricity into Swedish homes and businesses and in the development of Sweden's railway network. In the 1940s and 1950s, Asea AB expanded into the power, mining and steel industries. Brown Boveri & Cie. (later renamed BBC Brown Boveri AG) was formed in Switzerland in 1891 and initially specialized in power generation and turbines. In the early to mid-1900s, it expanded its operations throughout Europe and broadened its business operations to include a wide range of electrical engineering activities.

        In January 1988, Asea AB and BBC Brown Boveri AG each contributed almost all of their businesses to newly formed ABB Asea Brown Boveri Ltd, of which they each owned 50%. In 1996, Asea AB was renamed ABB AB and BBC Brown Boveri AG was renamed ABB AG. In February 1999, the ABB Group announced a group reconfiguration designed to establish a single parent holding company and a single class of shares. ABB Ltd was incorporated on March 5, 1999, under the laws of Switzerland. In June 1999, ABB Ltd became the holding company for the entire ABB Group. This was accomplished by having ABB Ltd issue shares to the shareholders of ABB AG and ABB AB, the two publicly traded companies that formerly owned the ABB Group. The ABB Ltd shares were exchanged for the shares of those two companies, which, as a result of the share exchange and certain related transactions, became wholly owned subsidiaries of ABB Ltd, and are no longer publicly traded. ABB Ltd shares are currently traded on the SWX Swiss Exchange (virt-x), the Stockholm Exchange, the New York Stock Exchange (in the form of ADSs), the Frankfurt Exchange and the London Stock Exchange.

Organizational Structure

        In 2001, we realigned our worldwide business operations, replacing our six existing business segments with seven business divisions structured along customer groups. Four divisions, Utilities, Process Industries, Manufacturing and Consumer Industries, and Oil, Gas and Petrochemicals, were established to serve end-user customers. Two divisions, Power Technology Products and Automation Technology Products, were established to serve the four end-user divisions as well as certain external customers. Our Financial Services division served the ABB Group's businesses and external customers.

        In April 2002, we announced our intention to sell our Building Systems business area (part of our Manufacturing and Consumer Industries division). The remaining business areas of the Manufacturing and Consumer Industries division were combined with our Process Industries division to form a new Industries division. In November 2002, we sold most of our Structured Finance business (part of our Financial Services division) and announced that we would sell the

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remaining Structured Finance businesses that are unrelated to our core businesses. The remaining activities in the Financial Services division were transferred to the Corporate and Non-Core Activities divisions.

        Effective January 1, 2003, we further realigned our business divisions to combine the Power Technology Products division and the Utilities division into a new Power Technologies division and the Automation Technology Products division and the Industries division into a new Automation Technologies division. Our Oil, Gas and Petrochemicals division, which we intend to divest, was reclassified as a discontinued operation along with a number of other businesses. Our remaining activities were grouped into a Non-Core Activities division. We began reporting our financial results to reflect this new structure starting with our results for the three months ended March 31, 2003.

        We streamlined our divisional structure to sharpen our focus on power and automation technologies, to increase efficiency and to create a sustainable lower cost base. We consider the Power Technologies and Automation Technologies divisions to be our core divisions, and our management is focusing its attention on, and investments in, these divisions.

        Our Non-Core Activities division comprises businesses and activities that are not integral to our focus on our power and automation technologies and that we are considering for sale, winding down or otherwise discontinuing. For a description of the businesses grouped within the Non-Core Activities division, see "—Business Divisions—Non-Core Activities."

        The components of our Corporate division, as well as the activities that are classified as discontinued operations, are described in detail under "—Business Divisions—Corporate/Other" and "—Discontinued Operations."

        The following table sets forth the amount and percentage of ABB Group revenues derived from each of our business divisions for the fiscal years ended December 31, 2003 and 2002, based on our current organizational structure:

	Revenues Year ended December 31,				Percentage of Revenues Year ended December 31,
	2003		2002		2003	2002
	($ in millions)				(%)
Power Technologies	7,680		6,963		38	37
Automation Technologies	9,897		8,464		49	45
Non-Core Activities	2,537		3,447		13	18
Subtotal	20,114		18,874		100	100
Corporate/Other and Eliminations	(1,319	)	(1,408	)
Consolidated Revenues	18,795		17,466

        For a breakdown of our consolidated revenues derived from each geographic region in which we operate, see "Item 5. Operating and Financial Review and Prospects—Summary Financial Data."

        Our principal corporate offices are located at Affolternstrasse 44, CH-8050 Zurich, Switzerland, telephone number +41-43-317-7111. Our agent for U.S. federal securities law purposes is ABB Holdings Inc., located at 501 Merritt 7, Norwalk, Connecticut 06851.

Cost Reduction Initiatives

        In 2002, we introduced the Step Change Program, which is designed to increase the competitiveness of our core divisions, reduce overhead costs and streamline operations, expected to result in approximately $900 million of cost savings on an annual basis by 2005. We expect the

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savings to be roughly evenly divided between our two core divisions, Power Technologies and Automation Technologies, and a third category of overhead and headquarters costs. The primary focus of the program is on the 19 countries in which we have our largest operations. We expect approximately 50% of the cost savings to be achieved in our four largest country operations, Germany, Sweden, Switzerland and the United States. In addition to eliminating between 10,000 and 12,000 jobs over the period, the Step Change Program involves over 1,400 specific measures, identified and executed by each business unit, aimed at reducing costs. As of December 31, 2003, we had completed approximately two-thirds of our 1,400 initiatives.

        As part of our initiative to streamline operations, in June 2003 we entered into a ten-year agreement with IBM pursuant to which IBM will take responsibility for the operation and support of information systems infrastructure in 13 countries in Europe and North America as well as our headquarters, representing approximately 90% of our information systems infrastructure. The agreement involved the transfer to IBM of 780 ABB employees, in addition to the 380 employees transferred under pilot programs prior to 2003. The final transfer of responsibilities took place in September 2003.

        For more information on the Step Change Program, see "Item 5. Operating and Financial Review and Prospects—Restructuring Expenses—Step Change Program."

BUSINESS DIVISIONS

Power Technologies Division

Overview

        The Power Technologies division serves electric, gas and water utilities as well as industrial and commercial customers, with a broad range of products, systems and services for power transmission, distribution and power plant automation. The division had 149 manufacturing plants and 38,700 employees as of January 1, 2004.

Power Industry Background

        The portions of an electricity grid that operate at highest voltages are "transmission" systems, while those at lower voltages are "distribution" systems. Transmission systems link power generation sources to distribution systems. Distribution networks then branch out over shorter distances to carry electricity from the transmission system to end users. These electricity networks incorporate sophisticated devices to control and monitor operations and to prevent damage from failures or stresses.

        Electricity is transformed at different stages in the delivery process between the source and the ultimate end user. For example, electrical power is often generated in large power plants at 10 to 20 kilovolts. Because this voltage is too low to be transmitted efficiently, transformers are used to increase the voltage of electricity (up to 1,100 kilovolts) for long-distance transmission. This reduces losses and increases the amount of power that can be carried per line.

        Transformers are also used to decrease the voltage at the local end for distribution to end users, such as residential, commercial or industrial consumers. An electric utility distribution system comprises distribution substations and networks, both overhead and underground. Some large industrial and commercial facilities receive electricity at higher voltage levels from the transmission or distribution network, while most industrial, commercial and residential users receive electricity from distribution network feeders at lower voltages.

        There is a global trend toward deregulation and privatization of the power industry, which is creating a more competitive environment for our customers. This trend is evident in the United

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States, parts of Latin America and Western Europe, particularly in the United Kingdom and the Nordic countries. It is accelerating elsewhere in Europe and is developing in other regions. The creation of a free market for electricity requires our customers to become more cost-efficient and reliable to compete as a lowest-cost provider among power suppliers. Grid operators must be able to deliver power to customers that are hundreds or thousands of miles away within a few minutes. As more disturbance-sensitive loads (such as computers and telecommunications systems) have been added to networks, demand for reliable, high-quality electricity is increasing. Power suppliers can achieve this efficiency and reliability in a number of ways, including the following:

•

Replacing and modernizing assets and investing in information technology-based control and monitoring equipment and communications networks to control and supervise power networks based on instantaneous access to information.



•

Upgrading current technologies and introducing new technologies to improve network reliability, increase network power rating and enhance the control of power flow through existing transmission and distribution assets.

Business Areas

        The following table sets forth the approximate proportion of the Power Technologies division's revenue generated in 2003 by each of the business areas in the division:

Business Area	Proportion of Division Revenues
Power Systems	28%
Utility Automation Systems	15%
High-Voltage Products	16%
Medium-Voltage Products	17%
Power Transformers	14%
Distribution Transformers	10%

        Two of the division's business areas—Power Systems and Utility Automation Systems—primarily provide engineering services drawing on the ABB Group's complete range of products and services. The other four business areas—High-Voltage Products, Medium-Voltage Products, Power Transformers and Distribution Transformers—are mainly product manufacturing businesses.

Power Systems

        Our Power Systems business area undertakes turnkey contracts to install and upgrade transmission and distribution systems incorporating components manufactured by this division and the Automation Technologies division, as well as those manufactured by third parties.

        We are a leader in high-voltage direct current ("HVDC") technology. HVDC transmission is an advanced technology for transporting electricity over long distances. It reduces power losses, increases system stability and provides a more controllable flow than high-voltage alternating current. An HVDC transmission system typically includes converters, which change alternating current to direct current and then back to alternating current when it reaches the terminal point, and transmission lines, either above or below ground. Advances in converter and cable technology have enabled us to introduce a system called HVDC Light™. Converter stations for HVDC Light™ are approximately one-fifth the size of conventional HVDC technology for the same rated power. HVDC Light™ extends the range of applications for high-voltage direct current. Typical applications include interconnection of separate networks that operate on different frequencies or provide variational power quality, such as wind parks. The system can also be used as a substitute for local power generation in remote areas, islands or oil platforms.

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        We also provide flexible AC transmission systems ("FACTS") to enhance power grid stability, improve power quality and thus increase transmission capability. FACTS devices include series compensators, static VAR compensators ("SVCs") and SVC Light™ (based on the same unique technology as HVDC Light™).

        HVDC, HVDC Light™, FACTS, and SVC Light™ systems rely on advanced power semiconductor components. Our in-house power semiconductor unit enables us to develop and manufacture tailor-made components to maximize the performance of these systems. This business area supplies power semiconductor devices to other ABB businesses and to external customers in the power transmission and distribution, drives, and transportation markets.

        The Power Systems business area also supplies substations to interconnect electricity grids operating on different voltage levels, to sectionalize portions of the grid and to protect the electrical system against damage from outside sources such as lightning and overload. By sectionalizing the grid, power can be rerouted from portions of the transmission system that are experiencing problems to sections that are functioning properly, thereby enhancing the overall reliability of the power supply. This business area delivers complete air and gas insulated substations for power transmission. Substations are also necessary in a power distribution network to sectionalize and reduce the voltage of the main power lines and cables to the lower voltages required for efficient distribution and consumption. For power distribution, this business area sells traditional custom-engineered substations as well as compact, modular substations, which require less space than a conventional substation and thus are particularly well suited for urban settings. It also offers prefabricated secondary substations that can be installed more quickly than traditional substations, and which transform electricity to consumer-level voltages.

        Power Systems also delivers the engineering, procurement and construction ("EPC") of overhead transmission lines, one of the main subsystems in a transmission network. ABB in-house engineering and manufacturing of steel transmission towers and composite insulators also add value in the delivery of a transmission line project. Power Systems also provides studies on the design of new transmission lines and system optimization that take into account technical, economic and environmental considerations.

        This business area offers service contracts and support for management of existing power transmission and distribution assets, including both ABB products and those manufactured by third parties. In addition, it offers asset management services including technical consulting (system diagnostics, network analysis, planning and optimization), commercial consulting (cost reduction programs, investment strategies, reengineering of business processes) and execution (maintenance strategies, logistics).

Utility Automation Systems

        Our Utility Automation Systems business area applies its power industry and automation expertise to integrate products manufactured by both the Power Technologies and the Automation Technologies divisions, as well as those of third parties, to provide utility customers with automation systems tailored for their generating plants or transmission and distribution networks.

        In the area of power plant automation, the Utility Automation Systems business area offers complete system integration of instrumentation, control and electrical ("ICE") equipment for the power generation market. The services offered by the business area include combustion management, plant performance optimization, condition monitoring and asset management.

        For water plants, the business area offers system integration for all ICE applications in water systems, including automation services for water treatment plants, distribution systems, waste water collection systems and wastewater treatment. The business area offers turnkey pumping

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stations and control systems for water leakage management, lift-station monitoring and optimization of plant performance.

        The Utility Automation Systems business area offers high-end supervisory control and data acquisition ("SCADA") systems to power and gas customers. SCADA systems are used to monitor and control energy transmission, distribution and power generation management systems. They are also used to operate market systems for power networks by tracking energy costs, end-user consumption and retail and wholesale prices, among other things. In addition, this business area offers customer care systems and asset management systems for electrical networks, district heating networks and gas networks. These allow utilities to optimize their business by improving the performance of their installed network equipment to meet changing customer requirements and new market conditions.

        This business area also provides system integration for substations used in power generation, transmission and distribution. Its offering includes small electrical SCADA systems, wide area protection systems, feeder automation systems and power system monitoring, which provides real-time information that enables utilities to make informed system-related decisions.

        The business area provides wireless and fixed communication systems for power, water and gas utilities, including both operational and corporate communication networks. It offers fiber optics, microwave radio and power line applications for data networking and broadband network management, as well as teleprotection and substation communication networks and voice switching management systems.

        The Utility Automation Systems business area offers a range of service capabilities aimed at reducing the in-house operational and maintenance requirements of utility customers. It offers service contracts for spare parts management, support agreements, software and hardware upgrades and retrofits, service consulting, asset management and training.

High-Voltage Products

        The High-Voltage Products business area provides power utilities with electricity transmission equipment that allows them to operate more efficiently and with lower environmental impact, both of which are significant business concerns in the market in which our customers operate. The business area manufactures the principal components of power transmission systems (50 to 800 kilovolts), including air- and gas-insulated switchgear, cables, capacitors, high-voltage circuit breakers, grounding switches and instrument transformers. This business area is also responsible for the entire ABB portfolio of low, medium and high voltage capacitors and surge arresters. Its products and components also include circuit breaker drives and cable accessories. Some of the business area's products are integrated into the offering of the Power Systems business area or are sold through external channel partners such as engineering, procurement and construction firms.

Medium-Voltage Products

        The Medium-Voltage Products business area develops products and systems that reduce outage times and improve power quality and control, which are key to improving operational efficiency of both utility and industrial customers. It supplies switching equipment both directly to end users and through distributors and original equipment manufacturers ("OEMs"). Most of its products provide connections between higher voltage substations and lower voltage uses. It produces a comprehensive line of medium-voltage equipment (1 to 50 kilovolts), including products such as indoor and outdoor switch disconnectors, breakers, reclosers, fuses, contactors, instrument transformers and sensors as well as air- and gas-insulated switchgear, motor control centers, and ring main units for primary and secondary distribution. It also produces indoor and outdoor modular systems, compact substations and power distribution centers. As with the High-Voltage Products

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business area, many of its components form part of the offering of the Power Systems business area. In addition, a significant portion of its products are sold through external channel partners such as OEMs.

Transformers

        Effective January 1, 2004, the Power Technologies division merged its Power Transformers business area with its Distribution Transformers business area to form a single Transformers business area. The merger was intended to reduce product overlaps, eliminate redundant research and development efforts and improve supply chain management. The two former business areas already shared many production locations prior to their merger.

        The Transformers business area designs and manufactures power transformers (72.5 to 800 kilovolts) for utility, transportation and industrial customers, as well as transformer components such as bushings and tap changers. The business area also produces insulation material. Transformers are typically used for power transmission and distribution systems, such as in large substations. Generator transformers are used in power generation when it is necessary to increase power voltage from a power plant for long-distance transmission. Industrial transformers are mainly delivered to the steel and aluminum industry, which need their own high-voltage transformers and substations on-site to service their heavy electricity requirements. Finally, the business area produces traction transformers used in electric locomotives. Customers in the components business come both from the transformer and electrical motor industry. The business area also provides a wide range of transformer service and retrofit solutions for utilities and industry customers.

        The business area also manufactures distribution transformers for use in industrial facilities, commercial buildings and utility distribution networks to step down electrical voltage to the levels needed by end users. The business area manufactures and sells a full range of power distribution transformers (up to 72.5 kilovolts), including oil-type, dry-type and special application distribution transformers. Although oil-type transformers are more commonly used, demand for dry-type transformers is growing because they minimize fire hazards and have applications in high-density office buildings, windmills, offshore drilling platforms, naval vessels and high-volume industrial plants.

Customers

        The Power Technologies division's principal customers are electric, gas and water utilities, owners and operators of power transmission systems, utilities that own or operate networks and owners and operators of power generating plants. Other customers include gas transmission companies, local distribution companies and multi-utilities, which are involved in the transmission or distribution of more than one commodity. The division also serves industrial and commercial customers, such as operators of large commercial buildings and heavy industrial plants. In 2003, the division's ten largest customers accounted for approximately 13% of its business volume, and its 34 largest customers accounted for approximately 20% of its business volume.

Geographic Markets

        The following table sets forth the proportion of Power Technologies division's third-party revenues derived from each geographic region (based on the location of the customer, which may

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be different from the ultimate destination of the products' end use) in which the ABB Group operates:

	Year ended December 31,
	2003	2002
	(%)
Europe	37	34
The Americas	25	33
Asia	24	20
Middle East and Africa	14	13
Total	100	100

Sales and Marketing

        The Power Technologies division sells its products individually through its four product business areas and as parts of larger systems through its two engineering business areas. Most product sales are made through the division's own direct sales force, which is enhanced by industrial representatives and agents where appropriate. Direct sales account for about 75% of the division's total product sales, and sales through external channel partners, such as wholesalers, distributors and OEMs, account for the remaining 25%. Sales in the engineering business areas are handled primarily by the division's specialized sales engineering teams, although the division uses system integrators and other third-party sellers from time to time.

Competition

        On a global basis, the Power Technologies division's principal competitors are Areva (which acquired ALSTOM's transmission and distribution division in January 2004), Schneider and Siemens. In the distribution transformers market, the division also competes with companies such as Cooper Cameron and Howard Industries. In the utility automation area, the division's principal competitors are ALSTOM, Emerson, GE Harris, Honeywell, Invensys and Siemens.

Research and Development

        Research and development expenses for the Power Technologies division amounted to approximately $170 million for 2003. The division's research and development activities in 2003 primarily related to streamlining product portfolios in all business areas. The aim is to increase product standardization and thus improve the efficiency of our design, supply, manufacturing, sales and distribution functions. Related research has focused on technologies that enable faster production cycles, mainly in the areas of new materials and design. In the Utility Automation Systems business area, research continued to focus on the standardization of controls and protection systems, with the goal of reducing costs in the production of substation automation systems, power plant controls and SCADA systems.

Capital Expenditures

        The Power Technologies division's capital expenditures for property, plant and equipment were $120 million in 2003, compared to $114 million and $128 million in 2002 and 2001, respectively. Principal investments in 2003 included investments to replace existing equipment, particularly in Sweden, the United States, China and Germany, mainly in the Power Transformers business area. Geographically, in 2003, Europe accounted for about 52% of the capital expenditure, with about 23% in the Americas, about 19% in Asia and about 6% in Middle East and Africa. Asia and Middle

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East experienced increases in the total amount of capital expenditure, particularly in China, India and Saudi Arabia. These expenditures were primarily financed internally.

Automation Technologies Division

Overview

        The Automation Technologies division provides products, systems, software and services for the automation and optimization of industrial and commercial processes. Key technologies include measurement and control, instrumentation, process analysis, drives and motors, power electronics, robots and low-voltage products. This division had approximately 150 manufacturing, software and application centers and 55,300 employees as of January 1, 2004.

        We are a recognized market leader in our core automation products and systems, with particular strength in process automation systems (including supervisory control and data acquisition, or SCADA, systems), quality control systems, advanced robotics, process instrumentation (including analytical measurement devices), electrical machines and alternating current, or AC, drives.

        The Automation Technologies division offers its products, both as separately sold devices and as part of a total automation system, through three product-based business areas and three industry-based business areas, as discussed below. Stand-alone products, often sold in cooperation with channel partners such as distributors, wholesalers and OEMs, account for approximately 60% of the division's sales volumes. Systems sales account for about 20% of total division revenues, and our service business accounts for the remaining 20% of division revenues. The division focuses on developing synergies and efficiencies among its business areas, such as common marketing, software re-use and streamlined geographic sales and service networks.

Automation Industry Background

        Our customers use automation technologies primarily to improve product quality, productivity and consistency in industrial and manufacturing applications. The automation market can be divided into three sectors:

•

Process automation refers to control systems applied in processes where the main objective is continuous production, such as oil and gas, electricity, chemicals and pulp and paper. Product lines for this market include instrumentation, analytical measurement and control products and systems, as well as motors and drives. This division offers complete process automation systems that incorporate medium and low-voltage switchgear, synchronized drive systems, instrument and control and advanced diagnostic packages. Its products also include software to optimize the manufacturing and business processes.



•

Factory automation refers to discrete operations which manufacture individual items used mainly within the automotive, packaging and consumer goods industries. Product lines for this market include robots and robot cells, which include standardized and tailored systems for discrete applications such as painting, picking, packing, palletizing, welding and assembly. This division provides a comprehensive set of systems using these technologies, including application-specific software and configuration tools.



•

Building automation comprises product lines and applications particularly targeted at the building industry. Product lines for this market include a wide range of low-voltage products for control of climate, lighting and security, as well as software for optimal management of the energy cost of buildings.

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        The Automation Technologies division manufactures products and systems relating to all three sectors, primarily focusing on process automation products and systems, as well as robotics technologies for factory automation. The division provides to its customers the full range of ABB's products on a stand-alone basis, or as part of systems involving conceptual design, detailed engineering, project management, installation and commissioning, as well as after-sales services and system optimization during the full life span of the system.

        The Automation Technologies division product range has been enhanced through a number of strategic acquisitions in recent years. In early 1999, ABB acquired Elsag Bailey Process Automation, a leading global provider of control, instrumentation and process analytical products whose offering significantly extended our reach both in terms of automation technology and geography. In mid-2001, we acquired Entrelec, a French supplier of industrial automation and control products, including electrical connecting devices, time relays, signaling and safety devices and wiring accessories for the housing market. This acquisition further diversified our product range and expanded our customer base in European and American markets.

        In mid-2001, this division entered into a ten-year strategic alliance with The Dow Chemical Company ("Dow") in which Dow agreed to use our Industrial IT automation systems in nearly all of its new automation projects, as well as in retrofits of existing systems. Another significant strategic cooperation was forged in 2001 through a framework agreement with the original equipment manufacturer York International (United States), a long-time customer, for simplified account service, pricing and joint development spanning multiple product lines. In late 2002, the division was awarded two contracts for long-term asset management services totaling more than $130 million at papermaker Carter Holt Harvey Limited (New Zealand) and petrochemical leader ENI Group (Italy). The division has similar strategic relationships with nearly 100 customers, and has been successful in expanding the scope of such agreements over time to cover additional ABB products and services. Significant agreements during 2003 included a frame agreement with transportation leader Bombardier for up to $500 million in power and automation technologies, signed in cooperation with ABB's Power Technologies Division, and a $34 million contract extension to provide site service, spare parts and modifications to oil producer Statoil.

        In December 2003, this division commercially released the latest version of its Industrial IT process automation platform, called System 800xA. This system extends the capability of traditional process control systems, introducing advanced functions such as batch management, asset optimization and field device integration which "plug in" to a common user environment. The same user interface may also be used to manage components of existing multiple ABB control systems that have been installed in the market over the past approximately 20 years. In this way, System 800xA gives customers a way to migrate to new functions one step at a time, rather than having to make a large-scale capital investment to replace their entire control system. By creating a common user interface that can be used to manage multiple systems, the System 800xA also reduces the research and development investment needed to achieve a "one size fits all" solution across our large installed systems base.

        Our customers are increasingly under pressure to deliver their products more quickly to their customers and to respond rapidly to changing customer preferences. At the same time, constant price pressure requires them to find ways to decrease production costs. Furthermore, as the quality of products becomes more equalized among our customers' competitors, our customers increasingly focus on design and branding to distinguish their products from those of their competitors. This change in focus means that much of the manufacturing and production activities are outsourced to sub-suppliers, which may manufacture products for a number of different companies in a given industry. The consolidation in the manufacturing role enables the sub-suppliers to provide products at a lower cost and presents further opportunities for ABB to provide flexible solutions for automation. Another growing practice among our customers is the

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outsourcing of non-core tasks such as maintenance and facilities management services. The division has sought to capitalize on this trend by providing an increasing number of service arrangements covering overall plant maintenance and asset optimization.

Business Areas

        The following table sets forth the approximate amount of the Automation Technologies division's revenue generated in 2003 by each of the business areas in the division:

Business Area	Proportion of Division Revenues
Low-Voltage Products and Instruments	27%
Paper, Minerals, Marine and Turbocharging	21%
Drives, Motors and Electronics	17%
Robotics, Automotive and Manufacturing	14%
Petroleum, Chemical and Consumer Industries	14%
Control Platform and Enterprise Products	7%

        The Automation Technologies division offers its products, both as separately sold devices and as part of complete automation systems, through three product-based business areas (Low-Voltage Products and Instruments; Drives and Motors; and Control Platform and Enterprise Products) and three industry-based business areas (Paper, Minerals, Marine and Turbocharging; Robotics, Automotive and Manufacturing; and Petroleum, Chemical and Consumer).

Low-Voltage Products and Instruments

        The Low-Voltage Products and Instruments business area manufactures circuit breakers, controls, switches and fuse gear that are used in industrial electrical applications to protect, switch and control industrial equipment. In addition, our acquisition of Entrelec provided us with a range of connectors, terminal blocks and protection and monitoring devices that are used primarily in industrial applications.

        Customers increasingly require low-voltage products with built-in intelligence, self-regulation and energy efficiency capabilities. To meet these requirements, we have recently launched several new product families for motor protection, monitoring and communications via advanced electronic sensing and feedback systems to control power distribution to industrial motors.

        This business area also makes line protection products, wiring accessories and enclosures and cable systems that are primarily used for control and protection in building installations. It also produces European Installation Bus/Powernet systems, which integrate and automate a building's electrical installations, ventilation, security and data communication networks. Although it provides low-voltage products and systems for building automation, this business area is not involved in the execution of building system projects and installations (which is the business of the non-core Building Systems business area).

        The process instrumentation products manufactured by this business area interact with the division's Open Control System products and include products for the measurement of process variables such as pressure, temperature, volume and flow. The increasing sophistication of many process automation systems often requires thousands of measurement points for such variables. These instrumentation products are sold separately or in combination with control systems. The various analytical measurement devices produced by this business area form an important part of instrumentation and control systems. These devices measure chemical characteristics while process instrumentation products measure physical characteristics. This business area's analytical product offerings include gas analyzers, chromatographs, spectrometers and paper quality control systems,

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which perform either sample-based or continuous measurement of properties such as chemical or physical composition (for example, the water and fiber content of paper or the composition of gas), energy content and environmental emissions. These products are sold separately or through the end-user business areas as part of complete systems.

Paper, Minerals, Marine and Turbocharging

        The Automation Technologies division's product offerings for the pulp and paper industries include quality control systems for pulp and paper mills, control systems, drive systems, on-line sensors, actuators and field instruments. On-line sensors measure product properties, such as weight, thickness, color, brightness, moisture content and additive content. Actuators allow the customer to make automatic adjustments during the production process to improve the quality and consistency of the product. Field instruments measure properties of the process, such as flow rate, chemical content and temperature.

        We increasingly package our products with sophisticated software applications that link the production process to the customer's business planning functions. In this way, we can improve our customer's ability to plan and schedule the utilization and output from the mill which, in turn, enhances our customer's ability to meet its commercial objectives.

        We offer our customers in the metals and minerals industries specialized products and services, as well as total production systems. We design, plan, engineer, supply, erect and commission electric equipment, drives, motors and equipment for automation and supervisory control within a variety of areas including mining, mineral handling, aluminum smelting, hot and cold steel applications and cement production.

        In the marine field, we provide global shipbuilders with power and automation technologies for luxury cruise liners, ferries, tankers, offshore oil rigs and special purpose vessels. We design, engineer, build, supply and commission electrical systems and software for marine power generation, power distribution and diesel electric propulsion, as well as turbochargers to improve efficiency for diesel and gasoline engines. The main markets for these products and services are manufacturers of vessels within the oil and gas upstream industries (such as exploration/production and shuttle transport) and the cruise and ferry industries. An example of our innovation within the area of marine propulsion is the Azipod® (azimuthing podded) propulsion system, which we developed in a joint venture with leading shipbuilders. The Azipod® system improves vessel maneuverability at low speeds, resulting in faster docking and embarkation, lower operating costs and increased vessel capacity. In 2001, we introduced a Compact Azipod® product for use on smaller vessels. In addition to their marine uses, ABB turbochargers are used in various heavy-equipment applications such as construction.

Drives, Motors and Electronics

        The Drives and Motors business area focuses on the ongoing development of low-voltage and medium-voltage AC drive products and systems for industrial, commercial and residential applications. Drives provide motion and torque while adding control and efficiency to equipment such as fans, pumps, compressors, conveyors, kilns, centrifuges, mixers, hoists, cranes, extruders, printing machinery and textile machines. Our drives are used in the building automation, marine, power, transportation and manufacturing industries, among others.

        The Drives and Motors business area also produces a range of power electronics products. It produces static excitation and synchronizing systems that provide stability for power stations, as well as high power rectifiers that convert AC power to DC power for very high-amperage applications such as furnaces in zinc plants and aluminum and magnesium smelters. The business

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area also manufactures frequency converters that use state-of-the-art semiconductor technology to convert electrical power into the type and frequency required by individual customers.

        In addition, this business area supplies a comprehensive range of electrical motors and generators, including high-efficiency motors that conform to leading environmental and efficiency standards. Efficiency is an important criterion for selection by customers, because electric motors account for nearly two-thirds of the electricity consumed by industrial plants. This business area manufactures synchronous motors for the most demanding applications and a full range of low and high-voltage induction motors.

Robotics, Automotive and Manufacturing

        The Robotics, Automotive and Manufacturing business area develops and manufactures industrial robots and related equipment for the automotive industry and other manufacturing industries. This business area designs, installs and commissions automation systems for customers in the automotive industry and their sub-suppliers, incorporating software developed by its engineers into its range of products, as well as those manufactured by the Power Technologies division. The products and systems are used in such areas as press shop, body shop, paint shop, power train assembly, trim and final assembly.

        In addition to serving the automotive industry, this business area provides complete production automation systems for industry segments ranging from metal and glass fabrication to telecommunications. Manufacturers use our flexible automation and advanced robotics products for applications involving multiple tasks such as welding, material handling, painting, picking, packing and palletizing. For example, we provide painting systems for mobile phones, as well as robot cells to produce base stations for telecom companies. This business area incorporates software developed by its engineers into its automation products and the power products manufactured by the Power Technologies division to maximize energy efficiency and provide a secure power supply for manufacturing lines. Our services include design and project management, engineering, installation, training and life-cycle care of the complete production line.

Petroleum, Chemical and Consumer Industries

        The Petroleum, Chemical and Consumer Industries business area supplies application-specific equipment and systems to the fine chemical, food and beverage, pharmaceutical, oil and gas, personal care, and agriculture milling industries. Its product portfolio includes control systems, instruments and analytic devices, safety systems, drives and motors. In the petroleum sector, it provides onshore, offshore and subsea production technology, gas gathering and processing, refining, transportation and distribution applications. In the pharmaceuticals and fine chemicals areas, the business area provides software and solutions for applications including manufacturing, packaging, quality control and compliance with regulatory agencies. Like other end-user business areas, it also offers full-service contracts, in which it takes over in-house maintenance activities for customers and applies strategies to reduce overall maintenance costs and helps optimize these investments.

Control Platform and Enterprise Products

        The Control Platform and Enterprise Products business area develops, markets and sells control products and systems within the Industrial IT architecture. The business area emphasizes Open Control Systems, including batch control systems, supervisory control and data acquisition systems, and, to a lesser but increasing extent, programmable logic controls ("PLCs") and remote terminal units ("RTUs"). Control systems are the hubs that link instrumentation, devices and systems for control and supervision of an industrial process. One primary advantage of using

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products and systems that conform to the Industrial IT architecture (which we refer to as Industrial IT Control Systems) instead of traditional Open Control Systems is that information is rendered accessible by other parties and systems across an organization at various points in the manufacturing process.

        Control systems also enable customers to integrate their production systems with their enterprise, resource and planning systems thereby providing a link to their ordering, billing and shipping processes. This linkage, combined with the connection of our Industrial IT Control Systems to field instrumentation and automation power products, allows customers to manage their entire manufacturing and business process based on real-time access to plant information. Additionally, this coordination allows customers to employ information received from instrumentation and measurement products to increase production efficiency, optimize their assets and reduce environmental waste. These features of Industrial IT Control Systems enable customers to react quickly to changing circumstances based on accurate information while decreasing the possibility of errors.

        The Control Platform and Enterprise Products business area also offers batch control and supervisory control and data acquisition systems. Batch control systems control the production of a variety of products in shorter runs, such as certain pharmaceuticals and food and beverage products. Supervisory control and data acquisition systems are used to collect and manage data over wide areas or long distances such as those involved in operating electric power networks.

        This business area also provides a comprehensive range of force measurement products designed to improve control, productivity and quality in a wide variety of processes. These products measure flatness, roll force, strip and web tension, strip width, position and torque. These technologies are sold to the metal fabrication, paper and other industries.

        Effective January 1, 2004, the Automation Technologies division merged its six business areas into three business areas as part of its drive to further simplify and focus the business and to improve efficiency. The new business areas are:

•

Process Automation, comprising the former Control Platform Products, Petroleum and Chemical, and Paper, Minerals, Marine and Turbocharging business areas



•

Automation Products, comprising the former business areas Low-Voltage Products and Instrumentation and Drives, Motors and Power Electronics.



•

Manufacturing Automation, previously called Robotics, Automotive and Manufacturing.

Customers

        The Automation Technologies division's end customers are primarily companies in the chemical, life sciences (pharmaceuticals), automotive, marine, turbocharging, metals, minerals, mining, cement, paper, petroleum, food and beverage, printing and building industries. In each of these industries, we sell both through direct sales forces as well as through third-party channels, such as distributors, wholesalers, installers, system integrators and OEMs.

Geographic Markets

        The following table sets forth the proportion of Automation Technologies division's third-party revenues derived from each geographic region (based on the location of the customer which may

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be different from the ultimate destination of the products' end use) in which the ABB Group operates:

	Year ended December 31,
	2003	2002
	(%)
Europe	61	63
The Americas	17	19
Asia	16	14
Middle East and Africa	6	4
Total	100	100

        The ultimate destination of our products' end use is relevant for the Automation Technologies division as some global distributors and wholesalers in Europe sell our products in Asia and in the Americas. We estimate this volume to be approximately 7% of the division revenues, divided equally between the ultimate destinations of Asia and the Americas.

Sales and Marketing

        In each of the Automation Technologies division's business areas, sales are made both through direct sales forces as well as through third-party channel partners, such as distributors, wholesalers, installers and OEMs. The proportion of direct sales compared to channel partner sales varies among the different industries, product technologies and geographic markets. For the division as a whole, approximately 60% of products are sold through channel partners, with the remainder sold through the division's own direct sales channels.

Competition

        The Automation Technologies division's principal competitors vary by product line but include Alstom, Emerson, Fanuc Ltd., General Electric, Honeywell, Invensys, Metso Automation Inc., Rockwell Automation, Inc., Schneider, Siemens, Voith AG, Aspen Technologies, Inc. and Yokogawa Electric Corporation.

Research and Development

        Research and development expenses for the Automation Technologies division amounted to approximately $356 million for 2003.

        An important focus of the division's research programs is the group-wide commitment to Industrial IT. The Automation Technologies division is responsible for the development of the Industrial IT platform architecture and the base Industrial IT control products and systems. As a result, the division's research is heavily focused on intelligent, "information enabled" products and devices that may be integrated easily to provide better access to real-time information across the business enterprise. Increasing "productization" of automation technologies is intended to yield a growing portfolio of reusable building blocks that may be easily deployed and bundled by customers, channel partners and the division itself.

Capital Expenditures

        The Automation Technologies division's capital expenditures for property, plant and equipment were $157 million in 2003, compared to $133 million and $144 million in 2002 and in 2001, respectively. Principal investments in 2003 were primarily related to ordinary course purchases of machinery and equipment mainly in Germany, Italy, France, Sweden, Finland and Switzerland.

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Geographically, in 2003, Europe accounted for about 89% of the capital expenditure, with about 5% in the Americas, about 5% in Asia and 1% in the Middle East and Africa. These expenditures were primarily financed internally.

Non-Core Activities

        Business activities that are not directly linked to our Power Technologies and Automation Technologies divisions (our core divisions) and which we are considering for sale, winding down or otherwise discontinuing are grouped together and their results are reported under the heading of Non-Core Activities. These activities comprise primarily the remaining parts of Equity Ventures business area, the remaining parts of the Structured Finance business area, the remaining parts of the Building Systems business area, the remaining parts of the New Ventures business area and a number of other activities, including Customer Service Workshops, Logistic Systems and the Group Processes business areas. The Insurance business area, which was previously included in Non-Core Activities, is now discussed as discontinued operations following our agreement in December 2003 to sell this business to White Mountains Insurance Group Limited of Bermuda. The businesses in the Non-Core Activities division are not being managed as an integral part of our business. The division had approximately 8,700 employees at December 31, 2003.

        Following is a description of our principal businesses in the Non-Core Activities division.

Equity Ventures

        Our Equity Ventures business area owns and operates infrastructure projects in various countries. Equity Ventures originally focused its investment activities on independent power projects because it provided business opportunities for our former power generation division. Subsequent projects also were selected primarily to develop opportunities to sell our equipment and systems. Therefore, the Equity Ventures portfolio reflects some of the businesses in which we were engaged when the investments were made. Our Equity Ventures business area is not pursuing further project development or additional investments, and we will consider selling the investments of this business area when we believe we have received an optimal offer. During 2003, we sold our stakes in ABB Redbank Project Pty Ltd. (a power plant) and ElectraNet Pty Ltd (an electricity transmission service provider), both in Australia.

Structured Finance

        Our Structured Finance business area provides financing, including export, trade and project financing and asset-based leasing and lending. In 2002, we decided to sell our Structured Finance businesses. In 2003, we continued the divestment of our remaining Structured Finance business area, including our ownership interest in the Swedish Export Credit Corporation, certain lease and loan portfolios, ownership interests in infrastructure projects and other financial assets. We sold ABB Export Bank, previously part of our Structured Finance business area in December 2003. The remaining Structured Finance assets, representing approximately $600 million of financing receivables, will be sold, discontinued or run off.

Building Systems

        Our Building Systems business area designs, builds and maintains complete installations for industrial, infrastructure and commercial facilities, integrating products manufactured by the Power Technologies and Automation Technologies divisions, as well as those from third-party suppliers.

        Following our decision to divest our Building Systems businesses in 2002, we finalized the divestment of a number of our activities in the Building Systems business area during 2003, including our activities in Austria, Belgium, the Netherlands, the Nordic region (Baltic states,

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Denmark, Finland, Norway, Russia and Sweden), Portugal and the United Kingdom. We have not yet sold the Building Systems businesses in Germany, Poland, the United States, Hong Kong and Egypt. In February 2004, we signed an agreement to sell our Building Systems business in Switzerland to an investor group, while retaining a 10% interest in the business.

New Ventures

        We established New Ventures in 2001 as a "fast lane" business incubator that would find, develop and invest in new business opportunities, both internally and externally. New Ventures had three investment portfolios—the Industrial IT Venture Fund and Operational Ventures, both of which focused on investment opportunities externally, and Innovisions, which focused on opportunities internally. New Ventures' involved providing both seed funding for start-ups and growth funding for mature businesses. It also directly managed several majority-owned companies. In October 2002, we announced a restructuring program to discontinue non-core activities in New Ventures and transfer out a number of core activities to other business areas. In December 2003, we announced the sale of our wind energy business in Germany, which was primarily focused on the development and engineering, procurement and construction of wind parks, primarily in Europe. We intend to divest the remainder of the business area, which includes the distributed energy business and investments in emerging technology businesses.

Group Processes

        We originally formed Group Processes as a business division in January 2001 to drive growth and cut costs by establishing common working processes and a common IT infrastructure for the entire ABB Group. The areas of focus included supply and demand chain management, project management, financial processes, internal audit, quality control and marketing and sales. In addition, this division provided shared services in areas such as accounting and payroll and training through local services centers in many countries. The division also provided IT infrastructure services and applications support. The division was dissolved in October 2002 when supply and demand chain management as well as marketing and sales activities, were moved into the core divisions to more closely link them to those businesses. The financial processes and shared services activities were moved into the Group's finance function, under the auspices of our chief financial officer. In February 2003, all the IT operations were moved into the office of the chief information officer. Effective January 1, 2004, activities in the Group Processes business area had been dissolved or integrated into the core divisions, and Group Processes no longer functions as a separate business area.

Customer Service Workshop

        Our Customer Service Workshop operations consist of overhaul, repair and rewinding of rotating machine products manufactured by the Automation Technologies division, as well as those from third-party suppliers. Following the decision we made in 2002 to strategically reduce our activities in this business, most of our activities were either transferred to the core divisions, closed or divested. We continue our efforts to divest or close the remaining portion of this business during 2004.

Logistic Systems

        The Logistic Systems business area provides information technology packages and automation services to airports for baggage and material handling and air traffic management, as well as turnkey electromechanical systems and airfield lighting systems. In the Logistic Systems business area in 2003, we finalized our exit from Norway whereas our units in Italy, Singapore and Zimbabwe are completing certain projects before closure. We continue efforts to divest our German business.

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Corporate/Other

        Our Corporate/Other activities comprise headquarters and stewardship activities, research and development activities, and other activities, as described below. Corporate/Other had approximately 3,000 employees at December 31, 2003.

        Headquarters and stewardship activities include the operations of our head office in Zurich, Switzerland, as well as the corresponding local holding companies in approximately 65 countries. These operations cover staff functions with group-wide responsibilities, such as group accounting and consolidation, finance and controlling, audit, tax, financial advisory, legal affairs, risk management and insurance, communications, investor relations and human resources.

        Group Research and Development supports the divisions in developing cross-divisional technology platforms and builds up our protected technology. Through our close cooperation with the world's leading universities, cutting edge technology is transferred to our products and systems.

        Other activities include our Real Estate and Group Treasury Operations. Our Real Estate management objective is to enhance our competitiveness and effectively support our business activities, with the most efficient and profitable use of our real estate assets and facilities. Group Treasury Operations act as a cost center for internal treasury activities.

DISCONTINUED OPERATIONS

Overview

        We have adopted, with effect from January 1, 2002, Statement of Financial Accounting Standards No. 144 ("SFAS 144"), Accounting for the Impairment or Disposal of Long Lived Assets. SFAS 144 broadened the presentation of discontinued operations to include disposal transactions involving less than an entire reporting segment, if certain criteria are met. The purpose of SFAS 144 was to allow for historically comparable data to be available to investors without the distortions created by divestments or operation abandonments, thereby improving the predictive value of financial statements.

        The following businesses are included in our Consolidated Financial Statements as discontinued operations:

•

All of our Oil, Gas and Petrochemicals businesses, of which we agreed to sell our upstream businesses to a consortium consisting of Candover Partners Limited, JP Morgan Partners LLC and 3i Group PLC in January 2004. The upstream business is a global producer of equipment and services for oil and gas exploration and production. The remaining part of the Oil, Gas and Petrochemicals businesses primarily consists of a full service engineering company which, in addition to having expertise in engineering, procurement and construction projects, also licenses process technologies in the refining, chemical, petrochemical and polymer fields.



•

Costs related to the potential asbestos obligation of our U.S. subsidiary, Combustion Engineering, of approximately $145 million, $420 million and $470 million in 2003, 2002 and 2001, respectively. The status of our potential asbestos obligation is described in "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Asbestos Liability," as well as in Note 18 to the Consolidated Financial Statements.



•

Our Reinsurance business, which we agreed to sell to White Mountains Insurance Group Limited, a Bermuda-based insurance holding company, in December 2003. This business provides international reinsurance and insurance underwriting, as well as specialized primary insurance in the United States. The completion of this sale is subject to regulatory approvals

37

and other customary closing conditions and is expected to take place in the second quarter of 2004.

•

Our Wind Energy business in Germany, of which we sold a portion to GI Ventures of Munich, Germany in December 2003. This business focused on the development and engineering, procurement and construction of wind parks in Europe.



•

The portion of our Structured Finance business that we sold to GE Commercial Finance ("GE") in November 2002. This business provided debt capital for projects and equipment, and asset-based financing (such as leasing).



•

Our MDVC cable business in Germany, which we agreed to sell to Wilms Group of Menden, Germany in December 2003 (this sale was completed in January 2004). This business manufactures medium- and high-voltage cables, cable systems and accessories for power suppliers and network operators.



•

ABB Export Bank, which we sold to a financial investor in December 2003. ABB Export Bank arranged international export, trade and project financing.



•

Our Metering business, which we sold to Ruhrgas Industries GmbH of Essen, Germany in December 2002. This business produced electricity, water, energy and gas meters, metering systems and load control systems.



•

A number of other businesses sold in 2003 including: Austevoll and Ølen, operations of Marine Austevoll, a marine switchgear business in Norway, that were sold to Scandinavian Electric Austevoll AS and Vassnes Elektro AS, respectively, both in Norway; our repair workshop business in Portugal that we intend to sell; and our retail software business in the United States that we have agreed to sell to PIM-Newco Incorporated. In 2002 the other divested businesses included: the components business of ABB Trasmissione e Distribuzione S.p.A (Italy), which was sold to EB Rebosio S.r.l.; Energy Information Systems Ltd of the United Kingdom, which was sold to ALSTOM, and the ABB Drying Business (a division of ABB Inc. comprising a number of legal entities), which was sold to Andritz AB and Andritz Ltd.



•

Various businesses that were abandoned in 2003 and 2002 for which a buyer could not be found.



•

Legal and professional fees related to the above disposals.

Oil, Gas and Petrochemicals

Overview

        Our Oil, Gas and Petrochemicals business supplies a comprehensive range of products, systems and services to the global oil, gas and petrochemicals industries, from the development of onshore and offshore exploration technologies to the design and supply of production facilities, refineries and petrochemicals plants.

        The oil, gas and petrochemicals industry is typically divided into two markets:

•

Upstream markets: Equipment, systems and services for onshore and offshore oil and gas exploration and production, including our areas of principal focus: subsea production, floating production systems and modification and maintenance.



•

Downstream markets: Processing of hydrocarbon raw materials, including refineries, petrochemical and chemical plants, gas processing and pipelines.

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        Our activities in this business are relatively evenly split between the upstream market and the downstream market, although large projects may shift the balance from year to year. Our upstream business focuses principally on the modification and maintenance, subsea and floating production markets. Our activities in the downstream markets range from EPC projects, engineering and project management services to licensing of technology to the refining and petrochemical industries.

        One of the strengths of the Oil, Gas and Petrochemicals business is its research and development capabilities. Upstream, the business continues to focus on making oil and gas exploration and production more economical, no matter where the natural resources are found. Downstream, the business is improving oil and gas conversion technology so refineries can manufacture fuels to stringent environmental specifications.

Products and Services

        The services, products and systems of the Oil, Gas and Petrochemicals business include:

Downstream

•

EPC projects, such as refineries and petrochemical plants, using ABB products and products procured from third parties; and



•

licensing of process technologies for refining, petrochemicals and gas processing, and proprietary heat transfer equipment.

Upstream

•

production and assembly of offshore production equipment, including specialized subsea equipment for production, controls and power distribution;



•

production of onshore and offshore pressure-containing equipment;



•

provision of project management and procurement services; and



•

modification and maintenance services for both offshore and onshore facilities.

        In the upstream market, the division is a global producer of equipment and services for oil and gas exploration and production.

        The division designs and manufactures subsea oil and gas production equipment for conventional subsea development as well as for deep waters. It offers a broad range of services, with particular expertise in offshore production, including:

•

front-end engineering and design studies, employing the division's technical and market expertise to develop a plan for building all or a portion of a production facility;



•

procurement of materials and equipment to be used in oil and gas production facilities, including equipment from the Oil, Gas and Petrochemicals division and other ABB business divisions;



•

management of projects for the development of a production facility; and



•

modification and maintenance, in which we apply our expertise to troubleshoot and make repairs and/or make proposals about enhancing productivity and efficiency.

        In the downstream market, the Oil, Gas and Petrochemicals business is a full service engineering company. In addition to expertise in EPC projects, it licenses approximately 50 process technologies in the refining, chemical, petrochemical and polymer fields. It has particular expertise

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in ethylene process technologies through ABB Lummus Global, which is part of the ABB Group. Ethylene is used as a raw material in a wide variety of plastics. It also provides modernization and maintenance services for refining and petrochemical facilities in the downstream market.

        Contracts for the Oil, Gas and Petrochemicals business's products and projects in both the upstream and downstream markets include both turnkey contracts and contracts providing for reimbursement of design, procurement, project management, construction management and commissioning. The business seeks to integrate its planning and project management expertise with the equipment that it produces, particularly in the turnkey EPC projects.

        The Oil, Gas and Petrochemicals business is also active in the design and fabrication of a wide variety of gas treatment systems. It produces equipment that cleanses (tail gas clean-up) and neutralizes (acid gas sweetening) the hazardous components of gasses that result from the petrochemical refining process before those gasses are released into the atmosphere. Its services in this area and in the area of gas processing for producing products such as ethylene and propane include project definition, installation, training and technical assistance.

Customers

        The Oil, Gas and Petrochemicals business serves a range of customers, including multinational integrated oil and gas companies, independent local and regional oil companies, national (i.e., state-owned) oil companies, drilling contractors, engineering contractors, independent exploration and production companies and petrochemical companies.

Sales and Marketing

        All sales and distribution activities of the Oil, Gas and Petrochemicals business, in both upstream and downstream oil and gas markets, are handled directly through dedicated sales forces with respect to both product and project sales.

Competition

        The Oil, Gas and Petrochemicals division's competitors include the following:

Upstream Market	Downstream Market
• Cooper Cameron	• Bechtel Group
• FMC Technologies	• Fluor
• Halliburton	• Foster Wheeler Corporation
• Aker Kvaerner	• Institut Français du Pétrol (IFP)
• CSO/Technip	• Kellog Brown & Root (a unit of Halliburton)
• Wood Group	• Snamprogetti S.p.A.
	• Technip-Coflexip
	• UOP LLP
	• Japan Gasoline Corp. (JGC)
	• Chiyoda

Research and Development

        Research and development expenses for the Oil, Gas and Petrochemicals division amounted to approximately $44 million for 2003. On the downstream side, key research and development activities included the start-up of a demonstration unit at the Tianjin Petrochemical Complex in China for the next generation of ethylene and propylene technology. Additional research in the downstream area related to new solid catalyst alkylation for refining clean fuels, new catalysts for

40

petrochemical and refinery processing, membrane solutions for gas processing, and metallocene catalysts for polypropylene.

        On the upstream side, key research areas included long-range remote control of subsea oil and reserve monitoring systems to enable compact and more efficient extraction, processing and separation of oil and natural gas in water depths up to 3,000 meters and hostile environments, as well as specialized floating platform systems for deep water oil exploration in benign environments and small oil fields that require cost-effective resource recovery systems.

Capital Expenditures

        The Oil, Gas and Petrochemicals division's capital expenditures for property, plant and equipment were $43 million, $34 million and $38 million in 2003, 2002 and 2001. The capital expenditures during this period related primarily to purchases of machinery and equipment in the United States, Great Britain, Italy and Norway.

Insurance Business

        Our Insurance business area provides international reinsurance and insurance underwriting through Sirius International and specialized primary insurance in the United States through Sirius America. In reinsurance, the reinsurer, in return for a premium payment, provides coverage to a primary insurance company for all or a specific portion of the primary insurer's obligation to its customer. The business area's brokerage companies, Komposit in Germany and ABB Insurance Brokers in Switzerland, provide services to ABB companies and third-party clients. Our network of branches and local companies comprises locations in Sweden, Germany, Belgium, Switzerland, Singapore and the United States.

        An important part of the reinsurance portfolio is excess of loss coverage, mainly in the property, marine, aviation, oil and energy sectors. This type of insurance provides coverage against all or a specified portion of losses on underlying insurance contracts to the extent they exceed an agreed level of losses.

        Investment income is a substantial component of this business area's results. We pursue prudent policies in managing our own funds and cooperate with investment managers to maximize returns within set guidelines.

        We determine our insurance liability based on reports from primary insurers that we reinsure and underwriting associations, as well as on our management's, including in-house actuaries', estimates. These estimates include incurred but not reported losses, salvage and subrogation recoveries. We seek to reduce the loss from our underwriting liabilities by reinsuring certain levels of risks with other insurance enterprises or reinsurers. We use recoverable amounts to cover both our paid and unpaid losses. We estimate these recoverable amounts in a manner consistent with the claim liability associated with the relevant reinsurance policy. Contracts where it is not reasonably possible that the reinsurer may realize a significant loss from the insurance risk generally do not meet the conditions for reinsurance accounting and are recorded as deposits.

        Provisions for unearned premiums and claims are calculated on a pro rata or more conservative basis over the period for which coverage is provided.

        Expected trends of frequency, severity and other factors inherent in the loss reserve estimates can vary significantly as claims are settled. Accordingly, ultimate losses may materially differ from the amounts we have currently provided for.

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        The following table sets forth a reconciliation of the beginning and ending gross liability for unpaid claims and claim expenses and a reconciliation of the gross liability to the corresponding net liability:

	Year ended December 31,
	2003	2002	2001
	($ in millions)
Net liability, beginning of year	1,630	1,729	937
Reinsurance recoverable, beginning of year	337	324	268
Gross liability, beginning of year	1,967	2,053	1,205
Gross incurred claims and claim expenses related to:
Current year	347	326	466
Prior years	267	221	638
Total	614	547	1,104
Gross payments for claims and claim expenses related to:
Current year	34	42	64
Prior years	831	691	417
Total	865	733	481
Other	109	100	225
Gross liability, end of year	1,825	1,967	2,053
Reinsurance recoverable, end of year	343	337	324
Net liability, end of year	1,482	1,630	1,729

        Prior to 2001, we presented a portion of our insurance reserves on a discounted basis, which estimated the present value of funds required to pay losses at future dates. During 2001, the timing and amount of claims payments being ceded to us in respect of prior years' finite risk reinsurance contracts changed and could not be reliably determined at December 31, 2001. Therefore, we did not discount our loss reserves, resulting in a charge to losses and loss adjustment expenses in 2001 of $295 million, which is disclosed in the "Other" line item above. We believe that this variability in ceded loss payments will preclude us from discounting our loss reserves in the future until reliably determinable amounts and timing of these payments can be re-established. Accordingly, as of December 31, 2003, 2002 and 2001, the insurance reserves have not been presented on a discounted basis.

        As we conduct our business in multiple currencies, we continuously evaluate currency risk and use derivatives such as currency forward contracts to reduce the currency risk. Currency translation is included in "Other" in the table above and represents the majority of amounts in this line item with the exception of the $295 million adjustment for discounting of our loss reserves, discussed above.

        The following information presents the development of the estimated year-end liability for unpaid claims and claim adjustment expenses for the five years prior to 2003. Sufficient data are only available for periods subsequent to 1997, as certain acquisitions and substantial changes to our Insurance business systems prevent us from obtaining reliable information prior to 1998.

        The first line of the table reflects our estimated liability for unpaid claims and claim adjustment expenses recorded at the balance sheet date for each of the indicated years. This liability represents the estimated amount of losses and loss adjustment expenses for claims arising in all

42

prior years that are unpaid at the balance sheet date, including estimated losses that had been incurred but not yet reported to us.

        The amounts following the first line of the table reflect the re-estimated amount of the previously recorded liability based on experience as of the end of the succeeding year. The estimate may change as additional information becomes available related to claims in any individual year. These changes are reflected in our operating results in the year the estimate is changed. The "Cumulative gross deficiency (redundancy)" line below represents the aggregate change in the reserve estimates from the original balance sheet dates through December 31, 2003. The amounts shown are cumulative in nature. For example, a deficiency recognized in 2002 relating to losses incurred prior to December 31, 1998 would be included in the cumulative deficiency amount for each year in the period 1998 through 2002. However, the deficiency would be reflected only in our 2002 operating results.

        The next section of the table reflects the cumulative amount paid with respect to the re-estimated liability as of the end of each succeeding year. The last section of the table reflects the gross liability, reinsurance recoverable and net liability recorded at each year-end. The difference between the gross liability and re-estimated gross liability represents the "Cumulative gross deficiency (redundancy)."

	Year ended December 31,
	1998		1999	2000	2001		2002		2003
	($ in millions)
Gross liability for unpaid claims and claim adjustment expenses	731		1,068	1,205	2,053		1,967		1,825
Gross liability re-estimated as of:
One year later	624		844	1,650	1,887		1,646
Two years later	602		1,083	1,597	2,037
Three years later	611		998	1,754
Four years later	648		1,114
Five years later	643
Total cumulative gross deficiency (redundancy)	(88	)	46	549	(16	)	(321	)
Cumulative amount of gross liability paid as of:
One year later	184		212	447	622		801
Two years later	218		488	861	1,197
Three years later	352		707	1,354
Four years later	482		1,034
Five years later	664
Gross liability, end of year	731		1,068	1,205	2,053		1,967		1,825
Reinsurance recoverable, end of year	161		254	268	324		337		343
Net liability, end of year	570		814	937	1,729		1,630		1,482
Re-estimated gross liability	643		1,114	1,754	2,037		1,646
Cumulative gross deficiency (redundancy)	(88	)	46	549	(16	)	(321	)

CAPITAL EXPENDITURES

        Total capital expenditures for property, plant and equipment for the ABB Group (excluding discontinued operations) amounted to $399 million, $436 million and $551 million in 2003, 2002 and 2001, respectively. The majority of the capital expenditures in 2003 related to replacement of existing equipment and improvements in existing production and testing sites, primarily in Germany, Sweden, Italy, the United States, France and China. Total divestitures of property, plant and

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equipment amounted to $153 million, $459 million and $169 million in 2003, 2002 and 2001, respectively. Of the total divestitures of 2003, $96 million related to the sale of our real estate properties, mainly from Switzerland, the United States, the United Kingdom and France.

SUPPLIES AND RAW MATERIALS

        We purchase a variety of raw materials for use in our production and project execution processes. The main materials used in our products, by weight, are steel, copper, aluminum, mineral oil and various plastics. We also purchase a variety of fabricated products and electronic components.

        We operate a worldwide supply chain management network with employees dedicated to this function in business areas and key countries. The supply chain management network uses the scale of the ABB Group to maximize the efficiency of supply networks. We expanded our eBusiness activities within the last two years, including e-procurement for materials and services, and further developed advanced supplier collaboration tools and a supplier information system.

        For many commodities that we purchase, including steel, fabricated copper and aluminum products and products derived from crude oil, the recovery in global economic growth, rising demand from China and changes in foreign exchange rates (particularly the U.S. dollar and the euro) have led to increases in raw materials costs for these commodities. While some of these increases will be offset through use of multi-year contracts and, in the case of copper and aluminum, through hedging, we expect prices to rise for many of these commodities in 2004 compared to 2003.

        In the field of electronic components, subassemblies or fabricated products, prices remained stable or decreased slightly in 2003 compared to 2002. Electronic component lead times remained relatively short in the first half of the year, but increased in the second half, although there were no shortages. We expect to experience shortages and significant price increases for certain components during 2004, which we expect will primarily affect our Automation Technologies division.

        There can be no assurance that our ability to obtain sufficient raw materials will not be adversely affected by unforeseen developments. In addition, the price of raw materials may vary, perhaps substantially, from year to year.

        We hedge our exposure to commodity risk arising from the changes in prices of raw materials. We manage copper and aluminum price risk using swap and forward contracts based on the London Metal Exchange price for these commodities. Our hedging policy is designed to minimize price volatility and create a stable cost base for the ABB Group. Hedging has the effect of minimizing the unfavorable impact of price increases in commodities, but it also limits the favorable impact of decreasing prices. In most cases, the gains and losses derived from our commodity hedging transactions are deferred and reflected in the cost of goods sold when the underlying physical transaction takes place. In addition to using hedging to reduce our exposure to fluctuations in raw materials prices, in some cases we can reduce this risk by incorporating changes in raw materials prices into the prices of our products.

RESEARCH AND DEVELOPMENT

        Each year, we invest significantly in research and development. Our research and development area focuses on developing and commercializing the core technologies of our businesses that are of strategic importance to our future growth. In 2003, 2002 and 2001, we invested $613 million, $547 million, and $590 million, respectively, or approximately 3.3%, 3.1%, and 3.2% of annual revenues, respectively, on research and development activities. We also had expenditures of

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$317 million, $248 million, and $404 million, respectively, or approximately 1.7%, 1.4% and 2.2%, respectively, of annual revenues in 2003, 2002 and 2001, on order-related development activities. These are customer- and project-specific development efforts that we undertake to develop or adapt equipment and systems to the unique needs of our customers in connection with specific orders or projects. Order-related development amounts are initially recorded in inventories as part of the work in progress of a contract and then are reflected in cost of sales at the time revenue is recognized in accordance with our accounting policies.

        In addition to continuous product development, and order-related engineering work, we develop future technology platforms for technology applications in our automation and power businesses in our Group research and development labs, which operate on a global basis. Through active management of our investment in research and development, we seek to maintain a balance between short-term and long-term research and development programs and optimize our return on investment.

        Our global computer network links our engineers and scientists to facilitate the exchange of ideas and foster the development of new products and systems. A significant part of our research and development activities is carried out in our nine research and development centers in the United States, Europe and Asia.

        In 2002 and 2001, we streamlined our portfolio of projects and sharpened the focus of our corporate research programs considerably. We have concentrated our research and development resources in two globally operating Group research and development laboratories, which focus on automation and power technologies, eliminating previous overlaps. In addition, we have shifted our resources toward new technologies, such as Industrial IT and wireless applications. This new focus has led to a reduction of more than 200 employees working in corporate research and development.

        We are building up new research and development activities in the United States and Asia, while moving away from research and development relating to mature technologies in Europe.

        Our two global research and development laboratories are strategically focused on two key areas of research: automation and power. They coordinate their research and link—in a fully networked, online environment—our scientists and engineers with one another, and with partner universities, research institutes and organizations.

        Recent developments include:

•

a broad campaign to implement our proprietary ABB Industrial IT architecture in all our products and systems;



•

a set of innovations relating to robots, including software for easy programming of robot applications, as well as the development of high precision robots for consumer products and manufacturing applications;



•

comprehensive software packages to serve the deregulated energy markets;



•

design optimized grids to facilitate the business processes of energy providers;



•

new products for the electrical power market to increase the efficiency, power quality and safety of the power transmission and distribution systems;



•

applications of power electronics in powerful drives for use in marine vessels, together with innovative propulsion concepts; and

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•

exploration of nanotechnologies, the design of material on a molecular base, for a variety of applications in our industry as well as micro-electromechanical systems in automation and power applications.

PATENTS AND TRADEMARKS

        We believe that intellectual property has become as important as tangible assets for a technology group such as ABB. Over the past ten years, we have almost doubled our total number of first patent filings, and we intend to continue our aggressive approach to seeking patent protection. Currently, we have over 14,000 patent applications and registrations, of which approximately 6,700 are pending applications. In 2003, we filed patent applications for more than 450 new inventions. Based on our existing intellectual property strategy, we believe that we have adequate control over our core technologies. The "ABB" trademarks and logo are protected in all of the countries in which we operate. We aggressively defend the reputation associated with the ABB brand.

ENVIRONMENTAL ACTIVITIES

        Environmental management is one of our highest business priorities. We address environmental issues in all our business operations. Our goal is to improve our social and environmental performance continuously, and improve the quality of life in the communities and countries where we operate.

        Our social and environmental efforts include:

•

joining initiatives that foster economic, environmental, social and educational development;



•

making positive contributions in the communities where we operate so they will welcome us and consider ABB an attractive employer and a good investment;



•

offering our customers eco-efficient products that save energy and are safe to use, that optimize the use of natural resources, minimize waste and reduce environmental impact over their complete life cycles;



•

sharing our latest technologies with emerging markets;



•

ensuring that our operations and processes comply with applicable environmental standards and legislation. Specifically, every operating unit must implement an environmental management system that continuously improves its environmental performance;



•

ensuring that our social and environmental policies are communicated and implemented;



•

working towards achieving best practices in occupational health and safety, and ensuring the health and safety of our employees, contractors and others involved in or affected by our activities; and



•

favoring suppliers that have sustainability policies and systems similar to our own.

        In 2003, we began the process of updating our environmental policy, which was unchanged since its introduction in 1992, to better reflect our commitments and activities. It is an integral part of our commitment to sustainability and is embedded in our strategies, processes and day-to-day business throughout the ABB Group.

        To continuously improve the environmental performance of our own operations, we are implementing environmental management systems according to the ISO 14001 standard on all our sites. We have implemented the ISO 14001 in 97% of our manufacturing facilities and service workshops (approximately 410 sites) and our environmental management program now includes

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operations in approximately 50 countries. We also require every operating unit within the ABB Group to implement an environmental management system that aims continuously to improve its environmental performance. We are now implementing an adapted environmental management system in our non-manufacturing organizations.

        We have introduced the concept of Environmental Product Declarations to communicate the environmental performance of our core products. These describe the salient environmental aspects and impacts of a product line, viewed over its complete life cycle. Declarations are based on Life Cycle Assessment studies, created according to the international standard ISO/TR 14025. To date, approximately 50 declarations have been produced for major product lines, 10 of which have been externally certified by agencies such as Det Norske Veritas (DNV) of Norway and the RINA Management System Certification Society in Italy.

        We have expanded the scope of our environmental reporting in recent years. In 2003, our formal reporting system covered approximately 80% of our employees. The parts of our business that are not yet covered by our reporting system have very limited environmental impacts. A total of 7 accidents were reported in 2003, none of which had a material environmental impact.

        One of our corporate objectives is to phase out the use of the hazardous substances that are recorded on our list of "restricted" substances. Priorities for replacement are set by each business using criteria such as the environmental aspects of alternatives, the risk of the substance escaping into the environment, how hazardous the substance is, whether we can use the substance under strict control and whether there are any technically acceptable alternatives.

        We have retained liability for environmental remediation costs at two sites in the United States that were operated by our former nuclear business, which we have sold to BNFL. The primary environmental liabilities associated with these sites relate to the costs of remediating radiological contamination upon decommissioning the facilities. For further information, see "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Environmental."

REGULATION

        Our operations are subject to numerous other governmental laws and regulations including those governing currency conversions and repatriation, taxation of foreign earnings and earnings of expatriate personnel and use of local employees and suppliers.

        As a reporting company under Section 12 of the U.S. Securities Exchange Act of 1934, as amended, we are subject to the U.S. Foreign Corrupt Practices Act's antibribery provisions with respect to our conduct around the world.

        Our operations are also subject to the 1997 Organization of Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, as implemented by the 34 signatory countries. The convention obliges signatories to adopt national legislation that makes it a crime to bribe foreign public officials. As of December 31, 2003, those countries which have adopted implementing legislation and have ratified the convention include the United States, Switzerland and several European nations in which we have significant operations.

        We and our subsidiaries conduct business in certain countries known to experience governmental corruption. While we and our subsidiaries are committed to conducting business in a legal and ethical manner, there is a risk that our employees or agents may take actions that violate either the U.S. Foreign Corrupt Practices Act or legislation promulgated pursuant to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. These actions could result in monetary penalties against us or our subsidiaries and could damage our reputation and, therefore, our ability to do business.

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RECENT DEVELOPMENTS AND SIGNIFICANT TRANSACTIONS

        For a description of our significant acquisitions, investments and divestitures in the last three fiscal years, see "Item 5. Operating and Financial Review and Prospects—Acquisitions, Investments and Divestitures."

SIGNIFICANT SUBSIDIARIES

        ABB Ltd, Zurich, Switzerland is the ultimate parent company of the ABB Group, which is comprised of around 500 subsidiaries (excluding dormant companies) worldwide. Besides ABB Ltd, the only other listed company in the ABB Group is ABB Ltd, India, which is listed on the exchanges in India at Mumbai (BSE and NSE), Ahmadabad, New Delhi and Kolkata.

        The following table sets forth, as of December 31, 2003, the name, country of incorporation and ownership interest of ABB Ltd of its significant subsidiaries:

Company Name / Location	Country	ABB Interest
		(%)
ABB S.A., Buenos Aires	Argentina	100.00
ABB Australia Pty Limited, Sydney	Australia	100.00
ABB AG, Vienna	Austria	100.00
ABB Ltda., Osasco	Brazil	100.00
ABB Bulgaria EOOD, Sofia	Bulgaria	100.00
ABB Inc., St. Laurent, Quebec	Canada	100.00
ABB (China) Ltd., Beijing	China	100.00
Asea Brown Boveri Ltda., Bogotá	Colombia	99.99
ABB Technology SA, Abidjan	Ivory Coast	99.00
ABB Ltd., Zagreb	Croatia	100.00
ABB s.r.o., Prague	Czech Republic	100.00
ABB A/S, Skovlunde	Denmark	100.00
Asea Brown Boveri S.A., Quito	Ecuador	96.88
Asea Brown Boveri S.A.E., Cairo	Egypt	100.00
ABB AS, Tallinn	Estonia	100.00
ABB Oy, Helsinki	Finland	100.00
ABB S.A., Paris La Défense	France	100.00
ABB AG, Mannheim	Germany	100.00
ABB Automation Products GmbH, Eschborn	Germany	100.00
ABB Gebäudetechnik AG, Mannheim	Germany	100.00
ABB Process Industries GmbH, Eschborn	Germany	100.00
Asea Brown Boveri S.A., Metamorphossis Attica	Greece	100.00
ABB (Hong Kong) Ltd., Hong Kong	Hong Kong	100.00
ABB Engineering Trading and Service Ltd., Budapest	Hungary	100.00
ABB Ltd., Bangalore	India	52.11
ABB Ltd, Dublin	Ireland	100.00
ABB Technologies Ltd., Tirat Carmel	Israel	99.99
ABB S.p.A., Milan	Italy	100.00
ABB Sace S.p.A., Milan	Italy	100.00
ABB Trasmissione & Distribuzione S.p.A., Milan	Italy	100.00
ABB K.K., Tokyo	Japan	100.00
ABB Ltd., Seoul	Korea	100.00
ABB Holdings Sdn. Bhd., Subang Jaya	Malaysia	100.00
Asea Brown Boveri S.A. de C.V., Tlalnepantla	Mexico	100.00
ABB BV, Rotterdam	Netherlands	100.00
ABB Capital, B.V., Amsterdam	Netherlands	100.00
ABB Holdings BV, Amsterdam	Netherlands	100.00
Lummus Worldwide Contracting B.V. (LUWOCO), The Hague	Netherlands	100.00
ABB Limited, Auckland	New Zealand	100.00
ABB Holding AS, Billingstad	Norway	100.00
Asea Brown Boveri S.A., Lima	Peru	99.99
Asea Brown Boveri Inc., Paranaque, Metro Manila	Philippines	100.00
ABB Sp. zo.o., Warsaw	Poland	95.98
ABB S.G.P.S, S.A., Amadora	Portugal	100.00
Asea Brown Boveri Ltd., Moscow	Russia	100.00
ABB Contracting Company Ltd., Riyadh	Saudi Arabia	65.00

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ABB Holdings Pte. Ltd., Singapore	Singapore	100.00
ABB Holdings (Pty) Ltd., Sunninghill	South Africa	80.00
Asea Brown Boveri S.A., Madrid	Spain	100.00
ABB AB, Västerås	Sweden	100.00
Sirius International Försäkrings AB (publ), Stockholm	Sweden	100.00
ABB Asea Brown Boveri Ltd, Zurich	Switzerland	100.00
ABB Schweiz Holding AG, Baden	Switzerland	100.00
ABB LIMITED, Bangkok	Thailand	100.00
ABB Holding A.S., Istanbul	Turkey	99.95
ABB Ltd., Kiev	Ukraine	100.00
ABB Industries (L.L.C), Dubai	United Arab Emirates	49.00
ABB Ltd., London	United Kingdom	100.00
ABB Holdings Inc., Norwalk	United States	100.00
ABB Inc., Raleigh, NC	United States	100.00
Asea Brown Boveri Inc., Norwalk, CT	United States	100.00
Asea Brown Boveri S.A., Caracas	Venezuela	100.00
ABB (Private) Ltd., Harare	Zimbabwe	100.00

DESCRIPTION OF PROPERTY

        As of December 31, 2003, the ABB Group had manufacturing, production and development facilities in approximately 100 countries throughout the world with over 18 million square meters of land and over 7 million square meters of building space. The facilities consist mainly of manufacturing plants, office buildings, research centers and warehouses. A substantial portion of our production and development activities is conducted in Germany, the United States, Sweden, Switzerland, Finland, Norway and Italy. We also own or lease other properties, including office buildings, warehouses, research and development facilities and sales offices in many countries. We own approximately 50% of the buildings and approximately 80% of the land on which our facilities are located and lease the remainder.

        We own essentially all of the machinery and equipment used in our manufacturing operations. In certain countries, we have entered into sale-leaseback agreements, notably in Sweden and Switzerland. Our sale-leaseback arrangements generally pertain to administrative buildings and partly to manufacturing facilities. From time to time, we have a surplus of space arising from acquisitions, production efficiencies and/or restructuring of operations. Normally, we seek to sell such surplus space or, to a lesser extent, lease it to third parties.

        It is our general policy to maintain facilities and equipment at quality levels assuring continuous production at good efficiency and safety standards. The net book value of our property, plant and equipment as of December 31, 2003 was $2,840 million, of which machinery and equipment represented $1,360 million and land and buildings represented $1,480 million. We believe that our current facilities are in good condition and are adequate to meet the requirements of our present and foreseeable future industrial operations.

Item 5. Operating and Financial Review and Prospects

        You should read the following discussion of our financial condition and results of operations in conjunction with our Consolidated Financial Statements and the related notes and other financial information contained elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties, including those discussed in "Item 3. Key Information—Risk Factors." See "Forward-Looking Statements" at the beginning of this annual report.

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ABOUT ABB

        We are a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. We employ approximately 116,000 people and operate in approximately 100 countries.

        We are headquartered in Zurich, Switzerland and our shares are traded on the SWX Swiss Exchange (virt-x), the Stockholm Exchange, the New York Stock Exchange (in the form of ADSs), the Frankfurt Exchange and the London Stock Exchange.

        We were formed in 1988, when Asea AB of Sweden and BBC Brown Boveri of Switzerland merged under the name ABB Ltd. Asea AB's history dates back to 1883. BBC Brown Boveri was founded in 1891.

MANAGEMENT OVERVIEW

        During the past three years, we have incurred significant net losses, principally as a result of a greater-than-anticipated increase in the number of, and in the amounts required to settle, certain asbestos-related claims, the weak performance of some of our businesses that are now classified as non-core activities or discontinued operations, as well as the effects on us of an overall weakening of global markets. As a result of these losses, combined with the effect of a repurchase of our own shares in 2001 and certain other factors, our consolidated stockholders' equity had decreased to approximately $1.0 billion at December 31, 2002. During 2003, we carried out a capital strengthening program designed to improve our Consolidated Balance Sheet to appropriate levels for an industrial company of our size and to provide our core divisions with the financial flexibility they need for profitable growth. We used part of the proceeds from the capital strengthening program to repay the remaining portion of our then existing $1.5 billion credit facility.

        In addition to the capital strengthening program, we have taken a number of steps to realign our organization and cost base, including reducing our workforce, selling some of our non-core businesses and other assets, extending our debt maturity profile and pursuing a settlement in relation to our asbestos exposure in the United States. As a result of the capital strengthening program and despite the $767 million net loss reported in 2003, our consolidated stockholders' equity had increased to approximately $3.0 billion at December 31, 2003 and our Consolidated Balance Sheet included approximately $5.1 billion of cash, equivalents and marketable securities at the same date.

        In 2002, we introduced the Step Change Program, which is designed to increase the competitiveness of our core divisions, reduce overhead costs and streamline operations, and is expected to result in approximately $900 million of cost savings on an annual basis by 2005. See "—Restructuring Expenses" and Note 25 to our Consolidated Financial Statements.

        Marking further progress towards the settlement of the asbestos issue, a U.S. district court confirmed a pre-packaged Chapter 11 plan of reorganization filed for our subsidiary Combustion Engineering. The plan will become effective when the confirmation order issued in 2003 has become a final order that is not subject to appeal and the other conditions to the effectiveness of the plan have been satisfied. The U.S. Federal Third Circuit Court of Appeals granted a motion for expedition of appeals and has set June 3, 2004 as the hearing date with respect to the appeals. Regardless of whether or not the pre-packaged plan becomes effective, the Master Settlement Agreement, which settles the amount of and provides for the partial payment on approximately 110,000 asbestos claims, remains effective. See "—Contingencies and Retained Liabilities" and Note 18 to our Consolidated Financial Statements. Although the nature of litigation makes it difficult to predict any particular outcome, we remain confident that the confirmation of the plan will be affirmed.

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        Since 2002, we have disposed of a number of businesses and assets in furtherance of our strategy to focus on our core divisions. We also signed an agreement to sell the upstream part of our Oil, Gas and Petrochemicals businesses to a private equity consortium. See "Acquisitions, Investments and Divestitures." We have received proceeds of approximately $1.2 billion from the divestments carried out in 2003 and with the divestment of the upstream part of our Oil, Gas and Petrochemicals businesses and the Reinsurance business, we are on course to generate proceeds of more than $2 billion from our various divestment programs.

        Our principal plans for 2004 include continued operational improvements in the core businesses and continued efforts to realize savings from the Step Change Program. We also intend to complete our divestment program (in particular, the remaining portion of our Oil, Gas and Petrochemical business and the remaining part of our Building Systems business), the disposal or closure of non-core activities and to further reduce our total debt using the proceeds of these divestments.

        Effective January 1, 2004, some business areas within our business divisions were combined. The changes are further discussed in "—Organizational Structure—Our Business Divisions."

ORGANIZATIONAL STRUCTURE

        Effective January 1, 2003, we realigned our business divisions to combine our former Power Technology Products and Utilities divisions into a new Power Technologies division and combined our former Automation Technology Products and Industries divisions into a new Automation Technologies division. Our Oil, Gas and Petrochemicals businesses, a part of which we have agreed to sell, and our Insurance business area were reclassified as discontinued operations along with a number of other businesses in 2003 and 2002, respectively. Our remaining activities were grouped as Non-core activities and the remaining headquarter type functions were grouped into a Corporate/Other division. We began reporting our financial results to reflect this new structure effective January 1, 2003.

        We streamlined our divisional structure to help sharpen our focus on power and automation technologies, to increase efficiency and to create a sustainable lower cost base. We consider the Power Technologies and Automation Technologies divisions to be our core divisions, and our management intends to focus its attention on, and future investments in, these divisions.

        Effective January 1, 2004, some business areas within our business divisions were combined. The changes are further discussed within "—Our Business Divisions."

Our Business Divisions

Power Technologies Division

        The ABB Power Technologies division serves electric, gas and water utilities, as well as industrial and commercial customers, with a broad range of products, systems and services for power transmission, distribution and power plant automation. The division had approximately 39,000 employees at December 31, 2003. See "Item 4. Information on the Company—Business Divisions—Power Technologies Division—Business Areas" for a breakdown of the approximate proportion of the Power Technologies division's revenue generated in 2003 by each business area in the division.

        The Power Technologies division at January 1, 2004 consists of five business areas:

•

Power Systems



•

Utility Automation Systems

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•

High-Voltage Products



•

Medium-Voltage Products



•

Transformers

        Our Power Systems business area generated approximately $2.3 billion in revenues in 2003 and had approximately 8,000 employees at December 31, 2003. Key product lines in this business area include transmission and distribution substations, flexible alternating current transmission systems (FACTS) and high-voltage direct current (HVDC) systems, which are technologically advanced concepts to increase transmission capacity and stability in power networks. Our HVDC and FACTS business lines are supported by our own in-house power semiconductor factory. In addition, this business area undertakes turnkey contracts to install and upgrade transmission and distribution systems.

        Our Power Systems business area sells primarily to utilities, but also to industrial end-users, and is complimented by a consulting and power systems services arm. Orders and revenues are evenly distributed among the Americas, Europe, the Middle East and Africa, and Asia-Pacific.

        Our Utility Automation Systems business area generated approximately $1.3 billion in revenues in 2003 and had approximately 5,500 employees at December 31, 2003. This business area is focused on automation, control and protection systems for power generation, power transmission and distribution networks, the energy market and water management. It also offers substation automation and protection products and systems and complete utility communication networks. Europe, Middle East and the United States are major markets, while activities in Asia are expanding.

        Our High-Voltage Products business area generated approximately $1.4 billion in revenues in 2003 and had approximately 6,000 employees at December 31, 2003.

        This business area's primary products include high-voltage switchgear and high-current systems and cables. We sell high-voltage products primarily to utilities, as well as to distributors, wholesalers, installers, original equipment manufacturers and industrial end-users. We export mostly from Europe to all parts of the world.

        Our Medium-Voltage Products business area generated approximately $1.5 billion in revenues in 2003 and had approximately 7,000 employees at December 31, 2003. This business area develops, manufactures and sells a wide range of circuit breakers and contactors, fuses, sensors, switches, vacuum interrupters and outdoor distribution products and sells primarily to utilities, industrial end-users, distributors, wholesalers, installers and original equipment manufacturers. Revenues of this business are primarily generated in Western Europe, followed by Asia, North America and the Middle East.

        The former Distribution Transformers and Power Transformers business areas, which shared many locations, were merged to form a single Transformers business area at the beginning of 2004. The merger is intended to help reduce product overlaps, eliminate redundant research and development efforts, and improve supply chain management.

        The combined Transformers business area generated approximately $2 billion in revenues in 2003 and, at December 31, 2003, had approximately 13,000 employees. The business area sells a wide range of transformers—from single-phase transformers, to small, medium and large distribution transformers, reactors, traction, phase-shifting, converter and extra high-voltage transformers. Europe and the Americas account for a major portion of this business area's revenues while the revenues in Asia and the Middle East are improving.

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Automation Technologies Division

        The ABB Automation Technologies division provides products, systems, software and services for the automation and optimization of industrial and commercial processes. Key technologies include measurement and control, instrumentation, process analysis, drives and motors, power electronics, robots and low-voltage products. The division had approximately 55,000 employees at December 31, 2003. See "Item 4. Information on the Company—Business Divisions—Automation Technologies Division—Business Areas" for a breakdown of the approximate proportion of the Automation Technologies division's revenue generated in 2003 by each business area in the division.

        The Automation Technologies division at January 1, 2004 consists of three business areas:

•

Automation Products



•

Process Automation



•

Manufacturing Automation

        The Automation Products business area generated approximately $4.5 billion in revenues in 2003 and had approximately 27,000 employees at December 31, 2003. Key products in the Automation Products business area include low and medium-voltage drives, as well as low and high-voltage motors, which are used in the building automation, marine, power, transportation, manufacturing and process industries. The business area also offers power electronics systems, which are sold to metals smelters, railway manufacturers and power plants.

        Other low-voltage products offered by the Automation Products business area include devices for power quality and protection, wire management, switching and motor control. Instrumentation products include actuators and positioners, analytical instruments, as well as devices to measure flow, pressure, level, temperature and similar process variables.

        Many of this business area's automation products are high volume products sold through channel partners, such as distributors, wholesalers, installers, and original equipment manufacturers. The business area is geographically diverse, with operations and customers throughout Europe, the Americas and Asia.

        The Process Automation business area generated approximately $4.0 billion in revenues in 2003 and had approximately 21,500 employees at December 31, 2003. It combines the resources of three former business areas: Control Platform and Enterprise Products; Petroleum, Chemical and Consumer; and Paper, Minerals, Marine and Turbocharging.

        This new business area includes control, force measurement, marine and turbocharging systems among its key technologies. The largest among these is the design of systems for control and plant optimization in the process and utility industries, where our employees apply their extensive knowledge of customer processes to application-specific requirements.

        Marine sector solutions include our systems for electric propulsion, power generation and distribution, automation and heating, ventilation and air conditioning systems aboard cruise, cargo and other offshore vessels. Our turbochargers add performance, environmental and fuel efficiency to large gasoline and diesel engines.

        Our Process Automation business area is geographically diverse, with strategic hubs of activity, including research and development, in the United States, Europe, India, China and Southeast Asia. Revenues of this business area are primarily generated in Europe followed by the Americas and Asia with equal share and the Middle East with a comparatively lower share.

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        The Manufacturing Automation business area generated approximately $1.4 billion in revenues in 2003 and had approximately 6,500 employees at December 31, 2003. Our Manufacturing Automation business has a large installed base of industrial robots—more than 100,000—and sells robots and related equipment and software to the automotive, material handling, foundry and packaging industries.

        This business area also develops standardized manufacturing cells for machine tending, welding, cutting, painting and finishing and provides packaged systems to auto manufacturers for press automation, paint process automation and power train assembly.

        This business area's research and development and manufacturing locations are focused in the United States and Sweden—near major automotive centers. Most of our revenues in this business area are generated in the Americas, Western Europe and China.

Non-Core Activities Division

        Business activities that are not directly linked to our Power Technologies and Automation Technologies divisions (our core divisions) and which we are considering for sale, winding down or otherwise discontinuing are grouped together and their results are reported under the heading of Non-Core Activities. These activities comprise primarily the remaining parts of Equity Ventures business area, the remaining parts of the Structured Finance business area, the remaining parts of the Building Systems business area, the remaining parts of the New Ventures business area and a number of other activities, including Customer Service Workshops, Logistic Systems and the Group Processes business areas. The Insurance business area, which was previously included in Non-Core Activities, is now discussed as part of discontinued operations following our agreement in December 2003 to sell this business to White Mountains Insurance Group Limited of Bermuda. The businesses in the Non-Core Activities division are not being managed as an integral part of our business. The division had approximately 8,700 employees at December 31, 2003.

        Our Equity Ventures business area owns and operates infrastructure projects in various countries. Our Equity Ventures business area originally focused its investment activities on independent power projects because it provided business opportunities for our former power generation division. Subsequent projects also were selected primarily to develop opportunities to sell our equipment and systems. Therefore, the Equity Ventures portfolio reflects some of the businesses in which we were engaged when the investments were made. Our Equity Ventures business area is not pursuing further project development or additional investments and we will consider selling investments of this business area when we believe we have received an optimal offer. During 2003, we sold our stakes in ABB Redbank Project Pty Ltd. (a power plant) and ElectraNet Pty Ltd (an electricity transmission service provider), both in Australia.

        Our Structured Finance business area provides financing, including export, trade and project financing and asset-based leasing and lending. In 2002, we decided to sell our Structured Finance businesses. In 2003, we continued the divestment of our remaining Structured Finance business area, including our ownership interest in the Swedish Export Credit Corporation, certain lease and loan portfolios, ownership interests in infrastructure projects and other financial assets. We sold ABB Export Bank, previously part of our Structured Finance business area in December 2003. The remaining Structured Finance assets, representing approximately $600 million of financing receivables, will be sold, discontinued or run off.

        Our Building Systems business area designs, builds and maintains complete installations for industrial, infrastructure and commercial facilities, integrating products manufactured by our Power Technologies and Automation Technologies divisions, as well as those from third-party suppliers. Following our decision to divest our Building Systems businesses in 2002, we finalized the divestment of a number of our activities in the Building Systems business area during 2003,

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including our activities in Austria, Belgium, the Netherlands, the Nordic region (Baltic states, Denmark, Finland, Norway, Russia and Sweden), Portugal and the United Kingdom. We have not yet sold the Building Systems businesses in Germany, Poland, the United States, Hong Kong and Egypt. In February 2004, we signed an agreement to sell our Building Systems business in Switzerland to an investor group, while retaining a 10% interest in the business.

        We established New Ventures in 2001 as a "fast lane" business incubator that would find, develop and invest in new business opportunities, both internally and externally. New Ventures had three investment portfolios—the Industrial IT Venture Fund and Operational Ventures, both of which focused on investment opportunities externally, and Innovisions, which focused on opportunities internally. Activities involved providing both seed funding for start-ups and growth funding for mature businesses. It also directly managed several majority-owned companies. In October 2002, we announced a restructuring program to discontinue Non-core activities in New Ventures and transfer out a number of core activities to other business areas. In December 2003, we announced the sale of our Wind Energy business in Germany, which was primarily focused on the development and engineering, procurement and construction of wind parks, primarily in Europe. We intend to divest the remainder of the business area, which includes the Distributed Energy business and investments in emerging technology businesses.

        We originally formed Group Processes as a business division in January 2001 to drive growth and cut costs by establishing common working processes and a common IT infrastructure for the entire ABB Group. The areas of focus included supply and demand chain management, project management, financial processes, internal audit, quality control and marketing and sales. In addition, this division provided shared services in areas such as accounting and payroll and training through local services centers in many countries. This division also provided IT infrastructure services and applications support. The division was dissolved in October 2002 when supply and demand chain management as well as marketing and sales activities were moved into the core divisions to more closely link them to those businesses. The financial processes and shared services activities were moved into our finance function, under the auspices of our chief financial officer. In February 2003, all the IT operations were moved into the office of the chief information officer. Effective January 1, 2004, activities in the Group Processes business area had been dissolved or integrated into the core divisions, and Group Processes no longer functions as a separate business area.

        Our Customer Service Workshop operations consist of overhaul, repair and rewinding of rotating machine products manufactured by the Automation Technologies division, as well as those from third-party suppliers. Following the decision we made in 2002 to strategically reduce our activities in this business, most of our activities were either transferred to the core divisions, closed or divested. We continue our efforts to divest or close the remaining portion of this business during 2004.

        The Logistic Systems business area provides information technology packages and automation services to airports for baggage and material handling, air traffic management, as well as turnkey electromechanical and airfield lighting systems. In the Logistic Systems business area in 2003, we finalized our exit from Norway whereas our units in Italy, Singapore and Zimbabwe are completing certain projects before closure. We continue efforts to divest our German business.

Corporate/Other

        Our Corporate/Other comprises headquarters and stewardship activities, research and development activities and other activities, as described below. Corporate/Other had approximately 3,000 employees at December 31, 2003.

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        Headquarters and stewardship activities include the operations of our head office in Zurich, Switzerland, as well as corresponding local holding companies in approximately 65 countries. These operations cover staff functions with group-wide responsibilities, such as group accounting and consolidation, finance and controlling, audit, tax, financial advisory, legal affairs, risk management and insurance, communications, investor relations and human resources.

        Group Research and Development supports the divisions in developing cross-divisional technology platforms and builds up our protected technology. By close cooperation with the world's leading universities, cutting edge technology is transferred to our products and systems.

        Other activities include our Real Estate and Group Treasury Operations. Our Real Estate management objective is to enhance our competitiveness and effectively support our business activities, with the most efficient and profitable use of our real estate assets and facilities. Group Treasury Operations act as a cost center for internal treasury activities.

        The discussion that follows reflects how we managed and reported our businesses during 2003. Therefore, we refer to the business areas as they were prior to their realignment in 2004, discussed above. We have included a separate discussion of discontinued operations.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

General

        We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").

        The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to: costs expected to be incurred to complete projects; the costs of product guarantees and warranties: provisions for bad debts, inventories, investments, intangible assets and income taxes; provisions for restructuring, long-term service contracts, pensions and other post-retirement benefits, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        We deem an accounting policy to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our Consolidated Financial Statements. We believe the following critical accounting policies reflect the more significant estimates and assumptions that we use in the preparation of our Consolidated Financial Statements. These policies should be considered in reviewing our Consolidated Financial Statements.

Revenues and Cost of Sales Recognition

        We recognize revenues from the sale of manufactured products when all of the following conditions are met: a persuasive evidence of an arrangement exists, the sales price is fixed and determinable, collectibility is reasonably assured and title, including the risks and rewards of ownership, has been transferred to the customer. When multiple elements such as products and services are contained in a single arrangement or in related arrangements with the same customer, we allocate revenue to each element based on its relative fair value, provided that such element

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meets the criteria for treatment as a separate unit of accounting. The allocation of the sales price between delivered elements and undelivered elements might affect the timing of revenue recognition, but would not change the total revenue recognized on the contract. Revenues from short-term contracts to deliver services are recognized upon completion of required services to the customer. Revenues from contracts that contain customer acceptance provisions are deferred until customer acceptance occurs or the contractual acceptance period has lapsed. As a result, significant contract interpretation is sometimes required to determine the appropriate period of revenue recognition.

        These revenue recognition methods assume collectibility of the revenues recognized. When recording the respective accounts receivable, loss reserves are calculated to estimate those receivables that will not be collected. These reserves assume a level of default based on historical information, as well as knowledge about specific invoices and customers. There remains the risk that greater defaults will occur than originally estimated. As such, the amount of revenues recognized might exceed the cash which will be collected, resulting in a deterioration of earnings in the future. This risk is likely to increase in a period of significant negative industry or economic trends.

        Revenues under long-term contracts are recognized using the percentage-of-completion method of accounting. We principally use the cost-to-cost or delivery events methods to measure progress towards completion on contracts. We determine the method to be used by type of contract based on our experience and judgment as to which method best measures actual progress towards completion.

        The percentage-of-completion method of accounting involves the use of assumptions and projections, relating to future material, labor, construction and overhead costs. As a consequence, there is a risk that total contract costs will exceed those which we originally estimated. These risks are heightened if the duration of a contract increases or if the project is a turnkey project and the price is fixed, because there is a higher probability that the circumstances upon which we originally developed the estimates will change in a manner that increases our costs and that we will not recover them. Factors that could cause costs to increase include:

•

unanticipated technical problems with the equipment being supplied or developed by us which may require that we incur additional costs to remedy the problem;



•

changes in the cost of components, materials or labor;



•

difficulties in obtaining required governmental permits or approvals;



•

project modifications creating unanticipated costs;



•

suppliers' or subcontractors' failure to perform;



•

penalties incurred as a result of not completing portions of the project in accordance with agreed upon time limits; and



•

delays caused by unexpected conditions or events.

        Changes in our initial assumptions, which we review on a regular basis between balance sheet dates, may result in revisions to total estimated costs, current earnings and anticipated earnings. We recognize these changes in the period in which the changes in estimate are determined. We believe that this approach, referred to as the "catch-up approach," produces more accurate information because the cumulative revenue-to-date reflects the current estimates of the stage of completion. Additionally, losses on long-term contracts are recognized in the period when they are identified and are based upon the anticipated excess of contract costs over the related contract revenues. Any such losses are recorded as a component of cost of sales.

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        We accrue anticipated costs for warranties when we recognize the revenue on the related contracts. Warranty costs include calculated costs arising from imperfections in design, material and workmanship, performance guarantees (technical risks) and delays in contract fulfillment. Although we generally make assessments on an overall, statistical basis, we make individual assessments on orders with risks resulting from order-specific conditions or guarantees, such as plants or installations. There is a risk that actual warranty costs will exceed the amounts provided for, which would result in a deterioration of earnings in the future when these actual costs are determined.

        Revenues under cost-reimbursement contracts are recognized as costs are incurred. Shipping and handling costs are recorded as a component of cost of sales.

Accounting for Discontinued Operations

        Our strategy is to focus on power and automation technologies for utility and industry customers. In accordance with our strategy, we have sold or plan to sell certain businesses that are not part of our core power and automation technologies businesses. On January 1, 2002 we adopted Statement of Financial Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment or Disposal of Long Lived Assets. SFAS 144 broadened the presentation of discontinued operations to include disposal transactions involving less than an entire reporting segment, if certain criteria are met. The purpose of SFAS 144 is to allow for historically comparable data to be available to investors without the distortions created by divestments or the closure or abandonment of businesses, thereby improving the predictive value of financial statements. SFAS 144 requires the revenues and associated costs, net of taxes, of certain divestments and abandonments, to be classified as discontinued operations, net of taxes, below income from continuing operations in the Consolidated Income Statement and requires the related assets and liabilities to be classified as assets or liabilities held for sale and in discontinued operations in the Consolidated Balance Sheet.

        In order to classify a business as a discontinued operation, SFAS 144 requires that certain criteria be met. In certain cases, significant interpretation is sometimes required to determine the appropriate classification. Changes in plans regarding the sale of a business may change our interpretation as to whether a business should be classified as a discontinued operation. Any such reclassification may have a material impact on our income from continuing operations and the individual components thereof.

        In the Consolidated Statement of Cash Flows, we have included the businesses classified as discontinued operations in the individual line items within cash from operating, investing and financing activities, together with continuing operations, as permitted by U.S. GAAP.

        For a description of the discontinued operations reflected in our Consolidated Financial Statements, see "—Discontinued Operations."

Goodwill and Other Intangible Assets Impairment

        We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with the Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangible Assets. SFAS 142 requires that a two-step impairment test be performed on goodwill. In the first step, we compare the fair value of each reporting unit to its carrying value. Our reporting units are one level below the reportable segments identified in Note 26 of our Consolidated Financial Statements. We use a discounted cash flow model to determine the fair value of reporting units unless there is a readily determinable fair market value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and we are not required to

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perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step to determine the implied fair value of the reporting unit's goodwill and compare it to the carrying value of the reporting unit's goodwill. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, then we must record an impairment loss equal to the difference.

        The discounted cash flow model, which we use to estimate the fair value of our reporting units is dependent on a number of factors including estimates of future cash flows, appropriate discount rates and other variables. Estimating future cash flows requires us to make significant estimates and judgments involving variables such as sales volumes, sales prices, sales growth, production and operating costs, capital expenditures, market conditions and other economic factors. We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

        We review intangible assets in accordance with SFAS 144, and accordingly test for impairment upon the occurrence of certain triggering events such as a decision to divest a business.

        We record any related impairment charge in other income (expense), net in our Consolidated Income Statement, unless it is related to a discontinued operation, in which case the charge is recorded in loss from discontinued operations, net of tax.

Pension and Post-Retirement Benefits

        As more fully described in Note 21 to our Consolidated Financial Statements, we operate pension plans which cover the majority of our employees. We use actuarial valuations to determine our pension and post retirement benefit costs and credits. The amounts calculated depend on a variety of key assumptions, including discount rates and expected return on plan assets. We are required to consider current market conditions, including changes in interest rates, in selecting these assumptions. The discount rate is reviewed annually and considered for adjustment based on changes in long-term, highly rated corporate bond yields. Decreases in the discount rate result in an increase in the projected benefit obligation and to pension costs (as shown in Note 21 to our Consolidated Financial Statements).

        The expected return on plan assets is reviewed annually and considered for adjustment based on current and expected asset allocations and represents the long-term return expected to be achieved. Decreases in the expected return on plan assets result in an increase to pension costs. If the expected rate of return on assets for 2004 were to decrease by 0.5% from the 2003 rate of 6.01%, then our 2004 pension costs would be approximately $29 million higher.

        Under U.S. GAAP, we accumulate and amortize over future periods actual results that differ from the assumptions used. Therefore, actual results generally affect our recognized expense and recorded liabilities for pension and other post retirement benefit obligations in future periods.

        The "unfunded" balance, which can increase or decrease based on the performance of the financial markets or changes in our assumption rates, does not represent a mandatory short-term cash obligation. Instead, the unfunded balance of a pension plan is the difference between the projected obligation to employees ("PBO") and the fair value of the plan assets. While we comply with appropriate statutory funding requirements, at December 31, 2003, the unfunded balance of our pension plans was $1,636 million. In accordance with Statement of Financial Accounting Standards No. 87 (SFAS 87), Employers' Accounting for Pensions, we have recorded on the Consolidated Balance Sheet a net liability of $866 million in relation to this unfunded benefit balance. The difference is primarily due to an unrecognized actuarial loss of $737 million, which is amortized using the "minimum corridor" approach as defined by SFAS 87.

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        In May 2003, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on Emerging Issues Task Force No. 03-4 (EITF 03-4), Determining the Classification and Benefit Attribution Method for a "Cash Balance" Pension Plan, which requires the "traditional unit credit method" to be used for the calculation of the liability and attribution of the costs for pension plans with certain characteristics. We determined that certain of our pension plans covering the employees of Switzerland had the characteristics described in EITF 03-4 and therefore we changed the approach to calculating the PBO from the projected unit credit method to the traditional unit credit method. The change in cost attribution methods resulted in an actuarial gain of $406 million which is included in the unrecognized actuarial loss of $737 million and as described above, will result in lower net pension costs in future years, but did not affect earnings in the current year.

        We have multiple non-pension post-retirement benefit plans. Our health care plans are generally contributory with participants' contributions adjusted annually. For purposes of estimating our health care costs, we have assumed health care cost increases per annum to be 11.81% for 2003, then gradually declining to 5.96% per annum in 2013, and to remain at that level thereafter.

        Assumed health care cost trends have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care costs would have had the following effects at December 31, 2003:

	One-percentage- point increase	One-percentage- point decrease
	($ in millions)
Effect on total of service and interest cost components	2	(2	)
Effect on accumulated post-retirement benefit obligation	23	(20	)

Taxes

        In preparing our Consolidated Financial Statements we are required to estimate income taxes in each of the jurisdictions in which we operate. We account for deferred taxes by using the asset and liability method. Under this method, we determine deferred tax assets and liabilities based on temporary differences between the financial reporting and the tax bases of assets and liabilities. The differences are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We recognize a deferred tax asset when we determine that it is more likely than not that the asset will be realized. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. To the extent we increase or decrease this allowance in a period, we recognize the change in the allowance within Provision for taxes in the Consolidated Income Statement unless the change relates to discontinued operations, in which case the change is recorded in income (loss) from discontinued operations, net of tax. Unforeseen changes in tax rates and tax laws as well as differences in the projected taxable income compared to the actual taxable income may affect these estimates.

Consolidation

        We evaluate our investments in joint ventures and other types of investments for purposes of determining whether consolidation or the cost or equity method of accounting is appropriate. This determination is based upon our ability to retain and exercise control through our decision-making powers and our ability to exercise significant influence over the entity, as well as our ownership interests in the entity.

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        Material changes to our ability to retain control and exercise significant influence over an entity could change the accounting method between consolidation or the cost or equity method, which could have a material impact on our Consolidated Financial Statements.

        In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51. FIN 46 requires variable interest entities (VIEs) to be consolidated by their primary beneficiaries. Accordingly, VIEs entered into after January 31, 2003, are consolidated when we are considered the primary beneficiary. Also after January 31, 2003, previously consolidated variable interest entities would be deconsolidated when a triggering event, as defined by FIN 46, indicates we are no longer the primary beneficiary. For those VIEs where we are not the primary beneficiary, we apply our existing consolidation policies in accordance with U.S. GAAP.

        In determining the primary beneficiary of a VIE, we are required to make projections of expected losses and expected residual returns to be generated by that VIE. The projected expected losses and expected residual returns are critical to the identification of the primary beneficiary. These projections require us to use assumptions, including the probability of cash flows. Expected losses and expected residual returns materially different from those projected could identify another entity as the primary beneficiary. A change in the contractual arrangements or ownership between the parties involved in the VIE could have an impact on our determination of the primary beneficiary, which in turn, could have a material impact on our Consolidated Financial Statements.

Contingencies

        As more fully described in Note 18 to our Consolidated Financial Statements, we are subject to proceedings, lawsuits and other claims related to environmental, labor, product and other matters. We are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the amount of provision required, if any, for these contingencies is made after careful analysis of each individual issue, often with assistance from both internal and external counsel and technical experts. The required amount of provision for contingencies of any type may change in the future due to new developments in the particular matter, including changes in approach to its resolution, such as in settlement strategy.

Restructuring

        We recorded significant provisions in connection with our restructuring programs. These provisions include estimates pertaining to employee termination costs and the settlements of contractual obligations resulting from our actions. Although we do not anticipate significant changes, the actual costs may differ from these estimates due to subsequent developments such as voluntary retirement of employees and other business developments. These costs are recorded primarily in other income (expense), net, in the Consolidated Income Statement unless the costs relate to discontinued operations in which case the change is recorded in discontinued operations, net of tax. See "—Restructuring Expenses."

Our Insurance Business

        In December 2003 we entered into an agreement to sell our Reinsurance business and consequently we have reflected the results of operations in loss from discontinued operations, net of tax, and the assets and liabilities in assets and liabilities held for sale and in discontinued operations for all periods presented.

        We generally recognize premiums in earnings on a pro rata basis over the period coverage is provided. Premiums earned include estimates of certain premiums not yet collected. These premium receivables include premiums relating to retrospectively rated contracts. For such

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contracts, a provisional premium is collected that will eventually be adjusted. We include an estimated value of the actual premium in receivables. Unearned premiums represent the portion of premiums written that is applicable to the unexpired terms of reinsurance contracts or certificates in force. These unearned premiums are calculated by the monthly pro rata method or are based on reports from ceding companies that we reinsure.

        Insurance liabilities are reflected in liabilities held for sale and in discontinued operations, in our Consolidated Balance Sheet and represent unpaid claims, losses, and related loss expenses based upon estimates for losses reported, estimates received from ceding reinsurers, and estimates of incurred but not reported losses related to direct and assumed business, less amounts ceded to reinsurers. Reserves for unreported losses are determined by an estimate established using various statistical and actuarial techniques reflecting historical patterns of development of paid and reported losses adjusted for current trends. The inherent variability of the estimate is analyzed in order to ascertain whether it is reasonable before application. We do not discount loss and loss adjustment expense reserves.

        We develop our estimate considering a range of reserve estimates bounded by a high and a low estimate. The high and low ends of the range do not correspond to an absolute best and worst case scenario of ultimate settlements because such estimates may be the result of unlikely assumptions. Our best estimate therefore does not include the set of all possible outcomes but only those outcomes that are considered reasonable. Those estimates are subject to the effects of trends in loss severity and frequency. Although considerable variability is inherent in such estimates, we believe the reserves for losses and loss adjustment expenses are adequate. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes known; such adjustments are included in discontinued operations. Adjustments to reserves are reflected in the loss from discontinued operations, net of tax, in the periods in which the estimates are changed.

        We reflect our liability for losses net of anticipated salvage and subrogation recoveries. Salvage and subrogation received and changes in estimates of future recoveries are reflected in current year underwriting results. We believe the liabilities for losses and loss adjustment expenses are adequate to cover the ultimate liability; however, due to the underlying risks and high degree of uncertainty associated with the determination of the liability for losses, such estimates may be more or less than the amounts ultimately paid when the claims are settled.

        We seek to reduce the loss from our underwriting liabilities by reinsuring certain levels of risks with other insurance enterprises or reinsurers. We used recoverable amounts for both paid and unpaid losses. We estimate these recoverable amounts in a manner consistent with the claim liability associated with the reinsurance policy. The risk of collectibility of these reinsurance receivables arises from disputes relating to the policy terms and the ability of the reinsurer to pay.

NEW ACCOUNTING PRONOUNCEMENTS

        In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations, and SFAS 142 which modified the accounting for business combinations, goodwill and identifiable intangible assets. All business combinations initiated after June 30, 2001, must be accounted for by the purchase method. Goodwill from acquisitions completed after that date is not amortized, but charged to operations when specified tests indicate that the goodwill is impaired, that is, when the goodwill's fair value is lower than its carrying value. Certain intangible assets are recognized separately from goodwill, and are amortized over their useful lives. During 2002, all goodwill was required to be tested for impairment as of January 1, 2002, with a transition adjustment recognized for any impairment found. We determined that no impairment of goodwill existed at January 1, 2002. All goodwill

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amortization also ceased at that date. We recognized goodwill amortization expense in continuing operations of $148 million in 2001, and goodwill amortization expense in discontinued operations of $43 million in 2001. Accordingly, income from continuing operations in 2001 would have been $319 million ($ 0.28 per share), loss from discontinued operations in 2001 would have been $794 million ($ 0.70 per share) and net loss in 2001 would have been $538 million ($ 0.48 per share) if we had not recognized amortization expense for goodwill that is no longer being amortized in accordance with SFAS 142.

        In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143 (SFAS 143), Accounting for Asset Retirement Obligations, which is effective for fiscal years beginning after June 15, 2002, and requires that the fair value of a legal obligation associated with the retirement of tangible long-lived assets be recognized in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the asset and allocated to expense over its useful life. We adopted SFAS 143 effective January 1, 2003. The adoption of SFAS 143 did not have a material impact on our results of operations.

        In August 2001, the Financial Accounting Standards Board issued Statement of Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement supersedes Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-lived Assets to Be Disposed Of, while retaining many of its requirements regarding impairment loss recognition and measurement. In addition, SFAS 144 broadens the presentation of discontinued operations to include more sold and abandoned businesses. We adopted this statement effective January 1, 2002, and, as a result, reflected the assets, liabilities and results of operations of several businesses and groups of assets as discontinued operations for all periods presented to the extent these businesses and groups of assets met the new criteria during 2003 and 2002. Disposals and abandonments in previous years were not re-evaluated or reclassified. See "—Application of Critical Accounting Policies—Accounting for Discontinued Operations."

        In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, which rescinds previous requirements to reflect all gains and losses from debt extinguishment as extraordinary. We elected to early adopt the new standard effective April 1, 2002, and, as a result, the gains from extinguishment of debt of $12 million recorded as extraordinary items in 2001, are no longer reflected as extraordinary items.

        In June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146 (SFAS 146), Accounting for Costs Associated with Exit or Disposal Activities, which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The standard became effective January 1, 2003 and was applied to restructuring activities initiated after that date. Prior to January 1, 2003, we accounted for restructuring activities in accordance with Emerging Issues Task Force No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). The adoption of SFAS 146 did not have a material impact on our financial position or results of operations.

        In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires the guarantor to recognize a liability for the non-contingent component of a guarantee; that is the obligation to stand ready to perform in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at its inception. The recognition of the liability is required even if it is

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not probable that payments will occur under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements. FIN 45 also requires additional disclosures related to guarantees. We adopted the disclosure requirements of FIN 45 on December 31, 2002. The recognition and measurement provisions of FIN 45 are effective for all guarantees entered into or modified after December 31, 2002. We adopted the recognition and measurement requirements of FIN 45 on January 1, 2003. The adoption of the recognition and measurement requirements of FIN 45 did not have a material impact on our results of operations.

        In November 2002, the Emerging Issues Task Force of the Financial Accounting Standards Board issued Emerging Issues Task Force No. 00-21 (EITF 00-21), Accounting for Revenue Arrangements with Multiple Deliverables, which was amended in January 2003 and requires that (a) revenue should be recognized separately for separate units of accounting in multiple deliverables arrangements, (b) revenue for a separate unit of accounting should be recognized only when the arrangement consideration is reliably measurable and the earnings process is substantially complete, and (c) consideration should be allocated among the separate units of accounting based on their relative fair value. EITF 00-21 is applicable to transactions entered into after June 30, 2003. The adoption of EITF 00-21 did not have a material impact on our financial position at December 31, 2003, or on our results of operations for the year then ended.

        In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148 (SFAS 148), Accounting for Stock-Based Compensation—Transition and Disclosure—an Amendment of FASB Statement No. 123. We have elected to continue with our current practice of applying the recognition and measurement principles of APB No. 25, Accounting for Stock Issued to Employees. We have adopted the disclosure requirements of SFAS 148 effective December 31, 2002.

        In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51. FIN 46 requires variable interest entities (VIEs) to be consolidated by their primary beneficiaries. During 2003, we adopted the requirements of FIN 46 and applied the guidance to VIEs in which we have an interest. See Note 8 of our Consolidated Financial Statements for information relating to the impact of adopting FIN 46. FIN 46 was revised in December 2003. We will adopt the December revision (FIN 46R) by March 2004. We continue to evaluate the effects of the adoption of FIN 46R and do not expect such effects to be material to our consolidated financial positions or results of operations.

        In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150 (SFAS 150), Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS 150 establishes how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement requires that an issuer classify a financial instrument that is within the scope of the statement as a liability. SFAS 150 applies to all financial instruments entered into after May 31, 2003, and otherwise became effective for us after June 15, 2003. In November 2003, SFAS 150 was amended to indefinitely defer the measurement and recognition guidance for non-controlling interests that are classified as equity in a subsidiary, but that would be classified as a liability in our financial statements under SFAS 150. However, SFAS 150, as amended, provides guidance on classification and disclosure of mandatorily redeemable non-controlling interests. We have adopted the measurement, classification and disclosure criteria of SFAS 150, as amended. The adoption of SFAS 150 did not have a material impact on our financial position at December 31, 2003, or on our results of operations for the year then ended.

        In May 2003, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on Emerging Issues Task Force No. 03-4 (EITF 03-4), Determining the Classification and Benefit Attribution Method for a "Cash Balance" Plan. EITF 03-4 clarifies that a

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cash balance plan, as defined by the guidance, should be accounted for as a defined benefit plan using the traditional unit credit attribution method. We adopted EITF 03-4 in May 2003. As a result, we account for certain of our pension plans in Switzerland as cash balance plans in accordance with EITF 03-4. The adoption of EITF 03-4 reduced the unfunded amount of our Swiss pension plans by approximately $406 million, but did not have a material impact on our financial position at December 31, 2003, or on our results of operations for the year then ended.

RESTRUCTURING EXPENSES

2001 Program

        In July 2001, we announced and initiated a restructuring program (2001 Program) in an effort to improve productivity, reduce our cost base, simplify product lines, reduce multiple location activities and perform other downsizing in response to weakening markets and consolidation of major customers in certain industries.

        Restructuring charges relating to workforce reductions, lease terminations and other exit costs associated with the 2001 Program are included in other income (expense), net. We paid termination benefits of $99 million, $149 million and $32 million to approximately 2,270, 4,000 and 2,150 employees in 2003, 2002 and 2001, respectively. Workforce reductions included production, managerial and administrative employees. Additionally, we paid approximately $12 million, $29 million and $31 million to cover costs associated with lease terminations and other exit costs in 2003, 2002 and 2001, respectively. Based on changes in our original estimate, a $22 million and $21 million reduction in the amounts accrued for workforce reductions, lease terminations and other exit costs have been included in other income (expense), net, in 2003 and 2002, respectively. Currency fluctuations resulted in a $23 million and $25 million increase in the liabilities accrued for workforce reductions, lease terminations and other exit costs in 2003 and 2002, respectively. Accrued liabilities included $9 million and $94 million for termination benefits and $27 million and $52 million for lease terminations and other exit costs at December 31, 2003 and 2002, respectively.

        As a result of the 2001 Program, certain assets, inventories and property, plant and equipment have been identified as impaired or will no longer be used in continuing operations. We recorded $18 million and $41 million in 2002 and 2001, respectively, to write down these assets to fair value. These costs are included in cost of sales and other income (expense), net.

Step Change Program

        In October 2002, we announced the Step Change Program. We estimate that restructuring costs under the Step Change Program will be approximately $200 million in 2004. The goals of the Step Change Program are to increase the competitiveness of our core businesses, reduce overhead costs and streamline operations by approximately $900 million on an annual basis by 2005. We expect to complete the Step Change Program by mid-2004.

        In order to achieve the desired cost savings, over 1,400 specific initiatives have been established and are being closely monitored by our management. We expect that the termination of between 10,000 and 12,000 employees will contribute to approximately 40% of the recurring cost savings on an annual basis, through the reduction of payroll and payroll-related costs. Additionally, we expect that productivity increases as a result of improved production methods, the continued consolidation of office space and manufacturing facilities and the closure of non-profitable units will generate approximately 20% of the cost savings. We expect to realize a significant part of the remaining 40% of the cost savings through outsourcing of selected activities. A large portion of the savings is related to the reorganization of our IT activities. This included the outsourcing of the major part of our information systems infrastructure services to the IBM Corporation ("IBM"), the

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reduction of multiple finance platforms in certain countries and concentration of local transaction processes in shared services units, as well as the outsourcing of new applications with external suppliers. We expect the remainder of the savings to result from changes in the material supply process, logistics and efficiency gains in the use of materials in our products. Approximately two-thirds of our 1,400 initiatives had been completed by the end of 2003.

        Restructuring charges relating to workforce reductions, lease terminations and other exit costs associated with the Step Change Program are included in other income (expense), net. We paid termination benefits of $145 million and $13 million to approximately 1,500 and 200 employees in 2003 and 2002, respectively. Workforce reductions include production, managerial and administrative employees. Additionally, we paid approximately $48 million and $1 million to cover costs associated with lease terminations and other exit costs in 2003 and 2002, respectively. Based on changes in our original estimate, a $4 million reduction in the amounts accrued for workforce reductions, lease terminations and other exit costs has been included in other income (expense), net in 2003. Currency fluctuations resulted in a $27 million increase in the liabilities accrued for workforce reductions, lease terminations and other exit costs in 2003. Accrued liabilities included $94 million and $38 million for termination benefits and $37 million and $25 million for lease terminations and other exit costs at December 31, 2003 and 2002, respectively.

        As a result of the Step Change Program, certain assets, inventories and property, plant and equipment have been identified as impaired or will no longer be used in continuing operations. We recorded $3 million and $2 million in 2003 and 2002, respectively, to write down these assets to fair value. These costs are included in cost of sales and other income (expense), net.

Other

        Certain restructuring programs were initiated during 2003 at specified locations not included in the Step Change Program. The goals of these programs are to increase efficiencies by reducing headcount and streamlining operations. These programs are expected to increase productivity of the non-core businesses. Anticipated savings will be recognized through the strategic divestments of these operations.

        Restructuring charges related to workforce reductions and lease terminations and other exit costs are included in other income (expense), net. In 2003, we paid termination benefits of $34 million to approximately 1,300 employees and $10 million to cover costs associated with lease terminations and other exit costs. Workforce reductions include production, managerial and administrative employees. Based on changes in our original estimate, a $6 million decrease in the amounts accrued for workforce reductions, lease terminations and other exit costs have been included in other income (expense), net. Currency fluctuations resulted in a $10 million increase in the liabilities accrued for workforce reductions, lease terminations and other exit costs. At December 31, 2003, accrued liabilities included $67 million for termination benefits and $35 million for lease terminations and other exit costs.

        As a result of other restructuring programs, certain assets, inventories and property, plant and equipment have been identified as impaired or will no longer be used in continuing operations. We

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recorded $11 million in 2003, to write down these assets to fair value. These costs are included in cost of sales and other income (expense), net.

	2001 Program		Step Change		Other		Total
	($ in millions)
Year ended December 31, 2003
Restructuring charge for workforce reduction	—		181		83		264
Restructuring charge for lease terminations and other	—		54		25		79
Write-down cost	—		3		11		14
Change in estimate	(22	)	(4	)	(6	)	(32	)
Total restructuring charges and related asset write-downs	(22	)	234		113		325
Total cash payments during the year	111		193		44		348
Total accrued liabilities at the end of the year	36		131		102		269
	2001 Program		Step Change		Other		Total
	($ in millions)
Year ended December 31, 2002
Restructuring charge for workforce reduction	165		51		—		216
Restructuring charge for lease terminations and other	38		26		—		64
Write-down cost	18		2		—		20
Change in estimate	(21	)	—		(9	)	(30	)
Total restructuring charges and related asset write-downs	200		79		(9	)	270
Total cash payments during the year	178		14		—		192
Total accrued liabilities at the end of the year	146		63		—		209
	2001 Program		Step Change		Other		Total
	($ in millions)
Year ended December 31, 2001
Restructuring charge for workforce reduction	109		—		—		109
Restructuring charge for lease terminations and other	71		—		—		71
Write-down cost	41		—		—		41
Total restructuring charges and related asset write-downs	221		—		—		221
Total cash payments during the year	63		—		—		63
Total accrued liabilities at the end of the year	117		—		—		117

ACQUISITIONS, INVESTMENTS AND DIVESTITURES

Acquisitions and Investments

        In 2003, 2002 and 2001, we paid aggregate consideration of $55 million, $154 million and $597 million, respectively, related to acquisitions and investments in new businesses, joint ventures and affiliated companies. Payments made for these acquisitions and investments, net of cash acquired, were $55 million, $144 million and $578 million in 2003, 2002 and 2001, respectively.

        In 2003 and 2002, we made no significant new acquisitions. However, in 2003 we increased our participation in a limited number of companies as part of our preparations for their eventual divestment and in 2002 we increased our investment in a small number of companies in which we had a controlling interest. In 2002, we also acquired an Italian small-ticket leasing business from Xerox Corp., which was later sold as part of Structured Finance business.

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        In June 2001, we completed the acquisition of Entrelec Group, a France-based supplier of industrial automation and control products, for total consideration of $284 million. The acquisition of Entrelec, which had operations in 17 countries, diversified our product range and expanded our customer base in high growth markets.

        In June 2000, we entered into a share subscription agreement to acquire a 42% interest in b-business partners B.V. During 2001, we sold most of our interest to Investor AB (a related party), and b-business partners B.V. repurchased a number of shares. As a result, at December 31, 2003 we hold a 4% interest. We are committed to provide additional capital to b-business partners B.V. of approximately $5 million (a euro-denominated commitment that may fluctuate with exchange rates). Further, b-business partners B.V. retains a put right to compel us to purchase 150,000 shares of b-business partners B.V. at a cost of approximately $19 million (a euro denominated commitment that may fluctuate with exchange rates).

Divestitures

Sales of Businesses, Joint Ventures and Affiliated Companies

        In 2003, 2002 and 2001, we received cash, net of cash disposed, from sales of businesses, joint ventures and affiliated companies of $543 million, $2,509 million and $283 million. We recognized net gains in 2003, 2002, and 2001 within other income (expense), net, of $43 million, $98 million and $34 million, respectively. We also recognized net losses in 2003, 2002, and 2001 within loss from discontinued operations, net of tax, of $37 million, $194 million and $0 million, respectively. The material dispositions are described below.

        In December 2003, as part of the divestment of our Structured Finance business, we sold ABB Export Bank to a financial investor. We received cash proceeds of approximately $50 million from the sale of ABB Export Bank and recorded a loss on disposal of $12 million which is included in loss from discontinued operations, net of tax.

        Also in December 2003, as part of the planned divestment of the Wind Energy business, we sold the related business in Germany to GI Ventures GmbH for consideration of $35 million including a vendor note of $10 million. We recognized a loss on disposal of approximately $25 million from the sale of this business, which is included in loss from discontinued operations, net of tax.

        In August 2003, as part of our intention to gradually dispose of our Building Systems businesses, we sold to YIT Corporation of Helsinki, Finland our Building Systems businesses located in Sweden, Norway, Denmark, Finland, Russia and the Baltic states for consideration of $213 million and we recorded a gain on disposal of approximately $124 million. Additionally, throughout 2003, we sold other Building Systems businesses in a number of countries including Belgium, the Netherlands, Austria, Hungary and the United Kingdom. The aggregate proceeds from these divestments were $21 million and we recorded a loss on disposal of approximately $41 million from the sale of these businesses which is recognized within other income (expense), net.

        In June 2003, we sold our entire 35% interest in the Swedish Export Credit Corporation to the government of Sweden for net proceeds of approximately $149 million and recorded a loss on disposal of approximately $80 million which is included in other income (expense), net.

        Also in June 2003, we sold our interests in certain equity investments in Australia for cash proceeds of approximately $90 million and recorded a gain on disposal of approximately $28 million which is included in other income (expense), net.

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        In March 2003, we sold our aircraft leasing business for approximately $90 million. This business consisted of a portfolio of loans and leases related to commuter aircraft and helicopters used primarily in the northern European and Nordic markets. We provided significant financial support to the VIE formed by the buyer upon acquisition. Following the introduction of FIN 46, we determined that, as a result of retaining such financing receivables, we are the primary beneficiary of the VIE and, accordingly, we consolidated this disposed entity in our Consolidated Financial Statements.

        In December 2002, we completed the sale of our Metering business, to Ruhrgas Industries GmbH for consideration of approximately $223 million. Cash held in escrow of $15 million was released after resolution of certain disputed items in 2003. We recorded a loss on disposal of approximately $48 million from the sale of this business, which is included in loss from discontinued operations, net of tax.

        In November 2002, we completed the sale of most of our Structured Finance business to General Electric Capital Corporation ("GE") and received cash proceeds of approximately $2 billion, including a contingent payment of $20 million to be released to us, should amounts ultimately collected by GE, from a portfolio transferred by us to GE reach specified targets. The $20 million contingent payment remains unpaid as of December 31, 2003, as the amounts collected by GE have not met such specified targets. We recorded a loss on disposal of approximately $146 million from the sale of this business, which is included in loss from discontinued operations, net of tax.

        Pursuant to the sale and purchase agreement, we provided GE with cash collateralized letters of credit aggregating $202 million as security for certain performance-related obligations retained by us, of which approximately $128 million was outstanding as of December 31, 2003.

        The sale and purchase agreement provided GE the option to require us to repurchase certain designated financial assets transferred to GE upon the occurrence of certain events, but in any event no later than February 1, 2004. The fair value of GE's right to require us to repurchase certain designated assets was $11 million at December 31, 2003. On January 26, 2004, we repurchased the financial assets for an amount of approximately $28 million. Additionally, as a result of the exercise of GE's option, the cash collateralized letters of credit were reduced by $35 million. No further obligation exists for us to repurchase any assets under the sale and purchase agreement with GE.

        In January 2002, we disposed of our Air Handling business for cash proceeds of $113 million (the sales price of $147 million included a vendor note of $34 million issued by the purchaser) to Global Air Movement (Luxembourg) SARL and recognized a gain in other income (expense), net of $74 million.

        During 2003, 2002 and 2001, we sold several operating units and investments for total proceeds of $31 million, $209 million and $117 million, respectively, and recognized net gains on disposal of $12 million, $24 million and $34 million, respectively, which are included in other income (expense), net. Net income from these businesses and investments was not significant in 2003, 2002 and 2001.

        In January 2004, we sold our MDCV cable business, located in Germany, to the Wilms Group of Menden, Germany. We recorded $10 million of impairment charges on this divestment in loss from discontinued operations, net of tax, in 2003.

        In March 2004, we completed the sale of our Swiss Building Systems business to CapVis Equity Partners AG, a Swiss private equity company for approximately $39 million, but retained a 10% ownership interest.

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Other Divestitures

        In May 2003, we sold our interest in China National Petrochemical Corporation (Sinopec Corp.) for approximately $82 million and recorded a loss on disposal of $40 million recognized in interest and other finance expense, net.

        In addition, throughout 2003, we engaged in a number of sales and terminations of lease portfolios and individual financing receivables resulting in proceeds of approximately $400 million. The gains (losses) on such disposals were not material.

Pending Divestitures

        We have previously announced our intention to sell a number of other businesses, including all of our Oil, Gas and Petrochemicals businesses and our remaining Building Systems businesses.

        In January 2004, we entered into an agreement to sell the upstream part of our Oil, Gas and Petrochemicals businesses to a private equity consortium consisting of Candover Partners, JP Morgan Partners and 3i Group. The sale includes our United States based Vetco Gray unit and our Norway based Offshore Systems business. The initial purchase consideration for the business (including the consideration for our separate agreement not to compete with the business for a period of three years) is $925 million. We may receive an additional consideration of up to $50 million based on the financial performance of the business in 2004. The sale is expected to close by mid-year 2004, pending receipt of customary regulatory approvals and satisfaction of closing conditions, including the satisfactory completion and disposition of compliance matters under review. As part of the sale, we have agreed, among other things, to terminate certain securitization programs and operational leases, to indemnify the purchasers against certain pre-existing environmental and tax liabilities, to reimburse the purchasers against financial losses that may be incurred on certain ongoing projects of the business, to reimburse the purchasers for certain unfunded benefit liabilities and to indemnify the purchasers from liabilities that might arise out of matters revealed by the compliance review. We do not expect a significant gain or loss to be recognized on the sale of the upstream business.

        The compliance investigation referred to above in connection with the description of the divestment of the upstream part of our Oil, Gas and Petrochemical businesses, was triggered by our discovery of a limited number of improper payments by some of our employees and agents in that business in Africa, Central Asia, and South America, which we have voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission. The payments, which violated our internal policies on business ethics, were made in order to obtain from local officials confidential information and commercial advantages, including with respect to contracts on which we were bidding. We are cooperating fully with the U.S. Department of Justice and the U.S. Securities and Exchange Commission. We have hired outside counsel and auditors (other than our auditors) to assist us in a compliance review to determine whether other instances of improper payments exist. The compliance review is being conducted jointly with the purchasers of the business and with the purchasers' outside counsel and auditors. We are hopeful that we will complete the sale of the upstream part of our Oil, Gas and Petrochemicals business by mid-year 2004 and the remainder of the business by year-end 2004.

        We are actively seeking a buyer for the remaining activities of our Oil, Gas and Petrochemicals businesses (remaining Oil, Gas and Petrochemicals businesses). The downstream activities of our Oil, Gas and Petrochemicals business is a full service engineering company, which in addition to expertise in Engineering, Procurement and Construction (EPC) projects, also licenses process technologies in the refining, chemical, petrochemical and polymer fields. An analysis of the operations of the Oil, Gas and Petrochemicals businesses is included in "—Analysis of Results of Operations—Business Divisions."

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        We have also agreed to sell, or are negotiating to sell, a number of other businesses. These include our Reinsurance business, which, we agreed to sell in December 2003, to White Mountains Insurance Group Limited of Bermuda for approximately $425 million. This business provides international reinsurance and insurance underwriting, as well as specialized primary insurance in the United States.

        Impairment charges on the divestments of the Reinsurance business (which had not been completed by year-end) of $154 million have been recorded in loss from discontinued operations, net of tax, in 2003. An analysis of the operations of these businesses is included in "—Analysis of Results of Operations—Business Divisions."

SUMMARY FINANCIAL DATA

        The following table shows the amount and percentage of our revenues derived from each of our business divisions (see also Note 26 to our Consolidated Financial Statements):

		Revenues						Percentage of Revenues
		Year ended December 31,						Year ended December 31,
		2003		2002		2001		2003	2002	2001
		($ in millions)						(%)
Power Technologies		7,680		6,963		6,776		37	35	32
Automation Technologies		9,897		8,464		8,496		47	43	40
Non-Core Activities
	Equity Ventures	26		19		34		—	—	—
	Remaining Structured Finance	48		66		97		—	—	—
	Building Systems	1,829		2,375		2,613		—	—	—
	New Ventures	53		50		97		—	—	—
	Other Non-Core Activities	581		937		1,278		—	—	—
Non-Core Activities Subtotal		2,537		3,447		4,119		12	18	20
Corporate/Other		822		860		1,596		4	4	8
Subtotal		20,936		19,734		20,987		100	100	100
Consolidation effect and eliminations		(2,141	)	(2,268	)	(2,653	)
Consolidated revenues		18,795		17,466		18,334

         We conduct business in approximately 100 countries around the world. The following table shows the amount and percentage of our consolidated revenues derived from each geographic region (based on the location of the customer) in which we operate:

	Revenues			Percentage of Revenues
	Year ended December 31,			Year ended December 31,
	2003	2002	2001	2003	2002	2001
	($ in millions)			(%)
Europe	10,332	9,739	10,368	55	56	57
The Americas	3,572	3,834	4,346	19	22	24
Asia	3,346	2,587	2,420	18	15	13
Middle East and Africa	1,545	1,306	1,200	8	7	6
Total	18,795	17,466	18,334	100	100	100

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EXCHANGE RATES

        We report our financial results in U.S. dollars. A significant amount of our revenues, expenses, assets and liabilities are denominated in other currencies due to our global operations. As a consequence, movements in exchange rates affect:

•

our profitability,



•

the comparability of our results between periods, and



•

the carrying value of our assets and liabilities.

        When we incur expenses that are not denominated in the same currency as the related revenues, foreign exchange rate fluctuations could adversely affect our profitability.

        We must translate non-U.S. dollar denominated results of operations, assets and liabilities to U.S. dollars in our Consolidated Financial Statements. Balance sheet items are translated to U.S. dollars using year-end foreign currency exchange rates and income statement and cash flow items are translated using average foreign currency exchange rates during the relevant period. As a consequence, increases and decreases in the value of the U.S. dollar against other currencies will affect our reported results of operations and the value of our assets and liabilities in our Consolidated Balance Sheet, even if our results of operations or the value of those assets and liabilities has not changed in their original currency. Consequently, because of the impact foreign exchange rates have on our reported results of operations and the reported value of our assets and liabilities, changes in foreign exchange rates could significantly impact the comparability of our reported results of operations between financial periods and/or result in significant changes to the reported value of our assets and liabilities.

        Because fluctuations in exchange rates affect the comparability of our results of operations between periods, the discussion of our results of operations below provides, where relevant, information with respect to orders, revenues and earnings before interest and taxes as reported in local currencies.

        While we operate globally and report our financial results in U.S. dollars, because of the location of our more significant markets and because our headquarters are in Switzerland, foreign exchange rate movements between the U.S. dollar and both the euro (EUR) and the Swiss franc (CHF) are of particular importance to us.

        In 2003, the euro strengthened against the dollar from a rate of $1.05 to EUR 1.00 at the end of 2002 to a rate of $1.26 to EUR 1.00. In 2002, the euro also strengthened against the dollar, increasing from a rate of $0.88 to EUR 1.00 at the end of 2001 to a rate of $1.05 to EUR 1.00 at the end of 2002. Similarly, the average U.S. dollar to euro foreign exchange rate was $1.13, $0.94 and $0.89 to EUR 1.00 during 2003, 2002 and 2001, respectively.

        In 2003, the Swiss franc strengthened against the dollar from a rate of $0.72 to CHF 1.00 at the end of 2002 to a rate of $0.81 to CHF 1.00. In 2002, the CHF also strengthened against the dollar, increasing from a rate of $0.59 to CHF 1.00 at the end of 2001 to a rate of $0.72 to CHF 1.00 at the end of 2002. Similarly, the average U.S. dollar to CHF foreign exchange rate was $0.75, $0.64 and $0.59 to CHF 1.00 during 2003, 2002 and 2001, respectively.

ORDERS

        We book an order when a binding contractual agreement has been concluded with the customer covering, at a minimum, the price and the scope of products or services to be supplied. Approximately 8% of our total orders booked in 2003 were "large orders," which we define as orders from third parties involving at least $15 million worth of products or systems. Portions of our

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business involve orders related to long-term projects, which can take many months or even years to complete. Revenues related to these large orders are typically recognized on a percentage of completion basis over the period of time taken to complete the project. Of the total orders in the Power Technologies and Automation Technologies divisions in 2003, approximately 11% and 7% respectively, represented large orders.

        The level of orders can fluctuate from year to year. Arrangements included in particular orders can be complex and non-recurring. Although large orders are more likely to result in revenues in future periods, the level of large orders, and orders generally, cannot be used to accurately predict future revenues or operating performance. Orders that are placed can be cancelled, delayed or modified by the customer. These actions can have the effect of reducing or eliminating the level of expected revenues or delaying the realization of revenues.

PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING

        When we undertake a long-term project, we recognize costs, revenues and profit margin from that project in each period, based on the estimated percentage of the project completed. Profit margin is based on our estimate of the amount by which total contract revenues will exceed total contract costs at completion. Accordingly, as work progresses or as change orders are approved and estimates are revised, contract margins may be increased or reduced. Expected losses on loss contracts are recognized in full when known.

        In an effort to reduce the amount of risk associated with long-term fixed price contracts we have shifted our focus to long-term reimbursable contracts, when possible, in which we charge our customers the sum of our materials, production, logistics, administrative and financial costs, together with a negotiated operating profit margin. While not eliminating the risk of loss completely, the nature of long-term reimbursable contracts generally means that costs resulting from contract delays or cost increases may be recovered from the customer more easily than in the case with fixed price contracts, where, we generally must demonstrate that the delays and increased costs were a direct result of the customer's action or impact.

PERFORMANCE MEASURES

        We evaluate the performance of our divisions based upon earnings before interest and taxes (EBIT), or operating profit, which excludes interest and dividend income, interest and other finance expense, provision for taxes, minority interest and loss from discontinued operations, net of tax. We also evaluate the performance of our divisions in terms of their revenues, including interdivisional revenues. Approximately, 95% of our core divisions' revenues are third-party customer sales.

ANALYSIS OF RESULTS OF OPERATIONS

Consolidated

Year ended December 31, 2003 compared with year ended December 31, 2002

Orders

        Orders (excluding orders for discontinued operations) increased $1,351 million, or 8%, to $18,703 million in 2003 from $17,352 million in 2002. As reported in local currencies, orders declined by 5% in 2003 compared to 2002. The level of orders in 2003 compared to 2002 increased in the core divisions, both in U.S. dollar terms and local currencies, whereas in Non-core activities, orders declined primarily due to the ongoing divestment of the activities resulting in fewer businesses generating orders.

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Revenues

        Revenues increased by $1,329 million, or 8%, to $18,795 million in 2003 from $17,466 million in 2002. As reported in local currencies, revenues decreased 6% in 2003 compared to 2002. The reported increase reflects the effect of translating revenues generated in local currencies into the U.S. dollar, which weakened against most of our local currencies.

        Power Technologies division revenues increased by $717 million or 10%, to $7,680 million in 2003 from $6,963 million in 2002. As reported in local currencies, revenues remained flat in 2003 compared to 2002. Strong revenue increases in local currencies in our Medium-Voltage Products business area were offset by revenue decreases in local currencies in both our Power Systems and Utility Automation Systems business areas.

        Automation Technologies division revenues increased by $1,433 million, or 17%, to $9,897 million in 2003 from $8,464 million in 2002. As reported in local currencies, revenues increased 3% in 2003 compared to 2002. This increase was primarily due to a strong revenue increase in local currencies in our Petroleum, Chemical and Consumer Industries business area, partly offset by a revenue decrease in our Paper, Minerals, Marine and Turbocharging business area.

        Non-core activities revenues decreased by $910 million, or 26%, to $2,537 million in 2003 from $3,447 million in 2002. As reported in local currencies, revenues decreased 39% in 2003 compared to 2002. The decrease was mainly due to a lower revenue base resulting from the disposal of Building Systems businesses in several countries and the ongoing disposal and reduction of our remaining non-core activities.

        A more detailed discussion of the results of our individual divisions follows in "—Business Divisions."

Cost of sales

        Cost of sales increased by $1,013 million, or 8%, to $14,080 million in 2003 from $13,067 million in 2002. Cost of sales as a percentage of revenues was 75% in 2003 and 2002. While the reduction of costs from the Step change program decreased the overall cost base, decreases in sales prices caused by market price pressures offset these gains, resulting in the costs of sales as a percentage of sales remaining flat year on year.

        In our Power Technologies division, cost of sales as a percentage of revenues remained flat at 79% in 2003 and 2002. This was a result of ongoing productivity improvements and cost savings resulting from the Step change program being offset by changes in product mix and price level erosion.

        In our Automation Technologies division, cost of sales as a percentage of revenues increased by 1% to 71%, from 70% in 2002. This increase was a result of savings in supply chain management and manufacturing and engineering activities being more than offset by ongoing price pressure and the negative impact on costs of the strengthening of the euro versus the U.S. dollar.

        Cost of sales in our Non-core activities is primarily attributable to our Building Systems businesses. Cost of sales was $1,890 million in 2003 and $2,499 million in 2002. The decrease is mainly due to the divestment of the Building Systems businesses in several countries.

        Cost of sales consists primarily of labor, raw materials and related components, as well as provisions for warranty claims, contract losses and project penalties. In addition, cost of sales includes order-related development expenses related to projects for which we have recognized corresponding revenues. Order-related development expenditures reflected in cost of sales were $317 million and $248 million in 2003 and 2002, respectively. Order-related development

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expenditures are initially recorded in inventories as part of the work-in-progress of a contract, and then reflected in cost of sales at the time revenue is recognized.

Selling, general and administrative expenses

        Selling, general and administrative expenses decreased by $124 million, or 3%, to $3,830 million in 2003 from $3,954 million in 2002. As reported in local currencies, selling, general and administrative expenses decreased by 15% in 2003 compared to 2002. This improvement occurred across our operations and reflects the cost savings generated by the Step change program. As a percentage of revenues, selling, general and administrative expenses decreased to 20% in 2003 from 23% in 2002 reflecting the impact of the Step change program. Non-order related research and development costs, which are included in selling, general and administrative expenses, were $613 million and $547 million in 2003 and 2002, respectively.

Amortization expense

        Amortization expense was $40 million in 2003 compared to $41 million in 2002. The expense in 2003 and 2002 primarily reflects the amortization of intellectual property related to the 1999 acquisition of Elsag Bailey Process Automation N.V.

Other income (expense), net

        Other income (expense), net, principally consists of: restructuring charges; our share of income or loss on investments, principally from our Equity Ventures business area; gains or losses from sales of businesses which are not accounted for as discontinued operations; gains or losses from sales of investments and property, plant and equipment; license income and write-downs of tangible and intangible assets.

        Other income (expense), net, increased to an expense of $189 million in 2003 from an expense of $58 million in 2002. The increased expense was principally a result of an increase in restructuring charges in 2003 to $325 million compared to $259 million in 2002; a decrease in our share of income from investments in 2003 to $101 million compared to $182 million in 2002; a decrease in gains from the sales of businesses in 2003 to $69 million versus $113 million in 2002 and a decrease in asset write-downs and other items in 2003 to $34 million compared to $94 million in 2002.

        The increase in restructuring charges in 2003 was primarily a result of costs incurred in 2003 from the streamlining of the Building Systems business in Germany and from lease cancellation costs associated with the closing and divestment of businesses in the U.K. and Germany, which were not present in 2002. The decrease in our share of income from investments in 2003 compared to 2002 was primarily due to a decrease in income from our stake in Swedish Export Credit Corporation, which we divested in the second quarter of 2003. The decrease in gains from the sales of businesses in 2003 was primarily caused by the loss recorded in 2003 on the sale of Swedish Export Credit Corporation of approximately $80 million, which partly offset the $83 million net gain recorded from the sale of our Building Systems businesses in several countries and a $28 million gain recorded from the sale of our interest in Electranet Pty Ltd. and in ABB Redbank Project Pty Ltd. In 2002, we recorded a gain of approximately $74 million from the sale of our Air Handling business. Asset write-downs and other items decreased primarily because of the non-recurrence of write-downs in our Non-core activities and Corporate/Other, which decreased to $9 million and $10 million in 2003 from $47 million and $37 million in 2002 respectively, mainly due to software write-downs.

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Earnings before interest and taxes

        Earnings before interest and taxes, or operating income, increased by $310 million, or 90%, to $656 million in 2003 from $346 million in 2002. As reported in local currencies, earnings before interest and taxes improved by 70% in 2003 when compared to 2002. The effects of our Step change cost reduction program significantly contributed to the increase in earnings before interest and taxes. As a percentage of revenues, earnings before interest and taxes increased to 3% in 2003 from 2% in 2002.

Net interest and other finance expense

        Net interest and other finance expense refers to the aggregate of the Consolidated Income Statement line items interest and dividend income and interest and other finance expense. Interest and other finance expense includes impacts associated with the change in fair value of the embedded derivative contained in our $968 million convertible bonds; amortization of financing costs associated with the issuance of our debt securities; losses on marketable securities and investments accounted for at cost; and interest expense on our borrowings. Net interest and other finance expense increased by $284 million, or 225%, to an expense of $410 million in 2003 compared with an expense of $126 million in 2002.

        Interest and dividend income decreased by $45 million, or 24%, to $144 million in 2003 from $189 million in 2002 primarily due to lower market interest rates.

        Interest and other finance expense increased to $554 million in 2003 from $315 million in 2002, an increase of $239 million or 76%. Included in interest and finance expense in 2003 is an expense of $84 million associated with the change in fair value of the embedded derivative contained in our $968 million convertible bonds, compared to a net gain of $215 million in 2002 for the same item. The unrealized gain (loss) resulted from the application of Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities, whereby a portion of the issuance proceeds is deemed to relate to the value of the derivative on issuance, creating a discount upon the issuance of the bonds. Subsequent changes in the value of the derivative and the continued amortization of the discount upon issuance are included in interest and other finance expense. This accounting treatment is more fully described in Note 15 to our Consolidated Financial Statements. Amortization of financing costs associated with the issuance of our debt securities was flat between 2003 and 2002. Also included in interest and finance expense in 2003 is a $40 million expense relating to the loss on disposal of Sinopec Corp. and a $36 million expense relating to the loss on sale of marketable securities, which were not present in 2002.

Provision for taxes

        Provision for taxes increased by $4 million to $78 million in 2003 compared to $74 million in 2002. The effective tax rate calculated as the provision for taxes, divided by income from continuing operations before taxes and minority interest was 31.7% in 2003 and 33.6% in 2002.

        The decrease in the effective tax rate is primarily attributable to $56 million of adjustments, relating to the favorable resolution of certain prior year tax matters, including the release of $38 million tax provision related to a tax case ruled in our favor. This is partially offset by the $84 million loss on the change in fair value of the embedded derivative contained in our $968 million convertible bonds, which is taxed at a rate that is lower than our effective tax rate.

        The effective tax rate in 2002 of 33.6% was also impacted by the change in fair value of the embedded derivative contained in our $968 million convertible bonds, as the $215 million gain partially offset by additional financing related costs, restructuring costs and costs related to Non-core activities that are taxed at rates lower than our effective tax rate.

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Income from continuing operations

        Income from continuing operations increased by $11 million to $86 million in 2003 compared to $75 million in 2002. The increase reflects the impact of the items discussed above.

Loss from discontinued operations, net of tax

        Loss from discontinued operations, net of tax, decreased by $5 million to $853 million in 2003 from $858 million in 2002. Tax expense in discontinued operations increased by $168 million to $218 million in 2003 compared to $50 million in 2002.

        A detailed discussion of the results of the significant businesses classified as discontinued operations follows in "—Business Divisions."

Net Loss

        Net loss decreased by $16 million, or 2%, to $767 million in 2003 from $783 million in 2002.

Earnings per share

Basic and Diluted Earnings (Loss) Per Share

		Year ended December 31,
		2003		2002
		($)
Income (loss) from continuing operations:
	Basic	0.07		0.07
	Diluted	0.07		(0.10	)
Loss from discontinued operations, net of tax:
	Basic	(0.70	)	(0.77	)
	Diluted	(0.70	)	(0.73	)
Net Loss:
	Basic	(0.63	)	(0.70	)
	Diluted	(0.63	)	(0.83	)

        Basic earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised and that any proceeds from such exercises were used to acquire shares of our stock at the average market price during the year or the period the securities were outstanding, if shorter. Potentially dilutive securities comprise: outstanding written call options, if dilutive; the securities issued under our management incentive plan, to the extent the average market price of our stock exceeded the exercise prices of such instruments; shares issuable in relation to the convertible bonds, if dilutive; and outstanding written put options, for which net share settlement at average market price of our stock was assumed, if dilutive.

        The shares issuable in relation to the warrants and options outstanding in connection with our management incentive plan were excluded from the computation of diluted earnings per share in all periods presented as their inclusion would have been antidilutive. In 2002, the shares issuable in relation to the convertible bonds were included in the computation of diluted earnings per share for the period they were outstanding.

        Basic loss per share was $0.63 in 2003 compared to a loss per share of $0.70 in 2002. The difference was largely the result of the factors mentioned above which impacted earnings.

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Year ended December 31, 2002 compared with year ended December 31, 2001

Orders

        Orders (excluding orders for discontinued operations) decreased $1,299 million, or 7%, to $17,352 million in 2002 from $18,651 million in 2001. As reported in local currencies, orders declined by 10% in 2002 compared to 2001. The level of orders in 2002 compared to 2001 increased in the Automation Technologies division but decreased in the Power Technologies and Non-core divisions.

Revenues

        Revenues decreased by $868 million, or 5%, to $17,466 million in 2002 from $18,334 million in 2001. As reported in local currencies, revenues decreased 8% in 2002 compared to 2001. The underlying decrease in revenues on a local currency basis was primarily within our Non-core activities.

        Power Technologies division revenues increased by $187 million, or 3% to $6,963 million in 2002 from $6,776 million in 2001. As reported in local currencies, revenues increased 1% in 2002 compared to 2001. Revenues showed a modest increase in most business areas, partially offset by a decrease in our Distribution Transformers business area.

        Automation Technologies division revenues decreased by $32 million, to $8,464 million in 2002 from $8,496 million in 2001. As reported in local currencies, revenues decreased 3% in 2002 compared to 2001. Revenue growth in our Petroleum, Chemical and Consumer business area was offset by a reduction in revenues in most of the other business areas due to weaker demand.

        Non-Core activities revenues decreased by $672 million, or 16% to $3,447 million in 2002 from $4,119 million in 2001. As reported in local currencies, revenues decreased by 22% in 2002 compared to 2001. This decrease resulted from the sale of the Air Handling business in January 2002, market downturns in the Building Systems business area and the strategic reduction of our presence in some of the markets of the Logistics Systems and Customer Systems business areas.

        A more detailed discussion of the individual divisions follows in "—Business Divisions."

Cost of sales

        Cost of sales decreased by $472 million, or 3%, to $13,067 million in 2002 from $13,539 million in 2001. Cost of sales as a percentage of revenues increased by 1% to 75%, from 74% in 2001. The decrease was primarily the result of operational improvements within the Automation Technologies division and the non-recurrence of a number of costs from 2001 within the Non-core activities. Cost of sales for Non-core activities during 2001 included $329 million for the Air Handling business area which we sold in January 2002. In 2001, within Non-core activities costs and provisions were recorded in relation to alternative energy projects of $55 million in the New Ventures business area. The non-recurrence of these costs in 2002 in the Non-core activities has been partly offset by project write-downs, closure and restructuring costs within the Building Systems business area. Order-related development expenditures amounted to $248 million and $404 million, in 2002 and 2001, respectively.

Selling, general and administrative expenses

        Our selling, general and administrative expenses increased by $25 million, or 1%, to $3,954 million in 2002 from $3,929 million in 2001. As reported in local currencies, selling, general and administrative expenses decreased by 3% in 2002 compared to 2001. This improvement on a

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local currency basis was the result of the continuing group-wide cost reduction and efficiency improvement initiatives from 2001 and the recovery of payments from a former chief executive officer. This improvement was slightly offset by the group-wide integration costs of group processes. As a percentage of revenues, selling, general and administrative expenses increased by 2% to 23% in 2002, from 21% in 2001. Non-order related research and developments costs, which are included in selling, general and administrative expenses, were $547 million in 2002 and $590 million in 2001. In 2002, the core-divisions incurred non-order related research and development costs of $441 million compared to $449 million in 2001.

Amortization expense

        Amortization expense decreased by $147 million, or 78%, to $41 million in 2002 from $188 million in 2001. This decrease reflects the implementation of SFAS 142, pursuant to which we ceased amortizing goodwill effective January 1, 2002. The expense in 2002 primarily reflects the amortization of intellectual property related to the 1999 acquisition of Elsag Bailey Process Automation N.V.

Other income (expense), net

        Other income (expense), net, decreased by $103 million, or 64%, to an expense of $58 million in 2002 from an expense of $161 million in 2001. The increase in capital gains to $113 million in 2002 from $56 million in 2001 primarily reflected the gain on the sale of our Air Handling business in January 2002. In addition income from equity accounted companies, license income and other increased to $182 million in 2002 from $93 million in 2001 (primarily related to our investment in the Swedish Export Credit Corporation). These increases were partly offset by the combined effects of the increase in restructuring expenses to $259 million in 2002 from $221 million in 2001 and the increase in asset write-downs of both tangible and intangible assets to $94 million in 2002 from $89 million in 2001.

Earnings before interest and taxes

        Earnings before interest and taxes, or operating income, decreased by $171 million, or 33%, to $346 million in 2002 from $517 million in 2001. As reported in local currencies, earnings before interest and taxes decreased by 42% in 2002 compared to 2001. This decrease is primarily attributable to the decreased revenue base in 2002 compared to 2001.

Net interest and other finance expense

        Net interest and other finance expense refers to the aggregate of the Consolidated Income Statement line items interest and dividend income and interest and other finance expense. Net interest and other finance expense decreased by $97 million, or 43%, to $126 million in 2002 compared to $223 million in 2001. In 2002, net interest and other finance expense includes the change in fair value of the embedded derivative contained in our $968 million convertible bonds and lower market interest rates that were partially offset by costs of $99 million associated with our debt refinancing. Total borrowings decreased in November 2002 due to the sale of our Structured Finance business, whereas average borrowings were flat for the year 2002.

        Interest and dividend income decreased by $159 million, or 46%, to $189 million in 2002 from $348 million in 2001, among other things due to the sale of trading securities following the cessation of proprietary trading in former Treasury Centers and the reduction in market interest rates.

        Interest and other finance expense improved by $256 million, or 45%, to $315 million in 2002 from $571 million in 2001, primarily due to a reduction in total borrowings and as a result of the

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change in fair value of the embedded derivative contained in our $968 million convertible bonds resulting in a net gain of $215 million in 2002. These gains were partly offset by costs of $99 million associated with our debt refinancing.

Provision for taxes

        Provision for taxes decreased $13 million to $74 million in 2002 from $87 million in 2001. The effective tax rate calculated as the provision for taxes, divided by income from continuing operations before taxes and minority interest was 33.6% in 2002 and 29.6% in 2001.

Income from continuing operations

        Income from continuing operations decreased by $96 million to $75 million in 2002 from $171 million in 2001. The decrease reflects the impact of the items discussed above.

Loss from discontinued operations, net of tax

        Loss from discontinued operations, net of tax, was $858 million in 2002, compared to $837 million in 2001. Tax expense in discontinued operations increased by $35 million to $50 million in 2002 compared to $15 million in 2001.

        A detailed discussion of the results of the significant discontinued businesses follows in "—Business Divisions."

Net loss

        As a result of the factors discussed above, net loss increased by $54 million, or 7%, to a loss of $783 million in 2002 from a loss of $729 million in 2001.

Earnings (loss) per share

Basic and Diluted Earnings (Loss) Per Share

		Year ended December 31
		2002		2001
		($)
Income (loss) from continuing operations:
	Basic	0.07		0.15
	Diluted	(0.10	)	0.15
Loss from discontinued operations, net of tax:
	Basic	(0.77	)	(0.73	)
	Diluted	(0.73	)	(0.73	)
Net Loss:
	Basic	(0.70	)	(0.64	)
	Diluted	(0.83	)	(0.64	)

        Basic loss per share was $0.70 and $0.64 in 2002 and 2001, respectively, resulting from the factors mentioned above.

        In 2002, the potential common shares from the convertible bonds were included in the computation of diluted loss per share. The diluted loss per share was $0.83 and $0.64 in 2002 and 2001, respectively, resulting from the factors mentioned above.

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Business Divisions

Overview

        In order to streamline our structure and improve operational performance we have, as of January 1, 2003, put into place two new divisions: Power Technologies, which combines the former Power Technology Products and Utilities divisions; and Automation Technologies, which combines the Automation Technology Products and Industries divisions. We present segment data below to reflect this change and we have restated data with respect to prior years.

        The tables below present revenues, earnings before interest and taxes (or operating income) and operating margins from continuing operations by division for the years 2003, 2002 and 2001 and net operating assets by division at December 31, 2003, 2002 and 2001 (see also Note 26 to the Consolidated Financial Statements):

		Revenues						Net Operating Assets
		Year ended December 31,						Year ended December 31,
		2003		2002		2001		2003		2002		2001
		($ in millions)						($ in millions)
Power Technologies		7,680		6,963		6,776		2,624		2,335		2,054
Automation Technologies		9,897		8,464		8,496		3,787		3,483		3,173
Non-Core Activities
	Equity Ventures	26		19		34		1,151		1,062		1,069
	Structured Finance	48		66		97		643		1,165		1,513
	Building Systems	1,829		2,375		2,613		9		68		(35	)
	New Ventures	53		50		97		313		262		269
	Other Non-Core Activities	581		937		1,278		(237	)	(159	)	(527	)
Total Non-Core Activities		2,537		3,447		4,119		1,879		2,398		2,289
Corporate/Other		822		860		1,596		2,524		2,346		2,732
Inter-division elimination		(2,141	)	(2,268	)	(2,653	)	(1,128	)	(736	)	(770	)
Consolidated		18,795		17,466		18,334		9,686		9,826		9,478

		Earnings before interest and taxes						Operating margins
		Year ended December 31,						Year ended December 31,
		2003		2002		2001		2003		2002		2001
		($ in millions)						(%)
Power Technologies		563		433		405		7.3		6.2		6.0
Automation Technologies		773		517		514		7.8		6.1		6.0
Non-Core Activities
	Equity Ventures	76		43		75		n/a		n/a		n/a
	Structured Finance	(65	)	96		1		n/a		n/a		n/a
	Building Systems	(104	)	(113	)	18		n/a		n/a		n/a
	New Ventures	(21	)	(37	)	(143	)	n/a		n/a		n/a
	Other Non-Core Activities	(67	)	(170	)	(64	)	n/a		n/a		n/a
Total Non-Core Activities		(181	)	(181	)	(113	)	(7.1	)	(5.3	)	(2.7	)
Corporate/Other		(475	)	(350	)	(157	)	n/a		n/a		n/a
Inter-division elimination		(24	)	(73	)	(132	)	n/a		n/a		n/a
Consolidated		656		346		517		3.5		2.0		2.8

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Division Costs

        Cost of sales and selling, general and administrative expenses comprise substantially all of the operating expenses for all divisions. Cost of sales includes, among other things, personnel costs, the cost of raw materials, components, order-related research and development and procurement costs related to the sale of our products and services. Selling, general and administrative expenses include the overhead related to the sales force and all costs related to general management, human resources, financial control, corporate finance and non-order related research and development.

        Further details of the divisional performances follow.

Power Technologies

        Power Technologies serves electric, gas and water utilities as well as industrial and commercial customers, with a broad range of products, systems and services. Ongoing deregulation and privatization in these markets are driving demand by increasing competition in the market. This has led to industry consolidation and pressures on the utilities to make existing plants more competitive by modernizing equipment and outsourcing activities such as service and maintenance. The trend is advanced but continuing in the United States, Western Europe, and parts of Latin America. This trend is beginning to take hold in most other markets as well.

        The demand in China, India and the Middle East remained strong in 2003. The Eastern European market showed good growth, whereas growth in Western Europe was modest.

        In North America demand was weak due to the flat economic growth in the major industrial countries. Political and financial uncertainties continued to depress energy markets in Latin America.

        In 2004, we expect order growth in Eastern Europe to continue and the mixed economic environment in Western Europe to remain. Demand in Latin America is expected to stay modest, whereas the low demand in the United States is expected to improve in the second half of 2004. We expect the strong growth in Asia and the Middle East to continue. On a global basis, we expect the market to improve in 2004. We expect higher investments in the utility industry, strong recovery from original equipment manufacturers and mixed levels of demand in the other industries we serve, depending on segment and market.

Year ended December 31, 2003 compared with year ended December 31, 2002

        Orders increased by $955 million, or 14%, to $7,708 million in 2003 from $6,753 million in 2002. As reported in local currencies, orders increased by 4% in 2003 compared to 2002. Orders increased in all business areas on a reported basis, whereas in local currencies orders in our High-Voltage Products business area remained flat and showed a slight decrease in the Power Transformers and Distribution Transformers business areas. The strongest order increase, both nominal and in local currencies, was experienced in our Medium-Voltage Products and Utility Automation Systems business areas, following a good growth in our base orders. In the Utility Automation Systems business area, the order increase was further enhanced by a higher level of large project awards. Regionally, the increase was driven by double-digit growth in the Middle East, Asia and Eastern Europe. Orders from other divisions were $420 million in 2003 (representing 5% of division orders) compared to $408 million in 2002 (representing 6% of division orders).

        Revenues increased by $717 million, or 10%, to $7,680 million in 2003 from $6,963 million in 2002. As reported in local currencies, revenues remained flat in 2003 compared to 2002. Our Medium-Voltage Products business area showed a strong increase in revenues based on good growth in China and Eastern Europe. Our Power Systems and Utility Automation Systems business areas both showed a decrease in revenues in local currencies due to a low order intake in the

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second half of 2002. The revenue performance also reflected the loss of revenues from three businesses that were divested in the United States, Poland and Italy. Adjusted for change in scope of business due to these divestments, revenues in local currencies increased by 3% in 2003 compared to 2002. Revenues from other divisions were $410 million in 2003 (representing 5% of division revenues) compared to $195 million in 2002 (representing 3% of division revenues).

        Cost of sales was $6,078 million representing 79% of revenues in 2003 compared to $5,516 million representing 79% of revenues in 2002. Despite difficult markets in 2003 characterized by a less favorable product mix and price level erosion, most noticeably in our Power Transformers business area with smaller declines in our High-Voltage Products and Medium-Voltage Products business areas, cost of sales as percentage of revenues remained flat mainly due to ongoing productivity improvements and cost savings.

        Selling, general and administration expenses increased in U.S. dollar terms by $28 million or 3% to $980 million in 2003 from $952 million in 2002. As reported in local currencies, selling, general and administration expenses decreased by 9% in 2003 compared to 2002. Expressed as a percentage of revenues, selling, general and administration expenses decreased to 13% in 2003 compared to 14% in 2002 reflecting the impact of the various restructuring and efficiency improvement programs.

        Earnings before interest and taxes, or operating income, increased by $130 million, or 30%, to $563 million in 2003 from $433 million in 2002. As reported in local currencies, earnings before interest and taxes increased by 22% in 2003. The increase in operating income was primarily due to the elimination of overlapping product lines and production sites, as well as productivity improvements. All business areas, with significant improvements from the Medium-Voltage Products and Power Systems business areas, contributed to this increase except the Power Transformers business area. Earnings in Power Transformers decreased due to low volumes in Canada and the United States following the weak market demand. The restructuring and related asset write-downs was $64 million in 2003 and $62 million in 2002 and the operating margin increased from 6.2% in 2002 to 7.3% in 2003.

Year ended December 31, 2002 compared with year ended December 31, 2001

        Orders decreased by $614 million, or 8%, to $6,753 million in 2002 compared to $7,368 million in 2001. As reported in local currencies, orders decreased 9% in 2002 compared to 2001. This decrease was primarily related to the Power Systems business area, which experienced a significant reduction in large orders compared to 2001, when we won two large orders in China and Brazil with a combined value of more than $500 million. In addition, our adoption in 2002 of a selective bidding approach aimed at reducing project risks and securing better margins, reduced the number of bids and consequently, the order intake. Orders decreased in all business areas except the Medium-Voltage Products business area, which increased orders from improving demand in Asia. Orders from other divisions were $408 million in 2002 (representing 6% of division orders) compared to $927 million in 2001 (representing 13% of division orders).

        Revenues increased by $187 million, or 3%, to $6,963 million in 2002 from $6,776 million in 2001. As reported in local currencies, revenues increased by 1% in 2002 compared to 2001. The business area High-Voltage Products showed a strong growth in revenues, whereas the Medium-Voltage Products and Power Transformers business areas showed moderate growth partly offset by a moderate decrease in our Distribution Transformers business area. Revenues were sustained by a high order backlog at the end of 2001 and a strong demand in Asia Pacific markets during 2002. Revenues from other divisions were $195 million in 2002 (representing 3% of division revenues) compared to $612 million in 2001 (representing 9% of division revenues).

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        Cost of sales was $5,516 million representing 79% of revenues in 2002 compared to $5,324 million representing 79% of revenues in 2001. Cost of sales as a percentage of revenues remained flat.

        Selling, general and administration expenses decreased in U.S. dollar terms by $8 million to $952 million in 2002 compared to $960 million in 2001. As reported in local currencies, selling, general and administration expenses decreased by 3% in 2002 compared to 2001. Expressed as a percentage of revenues, selling, general and administration expenses decreased to 14% in 2002 compared to 15% in 2001 primarily due to the ongoing restructuring programs.

        Earnings before interest and taxes, or operating income, increased by $28 million, or 7%, to $433 million in 2002 compared to $405 million in 2001. As reported in local currencies, earnings before interest and taxes increased by 7% in 2002 compared to 2001. Operating income in the Power Systems business area decreased mainly due to the execution of low-margin projects taken before 2001. This decrease was more than offset by higher earnings in the High-Voltage Products and Medium-Voltage Products business areas as a result of reductions in overlapping product lines, production lines and the size of the workforce in many countries. The restructuring and related asset write-downs decreased from $76 million in 2001 to $62 in 2002 and the operating margin remained at 6% in both 2002 and 2001.

Automation Technologies

        The Automation Technologies division's customers span a broad range of industry sectors and geographic regions. Consequently, demand is influenced by many factors and can vary significantly among customer groups within a given time period. Our customers use automation technologies primarily to improve productivity, quality, and consistency in industrial and manufacturing applications.

        During 2003, market demand was mixed in Western Europe, with significant growth in the Eastern European countries. North American markets remained weak for much of the year, with signs of an upturn in the fourth quarter, particularly in the United States industrial sector. Latin America remained flat, with low levels of capital investment by our customers. Continued strong growth was seen in Asia, highlighted by continued double-digit improvements in China and India.

        From an industry perspective, the automotive sector remained weak, characterized by price pressure. Petroleum, Chemicals, Paper, Marine and Turbocharging remained flat. Investment by the minerals and mining industry was down as a result of price pressure. Consumer industries and life sciences showed modest growth, with continued strength in oil and gas due to continued demand for automation systems in connection with production projects. The service activities within process industries continued to be in demand in this environment of cautious capital investment, with revenue growth for 2003.

        In 2004, we expect to see signs of a recovery in Europe and North America, a flat market in Latin America, continued strong growth in Asia, and somewhat improved market conditions in the Middle East and Africa. We anticipate a healthy growth in the chemicals and life sciences sectors, a gradual recovery in the marine, minerals, and paper industries, and increased demand in the automotive and general industries.

Year ended December 31, 2003 compared with year ended December 31, 2002

        Orders increased by $1,281 million, or 15%, to $9,961 million in 2003 compared to $8,680 million in 2002. As reported in local currencies, orders increased 2% in 2003 compared to 2002. A strong increase in orders in local currencies came from our Petroleum, Chemical and Consumer industries business area, supported by the receipt of a $173 million order for turnkey gas

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compressors for a pipeline project in Poland. Our Paper, Minerals, Marine and Turbocharging business area experienced weak markets in paper and minerals industries and our Robotics, Automotive and Manufacturing business area experienced weakness in the automotive industry in North America. All other business areas increased orders both in product and service businesses. Orders from other divisions were $474 million in 2003 compared to $429 million in 2002, representing 5% of division orders in both the periods.

        Revenues increased by $1,433 million or 17%, to $9,897 million in 2003 compared to $8,464 million in 2002. As reported in local currencies, revenues increased 3% in 2003 compared to 2002. Higher backlog from the large projects won during 2002 helped to increase revenues significantly in our Petroleum, Chemical and Consumer Industries business area. The Paper, Minerals, Marine and Turbocharging business area's revenues decreased due to lower order backlog and weak markets in the paper industry. Most other business areas showed moderate revenue increases reflecting volume improvements in products and service sales. Regionally, Asia and Europe had double-digit growth rates, whereas revenues in the Americas remained flat in local currencies. Revenues from other divisions were $455 million in 2003 compared to $409 million in 2002, representing 5% of division revenues in both periods.

        Cost of sales was $6,991 million representing 71% of revenues in 2003 compared to $5,933 million representing 70% of revenues in 2002. Cost of sales as a percentage of revenues showed a moderate increase due to ongoing price pressure and the negative impact of the strengthening of the euro offsetting savings in supply management, manufacturing and engineering activities.

        Selling, general and administration expenses increased in U.S. dollar terms by $115 million or 6% to $1,966 million in 2003 compared to $1,851 million in 2002. As reported in local currencies, selling, general and administration expenses decreased by 8% in 2003 compared to 2002. Expressed as a percentage of revenues, selling, general and administration expenses decreased to 20% in 2003 compared to 22% in 2002 reflecting the impact of the various restructuring and efficiency improvement programs.

        Earnings before interest and taxes, or operating income, increased by $256 million or 50%, to $773 million in 2003 compared to $517 million in 2002. As reported in local currencies, earnings before interest and taxes increased 33% in 2003 compared to 2002. The significant improvement in operating income was mainly due to productivity improvements and successful cost savings programs combined with ongoing growth in the service business resulting in increased operating income in all business areas in 2003. Restructuring and related asset write-downs were higher at $140 million during 2003 as compared to $137 million during 2002 and the operating margin increased to 7.8% in 2003 compared to 6.1% in 2002.

Year ended December 31, 2002 compared with year ended December 31, 2001

        Orders increased by $381 million, or 5%, to $8,680 million in 2002 compared to $8,299 million in 2001. As reported in local currencies, orders increased 1% in 2002 compared to 2001. Strong demand in India and China led to increased order intake in our Petroleum, Chemical and Consumer Industries business area. Our Control Platform and Enterprise Products business area experienced a moderate decline in orders due to generally weak capital spending by participants in the process industries. Higher demand for robotics products in several industries led to higher orders in the Robotics, Automotive and Manufacturing business area. Low-Voltage Products and Instrumentation and Drives and Motors business areas experienced a flat development with the increased demand from industrial customers in China for products and systems, being offset by decreased orders from Europe and North America. Orders from other divisions were $429 million in 2002 (representing 5% of division orders) compared to $482 million in 2001 (representing 6% of division orders).

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        Revenues decreased $32 million to $8,464 million in 2002 compared to $8,496 million in 2001. As reported in local currencies, revenues decreased by 3% in 2002 compared to 2001. Revenues mainly increased, in the Petroleum, Chemical and Consumer Industries business area due to strong order backlog at the end of 2001 and improved market conditions in the Middle East, Africa and Asia. This increase was more than offset by a reduction in revenues in all the other business areas due to generally weaker market conditions. Revenues from other divisions were $409 million in 2002 (representing 5% of division revenues) compared to $610 million in 2001 (representing 7% of division revenues).

        Cost of sales was $5,933 million representing 70% of revenues in 2002 compared to $6,005 million representing 71% of revenues in 2001 reflecting the impact of productivity improvement programs.

        Selling, general and administration expenses increased in U.S. dollar terms by $62 million or 3% to $1,851 million in 2002 compared to $1,789 million in 2001. As reported in local currencies, selling, general and administration expenses remained flat. Expressed as a percentage of revenues, selling, general and administration expenses increased to 22% in 2002 compared to 21% in 2001, primarily due to increased research and development costs.

        Earnings before interest and taxes, or operating income, increased modestly by $3 million to $517 million in 2002 compared to $514 million in 2001. As reported in local currencies, earnings before interest and taxes decreased 4% in 2002 compared to 2001. This reduction was mainly due to increased restructuring and asset write-downs of $137 million in 2002 as compared to $81 million during 2001. Earnings decreased in all business areas, except in the Drives and Motors business area, which remained flat. The operating margin increased to 6.1% in 2002 compared to 6.0% in 2001.

Non-Core Activities

        Business activities that are not directly linked to our Power Technologies and Automation Technologies divisions and which we are considering for sale, winding down or otherwise discontinuing are grouped together and their results are reported under the heading of Non-Core Activities. These comprise primarily the remaining parts of the Equity Ventures business area, the remaining parts of the Structured Finance business area, the remaining parts of the Building Systems business area, the remaining parts of the New Ventures business area and a number of other remaining activities, including Customer Service Workshop, Logistic Systems and the Group Processes business areas. The Insurance business area, which was previously included in Non-core activities, is now included as part of discontinued operations following our agreement in December 2003 to sell this business to White Mountains Insurance Group Limited of Bermuda.

        In April 2002, we decided to dispose of our Building Systems businesses. The gradual disposal process was envisaged to extend over a non-defined period of time preceded by restructuring in several locations. The disposal of our Building Systems businesses contemplated that we would retain an involvement in the disposed operations through a combination of technology license agreements, supplier relationships, retention of certain orders and participation on the Board of Directors of some of the disposed companies. As a result of these factors, we concluded that classification of the Building systems businesses as discontinued operations according to SFAS 144 was not appropriate. The results of operations of these businesses and the results from the disposal of each disposed business are reported in our Consolidated Income Statement within continuing operations, through the date of disposition.

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Year ended December 31, 2003 compared with year ended December 31, 2002

        Orders decreased by $1,164 million, or 33%, to $2,313 million in 2003 compared to $3,477 million in 2002. As reported in local currencies, orders decreased by 45% in 2003 compared to 2002. The reduction in orders is primarily due to the ongoing divestment process combined with difficult market conditions in the Building Systems business area, and the discontinuation and reduction of activities in the Group Processes business area. Orders from other divisions amounted to $524 million in 2003 (representing 23% of the division orders in 2003) and $871 million in 2002 (representing 25% of the division orders in 2002).

        Revenues decreased by $910 million, or 26%, to $2,537 million in 2003 compared to $3,447 million in 2002. As reported in local currencies, revenues declined 39% in 2003 compared to 2002. Revenues from other divisions amounted to $553 million in 2003 (representing 22% of the division revenues in 2003) and $875 million in 2002 (representing 25% of division revenues in 2002).

        The major components of the Non-core Activities division's revenues are the following:

Building Systems revenues decreased by $546 million, or 23%, to $1,829 million in 2003 compared to $2,375 million in 2002. As reported in local currencies, revenues decreased 34% in 2003 compared to 2002. The decrease in revenues was due to the lower revenue base resulting from our divestment of the majority of the businesses in this business area and continued difficult market conditions in the remaining units. Other non-core activities include Group Processes revenues that decreased by $241 million, or 32%, to $517 million in 2003 from $758 million in 2002. As reported in local currencies, revenues decreased by 40% in 2003 compared to 2002. This decrease was mainly due to the reduction of our activities in this area. Of the remaining businesses, revenues decreased by $115 million, or 64%, to $64 million in 2003 from $179 million in 2002. The decrease was mainly due to the ongoing divestment and closing process in our Customer Service Workshop and Logistic Systems business areas.

        Earnings before interest and taxes, or operating loss, remained flat at a loss of $181 million in 2003 and 2002. As reported in local currencies, operating loss decreased by 6% in 2003 compared to 2002. This result was primarily attributable to the following:

Equity Ventures operating income increased by $33 million to $76 million in 2003 compared to $43 million in 2002. As reported in local currencies, operating income increased by 38% in 2003 compared to 2002. The increase primarily resulted from the gain realized from the divestments of ABB Redbank Project Pty Ltd. and ElectraNet Pty Ltd. in Australia.

Structured Finance operating loss increased by $161 million to a loss of $65 million in 2003 compared to an income of $96 million in 2002. This increase primarily resulted from a loss on disposal of approximately $80 million in 2003 following the divestment of our stake in the Swedish Export Credit Corporation in early 2003, compared to an income from equity accounted companies of $125 million recognized in 2002.

Building Systems operating loss decreased by $9 million to $104 million in 2003 compared to $113 million in 2002. As reported in local currencies, operating loss decreased by 20% in 2003 compared to 2002. The operating loss for 2003 included the gain on sale of the businesses located in the Nordic Region for approximately $124 million being partially offset by the loss on sale of the businesses located in several other countries, principally Belgium, the Netherlands, Austria and the UK for approximately $41 million. Excluding these non-recurring items, the operating loss was $187 million in 2003 compared to $113 million in 2002. The increase in the loss from the prior year is the result of additional restructuring costs and the weak underlying market conditions with the remaining businesses.

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New Ventures operating loss decreased by $16 million to $21 million in 2003 compared to $37 million in 2002. As reported in local currencies, the operating loss decreased by 51% in 2003 compared to 2002. The decrease was largely due to the benefits of restructuring activities throughout all businesses leading to a significant reduction in selling, general and administrative expenses and considerably lower asset write-downs than in earlier years.

Other Non-core Activities operating loss decreased by $103 million to $67 million in 2003 compared to $170 million in 2002. Group Processes represented approximately $52 million and $105 million of this loss in 2003 and 2002, respectively. The improvement in Group Processes was due to the non-recurrence of costs for software write-downs in 2002 and reduced general and administrative expenses as a result of the ongoing dissolution of the Group Processes business area.

Year ended December 31, 2002 compared with year ended December 31, 2001

        Orders decreased by $583 million, or 14%, to $3,477 million in 2002 compared to $4,060 million in 2001. As reported in local currencies, orders decreased by 20% in 2002 compared to 2001. The reduction in orders was primarily due to the sale of our Air Handling business, decreased orders in our Building Systems business area resulting from market downturns across Europe and the planned reduction of our presence in some of the markets of the Logistic Systems and Customer Service Workshop business areas. Orders from other divisions amounted to $871 million in 2002 (representing 25% of the division orders in 2002) and $870 million in 2001 (representing 21% of the division orders in 2001).

        Revenues decreased by $672 million, or 16%, to $3,447 million in 2002 compared to $4,119 million in 2001. As reported in local currencies, revenues decreased 22% in 2002 compared to 2001. Revenues from other divisions amounted to $875 million in 2002 (representing 25% of the division revenues in 2002) and $821 million in 2001 (representing 20% of the division revenues in 2001).

        The major components of the Non-Core Activities division's revenues are the following:

Building Systems revenues decreased by $238 million, or 9%, to $2,375 million in 2002 compared to $2,613 million in 2001 due to market downturns across Europe, particularly Germany and selective order taking. As reported in local currencies, revenues decreased by 14% in 2002 compared to 2001. Other non-core activities included Group Processes revenues that increased by $20 million, or 3%, to $758 million in 2002 from $738 million in 2001. As reported in local currencies, revenues decreased by 3% in 2002 compared to 2001. Of the remaining businesses within Other Non-core activities, revenues decreased by $361 million, or 67%, to $179 million in 2002 from $540 million in 2001, mainly due to the sale of the Air Handling business.

        Earnings before interest and taxes, or operating loss, increased by $68 million to $181 million in 2002 compared to $113 million in 2001. As reported in local currencies, operating loss increased by 65% in 2002 compared to 2001. The reasons for the increase in operating loss are outlined below.

Equity Ventures operating income decreased by $32 million to $43 million in 2002 compared to $75 million in 2001. As reported in local currencies, operating income decreased by 44% in 2002 compared to 2001. The decrease was the result of reduced returns from investments and the effects of closing down development and office activities.

Structured Finance operating income increased by $95 million to $96 million in 2002 compared to $1 million in 2001. The increase primarily resulted from our 35% stake in Swedish Export Credit Corporation in Sweden, which in 2002 reported income from equity accounted companies of $125 million in 2002 compared to a loss of $16 million in 2001.

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Building Systems operating income decreased by $131 million to a loss of $113 million in 2002 compared to an income of $18 million in 2001. The decrease was due to: project write-downs in Germany, Sweden, United Kingdom and Denmark; closure costs in Italy and Poland; and restructuring costs in Germany.

New Ventures operating loss decreased by $106 million to $37 million in 2002 compared to $143 million in 2001. As reported in local currencies, operating loss decreased by 74% in 2002 compared to 2001. The decrease was due to the non-recurrence of costs and provisions for alternative energy projects and asset write-downs in 2001.

Other Non-core Activities operating loss increased by $106 million to $170 million in 2002 compared to $64 million in 2001. Group Processes represented approximately $105 million and $54 million of the losses in 2002 and 2001, respectively. The increase in Group Processes was mainly due to the write-down of software and increased general and administrative expenses.

Corporate/Other

        Our corporate/other activities comprise headquarters and stewardship, research and development and other activities.

Year ended December 31, 2003 compared with year ended December 31, 2002

        Total operating costs increased by $76 million, or 18%, to $499 million in 2003 compared to $423 million in 2002. In local currencies, operating costs increased 5% in 2003 compared to 2002.

        Headquarters and stewardship operating costs increased by $153 million, or 81%, to $342 million in 2003 compared to $189 million in 2002. In local currencies, operating costs were 87% higher in 2003 compared to 2002. The increase in operating costs was mainly due to the non-recurrence of one-time events in 2002 such as the recovery of payments from a former chief executive officer.

        Corporate research and development costs were $92 million in 2003 compared to $93 million in 2002. In local currencies, operating costs improved by 14% in 2003 compared to 2002. The improvement in operating costs was mainly due to a continuous attention to reducing unnecessary costs and a strong focus on the reduction of administrative overhead.

        Other operating costs (including Real Estate, Group Treasury Operations and consolidation) decreased by $76 million, or 54%, to $65 million in 2003 compared to $141 million in 2002, mainly due to lower costs following the cessation of proprietary trading and the consequent reduction in number of employees in Group Treasury Operations in 2002 and a reduction in earnings from certain intra-Group transactions when compared to 2002. In local currencies, operating costs improved by 83% in 2003 compared to 2002.

Year ended December 31, 2002 compared with year ended December 31, 2001

        Total operating costs increased by $134 million, or 46%, to $423 million in 2002 compared to $289 million in 2001. As reported in local currencies, operating costs increased by 91% in 2002 compared to 2001.

        Headquarters and stewardship operating costs decreased by $5 million, or 3%, to $189 million in 2002 compared to $194 million in 2001.

        Corporate research and development costs decreased by $10 million, or 10%, to $93 million in 2002 compared to $103 million in 2001 as a result of the reorganization in our global research and development centers and the related headcount reductions. As reported in local currencies, research and development costs decreased 13% in 2002 compared to 2001.

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        Other operating costs (including Group Treasury Operations, Real Estate and consolidation) increased by $149 million to $141 million in 2002 compared to an income of $8 million in 2001, mainly due to a reduction in rental income as a result of asset sales, increased lease obligations in Real Estate, the reduced trading result of Group Treasury Operations following the cessation of proprietary trading in 2002 and a higher elimination of earnings from certain intra-Group transactions when compared to 2001.

Discontinued Operations

        Loss from discontinued operations, net of tax, in our Consolidated Income Statement includes the following items:

•

All of our Oil, Gas and Petrochemicals businesses, of which we agreed to sell our upstream businesses to a consortium consisting of Candover Partners, JP Morgan Partners and 3i Group in January 2004. The upstream business is a global producer of equipment and services for oil and gas exploration and production. The remaining part of the Oil, Gas and Petrochemicals businesses primarily consists of a full service engineering company which in addition to having expertise in EPC projects also licenses process technologies in the refining, chemical, petrochemical and polymer fields.



•

Costs related to the potential asbestos obligation of our U.S. subsidiary, Combustion Engineering Inc. The status of our potential asbestos obligation is contained in "—Contingencies and Retained Liabilities—Asbestos Liability," as well as in Note 18 to the Consolidated Financial Statements.



•

Our Reinsurance business, which we agreed in December 2003 to sell to White Mountains Insurance Group Limited, a Bermuda-based insurance holding company. The completion of this sale is subject to regulatory approvals and other customary closing conditions and is expected to take place in the second quarter of 2004.



•

Our Wind Energy business in Germany, of which we sold a portion to GI Ventures AG of Munich, Germany, in December 2003. This business focused on the development and engineering, procurement and construction of wind parks in Europe.



•

The portion of our Structured Finance business which we sold to General Electric Capital Corporation (GE) in November 2002. This business provided debt capital for projects and equipment, and asset-based financing (such as leasing).



•

Our MDVC Cable business located in Germany, which we agreed in December 2003 to sell to Wilms Group of Menden, Germany (this sale was completed in January 2004). This business manufactures medium and high-voltage cables, cable systems and accessories for power suppliers and network operators.



•

ABB Export Bank, which we sold to a financial investor in December 2003 as a continuation of the divestment of our Structured Finance business. ABB Export Bank arranged international export, trade and project financing.



•

Our Metering business, which we sold to Ruhrgas Industries GmbH of Essen, Germany, in December 2002. This business produced electricity, water, energy and gas meters, metering systems and load control systems.



•

A number of other businesses sold in 2003 and those we are planning to sell in 2004 including: Austevoll and Ølen, operations of Marine Austevoll, a marine switchgear business in Norway, that were sold to Scandinavian Electric Austevoll AS and Vassnes Elektro AS, respectively, both in Norway; our Repair Workshop business in Portugal which we intend to sell; and our Retail software business in the United States that we have agreed to sell to

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PIM-Newco Incorporated. In 2002, the other divested businesses included: The Components business of ABB Trasmissione e Distribuzione S.p.A (Italy), which was sold to EB Rebosio S.r.l.; Energy Information Systems Ltd of the United Kingdom, which was sold to Alstom SA; and the ABB Drying Business (a division of ABB Inc. comprising a number of legal entities), which was sold to Andritz AB and Andritz Ltd.

•

Various businesses that were abandoned in 2003 and 2002 for strategic reasons or for which a buyer could not be found.



•

Legal and professional fees related to the above disposals.

        Loss from discontinued operations, net of tax, was $853 million, $858 million and $837 million in 2003, 2002 and 2001, respectively. The loss from discontinued operations, net of tax, for the above items is detailed below.

	Year ended December 31,
Discontinued operations
	2003		2002		2001
	($ in millions)
Oil, Gas and Petrochemicals	(496	)	(127	)	9
Combustion Engineering (Asbestos)	(145	)	(420	)	(470	)
Reinsurance	(97	)	22		(336	)
Wind Energy	(42	)	(1	)	—
Structured Finance	(29	)	(183	)	8
MDCV Cables	(24	)	(1	)	(5	)
ABB Export Bank	(9	)	10		6
Metering	(3	)	(54	)	14
Other abandoned or sold businesses/Other	(8	)	(104	)	(63	)
Loss from discontinued operations, net of tax	(853	)	(858	)	(837	)

        The above includes the businesses' operational results, accumulated foreign currency translation adjustments, allocation of interest in accordance with EITF 87-24, capital gains and losses on sale, impairment charges, goodwill write-offs and other costs.

        We expect to continue to identify non-core businesses for disposal. If a business meets the criteria of SFAS 144, we will reflect the results of operations from the business as discontinued operations in our Consolidated Income Statement and as assets and liabilities held for sale and in discontinued operations in our Consolidated Balance Sheet. We will reclassify the prior years' presentation to reflect the disposals on a comparable basis.

Oil, Gas and Petrochemicals

        Capital expenditures by customers of the Oil, Gas and Petrochemicals businesses are influenced by oil company expectations about the oil price, which is determined by supply and demand for crude oil and natural gas products, the energy price environment that results from supply and demand imbalances and consolidation of the oil and gas markets. Key factors that may influence the worldwide oil and gas market include production restraint of OPEC nations and other oil-producing countries, global economic growth, technological progress in oil exploration and production and the maturity of the resource base. The downstream markets are in the short term influenced by capacity utilization and in the longer term by factors such as economic growth, substitution of products and demand for more environmentally friendly products.

        While there are signals of an improving outlook for 2004 as the global economy stabilizes, spending for upstream and downstream projects remained modest throughout 2003. The oil price

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remained within the OPEC target band of $22 to $28 per barrel during most of 2003 and moved towards the high end of this band towards the end of 2003 due to recovery in underlying consumption, reflecting the faster pace of global economic recovery. Investment growth in exploration and production in the upstream market (from the well or bore hole to the refinery) was soft and predominantly outside North America. Competition in the downstream markets remained intense throughout 2003. Refining expenditures continued to be driven by clean fuel regulations, with some increase in demand in Asia as those economies continue to grow. The petrochemical cycle is emerging from an extended downturn during which there was lower investment in new capacity. The increased use of plastics and textiles, particularly in growing economies, is resulting in increased investment in both low material cost regions such as the Middle East and in major petrochemical consuming markets such as India and China.

        In January 2004, we announced the sale of our upstream businesses to a consortium consisting of Candover Partners, JP Morgan Partners and 3i Group. For further information on the sale of our upstream businesses, see "—Acquisitions, Investments and Divestitures—Divestitures—Pending Divestitures."

        The remaining Oil, Gas and Petrochemicals businesses are available for immediate sale and continue to be actively marketed. It is unlikely that significant change to the divestment strategy will be made or that the plan to divest the remaining Oil, Gas and Petrochemicals businesses will be withdrawn in the future. Management anticipates divesting this business in 2004.

        In 2002, we initiated a strategic shift to narrower-scope, lower risk projects based on a more selective bidding process in the downstream oil and gas business (typically from the refinery to industrial manufacturers or distributors) and a shift from fixed price contracts towards lower-risk reimbursable contracts, which allow a more balanced sharing of risks and opportunities between customer and contractor. To prepare the remaining Oil, Gas and Petrochemicals businesses for disposal, we streamlined the management structure of the businesses and in October 2003, announced that the chief financial officer, would have direct management responsibility for our entire Oil, Gas and Petrochemicals businesses until they are divested.

Year ended December 31, 2003 compared with year ended December 31, 2002

        Orders decreased by $942 million, or 26%, to $2,683 million in 2003 compared to $3,625 million in 2002. As reported in local currencies, orders decreased by 31% in 2003. Orders in 2003 included $20 million received from our other divisions, compared to $23 million in 2002. The overall decrease is primarily due to a 40% decrease in large orders, mainly attributable to our strategic decision to de-emphasize fixed priced EPC contracts in favor of lower-risk reimbursable contracts, to limit construction in the scope of work in our downstream business and to more selectively tender for project work. In addition, both upstream and downstream experienced a decline in orders due to an overall relatively soft market.

        Revenues decreased by $467 million, or 12%, to $3,402 million in 2003 compared to $3,869 million in 2002. As reported in local currencies, revenues decreased by 17%. In 2003, revenues included $28 million of sales to our other divisions, compared to $15 million in 2002. The upstream business recorded revenues of approximately $1,524 million and $1,538 million in 2003 and 2002, respectively. The remaining Oil, Gas and Petrochemicals businesses recorded revenues of approximately $1,878 million and $2,331 million in 2003 and 2002, respectively. The overall decrease in revenues was the result of a lower backlog going into 2003 and a relatively low order intake in 2003, reflecting the shift in our market strategy pertaining to fixed priced EPC contracts in the downstream business.

        The net loss increased by $369 million to $496 million in 2003 compared to $127 million in 2002. The upstream business recorded net income of approximately $4 million and $98 million in

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2003 and 2002, respectively. The decrease in net income of $94 million was attributable to costs associated with the future sale of the upstream business of approximately $44 million and $13 million of allocated interest expense in accordance with EITF 87-24. The remaining Oil, Gas and Petrochemicals businesses had net losses of $500 million and $225 million in 2003 and 2002, respectively. The remaining Oil, Gas and Petrochemicals businesses were adversely affected by charges of $399 million, primarily in four large, long-term, downstream fixed price projects booked prior to the implementation of our current bidding strategy for such contracts. The customers and the countries in which the project execution took place were in each case unrelated. These charges are related to delays, project cost overruns and write-down of assets that we, for various reasons, consider no longer to be recoverable. There is inherent risk in fixed priced EPC contracts and we have experienced losses from such contracts due to, among other things, our inability to make proper estimates during the tendering process and weaknesses in project execution. In any event, we may continue to experience losses on the contracts we entered into prior to adopting our new approach until they expire or are terminated, but the number of such contracts and the remaining risks, both inherent and specific, associated with them has been significantly reduced as a result of the measures we have taken to address these problems. We also recorded a valuation allowance on deferred tax assets of approximately $120 million related to the remaining Oil, Gas and Petrochemicals businesses as we determined it was more likely than not that such deferred tax assets would not be realized.

Year ended December 31, 2002 compared with year ended December 31, 2001

        Orders increased by $222 million, or 7%, to $3,625 million in 2002 compared to $3,403 million in 2001. As reported in local currencies, orders increased by 3% in 2002. Orders in 2002 included $23 million received from our other divisions, compared to $15 million in 2001. A 22% increase in large orders was attributable to the award of the ExxonMobil Sakhalin order within our downstream business, offset by a reduction resulting from a shift in strategy from fixed price contracts towards lower-risk reimbursable contracts. The increase in the downstream business offset a general reduction in the upstream business.

        Revenues increased by $380 million, or 11%, to $3,869 million in 2002 compared to $3,489 million in 2001. As reported in local currencies, revenues increased by 7% in 2002. In 2002, revenues included $15 million of sales to our other divisions, compared to $11 million in 2001. The upstream business recorded revenues of approximately $1,538 million and $1,470 million in 2002 and 2001, respectively. The remaining Oil, Gas and Petrochemicals businesses recorded revenues of approximately $2,331 million and $2,019 million in 2002 and 2001, respectively. The overall increases came from improvements in the upstream and downstream businesses, reflecting a high order backlog going into 2002 and a relatively high level of order intake in 2002.

        We recorded a net loss of $127 million in 2002 compared to net income of $9 million in 2001 that represents a decrease of $136 million. The upstream business recorded net income of approximately $98 million and $93 million in 2002 and 2001, respectively. The increase in net income of $5 million was attributable to the increase in revenues for the same period. The remaining Oil, Gas and Petrochemicals businesses had net losses of $225 million and $84 million in 2002 and 2001, respectively. The remaining Oil, Gas and Petrochemicals businesses were adversely affected by cost overruns and project delays, which resulted in a charge of $224 million in 2002, primarily in four, long-term, large downstream fixed price projects booked prior to the implementation of current bidding strategy for such contracts. The loss was partially offset by an increase in revenues for the same period.

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Asbestos

        Loss from discontinued operations, net of tax, also includes costs related to the potential asbestos obligation of our U.S. subsidiary, Combustion Engineering Inc., of approximately $145 million, $420 million and $470 million in 2003, 2002 and 2001, respectively. See "—Contingencies and Retained Liabilities—Asbestos Liability."

Reinsurance Business

        In December 2003, we agreed to sell our Reinsurance business to White Mountains Insurance Group Limited of Bermuda for approximately $425 million.

        Our Reinsurance business provides international reinsurance and insurance underwriting and specialized primary insurance in the United States. In reinsurance, the reinsurer, in return for a premium payment, provides coverage to a primary insurance company for all or a specific portion of the primary insurer's obligation to its customer.

Year ended December 31, 2003 compared with year ended December 31, 2002

        Revenues increased by $145 million, or 22%, to $816 million in 2003 compared to $671 million in 2002. Included in revenues are revenues from other business areas of $34 million and $27 million in 2003 and 2002, respectively. The increase in revenues was primarily due to higher premium income from increased volumes and higher insurance premium rates compared to the rates for comparable products and risks in 2002.

        We recorded a net loss of $97 million in 2003 compared to net income of $22 million in 2002 that represents a decrease of $119 million. The decrease was the result of a $154 million impairment charge and an allocation of interest of $15 million in accordance with EITF 87-24 being partially offset from income from operations of approximately $72 million due to higher technical insurance results and improved investment income in the major operating units. The impairment charge recorded from the anticipated disposal of the Reinsurance business of $154 million was principally comprised of an asset write-down of $48 million, goodwill and other intangible write-offs of $89 million, expected selling costs of $25 million, deferred tax write-offs of approximately $16 million and an accumulated foreign currency translation gain of $24 million.

Year ended December 31, 2002 compared with year ended December 31, 2001

        Reinsurance revenues decreased by $267 million, or 28%, to $671 million in 2002 compared to $938 million in 2001. Included in revenues are revenues from other business areas of $27 million and $5 million in 2002 and 2001, respectively. The decrease in revenues was primarily due to the cessation of new reinsurance activity in Scandinavian Reinsurance Company Limited, Bermuda.

        We recorded net income of $22 million in 2002 compared to a net loss of $336 million in 2001 that represents an increase of $358 million. The increase was the result of the non-recurrence of a number of costs from 2001. Prior to 2001, we presented a portion of our insurance reserves on a discounted basis, which estimated the present value of funds required to pay losses at future dates. During 2001, the timing and amount of claims payments being ceded to us in respect of prior years' finite risk reinsurance contracts changed and could not be reliably determined at December 31, 2001. Therefore, we were no longer able to continue to discount our loss reserves and were required to record a charge to losses and loss adjustment expenses in 2001 of $295 million. In addition, the Reinsurance business area also recorded provisions for $138 million in underwriting losses, including provisions totalling $48 million relating to the events of September 11, 2001, leading to the significantly negative insurance results. The benefit of the non-recurrence of these costs was partially offset by lower revenues.

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Wind Energy

        Our Wind Energy business in Germany was primarily focused on the development of Wind Parks mainly in Europe. In December 2003, we sold part of our Wind Energy business in Germany to GI Ventures AG of Munich, Germany, with the remaining portion set to be sold in 2004.

Year ended December 31, 2003 compared with year ended December 31, 2002

        Revenues decreased by $32 million, or 67%, to $16 million in 2003 compared to $48 million in 2002. The decrease in revenues was primarily due to a large order progressing through the execution phase with no other significant replacement orders.

        The net loss increased by $41 million to $42 million in 2003 from $1 million in 2002. The 2003 net loss of $42 million was comprised principally of a $25 million loss from disposal (net of a tax benefit of $10 million), asset write-downs of $9 million and loss from operations of $8 million.

        This unit did not exist in this form in 2001 and therefore no comparison between 2002 and 2001 is provided.

Structured Finance

        In November 2002, we completed the sale of most of our Structured Finance business to GE.

Period from January 1 to November 30, 2002 compared with year ended December 31, 2001

        Revenues increased by $42 million, or 19%, to $262 million in 2002 from $220 million in 2001. The revenue increase reflects the acquisition of a portfolio of small, mainly standardized leases as well as growth in the businesses existing portfolio of such small leases.

        We recorded a net loss of $183 million in 2002 compared to net income of $8 million in 2001 that represents a decrease of $191 million. The 2002 net loss of $183 million included a $146 million loss on disposal, loss from operations of $22 million and the allocation of interest expense of $15 million in accordance with EITF 87-24. The loss on disposal of $146 million for the sold business was principally comprised of an asset write-down of $15 million, goodwill and other intangible write-offs of $2 million, transaction costs of $27 million, the fair value for GE's right to require the Company to repurchase certain designated assets of $38 million, capital tax expense associated with the disposal of $10 million and an accumulated foreign currency translation loss of $54 million. The lower operating income in general reflected the change in strategy to refrain from new lease and financing transactions, leading to a corresponding reduction in business activity during 2002.

MDCV Cable Business

        In December 2003, we agreed to sell our MDCV cable business, located in Germany, to the Wilms Group of Menden, Germany. This business manufactures medium and high-voltage cables, cable-systems and accessories for power suppliers and network operators. The sale was completed in January 2004.

Year ended December 31, 2003 compared with year ended December 31, 2002

        Revenues decreased by $3 million, or 4%, to $79 million in 2003 compared to $82 million in 2002 mainly due to the loss of important projects. Included in revenues are revenues from other business areas of $5 million and $4 million in 2003 and 2002, respectively.

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        The net loss increased by $23 million to $24 million in 2003 compared to $1 million in 2002. The 2003 net loss of $24 million was comprised principally of asset write-downs of $10 million and a loss from operations of $14 million.

Year ended December 31, 2002 compared with year ended December 31, 2001

        Revenues increased by $20 million, or 32%, to $82 million in 2002 compared to $62 million in 2001 primarily due to extension of the product mix. Included in revenues are revenues from other business areas of $4 million and $2 million in 2002 and 2001, respectively.

        The net loss decreased by $4 million, or 80% to $1 million in 2001 compared to $5 million in 2001, reflecting a more favorable product mix.

ABB Export Bank

        In December 2003 we completed the sale of ABB Export Bank to an investor in Sweden. ABB Export Bank was part of our Structured Finance business area and arranged export, trade and project financing. Backed by national export credit agencies or bilateral and multilateral institutions such as the World Bank, ABB Export Bank lent money to our customers in various countries, in all currencies accepted by the agency involved.

Period from January 1 to December 16, 2003 compared with year ended December 31, 2002

        Revenues decreased by $15 million, or 56%, to $12 million in 2003 compared to $27 million in 2002 due to lower business volumes, the sale of assets following our decision to divest the business and lower interest rates. Included in revenues are revenues from other business areas of $3 million and $10 million in 2003 and 2002, respectively.

        We recorded a net loss of $9 million in 2003 compared to net income of $10 million in 2002 that represents a decrease of $19 million. The 2003 net loss of $9 million includes a $12 million loss on disposal, income from operations of $6 million and the allocation of interest expense of $3 million in accordance with EITF 87-24. The loss on disposal of $12 million for the sold business was principally comprised of an asset write-down of $20 million, transaction costs of $1 million, capital tax expense associated with the disposal of $4 million and an accumulated foreign currency translation gain of approximately $13 million.

Year ended December 31, 2002 compared with year ended December 31, 2001

        Revenues decreased by $10 million, or 27%, to $27 million in 2002 compared to $37 million in 2001 due to lower business volumes, the sale of assets following our decision to divest the business and lower interest rates. Included in revenues are revenues from other business areas of $10 million and $8 million in 2002 and 2001, respectively.

        Net income increased by $4 million, or 67% to $10 million in 2002 compared to $6 million in 2002.

Metering

        In December 2002, we sold our Metering business to Ruhrgas Industries GmbH of Germany. This business produced electricity, water, energy and gas meters, metering systems and load control systems.

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Period from January 1 to December 4, 2002 compared with year ended December 31, 2001

        Revenues decreased by $76 million, or 17%, to $372 million in 2002 compared to $448 million in 2001. The 2002 figure is for eleven months trading as the business was sold to Ruhrgas Industries GmbH at the beginning of December 2002. The 2002 annualized revenues decreased as a result of the weak market conditions in North America, Latin America and Germany.

        We recorded a net loss of $54 million in 2002 compared to net income of $14 million in 2001 that represents a decrease of $68 million. The 2002 net loss of $54 million included a $48 million loss on disposal, loss from operations of $3 million and the allocation of interest expense of $3 million in accordance with EITF 87-24. The loss on disposal of $48 million for the sold business was principally comprised of goodwill and other intangible write-offs of $65 million, transaction costs and other provisioning of $46 million, capital tax expense associated with the disposal of $21 million and an accumulated currency translation loss of $35 million offset in part by a gain of $119 million, being the difference between the proceeds received and net assets of the business.

LIQUIDITY AND CAPITAL RESOURCES

Principal Sources of Funding

        In 2003, as in 2002 and 2001, we met our liquidity needs using cash from operations, bank borrowings, the proceeds from the issuance of debt securities, divestment proceeds, as well as the sales of receivables under our securitization programs. The reductions in our credit rating during 2002, described below, restricted our access to the capital markets during 2002 and the first half of 2003. As a result, we relied increasingly on proceeds from divestments, bank borrowings, cash from operations and, additionally in 2003 from our capital strengthening program described below. Also, in the first quarter of 2003, we raised approximately $156 million from the sale of 80 million treasury shares in two transactions.

        During the second half of 2003, we completed a number of steps to strengthen our Consolidated Balance Sheet and to improve our liquidity. In September 2003, we issued convertible unsubordinated bonds of an aggregate principal amount of 1,000 million Swiss francs, due 2010. See "—Convertible Bonds and Notes." In October 2003, we announced a three- component capital strengthening program, consisting of a rights issue providing net proceeds of approximately $2.5 billion, a new $1 billion unsecured revolving credit facility to replace our $1.5 billion credit facility and a bond offering of 650 million euro (equivalent to approximately $769 million, at the date of issuance). This program has provided a stronger financial base for the future growth of our core operations, has deleveraged our balance sheet by reducing our gearing from 86% at December 31, 2002 to 70% at December 31, 2003 (see "—Financial Position") and has given us more flexibility, particularly with regard to the timing of our divestment program.

        We believe that our ability to obtain funding from the sources described above will continue to provide the cash flows necessary to satisfy our working capital requirements and capital expenditure requirements, as well as meet our debt repayments and other financial commitments for the next 12 months. Due to the nature of our operations, our cash flow from operations generally tends to be weaker in the first half of the year than in the second half of the year.

Rights Issue

        On November 20, 2003, our shareholders approved the issuance of 840,006,602 new shares pursuant to a fully underwritten rights issue. For each share that they owned, holders of existing shares were allocated one right to purchase the offered shares. For every 10 rights, holders of existing shares were entitled to purchase seven offered shares. The banks agreed to underwrite 840,006,602 shares at an issue price of 4.00 Swiss francs per share representing an approximate

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50% discount on the share price at the time and providing for net proceeds of $2,487 million. The rights issue was completed on December 12, 2003 when the cash was received together with the net proceeds of the bonds of 650 million euro aggregate principal amount (see "—Convertible Bonds and Notes"). Of these funds, approximately $1.2 billion was used to repay debt maturing in December 2003 and repurchase bonds with a face value of $94 million, while the remainder was placed on deposit with banks to be used to repay debt maturing in 2004.

Interest Rates

        We have obtained financing in a range of currencies and maturities and on various interest rate terms. We use derivatives to reduce the interest rate and/or foreign exchange exposures arising on our debt. For example, to reduce our exposure to interest rates, we use interest rate swaps to effectively convert fixed rate borrowings into floating rate liabilities and we use cross currency swaps to effectively convert foreign currency denominated bonds into U.S. dollar liabilities. At December 31, 2003, after considering the effects of interest rate swaps, the effective average interest rate on our floating rate long-term borrowings (including current maturities) of $4,241 million and our fixed rate long-term borrowings (including current maturities) of $1,754 million was 3.2% and 5.8%, respectively. This compares with an effective rate of 3.0% for floating rate long-term borrowings and 5.0% for fixed-rate long-term borrowings as of December 31, 2002. A discussion of our use of derivatives to modify the characteristics of our long-term borrowings is contained in Note 15 to our Consolidated Financial Statements.

Convertible Bonds and Notes

        In 2003, we completed two note issuances, including the issuance of bonds convertible into our shares, as sources of funding.

        In September 2003, we issued 1,000 million Swiss francs aggregate principal amount of convertible unsubordinated bonds due 2010 (approximately $722 million at the date of issuance). This transaction lengthened the maturity profile of our debt, thereby reducing our dependence on short-term funding. We used the proceeds, net of expenses and fees, to reduce our drawing under our $1.5 billion credit facility (see "—Credit Facilities"). The convertible bonds pay interest annually in arrears at a fixed annual rate of 3.5%. On issuance, each 5,000 Swiss francs principal amount of bonds was convertible into 418.41004 fully paid ABB ordinary shares at an initial conversion price of 11.95 Swiss francs. The conversion price is subject to adjustment provisions to protect against dilution or change in control. As a result of the rights issue discussed above, the conversion price and conversion ratio of the bonds were adjusted to 9.53 Swiss francs and 524.65897 shares, respectively. Consequently, the bonds are now convertible into 104,931,794 fully paid ordinary ABB shares.

        The bonds are convertible at the option of the bondholder at any time from October 21, 2003 up to and including the tenth business day prior to September 10, 2010. We may at any time on or after September 10, 2007 redeem the outstanding bonds at par plus accrued interest if, for a certain number of days during a specified period of time, the official closing price of our ordinary shares on the relevant exchange has been at least 150% of the conversion price. In addition, at any time prior to maturity, we can redeem the outstanding bonds at par plus accrued interest, if at least 85% in aggregate of the principal amount of bonds originally issued have been redeemed, converted or purchased and cancelled. We have the option to redeem the bonds when due in cash, ordinary shares or any combination thereof.

        In November 2003, as part of our three-component capital strengthening program, we issued bonds of an aggregate principal amount of 650 million euro (approximately $769 million at the time of issuance), due 2011. These bonds pay interest semi-annually in arrears at a fixed annual rate of

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6.5%. In the event of a change of control of ABB Ltd, the terms of the bonds require us to offer to repurchase the bonds at 101% of the principal amount thereof, plus any accrued interest. The net proceeds from the issue of these bonds were placed in escrow and were released to us upon successful completion of the rights issue in December 2003.

        In May 2002, we issued $968 million aggregate principal amount of convertible unsubordinated bonds due 2007. The bonds pay interest semi-annually in arrears at a fixed annual rate of 4.625%. On issuance each $1,000 principal amount of bonds was convertible into 87.7489 fully paid ABB ordinary shares at an initial conversion price of 18.48 Swiss francs (converted into U.S. dollars at a fixed conversion rate of 1.6216 Swiss francs per U.S. dollar). The conversion price is subject to adjustment provisions to protect against dilution or change in control. As a result of the rights issue discussed above, the conversion price of the bonds was adjusted to 14.64 Swiss francs (converted into U.S. dollars at the fixed exchange rate of 1.6216 Swiss francs per U.S. dollar), representing a total of 107,220,546 shares if the bonds were fully converted.

        The bonds are convertible at the option of the bondholder at any time from June 26, 2002 up to and including May 2, 2007. We may, at any time on or after May 16, 2005, redeem the outstanding bonds at par plus accrued interest if (1) for a certain number of days during a specified period of time, the official closing price of our shares on virt-x exceeds 130% of the conversion price or (2) at least 85% in aggregate principal amount of bonds originally issued have been exchanged, redeemed or purchased and cancelled. We have the option to redeem the bonds when due, in cash, ordinary shares or any combination thereof.

        Also in May 2002, we issued 200 million pounds sterling (approximately $292 million) aggregate principal amount of bonds due 2009 (sterling-denominated bonds), which pay interest semi-annually in arrears at 10% per annum. We also issued in May 2002, 500 million euro (approximately $466 million) aggregate principal amount of bonds, due 2008 (euro-denominated bonds), which pay interest annually in arrears at 9.5% per annum.

        The sterling-denominated bonds and the euro-denominated bonds contain certain clauses linking the interest paid on the bonds to the credit rating assigned to the bonds. If the rating assigned to these bonds by both Moody's and Standard & Poor's remains at or above Baa3 and BBB-, respectively, then the interest rate on the bonds remains at the level at issuance, that is 10% and 9.5%, for the sterling-denominated and euro-denominated bonds, respectively. If the rating assigned by either Moody's or Standard & Poor's decreases below Baa3 or BBB-, respectively, then the annual interest rate on the bonds increases by 1.5% per annum to 11.5% and 11%, for the sterling-denominated and euro-denominated bonds, respectively. If after such a rating decrease, the rating assigned by both Moody's and Standard & Poor's returns to a level at or above Baa3 and BBB-, respectively, then the interest rates on the bonds return to their original levels. As a result of the downgrade of our long-term credit rating by Moody's to Ba2 on October 31, 2002, this step-up clause in interest was triggered on both bonds. The increase in interest costs is effective for interest periods beginning after the payment of the coupon accruing at the date of the downgrade. This increase in interest rates had no significant impact on 2002 interest expense. The total impact on 2003 was an increase in interest expense of approximately $13 million and future years will be affected if our credit ratings do not return to at least both Baa3 and BBB- from Moody's and Standard & Poor's, respectively.

        A cross-currency swap has been used to modify the characteristics of the sterling-denominated bonds and an interest rate swap to modify the euro-denominated bonds. After considering the impact of the cross-currency and interest rate swaps, the sterling-denominated bonds effectively became a floating rate U.S. dollar obligation, while the euro-denominated bonds became a floating rate euro obligation. In both cases, the floating rate resets every three months. See Note 15 to our Consolidated Financial Statements.

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        Almost all of our publicly traded bonds contain cross-default clauses which would allow the bondholders to demand repayment if we were to default on certain borrowings at or above a specified threshold amount.

Credit Facilities

        On November 17, 2003, as part of our three-component capital strengthening program, we entered into a new unsecured syndicated $1 billion three-year revolving credit facility (new credit facility) which became available in December 2003 after the fulfillment of certain conditions including the repayment and cancellation of the existing $1.5 billion facility and the raising of specified minimum levels of gross proceeds from the rights issue (see "—Rights Issue") and from the bonds denominated in euros which were issued in November 2003 (see "—Convertible Bonds and Notes"). This new credit facility is for general corporate purposes. At December 31, 2003 and March 31, 2004, nothing was outstanding under the new facility and although we currently do not intend to draw on it, it provides us with additional financial flexibility.

        The new credit facility contains certain financial covenants in respect of minimum interest coverage, maximum net leverage and a minimum level of consolidated net worth. We are required to meet these covenants on a quarterly basis beginning with the period ending December 31, 2003. Should our unsecured long-term debt ratings reach certain defined levels (basically investment grade), these covenants will only have to be calculated as of June and December of each year. The new facility also contains provisions for the mandatory prepayment and cancellation of the facility upon a change of control of ABB Ltd.

        The new credit facility imposes restrictions on the amount of third party indebtedness in subsidiaries other than in the obligors under the facility, subject to certain exceptions. The facility also contains certain other undertakings including certain limitations on disposals of assets, certain restrictions on mergers and acquisitions, negative pledges and restrictions on the early redemption of capital market instruments, such as bonds having a maturity date beyond that of the facility. However, the facility permits the lengthening of the maturity profile of our debt through the early redemption of any bonds or other capital market instruments out of the net cash proceeds of any capital market instrument issued after November 17, 2003 and having a maturity date not earlier than the capital market instruments being repaid.

        The new credit facility contains cross-default clauses whereby an event of default would occur if we were to default on indebtedness, as defined in the facility, at or above a specified threshold. As long as there is no drawing under the facility, a failure to comply with the financial covenants and other obligations in the facility will not cause a cross default to other indebtedness.

        The new credit facility replaced a secured $1.5 billion 364-day revolving credit facility entered into in December 2002. The $1.5 billion facility was secured by a package of assets with a net carrying value of $3.5 billion at December 31, 2002 and by certain intra-group loans. As of December 31, 2002, no amounts had been drawn under the $1.5 billion facility. Beginning January 2003, amounts were drawn under the facility within the facility's specified monthly drawing limits until September when the amount drawn was reduced such that at September 30, 2003 an amount of $753 million was outstanding under the facility. The maximum amount available under the facility reduced from $1,500 million to $1,250 million, $1,200 million and $1,000 million at the beginning of October, November and December 2003, respectively. In December 2003, the remaining amount outstanding was repaid, the facility cancelled and the related security released.

        The $1.5 billion facility contained certain stringent financial covenants in respect of minimum interest coverage, total gross debt, a maximum level of debt in subsidiaries other than those specified as borrowers under the facility, a minimum level of consolidated net worth, as well as specific negative pledges. We were required to meet these financial covenants at each quarter-end

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commencing December 31, 2002. In addition, in order to ensure the continued availability of the credit facility until its cancellation in December 2003, we were required to obtain minimum levels of proceeds from the disposal of specified assets and businesses and/or equity issuances during 2003.

        The $1.5 billion facility prohibited the voluntary prepayment of any banking facility, the prepayment or early redemption of any bonds or capital market instruments, the repurchase of any of our shares, as well as the declaration or payment of dividends as long as the facility was outstanding.

Securitization Programs

        In addition to the aforementioned primary sources of liquidity and capital resources, we also sell certain trade receivables to Qualifying Special Purpose Entities ("QSPEs"), unrelated to us, primarily through two revolving-period securitization programs. Under the two securitization programs, neither QSPE commits to purchase our trade receivables, and the QSPEs may at any time refuse to continue purchasing our trade receivables. If both QSPEs simultaneously refuse to purchase additional receivables, then we would experience a temporary loss of cash flow from the sale of trade receivables over a period of several weeks until new trade receivables generated by us began to convert to cash in the normal course of our business.

        Solely for the purpose of credit enhancement from the perspective of the QSPEs, we retain an interest in the sold receivables. Pursuant to the requirements of the revolving-period securitizations, we effectively bear the risk of potential delinquency or default associated with trade receivables sold or interests retained. The fair value of the retained interests at December 31, 2003 and 2002 was approximately $367 million and $497 million, respectively.

        We retain servicing responsibility relating to the sold receivables. Cash settlement with the QSPEs in 2001 and through the third quarter of 2002 took place monthly on a net basis which gave us daily access to the cash moving through the securitization programs.

        During the fourth quarter of 2002, a number of changes were made to the two securitization programs as a consequence of our credit rating falling below BBB (Standard & Poor's) and Baa2 (Moody's). These changes included, in the case of the first program, twice monthly settlements (instead of monthly), the sale of additional receivables as security, changes in eligibility criteria for receivables to be sold and the establishment of certain banking and collection procedures in respect of sold receivables. Changes in the second program included the introduction of net cash settlements twice per month (instead of monthly), the daily transfer of collections of sold receivables, as well as a fixed percentage of retained interest on the sale of new receivables. In 2003, further amendments have been made to the second program, including the return to a dynamic calculation of the retained interest on the receivables sold rather than a fixed percentage. Under the amended terms of the second program, if our rating falls below BB+ (Standard & Poor's) or Ba3 (Moody's) then we may be required to relinquish the right to collect the sold receivables on behalf of the QSPE, and instead the cash collection of such sold receivables would be made directly to the accounts of the QSPE rather than via our company.

        As discussed above, we retain an interest in the sold receivables. Retained interests at December 31, 2003 and 2002 amounted to $390 million and $514 million, respectively. The decrease in the retained interest during 2003 was primarily related to businesses that were classified as discontinued operations or held for sale being phased out of the securitization programs during the year.

        Pursuant to the terms of the securitization programs, receivables more than 90 days overdue are considered delinquent. An increase in delinquency rates compared to historic levels will cause

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an increase in retained interests, while a decrease in delinquency rates compared to historic levels will cause a corresponding decrease in retained interests. Ultimately, if the customer defaults, we will be responsible for the uncollected amount.

        The net cash paid to QSPEs during 2003 and 2002 was $119 million and $384 million, respectively, comprising the cash flows in the table below:

	Year ended December 31,
	2003		2002
	($ in millions)
Gross trade receivables sold to QSPEs ($482 and $800)*	5,661		5,972
Collections made on behalf of and paid to QSPEs (($663) and ($735))*	(5,883	)	(6,074	)
Purchaser's liquidity and program fees (($2) and ($5))*	(21	)	(37	)
Decrease (increase) in retained interests ($119 and ($91))*	124		(245	)
Net cash paid to QSPEs during the year (($64) and ($31))*	(119	)	(384	)

^* Related to assets held for sale and in discontinued operations for 2003 and 2002, respectively

        The decrease in gross receivables sold in 2003 compared to 2002 is due primarily to the fact that businesses which were either classified as discontinued operations or which were sold by us were phased out of the securitization programs during the year.

        We pay purchaser's, liquidity and program fees on our securitization programs. Purchaser's and program fees are based on the amount of funding that we receive, while liquidity fees are based on the programs' size. The reduction in gross receivables sold, a lower average funded volume, a reduction in default and delinquency rates, as well as the fact that 2002 contained costs related to restructuring the programs, all contributed to lower purchaser's, liquidity and program fees in 2003 compared to 2002. The total cost of $21 million and $37 million in 2003 and 2002, respectively, related to the securitization of trade receivables, is included in the determination of current earnings.

        At December 31, 2003 and 2002, of the gross trade receivables sold, the total trade receivables for which cash has not been collected at those dates amounted to $898 million and $1,026 million, respectively.

        In addition, we transfer receivables outside of the above described securitization programs. These transfers were sales, made without recourse, directly to banks and/or sales pursuant to factoring or similar type arrangements. Total sold receivables included in these transactions during 2003 and 2002 were approximately $1,400 million (of which $581 million related to assets held for sale and in discontinued operations) and $534 million (of which $22 million related to assets held for sale and in discontinued operations), respectively. The related costs, including the associated gains and losses, were $12 million (of which $3 million related to assets held for sale and in discontinued operations) in 2003 and were not significant in 2002. The increase in the amount of receivables transferred outside of the securitization programs related to an increase in the sales and transfers of receivables meeting the requirements of SFAS 140.

        For a further discussion of our securitization programs, see Notes 2 and 7 to our Consolidated Financial Statements.

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Credit Ratings

        Debt ratings are an assessment by the rating agencies of the credit risk associated with our company and are based on information provided by us or other sources that the rating agencies consider reliable. Lower ratings generally result in higher borrowing costs and reduced access to capital markets.

        At December 31, 2002, after a series of rating downgrades during 2002, our long-term company ratings were Ba3 and BBB- (our long-term unsecured debt was rated B1 and BB+) from Moody's and Standard & Poor's, respectively (compared to long-term ratings of A2 and AA- from Moody's and Standard & Poor's, respectively, at December 31, 2001). On January 13, 2003, Standard & Poor's further lowered our long-term company rating to BB+ and our long-term unsecured debt to BB-. The ratings from both Moody's and Standard & Poor's have remained unchanged during the remainder of 2003, such that at December 31, 2003, our long-term company ratings were Ba3 and BB+ (our long-term unsecured debt was rated B1 and BB-) from Moody's and Standard & Poor's, respectively. In late October 2003, both rating agencies changed the outlook on these ratings to positive from negative. Our ratings are currently below "investment grade" that would be represented by Baa3 (or above) and BBB- (or above) from Moody's and Standard & Poor's, respectively. A rating below investment grade is reflected in higher interest costs on borrowings. Although our credit ratings are below investment grade, we expect that we will continue to be able to access the bond markets as we did in 2003 (see "—Convertible Bonds and Notes"). Until our credit rating has returned to investment grade, we do not anticipate having the ability to access the commercial paper markets.

Restrictions on Transfers of Funds

        We face restrictions on the transfer of funds in various countries due to local regulations and foreign exchange restrictions. Funds, other than regular dividends, fees or loan repayments, cannot be transferred offshore from these countries and are therefore deposited locally. As a consequence, these funds are not available within our Group Treasury Operations to meet short-term cash obligations. These funds are reported as cash on our Consolidated Balance Sheet, but we do not consider these funds as available for the repayment of debt outside the respective countries where the cash is situated, including those described below.

        Currency and other local regulatory restrictions exist in a number of countries where we operate, including: Brazil, China, Egypt, India, Korea, Malaysia, Norway, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and Venezuela.

        Furthermore, restricted cash amounting to $394 million and $377 million is not included in cash and equivalents on our Consolidated Balance Sheet at December 31, 2003 and 2002, respectively.

Financial Position

        During 2003 and 2002, the divestments and discontinuations of certain businesses were treated as discontinued operations pursuant to SFAS 144, as discussed in detail under "—Application of Critical Accounting Policies—Accounting for Discontinued Operations." Accordingly, the balance sheet data for all periods presented have been restated to present the financial position and results of operations of the businesses meeting the criteria of SFAS 144 as assets and liabilities in discontinued operations. In the Consolidated Statements of Cash Flows, the effects of the discontinued operations are not segregated, as permitted by Statement of Financial Accounting Standards No. 95 (SFAS 95), Statement of Cash Flows.

        Our operating assets which include marketable securities, receivables, inventories and prepaid expenses decreased by $195 million to $10,417 million at December 31, 2003, from $10,612 million

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at December 31, 2002. Operating assets exclude cash and equivalents and assets held for sale and in discontinued operations.

        Primarily as a result of the sale of shares in the China National Petrochemical Corporation (Sinopec Corp.), marketable securities decreased by $116 million from $589 million at December 31, 2002 to $473 million at December 31, 2003. Receivables increased by $203 million from $5,134 million at December 31, 2002 to $5,337 million at December 31, 2003. Inventories increased by $344 million from $2,261 million at December 31, 2002 to $2,605 million at December 31, 2003. These increases reflect the impact of translating balance sheet amounts from local currencies to U.S. dollars for reporting purposes as a result of a decline in 2003 in the U.S. dollar as compared to currencies of other countries in which we operate. Expressed in local currency terms, receivables decreased in the Building Systems business area, which is being divested, primarily as a result of reduced business volumes and closing of old contracts, while in the core divisions the decrease was due to our continued focus on reducing the working capital level.

        Prepaid expenses and other decreased by $626 million, from $2,628 million at December 31, 2002 to $2,002 million at December 31, 2003. This decrease primarily reflects a $565 million decrease in the fair value of derivative assets.

        Operating liabilities, excluding liabilities held for sale and in discontinued operations, include accounts payable, short-term borrowings including current maturities of long-term borrowings and accrued liabilities and other. Operating liabilities decreased by $1,712 million to $11,112 million at December 31, 2003 from $12,824 million at December 31, 2002. Total accounts payable increased by $256 million mainly due to translating balance sheet amounts from local currencies to U.S. dollars for reporting purposes. Expressed in local currency terms, accounts payable decreased by 9%, primarily as a result of the reduced operations in our Building Systems business area, which is being divested.

        Short-term borrowings and current maturities of long-term borrowings decreased by $973 million, reflecting our strategy to reduce our overall debt position and lengthen our maturity profile. See "—Liquidity and Capital Resources." In addition, accrued liabilities and other decreased by $995 million, primarily reflecting a reduction of $882 million in the fair value of derivative liabilities and a reduction in the provision for asbestos-related issues by $278 million (see "—Contingencies and Retained Liabilities—Asbestos Liability") which were partly offset by increased provisions for warranty and other obligations.

        Financing receivables, which include receivables from leases and loans receivable, decreased by $275 million to $1,330 million at December 31, 2003 from $1,605 million at December 31, 2002. This is primarily due to the sale of various leasing assets within the remaining portion of our Structured Finance business, in line with our focus on core business and improving the liquidity levels.

        We sold many of our investments and joint venture participations as part of our divestment program during 2003. Major divestitures included the sale of our 35% stake in the Swedish Export Credit Corporation, and, two projects in our Equity Ventures portfolio—a power plant project and a power transmission project—both in Australia. As a consequence, investments and other assets decreased by $109 million to $1,326 million at December 31, 2003 from $1,435 million at December 31, 2002.

        Property, plant and equipment increased by $139 million to $2,840 million at December 31, 2003 from $2,701 million at December 31, 2002, reflecting the impact of translating balance sheet amounts from local currencies to U.S. dollars for reporting purposes. Expressed in local currency terms, property, plant and equipment decreased by 7% primarily as a result of the sale of real

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estate properties and normal levels of depreciation. The core divisions have invested $277 million in tangible fixed assets during 2003 compared to $247 million during 2002. Total intangible assets, including goodwill and other increased by $72 million, to $2,880 million at December 31, 2003 from $2,808 million at December 31, 2002. However, total intangible assets in local currency terms decreased by 5%, mainly due to the write down of capitalized software in Group Processes. In accordance with SFAS 142, goodwill is no longer amortized as of January 1, 2002.

        Our gearing ratio (defined as total borrowings divided by the sum of total borrowings and the stockholders equity including minority interest), excluding the assets and liabilities in the discontinued operations, was 70% at December 31, 2003, compared to 86% at December 31, 2002. This change reflected the increase in equity through our rights issue completed in December 2003. Total borrowings decreased by $41 million to $7,887 million at December 31, 2003 from $7,928 million at December 31, 2002. Short-term borrowings, including current maturities of long-term borrowings, decreased by $973 million, or 38%, to $1,597 million outstanding at December 31, 2003 from $2,570 million outstanding at December 31, 2002. Long-term borrowings increased by $932 million, or 17%, mainly as a result of the two bond issuances completed during 2003, to $6,290 million at December 31, 2003 from $5,358 million at December 31, 2002. For a description of the bonds issued during 2003, see "—Liquidity and Capital Resources." A component of the $968 million convertible bonds issued in May 2002 must be accounted for as an embedded derivative in accordance with SFAS 133, as our shares are denominated in Swiss francs while these bonds are denominated in U.S. dollars. A portion of the issuance proceeds is deemed to relate to the value of the derivative on issuance and subsequent changes in value of the derivative are recorded through earnings and as an adjustment to the carrying value of the bonds. The allocation of a portion of the proceeds to the derivative creates a discount on issuance, which is amortized to earnings over the life of the bonds. The value of the derivative moves inversely to movements in our share price. The change in value of the embedded derivative, primarily due to the changes in our share price, combined with the amortization of discount on issuance, increased total borrowings by $84 million in 2003 and decreased total borrowings by $215 million in 2002. Long-term debt at December 31, 2003 as a percentage of total debt was 80% compared to 68% at December 31, 2002 as a result of our strategy to lengthen the debt maturity profile.

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Cash Flow

        The effects of the discontinued operations are not segregated in the Consolidated Statements of Cash Flows, as permitted by SFAS No. 95, Statement of Cash Flows. The Consolidated Statements of Cash Flows can be summarized into main activities as follows:

	Year ended December 31,
	2003		2002		2001
	($ in millions)
Net income (loss), net of adjustments for non-cash items	(414	)	(399	)	1,228
Changes in operating assets and liabilities	253		418		755
Sub-total: Cash flows provided by (used in) operations	(161	)	19		1,983
Acquisitions, investments, divestitures, net	488		2,365		(295	)
Asset purchases, net of disposals	(392	)	(126	)	(609	)
Other investing activities	658		412		(314	)
Sub-total: Cash flows provided by (used in) investing activities	754		2,651		(1,218	)
Change in borrowings, net of repayments	(1,028	)	(2,815	)	2,639
Treasury and capital stock transactions	2,675		—		(1,393	)
Dividends paid	—		—		(502	)
Other financing activities	(56	)	3		(67	)
Sub-total: Cash flows provided by (used in) financing activities	1,591		(2,812	)	677
Effects of exchange rate changes	150		141		(72	)
Adjustment for the net change in cash and equivalents in assets held for sale and in discontinued operations	(1	)	26		(244	)
Net change in cash and equivalents—continuing operations	2,333		25		1,126

Cash flows provided by (used in) operating activities

        Cash provided by operating activities of the Power Technologies division of $616 million and of the Automation Technologies division of $848 million during 2003, resulting from higher earnings and working capital improvements were more than offset by $239 million cash used in Non-core activities, $526 million cash used in Oil, Gas and Petrochemicals division, $388 million payments towards the settlement of asbestos related issues and $472 million towards corporate overhead and interest payments resulting in $161 million net cash used in operations during 2003. This represents a decrease of $180 million from 2002.

        Operating assets and liabilities include marketable securities held for trading purposes, trade receivables, inventories, payables and other assets and liabilities. Debt and equity securities that are bought and held principally for the purpose of sale in the near term are classified as trading securities. Marketable securities classified as available-for-sale are treated as part of investing activities. A reduction in business volumes in the Oil, Gas and Petrochemical businesses as a result of a shift from executing lump sum projects to reimbursable contracts resulted in a substantial reduction in accounts payable and consequently increased cash outflow from changes in operating assets and liabilities. This partly offset the increase in cash flow from the reduction in net operating assets in the core divisions. Non-core activities also generated cash through changes in operating assets and liabilities due to reduced volume of business activities, primarily from the Building Systems business.

        During 2002, net cash provided by operating activities of the Power Technologies division was $335 million and of the Automation Technologies division was $524 million primarily resulting from improved earnings and reduced net working capital levels. Net cash provided by Non-core activities was $224 million mainly due to the net cash proceeds from the sale of marketable securities (trading) of $498 million. Oil, Gas and Petrochemicals businesses used cash of $251 million due to

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increased project losses and higher working capital levels while the cash payments related to asbestos were $246 million. Corporate cash outflows were $480 million, influenced by the increased costs in respect of the credit facility and other financing arrangements, resulting in overall net cash provided by operating activities of $19 million. This represented a decrease of $1,964 million from 2001.

        During 2001, improved earnings and collections of receivables resulted in net cash provided by operating activities of the Power Technologies division of $675 million and of the Automation Technologies division of $1,056 million. In addition, net cash provided by the Oil, Gas and Petrochemicals businesses was $476 million primarily due to a substantial increase in accounts payable. These were partly offset by net cash used in Non-core activities of $77 million and in Corporate of $147 million resulting in a overall net cash provided by operating activities in 2001 of $1,983 million. Net income, net of adjustments for non-cash items was $1,228 million, primarily due to improved profitability in Power Technologies and Automation Technologies division. This was further influenced by the decrease in net operating assets of $755 million in 2001 resulting largely from the increase in accounts payable.

Cash flows provided by (used in) investing activities

        Investing activities include: acquisitions of, investments in and divestitures of businesses; purchases of property, plant and equipment, net of disposals; net investments in marketable securities that are not held for trading purposes; and accounts receivable from leases and third-party loans (financing receivables). Net investments in available-for-sale marketable securities and financing receivables are summarized in the table above as "other investing activities." Net cash provided by investing activities was $754 million during 2003, a decrease of $1,897 million from $2,651 million during 2002.

        We continued our program of divesting non-core businesses and other assets during 2003. We received cash proceeds of approximately $149 million from the sale of our 35% stake in Swedish Export Credit Corporation and approximately $90 million from the sale of our investments in two projects in Equity Ventures—a power plant project and a power transmission project, both in Australia. Approximately $213 million was received through the sale of our Building Systems businesses in Sweden, Norway, Denmark, Finland and Russia. In addition, the sale of the ABB Export Bank for about $50 million and the sale of our Wind Energy business, part of the New Ventures business in Non-core activities, were completed during the fourth quarter of 2003. As a result of these significant divestitures and net cash outflows of $24 million for certain smaller investments and disposals, net cash flow from purchases of, investments in, and divestitures of businesses was $488 million during 2003. The cash flows from investing activities during 2002 was largely influenced by the sale of the major part of our Structured Finance business to GE for approximately $2 billion. We also received cash proceeds of approximately $113 million from the sale of the Air Handling business and approximately $223 million from the sale of our Metering business during 2002. In addition, we received net cash proceeds of approximately $55 million from the divestments of and investments in certain smaller businesses during 2002 resulting in net cash flow from purchases of, investments in and divestitures of businesses of 2,365 million. In 2001, cash used for acquisitions of new businesses totaled $578 million (including $284 million, related to the acquisition of Entrelec). These cash outflows were only partially offset by cash proceeds from disposals of businesses for an amount of $283 million resulting in net cash flow from purchases of, investments in, and divestitures of businesses to $295 million.

        Cash used for purchases of property, plant and equipment, net of disposals, was $392 million during 2003, an increase of $266 million, compared to $126 million during 2002. While the level of investment in property plant and equipment remained at nearly the same level in both years, proceeds of approximately $300 million from the sale of our real estate properties in Sweden,

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substantially offset the outflows of investment in property, plant and equipment during 2002. Cash used for purchases of property, plant and equipment, net of disposals during 2001 was $609 million reflecting lower proceeds from the disposals of fixed assets in 2001.

        Cash provided by other investing activities increased to $658 million in 2003 from $412 million in 2002 and $314 million of cash used in 2001. The cash provided by other investing activities largely resulted from the cash inflows from financing receivables of $390 million through the sale and closure of many leasing assets related to the remaining parts of our Structured Finance business and net cash proceeds of $268 million from the sale of marketable securities that were not held for trading purposes, primarily relating to the Insurance business which we agreed to sell during the fourth quarter of 2003 and the sale of our shares in the China National Petrochemical Corporation (Sinopec Corp.) for approximately $82 million. The increase in cash provided by other activities in 2002 was primarily due to a reduction in investments in financing receivables.

Cash flows provided by (used in) financing activities

        Our financing activities primarily include borrowings, both from the issuance of debt securities and directly from banks, treasury and capital stock transactions and payment of dividends. Net cash provided by financing activities was $1,591 million during 2003. As part of our strategy to lengthen our debt maturity profile, we replaced maturing short-term borrowings with long-term borrowings. See "—Liquidity and Capital Resources" for a detailed discussion on the nature of borrowings. Cash outflows in connection with borrowings amounted to $1,028 million, reflecting the repayment of short-term (including current portion of long-term) borrowings as they fell due, partially offset by the cash inflows from the proceeds of the 1 billion Swiss francs convertible bonds and 650 million euro aggregate principal of bonds issued in September and November 2003, respectively.

        During 2002, net cash outflows from borrowings were $2,815 million reflecting our strategy to reduce our overall level of borrowings, including net cash outflows of $1,677 million in respect of borrowings with maturities of 90 days or less (including current portion of long-term borrowings) and net cash outflows of $1,138 million in respect of other borrowings.

        During 2001, cash provided by borrowings, net of repayments amounted to $2,639 million. Our level of borrowings increased significantly during the first nine months of 2001 mainly due to the financing of the repurchase of our own shares, as well as a higher level of activity in project financing. Toward year-end 2001, we decreased our borrowings significantly through a strong increase in our cash flow from operations.

        The net proceeds of the rights issuance of $2.5 billion, completed in December 2003 and the proceeds from the sale of treasury shares during the first quarter of 2003 for $156 million, contributed to the overall net cash inflow of $2,675 million during 2003. There were no treasury and capital stock transactions or dividends paid in 2002. In 2001, there was $1,393 million net cash used in treasury and capital stock transactions and $502 million in dividend payments.

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CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Contractual Obligations

        The following table summarizes certain of our contractual obligations and principal payments under our debt instruments and leases at December 31, 2003:

	Payments due by period
	Total	Less than 1 year	2-3 years	4-5 years	After 5 years
	($ in millions)
Long-term debt obligations	7,641	1,351	1,841	1,777	2,672
Other short-term debt obligations	246	246	—	—	—
Operating lease obligations	1,880	363	533	361	623

Commercial Commitments

        Certain guarantees issued or modified after December 31, 2002 are accounted for in accordance with FIN 45. Upon issuance of certain guarantees, a liability, equal to the fair value of the guarantee, is recorded. For further discussion of FIN 45, see "—New Accounting Pronouncements."

        FIN 45 requires that we disclose the "maximum potential exposure" of certain guarantees, as well as possible recourse provisions that may allow us to recover from third parties amounts paid out under such guarantees. The "maximum potential exposure" as defined by FIN 45 does not allow any discounting of our assessment of actual exposure under the guarantees. The information below reflects our maximum potential exposure under the guarantees, which is higher than our assessment of the expected exposure.

        Performance guarantees represent obligations where we guarantee the performance of a third party's product or service according to the terms of a contract. Such guarantees may include guarantees that a project will be completed within a specified time. If the third party does not fulfill the obligation, we will compensate the guaranteed party in cash or in kind. Performance guarantees include surety bonds, advance payment guarantees and performance standby letters of credit.

        Financial guarantees represent irrevocable assurances that we will make payment to the beneficiary in the event that a third party fails to fulfill its financial obligations and the beneficiary under the guarantee incurs a loss due to that failure.

Commitments Relating to Disposed Businesses

        We retained obligations for guarantees related to the power generation business contributed to the former ABB ALSTOM POWER NV joint venture. The guarantees primarily consist of performance guarantees, advance payment guarantees, product warranty guarantees and other miscellaneous guarantees under certain contracts such as indemnification for personal and property injuries, taxes and compliance with labor laws, environmental laws and patents. The guarantees have maturity dates ranging from one to ten years and in some cases have no definite expiry. In May 2000, we sold our interest in the ABB ALSTOM POWER NV joint venture to ALSTOM SA (ALSTOM). As a result, ALSTOM and its subsidiaries have primary responsibility for performing the obligations that are the subject of the guarantees. Further, ALSTOM, the parent company, and ALSTOM POWER NV, formerly ABB ALSTOM POWER NV, have undertaken jointly and severally to fully indemnify us and hold us harmless against any claims arising under such guarantees. Due to the nature of product warranty guarantees and the miscellaneous guarantees, we are unable to develop an estimate of the maximum potential amount of future payments for these guarantees issued on behalf of the former power generation business. Our best estimate of the total maximum

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potential exposure of all quantifiable guarantees we issued on behalf of our former power generation business was approximately $1,200 million and $2,200 million at December 31, 2003 and 2002, respectively. The maximum potential exposure is based on the original guarantee or contract amount and does not reflect the completion status of the project. At December 31, 2003, no losses have been recognized relating to guarantees issued on behalf of the former power generation business. We believe that it is not probable that we will incur a loss under these guarantees and therefore, in accordance with SFAS 5, a provision has not been recorded at December 31, 2003 and 2002.

        In November 2002, we completed the sale of most of our Structured Finance business to General Electric Capital Corporation (GE). Pursuant to the sale and purchase agreement, we provided GE with cash collateralized letters of credit aggregating $202 million, of which approximately $128 million was outstanding at December 31, 2003 as security for certain performance-related obligations retained by us in connection with the sale. The sale and purchase agreement provided GE the option to require us to repurchase certain designated financial assets transferred to GE upon the occurrence of certain events, but in any event no later than February 1, 2004. The fair value of GE's right to require us to repurchase certain designated assets was $11 million at December 31, 2003. On January 30, 2004, we repurchased the financial assets discussed above for an amount of approximately $28 million. Additionally, the $128 million in cash collateralized letters of credit at December 31, 2003 was further reduced by $35 million as a result of the expiration of the option on February 1, 2004. No further obligation exists for us to repurchase any assets under the sales and purchase agreement with GE.

Other Commitments

        At December 31, 2003 and 2002, we had $207 million and $223 million, respectively, of financial guarantees outstanding. Of that amount, $189 million and $206 million, respectively, were issued on behalf of companies in which we currently have or formerly had an equity interest. The guarantees have maturity dates ranging from one to thirteen years. We believe that it is not probable that we will incur a loss under these guarantees and therefore, in accordance with SFAS 5, no provision has been recorded at December 31, 2003 and 2002.

        We have granted lines of credit and have committed to provide additional capital for certain equity accounted companies. At December 31, 2003 and 2002, the total unused lines of credit amounted to $11 million and $22 million, respectively, and the capital commitments amounted to $88 million and $84 million, respectively. Included in the $88 million and $84 million are capital commitments of $24 million and $20 million, respectively, related to b-business partners B.V.

Guarantees Relating to Our Performance

        In accordance with industry practice we also issue letters of credit, surety bonds and other performance guarantees on major projects, including long-term operation and maintenance contracts, which guarantee our own performance. Such guarantees may include guarantees that a project will be completed or that a project or particular equipment will achieve defined performance criteria. If we fail to attain the defined criteria, we must make payments in cash or in kind. We record provisions in the Consolidated Financial Statements at the time it becomes probable that we will incur losses pursuant to a performance guarantee. We do not expect to incur significant losses under these guarantees in excess of our provisions. However, such losses, if incurred, could have a material impact on our Consolidated Financial Statements.

        When we guarantee our own performance, some customers will require that the guarantee be issued by a financial institution. If we cannot obtain the guarantee from a financial institution, we could be prevented from bidding on or obtaining the contract. Financial institutions will consider our

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credit ratings in the guarantee approval process. Our current credit rating does not prevent us from obtaining guarantees from financial institutions, but can make the process more difficult or expensive. If we cannot obtain guarantees from financial institutions in the future, there could be a material impact on our Consolidated Financial Statements.

Pension and Other Postretirement Obligations

        At December 31, 2003, our pension and other postretirement plan liabilities exceeded the plan assets by $1,636 million and $367 million, respectively. This underfunding is not a short term obligation for us. Of the $1,636 million pension underfunding, $1,449 million relates to pension plans which are not required to be funded pursuant to local government and tax requirements and contains liabilities that will not be paid until a current employee retires.

        We expect to contribute $248 million to our pension plans and $27 million to our other postretirement benefit plans in 2004.

RELATED AND CERTAIN OTHER PARTIES

        In the normal course of our industrial activities, we sell products and derive certain other revenues from companies in which we hold an equity interest. The revenues derived from these transactions are not material for us. In addition, in the normal course of our industrial activities, we purchase products from companies in which we hold an equity interest. The amounts involved in these transactions are not material for us. Also, in the normal course of our industrial activities, we engage in transactions with businesses that we have divested. We believe that the terms of the transactions we conduct with these companies are negotiated on an arm's length basis. For additional information, see "Item 7. Major Shareholders and Related Party Transactions."

        We have participations in joint ventures and affiliated companies, which are accounted for using the equity method. Many of these entities have been established to perform specific functions, such as constructing, operating and maintaining a power plant. In addition to our investment, we may provide products to the project, may act as contractor of the project and may operate the finished product. We may also grant lines of credit to these entities and guarantee their obligations, as discussed in "—Contractual Obligations and Commercial Commitments—Commercial Commitments." The entity created would generally receive revenues either from the sale of the final product or from selling the output generated by the product. The revenue usually is defined by a long-term contract with the end user of the output.

        Our risk with respect to these entities is substantially limited to the carrying value of the companies on our Consolidated Balance Sheet. The carrying value for the equity accounted companies at December 31, 2003 and 2002 was $562 million and $730 million, respectively.

        Our Consolidated Financial Statements include the following aggregate amounts related to transactions with related and certain other parties:

	2003	2002
	($ in millions)
Revenues	123	93
Receivables	98	75
Other current assets	17	27
Financing receivables (non-current)	22	76
Payables	6	30
Short-term borrowings	32	39
Long-term borrowings	48	1
Other current liabilities	4	21

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CONTINGENCIES AND RETAINED LIABILITIES

Environmental

        All of our operations, but particularly our manufacturing operations, are subject to comprehensive environmental laws and regulations. Violations of these laws could result in fines, injunctions (including orders to cease the violating operations and to improve the condition of the environment in the affected area or to pay for such improvements) or other penalties. In addition, environmental permits are required for our manufacturing facilities (for example, with respect to air emissions and wastewater discharges). In most countries in which we operate, environmental permits must be renewed on a regular basis and we must submit reports to environmental authorities. These permits may be revoked, renewed or modified by the issuing authorities at their discretion and in compliance with applicable laws. We have implemented formal environmental management systems at nearly all our manufacturing sites in accordance with the international environmental management standard ISO 14001, and we believe that we are in substantial compliance with environmental laws, regulations and permits in the various jurisdictions in which we operate, except for such instances of non-compliance that, in the aggregate, are not reasonably likely to be material. For detailed information please refer to our Annual Report 2003, Sustainability Review.

        In a number of jurisdictions, including the United States, we may be liable for environmental contamination at our present or former facilities, or at other sites where wastes generated from our present or former facilities were disposed of. In the United States, the Environmental Protection Agency and various state agencies are responsible for regulating environmental matters. These agencies have identified certain of our current and former U.S. based companies as potentially responsible parties in respect to a number of such sites under the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource Conservation and Recovery Act and other federal and state environmental laws. As a potentially responsible party, we may be liable for a share of the costs associated with cleaning up these sites. As of December 31, 2003, there were approximately 25 sites, at which, our companies have, or may be potentially responsible for, environmental clean up costs. These 25 sites include several of our current or former facilities where we have undertaken voluntary corrective actions. The clean up of these sites involves primarily soil and groundwater contamination. We do not believe that our aggregate liability in connection with these sites will be material.

        Generally, our liability with regard to any specific site will depend on the number of potentially responsible parties, their relative contributions of hazardous substances or wastes to the site and their financial viability, as well as on the nature and extent of the contamination. Nevertheless, such laws commonly impose liability that is strict, joint and several, so that any one party may be liable for the entire cost of cleaning up a contaminated site.

        In addition, we retained liability for certain specific environmental remediation costs at two sites in the United States that were operated by our Nuclear technology business, which has been sold to BNFL in April 2000. Pursuant to the purchase agreement with BNFL, we have retained all of the environmental liabilities associated with our subsidiary Combustion Engineering Inc.'s (Combustion Engineering) Windsor, Connecticut facility and a portion of the environmental liabilities associated with our ABB C-E Nuclear Power Inc. subsidiary's Hematite, Missouri facility. The primary environmental liabilities associated with these sites relate to the costs of remediating radiological and chemical contamination at these facilities. Such costs are not payable until a facility is taken out of use and generally are incurred over a number of years. Although it is difficult to predict with accuracy the amount of time it may take to remediate radiological contamination upon decommissioning, based on information that BNFL has made publicly available, we believe that it may take until 2013 to remediate the Hematite site. With respect to the Windsor site, we believe the

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remediation may take until 2008. At the Windsor site, a significant portion of the contamination is related to activities that were formerly conducted by or for the United States government. We believe that a significant portion of the remediation costs will be covered by the United States government under the government's Formerly Utilized Sites Remedial Action Program. As a result of the sale of the Nuclear Technology business, during 2000, we established in other liabilities a reserve of $300 million in connection with our estimated remediation costs related to these facilities. Expenditures charged to the remediation reserve were $6 million, $12 million and $6 million during 2003, 2002 and 2001, respectively. In connection with the pre-packaged Chapter 11 filing by Combustion Engineering discussed below, we will assume any and retain all remaining environmental liabilities of Combustion Engineering in respect to the Windsor and Hematite sites.

        Estimates of the future costs of environmental compliance and liabilities are imprecise due to numerous uncertainties. Such costs are affected by the enactment of new laws and regulations, the development and application of new technologies, the identification of new sites for which we may have remediation responsibility and the apportionment of remediation costs among, and the financial viability of, responsible parties. In particular, the exact amount of the responsibility of the United States government for the Windsor site cannot reasonably be estimated. It is possible that final resolution of environmental matters may require us to make expenditures in excess of our expectations, over an extended period of time and in a range of amounts that cannot be reasonably estimated. Although final resolution of such matters could have a material effect on our Consolidated Income Statement in a particular reporting period in which the expenditure is incurred, we believe that these expenditures will not have a material adverse effect on our Consolidated Financial Statements.

Product and Order Related Contingencies

        In 1998, we entered into an engineering, procurement and project management contract with a customer for an oil and petrochemical refinery in India with a contract value of approximately $860 million. The project, which is subject to a reimbursable cost agreement, is approximately 60% complete and has been stalled for the past few years due to complications encountered by the customer in obtaining necessary additional financing. Given the uncertainty as to whether the project will be restarted, we recorded a loss of $108 million in 2003 to write down its remaining net assets associated with this project. If the project is not restarted, we will be subject to certain contingent liabilities to third parties.

Asbestos Liability

Overview

        When we sold our 50% interest in the former ABB ALSTOM POWER NV joint venture to ALSTOM in May 2000, we retained ownership of Combustion Engineering, a subsidiary that had conducted part of our former power generation business and that now owns commercial real estate that it leases to third parties. Combustion Engineering is a co-defendant, together with other third parties, in numerous lawsuits in the United States in which the plaintiffs claim damages for personal injury arising from exposure to asbestos in equipment or materials that Combustion Engineering allegedly supplied or was responsible for, primarily during the early 1970s and before. Other ABB Group entities have sometimes been named as defendants in asbestos claims. These entities include ABB Lummus Global Inc. (Lummus) (which is part of our Oil, Gas and Petrochemicals business and was formerly a subsidiary of Combustion Engineering) and Basic Incorporated (Basic) (which is currently a subsidiary of Asea Brown Boveri Inc. and was formerly a subsidiary of Combustion Engineering). These claims, however, have been less significant than the Combustion Engineering claims and have not had a material impact on our financial position, results of operations or cash flows.

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        From 1989 through February 17, 2003 (the date that Combustion Engineering filed for Chapter 11 as described below) approximately 438,000 asbestos-related claims have been filed against Combustion Engineering. On February 17, 2003 there were approximately 164,000 asbestos related personal injury claims pending against Combustion Engineering. There were approximately 138,000 such claims pending against Combustion Engineering on December 31, 2002 and approximately 94,000 such claims were pending on December 31, 2001. Of the approximately 164,000 claims that were pending on February 17, 2003, approximately 111,000 are claims that we have treated as settled (including those settled under the Master Settlement Agreement described below) but under which there are continuing payments. Approximately 29,000 new claims were made in the period from January 1, 2003 to February 17, 2003; 79,000 in 2002 and 55,000 in 2001. Approximately 30,000 claims were resolved in the period from January 1, 2003 to February 17, 2003 (all but 111 of which were resolved under the Master settlement Agreement); approximately 34,500 claims were resolved in 2002 and approximately 27,000 claims were resolved in 2001 At December 31, 2003, there were approximately 14,800 claims pending against Basic and Lummus. Additionally, at December 31, 2003, there were 287 cases described below (involving approximately 8,700 claims) against ABB entities other than Combustion Engineering, Lummus and Basic.

        At December 31, 2003 and 2002, provisions of $813 million and $1,091 million, respectively, were recorded on a consolidated basis in respect of the asbestos claims and related defense costs. These provisions were based on our obligations under Combustion Engineering's Chapter 11 plan of reorganization, as described below, and assumed the confirmation and effectiveness of the pre-packaged plan. These provisions do not reflect probable insurance recoveries on those claims. We recorded receivables of approximately $232 million and $241 million at December 31, 2003 and 2002, respectively, for probable insurance recoveries, which were established with respect to asbestos claims. During 2002 and 2001, Combustion Engineering experienced a significant increase in the level of new claims and higher total and per-claim settlement costs as compared to prior years. Cash payments, before insurance recoveries, to resolve Combustion Engineering's asbestos claims were $391 million (including $369 million contributed to the CE Settlement Trust, described below), $236 million (including $30 million contributed into the CE Settlement Trust), and $136 million in 2003, 2002 and 2001, respectively. Administration and defense costs were $36 million, $32 million and $13 million in 2003, 2002 and 2001, respectively.

        Cash payments to resolve claims against entities other than Combustion Engineering, Lummus and Basic have been immaterial to date, totalling less than $0.3 million in the aggregate. We have not maintained a reserve for the claims pending against such entities. Of the claims outstanding at December 31, 2003, approximately 2,250 claims were brought in Mississippi in 2002 in a single case that names hundreds of co-defendants and makes no specific allegations of any relationship between any ABB entity and the plaintiffs. Approximately 3,900 claims have been brought in Ohio by claimants represented by a single law firm in cases that typically name 50 to 60 co-defendants and do not allege any specific linkage between the plaintiffs and any ABB entity. The remaining claims are pending in various jurisdictions. We generally seek dismissals from claims where there is no apparent linkage between the plaintiffs and any ABB entity. As these claims are unrelated to Combustion Engineering, Lummus or Basic, they will not be resolved pursuant to the pre-packaged bankruptcy plan of Combustion Engineering described below. Our experience resolving these claims to date indicates that they have not had a material impact on our consolidated financial position, results of operations or cash flows.

Negotiations with Representatives of Asbestos Claimants and Pre-Packaged Chapter 11 Filing

        In October 2002, we and Combustion Engineering determined that it was likely that the expected asbestos-related costs of Combustion Engineering would exceed the value of its assets

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($812 million at September 30, 2002 and $828 million at December 31, 2002) if its historical settlement patterns continued into the future. At that time, we and Combustion Engineering were actively considering various options for resolving Combustion Engineering's asbestos liabilities, including the possible reorganization of Combustion Engineering under Chapter 11 of the U.S. Bankruptcy Code. In that context, we believed that estimating Combustion Engineering's asbestos liabilities based on historical settlement patterns was no longer appropriate. Subsequently, we and Combustion Engineering determined to resolve the asbestos liability of Combustion Engineering and its affiliates by reorganizing Combustion Engineering under Chapter 11, the principal business reorganization chapter of the U.S. Bankruptcy Code. We and Combustion Engineering determined to structure the Chapter 11 reorganization as a "pre-packaged plan," in which acceptances of the plan would be solicited prior to the filing of the Chapter 11 case, thus reducing the duration and expense of the bankruptcy proceedings.

        Beginning in October 2002, we and Combustion Engineering conducted extensive negotiations with representatives of certain asbestos claimants with respect to a pre-packaged plan. On November 22, 2002, Combustion Engineering and the asbestos claimants' representatives entered into a Master Settlement Agreement for settling open asbestos-related personal injury claims that had been filed against Combustion Engineering prior to November 15, 2002. Combustion Engineering also agreed, pursuant to the Master Settlement Agreement, to form and fund the CE Settlement Trust to fund and administer the payment of asbestos-related personal injury claims settled under the Master Settlement Agreement. Under the terms of the Master Settlement Agreement, eligible claimants who met all criteria to qualify for payment were entitled to receive a percentage of the value of their claim from the CE Settlement Trust and retain a claim against Combustion Engineering for the unpaid balance. The Master Settlement Agreement divides claims into three categories based on the status of the claim at November 14, 2002, the status of the documentation relating to the claim, and whether or not the documentation establishes a valid claim eligible for settlement and payment by Combustion Engineering. The Master Settlement Agreement was supplemented in January 2003 to clarify the rights of certain claimants whose right to participate in a particular payment category was disputed. The Master Settlement Agreement, as supplemented, settles the amount of and provides for the partial payment on approximately 110,000 open asbestos-related personal injury claims that had been lodged against Combustion Engineering.

Pursuant to the Master Settlement Agreement, the CE Settlement Trust was funded by:

•

cash contributions from Combustion Engineering in the amount of $5 million;



•

cash contributions from ABB Inc., a subsidiary of ABB Ltd, in the amount of $30 million by December 31, 2003;



•

a promissory note from Combustion Engineering in the principal amount of approximately $101 million (guaranteed by Asea Brown Boveri Inc., a subsidiary of ABB Ltd); and an assignment by Combustion Engineering of the $311 million unpaid balance of principal and interest due to Combustion Engineering from Asea Brown Boveri Inc. under a loan agreement dated May 12, 2000 (guaranteed by ABB Ltd).

Pre-Packaged Plan of Reorganization

        On January 17, 2003, we announced that we and Combustion Engineering had reached an agreement on a proposed Pre-Packaged Plan of Reorganization for Combustion Engineering under Chapter 11 of the U.S. Bankruptcy Code (the "Plan"). The agreement was reached with certain representatives of asbestos claimants with existing asbestos-related personal injury claims against Combustion Engineering (encompassing claimants who had lodged claims prior to November 15, 2002 and claimants who had filed claims after that date and were not eligible to participate in the

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Master Settlement Agreement) and with the proposed representative of persons who may be entitled to bring asbestos-related personal injury claims in the future.

        The Plan provides for the creation of the Asbestos PI Trust, an independent trust which is separate and distinct from the CE Settlement Trust and addresses Asbestos PI Trust Claims, which consist of present and future asbestos-related personal injury claims (including the claims previously settled pursuant to the Master Settlement Agreement only to the extent of any unpaid portions thereof) that arise directly or indirectly from any act, omission, products or operations of Combustion Engineering, Lummus or Basic. If the Plan ultimately becomes effective, a channelling injunction would be issued under the U.S. Bankruptcy Code pursuant to which the Asbestos PI Trust Claims against ABB Ltd and its affiliates (including Combustion Engineering, Lummus and Basic) would be channelled to the Asbestos PI Trust. This would mean that the sole recourse of a holder of an Asbestos PI Trust Claim would be to the Asbestos PI Trust and such holder would be barred from asserting such a claim against ABB Ltd and its affiliates (including Combustion Engineering, Lummus and Basic). A preliminary injunction is currently in force. The Asbestos PI Trust would be funded with cash and other assets, including approximately 30 million common shares of ABB Ltd. The total package is valued at approximately $800 million.

        The Plan sets forth distribution procedures for the allocation of funds to the claimants. The Plan provides that the unpaid portion of claims that were settled pursuant to the Master Settlement Agreement will also be entitled to distributions from the Asbestos PI Trust.

        On the effective date of the Plan, the Asbestos PI Trust will be funded as follows:

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a $20 million 5% term note with a maximum term of ten years from the effective date of the Plan, issued by Combusting Engineering and secured by its Windsor, Connecticut real estate and real estate leases (under certain specified contingencies, the Asbestos PI Trust may have the right to convert the term note into ownership of 80% of the voting securities of the reorganized Combustion Engineering);



•

excess cash held by Combustion Engineering on the effective date of the Plan;



•

a promissory note issued by ABB Inc. and ABB Ltd and guaranteed by certain ABB Ltd subsidiaries, in an aggregate amount of up to $350 million payable in installments commencing in 2004, with $50 million to be paid during 2004, $100 million to be paid during 2005 and $100 million to be paid during 2006, and further providing for payments amounting to $50 million to be paid no later than 2010 ($ 25 million of which may be payable as early as 2006) and contingent payments of an additional aggregate amount of $50 million (in equal $25 million installments) in 2008 and 2009 if ABB Ltd meets certain financial performance standards (an EBIT margin of 12% in 2007 and 2008);



•

a non-interest bearing promissory note on behalf of Lummus in the amount of $28 million payable in relatively equal annual installments over 12 years;



•

a non-interest bearing promissory note on behalf of Basic in the aggregate amount of $10 million payable in relatively equal annual installments over 12 years;



•

30,298,913 shares of ABB Ltd (the "CE Settlement Shares"), which had a fair value at December 31, 2003 of $154 million and $86 million at December 31, 2002. Our obligation to deliver these CE Settlement Shares will continue to be marked to market, with changes in the fair value of the CE Settlement Shares reflected in earnings until such CE Settlement Shares are contributed to the Asbestos PI Trust;



•

we will execute and deliver a nuclear and environmental indemnity with regard to obligations arising out of Combustion Engineering's Windsor, Connecticut site for the benefit of Combustion Engineering;

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•

Combustion Engineering, Lummus and Basic will assign to the Asbestos PI Trust any proceeds under certain insurance policies and insurance settlement agreements. Aggregate unexhausted product liability limits are approximately $200 million for Combustion Engineering, approximately $43 million for Lummus and approximately $28 million for Basic, although amounts ultimately recovered by the Asbestos PI Trust under these policies may be substantially less than the policy limits. In addition, Combustion Engineering will assign to the Asbestos PI Trust scheduled payments under certain of its insurance settlement agreements ($86 million at December 31, 2003); and



•

if Lummus is sold within 18 months after the effective date of the Plan, ABB Inc. will contribute $5 million to the CE Settlement Trust and $5 million to the Asbestos PI Trust. If the CE Settlement Trust has ceased to exist at that time, both $5 million payments will be made to the Asbestos PI Trust, but in no event will this contribution exceed the net proceeds from the sale of Lummus.

Next Steps in the Chapter 11 Process

        The Plan, including the channelling injunction, will become effective when the U.S. Bankruptcy Court recommends the issuance of a confirmation order (which occurred on July 10, 2003), the confirmation order is entered by the U.S. District Court (which occurred on August 8, 2003) and has become a final order that is not subject to appeal, and certain other conditions to the effectiveness of the Plan have been satisfied.

        The solicitation of votes to approve the Plan began on January 19, 2003, and Combustion Engineering filed for Chapter 11 in the U.S. Bankruptcy Court in Delaware on February 17, 2003 based on the previously negotiated Plan. The voting period closed on February 19, 2003, and approximately 97% of qualified ballots voted to approve the Plan. A confirmation hearing and related hearings commenced on April 7, 2003 and continued from time to time through early June 2003. On June 23, 2003, the U.S. Bankruptcy Court issued its Order Approving the Disclosure Statement but Recommending Withholding of Confirmation of the Plan of Reorganization for Combustion Engineering for Ten Days (the "Ruling") and related findings of fact. The Ruling approved the disclosure statement that was the document used as the basis for soliciting approval of the Plan from asbestos claimants and verified the voting results that approved the Plan. Although the Ruling did not confirm the Plan, it indicated that the U.S. Bankruptcy Court would recommend that the Plan be confirmed if we and Combustion Engineering could establish to the court's satisfaction certain specified information. We then submitted the additional information for the court's consideration.

        On July 10, 2003, the U.S. Bankruptcy Court issued a Supplemental and Amendatory Order Making Additional Findings and Recommending Confirmation of Plan of Reorganization (the "Supplemental Ruling"). The Supplemental Ruling recommended to the U.S. District Court, among other things, that the Plan be confirmed.

        Following the issuance of the Supplemental Ruling, interested parties had a period during which they could appeal the Ruling and the Supplemental Ruling. This appeal period expired on July 24, 2003. A number of interested parties, including a small number of asbestos claimants and certain insurance companies which historically have provided insurance coverage to Combustion Engineering, Basic and Lummus, filed appeals based on various objections to the Plan, including the following:

•

arguments that Combustion Engineering is not permitted to obtain a channelling injunction that protects Combustion Engineering's affiliates with respect to claims against Combustion Engineering;

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•

arguments that asbestos claims against Lummus and Basic cannot be made subject to a channelling injunction;



•

arguments that the disclosure provided in connection with the solicitation of acceptances of the Plan did not satisfy the required standards;



•

arguments that claimants covered by the Plan would fare better outside the Plan;



•

arguments that the Plan and the Bankruptcy Court's rulings improperly affect the rights and obligations of insurance carriers who have continuing obligations to provide insurance coverage with respect to Combustion Engineering's asbestos liabilities;



•

arguments that the Plan and the Bankruptcy Court's rulings fail to address properly the indemnification rights of certain insurers; and



•

arguments that the Bankruptcy Court was in error in not permitting the release of the trust created under the Master Settlement Agreement and certain other entities, under the Plan.

        The U.S. District Court held a hearing on July 31, 2003, with respect to the appeals and entered its confirmation order on August 8, 2003. The U.S. Federal Third Circuit Court of Appeals granted a motion for expedition of appeals and ordered that all briefs were to be filed by October 7, 2003. The Circuit Court has set June 3, 2004 as the date for the hearing. We cannot be certain of the duration or outcome of the appeal process. Regardless of whether or not the Plan becomes effective, the Master Settlement Agreement remains effective.

Effect of the Plan on our Financial Position

        We recorded expenses related to asbestos of $145 million, $420 million and $470 million in loss from discontinued operations, net of tax, for 2003, 2002 and 2001, respectively. Loss from discontinued operations, net of tax for 2003 includes a charge of $68 million, net of tax, resulting from the mark-to-market adjustment relating to the CE Settlement Shares, a provision of $41 million, representing the present value of the first two $25 million payments previously considered contingent, as well as $36 million of other costs. The 2002 amount reflected our estimate of incremental total costs to be incurred based upon the terms of the Plan. In 2001, loss from discontinued operations, net of tax, reflected a charge to earnings based on Combustion Engineering's forecasts of the expected cost of future claim settlements over a period of several years and estimates of the amounts recoverable from insurance when the claims were settled.

        Based upon expected implementation of the Plan, we have recorded provisions of $813 million at December 31, 2003, in accrued liabilities and other. If the Plan becomes effective, certain amounts will be reclassified as of the effective date to other long-term liabilities based on the timing of the future cash payments to the Asbestos PI Trust. Future earnings will be affected by mark-to-market adjustments relating to the CE Settlement Shares through the effective date of the Plan, as well as contingent payments when they become probable of payment. In the event the Plan does not become effective, the ultimate cost for the resolution of asbestos-related personal injury claims against Combustion Engineering, Lummus and Basic may be significantly higher and could have a material adverse impact on our consolidated financial position, results of operations and cash flows.

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Item 6. Directors, Senior Management and Employees

BOARD OF DIRECTORS

        Our board of directors defines the ultimate direction of the business of ABB and issues the necessary instructions. It determines the organization of the ABB Group and appoints, removes and supervises the persons entrusted with the management and representation of ABB. The internal organizational structure and the definition of the areas of responsibility of our board of directors, as well as the information and control instruments vis-à-vis the executive committee, are set forth in the regulations of the board of directors. We have been granted an exception by the Federal Office of Justice of Switzerland (Bundesamt für Justiz) to the rule that a majority of the members of the board of directors of ABB must be citizens of Switzerland with residence in Switzerland according to Article 708 para 1 of the Swiss Code of Obligations.

        Our articles of incorporation stipulate that the board of directors must consist of not fewer than seven and no more than 13 members at any time. Swiss law and our articles of incorporation also provide that each director must be a shareholder of ABB Ltd. Directors are elected for terms of one year by the shareholders in a shareholders' meeting. Members of the board of directors whose terms of office have expired are immediately eligible for re-election. Our articles of incorporation do not provide for the retirement or non-retirement of directors under an age-limit requirement. Our internal regulations provide that a director shall resign at the annual general meeting of shareholders taking place in the year of his 70th birthday.

        The board of directors appoints its Chairman and one or more Vice Chairmen, as well as the persons entrusted with our management and representation, whom the board of directors is also responsible for removing. At present, the position of Vice Chairman is vacant.

        The following table sets forth the names and the years of birth of our directors and their current positions with ABB.

Name	Born	Current Position
Jürgen Dormann	1940	President, Chairman and Chief Executive Officer
Roger Agnelli	1958	Director
Louis R. Hughes	1949	Director
Hans Ulrich Märki	1946	Director
Michel de Rosen	1951	Director
Michael Treschow	1943	Director
Bernd W. Voss	1939	Director
Jacob Wallenberg	1956	Director

        ABB Ltd became the ultimate holding company of the ABB Group on June 28, 1999. The biographies of Messrs. Dormann and Wallenberg also note the years of service they provided to ABB Asea Brown Boveri Ltd, the former parent company of the ABB Group.

        Jürgen Dormann has been the Chairman of ABB's board of directors since November 2001 and has been ABB's President and Chief Executive Officer since September 2002. He has been a member of ABB's board of directors since June 28, 1999. From 1998 to 1999, he served as a member of the board of directors of ABB Asea Brown Boveri Ltd. He is the chairman of the supervisory boards of Aventis and Lion Bioscience. He is currently a member of the supervisory board of Allianz; he has resigned this position with effect from May 5, 2004. Mr. Dormann is a German citizen.

        Roger Agnelli was elected to ABB's board of directors at the annual general meeting of shareholders on March 12, 2002. He is the President and Chief Executive Officer of Companhia Vale do Rio Doce. He is also a member of the boards of directors of Valepar, Companhia Paulista

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de Força e Luz, Companhia Siderurgica Nacional, LATASA, VBC Energia, Brasmotor, Mahle Metal Leve, Rio Grande Energia and Serra da Mesa Energia. Mr. Agnelli is a Brazilian citizen.

        Louis R. Hughes was elected to ABB's board of directors at the annual general meeting of shareholders on May 16, 2003. Mr. Hughes is the chairman of the board of directors of Maxager Technology and is a member of the boards of directors of BT Group, Electrolux and Sulzer. Mr. Hughes was the president and chief operating officer of Lockheed Martin Corp. in 2000 and was an executive vice president of General Motors from 1992 to 2000. He was also the acting chief executive officer of Wavecrest Laboratories from 2002 to 2003 and is now a member of its board of advisors. Mr. Hughes is a United States citizen.

        Hans Ulrich Märki was elected to ABB's board of directors at the annual general meeting of shareholders on March 12, 2002. He is general manager of IBM Europe/Middle East/Africa and a member of the board of directors of Mettler-Toledo International. Mr. Märki is a Swiss citizen.

        Michel de Rosen was elected to ABB's board of directors at the annual general meeting of shareholders on March 12, 2002. He is the chairman, chief executive officer and president of ViroPharma. He is a member of the boards of directors of Innaphase and Ursinus College. Mr. de Rosen is a French citizen.

        Michael Treschow was elected to ABB's board of directors at the annual general meeting of shareholders on May 16, 2003. He is the chairman of the board of directors of Ericsson. He is the vice chairman of the Confederation of Swedish Enterprise and a member of the board of directors of Electrolux. From 1997 to 2002, he was the president and chief executive officer of the Electrolux Group. Prior to 1997, he was the president and chief executive officer of Atlas Copco. Mr. Treschow is a Swedish citizen.

        Bernd W. Voss was elected to ABB's board of directors at the annual general meeting of shareholders on March 12, 2002. He is a member of the supervisory board of Dresdner Bank. He is also a member of the boards of directors of Allianz Leben, Continental, Quelle, TUI, Wacker Chemie and Osram. Mr. Voss is a German citizen.

        Jacob Wallenberg has been a member of ABB's board of directors since June 28, 1999. From March 1999 to June 1999, he served as a member of the board of directors of ABB Asea Brown Boveri Ltd. He is the chairman of the board of directors of Skandinaviska Enskilda Banken and W Capital Management. He is vice-chairman of Investor, the Knut and Alice Wallenberg Foundation, Atlas Copco, SAS and Electrolux, and a member of the boards of directors of the Confederation of Swedish Enterprise and the Nobel Foundation. Mr. Wallenberg is a Swedish citizen.

SENIOR MANAGEMENT

Executive Committee

        Our board of directors has delegated the executive management of ABB to the chief executive officer and the other members of the executive committee. The chief executive officer, and under his direction the other members of the executive committee, are responsible for our overall business and affairs and day-to-day management. The chief executive officer reports to the board regularly, and whenever extraordinary circumstances so require, on the course of our business and financial performance and on all organizational and personnel matters, transactions and other issues relevant to the group.

        Upon proposal by the nomination and compensation committee, the executive committee is appointed and discharged by the board and consists of the chief executive officer, the chief financial officer and the other executive vice presidents.

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        The following table sets forth the names and the years of birth of the members of the executive committee, their current positions with us and the dates of their initial appointment to their current positions.

Name	Born	Current Position	Year of Appointment
Jürgen Dormann	1940	President, Chairman and Chief Executive Officer	2002
Peter Voser	1958	Chief Financial Officer	2002
Dinesh C. Paliwal	1957	Head of Automation Technologies Division	2003
Peter Smits	1951	Head of Power Technologies Division	2003
Gary Steel	1952	Head of Human Resources	2003

        Jürgen Dormann.    For Mr. Dormann's biography, see above under "—Board of Directors."

        Peter Voser has been our Chief Financial Officer since March 2002. Since August 2003, he has been given responsibility for the management of our Oil, Gas and Petrochemicals division until it is divested. Mr. Voser was Chief Financial Officer of Shell Europe Oil Products from 1999 until early 2001, when he became Chief Financial Officer of Shell Oil Products. Mr. Voser is proposed to be elected as a member of the Supervisory Board of AEGON at its annual general meeting on April 22, 2004. Mr. Voser is a Swiss citizen.

        Dinesh C. Paliwal has been the Head of our Automation Technologies division since January 2003. From April 2002 to January 2003, he was our Executive Vice President responsible for our Industries Division. Between January 1, 2001 and March 2002, he was our Executive Vice President responsible for our Process Industries division. From 1999 to 2001, he was responsible for our worldwide activities in the Automation Segment for the paper, printing, metals, mining and cement industries. From 1998 to 1999, he was responsible for our worldwide activities in the Automation Segment for the pulp, paper and printing industries. From 1994 to 1998, he was Vice President responsible for our automation activities in process industries in China and Northeast Asia. From 1990 to 1994, he was Director of Marketing and Sales for our automation activities for the paper industry in Asia. Prior to 1990, he held several positions in sales and project management. Mr. Paliwal is an Indian citizen.

        Peter Smits has been the Head of our Power Technologies division since January 2003. From 2001 to January 2003, he was Executive Vice President responsible for the Power Technology Products division. From 1998 to 2001, he was Senior Vice President, Business Area Manager Distribution Transformers, at ABB T&D Ltd. From 1994 to 1998, he was President and Country Manager at Asea Brown Boveri SA, Belgium. From 1990 to 1994, he served as President at Pfleiderer Verkehrstechnik GmbH. From 1988 to 1990, he held the position of Vice-President at ABB Schaltanlagen GmbH and was Business Unit Manager within our High-Voltage Switchgear business area. From 1980 to 1988, he held several positions at Asea Lepper GmbH. Mr. Smits is a German citizen.

        Gary Steel was appointed our Head of Human Resources in January 2003. In 2002, he was the Human Resources Director, Group Finance at Shell. Between 1976 and 2002, he held several human resources and employee relations positions at Shell. Mr. Steel is a Scottish citizen.

        On February 27, 2004, the board of directors of ABB announced that Fred Kindle would be appointed as ABB's new chief executive effective January 2005. Mr. Kindle will join ABB on September 1, 2004, and will assume the roles of president and chief executive officer of ABB in January 2005. At that time, our current chief executive officer, Mr. Jürgen Dormann, will revert to a single role as chairman of ABB. Mr. Kindle is currently the chief executive officer of Sulzer where he will remain until mid-2004. Mr. Kindle has been with the Sulzer Group since 1992. In 1999, he

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became responsible for Sulzer Industries. In 2001, he became chief executive officer of Sulzer. Since 2003, he has been a member of Sulzer's board of directors. He is also a member of the board of directors of VZ Holding. Mr. Kindle has dual Liechtenstein and Swiss citizenship.

Senior Officers

        The following table sets forth the names of our senior officers, their current positions with us and the dates of their initial appointment to their current positions.

Name	Current Position	Year of Appointment
Markus Bayegan	Chief Technology Officer	2001
John Scriven	General Counsel, Head of Group Function Legal and Compliance	2003
Alfred Storck	Deputy Chief Financial Officer, Head of Group Function Corporate Finance and Taxes	2003

        Markus Bayegan has been our Chief Technology Officer since January 2001. From 2000 until our realignment in January 2001, he was Executive Vice President responsible for our research and development activities worldwide. From 1998 to 2000, he served as Senior Corporate Officer for our group research and development activities worldwide. From 1994 to 1998, he served as Senior Vice President of Technology for our Building Technologies Segment. From 1987 to 1998, he served as president of ABB Corporate Research, A/S, a Norwegian subsidiary. From 1985 to 1998, he was Professor in Electronics Manufacturing at the Norwegian Institute of Technology. Prior to joining us, he was employed by EB Corporation, a Norwegian electromechanical and telecommunication company that we acquired. Mr. Bayegan is a Norwegian citizen.

        John Scriven joined ABB Ltd in May 2003 and has assumed the positions of General Counsel, Head of Group Function Legal and Compliance and Secretary to the ABB Ltd board of directors. From 2001 to 2003, he was "of Counsel" at the Homburger Rechtsanwälte law firm in Zurich, Switzerland. From 1975 to 2000, he held various executive positions within the legal department of The Dow Chemical Company at both its corporate headquarters in the United States and Switzerland. From 1994 to 2000, he held the position of Vice President, General Counsel and Secretary at The Dow Chemical Company, Midland, Michigan, USA. He is currently a member of the board of directors of the American Arbitration Association. Mr. Scriven holds both British and Swiss citizenship.

        Alfred Storck has been our Deputy Chief Financial Officer since February 2003 and has been our Head of Group Function Corporate Finance and Taxes since January 2001. From 1997 to 2001, he was the head of Corporate Staff Corporate Finance and Taxes. From 1988 (when BBC Brown Boveri AG and Asea AB merged) to 1997, he was our Group Tax Officer. Mr. Storck is a German citizen.

CORPORATE GOVERNANCE

        We are committed to the highest international standards of corporate governance, and we support the general principles as set forth in the Swiss Code of Best Practice for Corporate Governance as well as those of the capital markets where ABB shares are listed: the SWX Swiss Exchange, the Stockholm Exchange, the London Stock Exchange, the Frankfurt Stock Exchange and the New York Stock Exchange (where our shares are traded in the form of ADSs).

        In addition to the provisions of the Swiss Code of Obligations, our principles and rules on corporate governance are laid down in our articles of incorporation, our board regulations, our standards for corporate governance, the charters of our board committees, the board membership

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guidelines, several internal directives (such as the directive on insider information) and the code on business ethics. It is the duty of our board of directors to review and amend or propose amendments to those documents from time to time to reflect the most recent developments and practices as well as to ensure compliance with applicable laws and regulations.

        In November 2003, the Securities and Exchange Commission approved changes to the New York Stock Exchange's listing standards related to the corporate governance practices of listed companies. Under these rules, listed foreign private issuers, such as ABB, must disclose any significant ways in which their corporate governance practices differ from those followed by U.S. domestic companies under the New York Stock Exchange listing standards. This disclosure can be found on our web site under www.abb.com/about.

Duties of Directors and Officers

        The directors and officers of a Swiss corporation are bound, as specified in the Swiss Code of Obligations, to perform their duties with all due care, to safeguard the interests of the corporation in good faith and to extend equal treatment to shareholders in like circumstances.

        The Swiss Code of Obligations does not specify what standard of due care is required of the directors of a corporate board. However, it is generally held in Swiss doctrine and jurisprudence that the directors must have the requisite capability and skill to fulfill their function, and must devote the necessary time to the discharge of their duties. Moreover, the directors must exercise all due care that a prudent and diligent director would have taken in like circumstances. Finally, the directors may not take any actions that may be harmful to the corporation.

Exercise of Powers

        Directors as well as other persons authorized to act on behalf of a Swiss corporation may perform all legal acts on behalf of the corporation which the business purpose as set forth in the articles of incorporation of the corporation, may entail. Pursuant to court practice, such directors and officers can take any action that is not explicitly excluded by the business purpose of the corporation. In so doing, however, the directors and officers must still pursue the duty of due care and the duty of loyalty described above and must extend equal treatment to the corporation's shareholders in like circumstances. Our articles of incorporation do not contain provisions concerning a director's power, in the absence of an independent quorum, to vote on the compensation to themselves or any members of their body.

Conflicts of Interest

        Swiss law does not have a general provision on conflicts of interest and our articles of incorporation do not limit our directors' power to vote on a proposal, arrangement or contract in which the director or officer is materially interested. However, the Swiss Code of Obligations requires directors and officers to safeguard the interests of the corporation and, in this connection, imposes a duty of care and loyalty on directors and officers. This rule is generally understood and so recommended by the Swiss Code of Best Practice for Corporate Governance as disqualifying directors and officers from participating in decisions, other than in the shareholders' meeting, that directly affect them. In addition, in 2003 our board of directors created the new position of lead director who will intervene and lead proceedings, where the chairman of the board, as a result of his executive role as chief executive officer, would be exposed to conflicting interests. See "—Board Practices."

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Confidentiality

        Confidential information obtained by directors and officers of a Swiss corporation acting in such capacity must be kept confidential during and after their term of office.

Sanctions

        If directors and officers transact on behalf of the corporation with bona fide third parties in violation of their statutory duties, the transaction is nevertheless valid as long as it is not explicitly excluded by the corporation's business purpose as set forth in its articles of incorporation. Directors and officers acting in violation of their statutory duties—whether transacting with bona fide third parties or performing any other acts on behalf of the company—may, however, become liable to the corporation, its shareholders and its creditors for damages. The liability is joint and several, but the courts may apportion the liability among the directors and officers in accordance with their degree of culpability.

        In addition, Swiss law contains a provision under which payments made to a shareholder or a director or any person(s) associated therewith other than at arm's length must be repaid to the company if the shareholder or director or any person associated therewith was acting in bad faith.

        If the board of directors has lawfully delegated the power to carry out day-to-day management to a different corporate body, e.g., the executive committee, it is not liable for the acts of the members of that different corporate body. Instead, the directors can only be held liable for their failure to properly select, instruct and supervise the members of that different corporate body.

Board Practices

        Board meetings are convened by the chairman or upon request by a director or the chief executive officer. During 2003, six board meetings were held. Written documentation covering the various items of the agenda for each board meeting is sent out in advance to each board member in order to allow the member time to study the covered matters prior to the meetings. Decisions made at the board meetings are recorded in written minutes of the meetings. Our board membership guidelines require that the board of directors be comprised of a substantial majority of independent directors. Currently all board members, with the exception of Mr. Dormann, our chairman and chief executive officer, are independent, non-executive directors. In order to address situations of conflicting interests between the chairman of the board and board members, the board created the new position of lead director. The additional tasks of the lead director are to act as counselor to the chairman and facilitate the dialogue between the members of the board and the chairman. The lead director has the ability to call special meetings without the chairman's presence where the chairman's role and performance will be discussed. The board of directors appointed Jacob Wallenberg as the lead director in July 2003. The position of lead director will cease to exist once the positions of chairman of the board and chief executive officer are separated in 2005.

        Our board of directors has appointed from among its members three board committees, the finance and audit committee, the nomination and compensation committee and the new strategy committee, which was created in July 2003. The duties and objectives of the board committees (with the exception of the newly created strategy committee) are set forth in charters issued or approved by the board of directors. These committees assist the board in its tasks and report regularly to the board.

        The finance and audit committee oversees the financial reporting processes and accounting practices, evaluates the independence, objectivity and effectiveness of external and internal auditors, reviews audit results, monitors compliance with the laws and regulations governing the preparation of our financial statements and assesses the processes relating to our risk management

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and internal control systems. The finance and audit committee is required to be composed of three or more independent directors who have a thorough understanding of finance and accounting. The chief financial officer and, as determined by the committee's chairman for matters related to their respective functions, the head of internal audit, as well as the external auditors may participate in the finance and audit committee meetings. Mr. Voss is the chairman of the finance and audit committee, and Messrs. Wallenberg and Agnelli are members. The committee met nine times in 2003.

        The nomination and compensation committee determines the selection of candidates for the board of directors and its committees, plans for the succession of directors and ensures that newly elected directors receive the appropriate introduction and orientation and that all directors receive adequate continuing education and training to fulfill their obligations. The nomination and compensation committee determines the remuneration of the members of the executive committee. The nomination and compensation committee is required to be composed of three or more independent directors. Upon invitation by the committee's chairman, the chief executive officer or other members of the group executive committee may participate in the committee meetings, provided that any potential conflict of interest is avoided and confidentiality of the discussions is maintained. Mr. Märki is the chairman of the nomination and compensation committee, and Messrs. Wallenberg and de Rosen are members. The committee met five times in 2003.

        The strategy committee reviews management proposals relating to the strategic direction of the ABB Group and assists the board of directors in determining the long-term strategy of the ABB Group. Mr. Hughes is the chairman of the strategy committee, and Messrs. Märki and Treschow are members. Most meetings of the strategy committee were also attended by all of the members of the group executive committee. The committee met four times in 2003.

COMPENSATION

Board of Directors

        For the period from the annual general meeting of shareholders in 2003 to the annual general meeting of shareholders in 2004, board members' compensation was fixed as follows:

•

Chairman: CHF 1,000,000 (approximately $807,800 at December 31, 2003);



•

Member: CHF 250,000 (approximately $201,900 at December 31, 2003);



•

Committee chairman: CHF 50,000 (approximately $40,400 at December 31, 2003); and



•

Committee member: CHF 20,000 (approximately $16,200 at December 31, 2003).

        Payments to board members are made for each term of a member in May and November of each year.

        Board members receive at least 50% (and may elect to receive a higher ratio) of their net compensation (i.e., after deduction of social security costs and withholding tax), in ABB shares, which they are entitled to receive at a discount of 10% of the average share trading price during a 30-day reference period. The gross compensation paid to board members in shares and cash with respect to 2003 amounted to CHF 3,020,000 ($2,439,418 at December 31, 2003).

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        Our current board members received the following compensation with respect to 2003 (the calculation of the number of shares and the cash amount varies depending on whether the person is subject to taxation at source):

	Total Annual Compensation (gross)	Amount received in cash (net)	Number of shares received
	(CHF)
Jürgen Dormann(1)	1,000,000	—	155,948
Roger Agnelli	270,000	—	41,629
Louis R. Hughes	300,000	103,863	23,153
Hans Ulrich Märki	320,000	—	67,833
Michel de Rosen	270,000	93,371	20,814
Michael Treschow	270,000	93,371	20,814
Bernd W. Voss	300,000	—	46,307
Jacob Wallenberg	290,000	—	44,748
Total	3,020,000	290,605	421,246

(1)

Jürgen Dormann received this compensation in addition to his compensation as chief executive officer (see below).

        No payments were made to former board members in 2003.

        With the exception of Jürgen Dormann in his function as chief executive officer, board members do not receive pension benefits and are not eligible to participate in our management incentive plan.

Executive Committee

        Members of the executive committee receive annual base compensation. In addition, they are eligible for annual bonus compensation, which depends on the performance of the individual area of responsibility of each executive committee member and of the ABB Group and, in certain cases, on a qualitative appreciation of a member's achievements.

        In addition to receiving annual base and bonus compensation, members of the executive committee may participate in a management incentive plan, which is described in detail below under "—Management Incentive Plan." Each member of the executive committee received 1,000,000 warrants or warrant application rights under the management incentive plan in 2003. See "—Share Ownership."

        None of the members of the executive committee has received ABB shares as compensation, except for Jürgen Dormann in his function as chairman of the board.

        Executive committee members also enjoy pension benefits in accordance with Swiss and foreign social security legislation. In 2003, we incurred costs for pension contributions of CHF 2,223,777 ($1,796,266 at December 31, 2003) for current executive committee members and CHF 321,886 ($260,005 at December 31, 2003) for executive committee members who departed during 2002.

        Executive committee members receive customary additional benefits such as a company car and health insurance compensation, which are not material in the aggregate.

        We believe that the compensation and pension levels of our current ABB Group executives comply with prevailing European practices. It is the task of the nomination and compensation Committee to monitor our compensation practices. See "—Corporate Governance—Duties of Directors and Officers—Board Practices."

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        The following gross payments were made to the members of the executive committee with respect to 2003:

	Currency	Salary paid in 2003	Bonus for 2003(1)	Additional compensation	Total annual compensation
Jürgen Dormann(2)	(CHF)	3,235,000	799,680	—	4,034,680
Dinesh Paliwal(3)	($)	550,000	374,000	—	924,000
Peter Smits	(CHF)	825,000	561,000	—	1,386,000
Gary Steel(4)	(CHF)	600,000	408,000	660,300	1,668,300
Peter Voser(5)	(CHF)	700,000	476,000	300,000	1,476,000
Total(6)	(CHF)	6,040,900	2,707,692	960,300	9,708,892

(1)

The table above provides compensation amounts with respect to 2003 on an accrual basis. Bonuses with respect to 2003 were paid in 2004.

(2)

This compensation as chief executive officer is in addition to the compensation received as chairman of the board.

(3)

As Dinesh Paliwal has a U.S. employment contract, he received his salary in U.S. dollars.

(4)

Gary Steel received the amount of CHF 660,300 as compensation for shares and options due to change of employment.

(5)

Peter Voser received a special bonus of CHF 300,000 for the successful management of the capital strengthening program.

(6)

For the purpose of calculating the total, the U.S. dollar amounts relating to Dinesh Paliwal have been converted into Swiss francs using the noon buying rate for Swiss francs on December 31, 2003 ($1.00 = CHF 1.2380).

        In 2003, we made a total payment of CHF 5,191,616 ($4,193,551 at December 31, 2003) gross to four members of the group executive committee who departed during the calendar year 2002. This figure is composed of salary payments during contractual notice periods and severance payments made in lieu of continuing salary payments. In addition, ABB made contributions to the respective pensions funds in an aggregate amount of CHF 321,886 ($260,005 at December 31, 2003). In January 2004 ABB made a payment of CHF 589,592 ($486,451 at January 31, 2004) gross to one former member of the group executive committee, in fulfillment of a contractual pension commitment.

Performance Alignment

        For 2003, we have introduced a structure for aligning the performance expectations of senior managers. Group executive committee members, corporate staff and country managers of the 19 largest countries receive targets and are measured on ABB Group results rather than on the basis of individual businesses. Business area managers and local country division managers receive targets and are measured on ABB Group results (60%) and on their business area or divisional results (40%). At least 20% of this "scorecard" must be made up of qualitative measurements, such as order growth with key customers, performance appraisal systems and financial gearing. In addition to this group of senior managers, all other participating managers are measured with a minimum of 25% on ABB Group results. Resulting bonuses are paid in March each year after full-year results are announced. In applying the scorecard principles, group executive committee members have a maximum bonus opportunity of 100% of their base salary.

Employment Contracts

        None of our board members, executive committee members or members of senior management benefits from a "golden parachute" clause which would become effective upon a change of control. Employment contracts normally contain notice periods of 12 months for executive committee members and three to six months for members of senior management, during

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which they are entitled to salaries and bonuses. No director has a contract with us providing for further benefits upon termination of his board membership, other than pursuant to applicable employment agreements in case of simultaneous termination of their employment.

MANAGEMENT INCENTIVE PLAN

        We have a management incentive plan under which approximately 1,100 key employees received warrants and warrant appreciation rights for no consideration over the course of seven launches from 1998 to 2003. The warrants are exercisable for shares at a predetermined price, not less than the fair market value as of the date of grant. Participants may also sell the warrants rather than exercise the right to purchase shares. Equivalent warrants are listed on the SWX Swiss Exchange, which facilitates valuation and transferability of warrants granted under the management incentive plan.

        Each warrant appreciation right entitles the holder to an amount in cash equal to the market price of one equivalent warrant on the SWX Swiss Exchange on the date of exercise of the warrant appreciation right. Warrant appreciation rights are not transferable. Participants may exercise or sell warrants or exercise warrant appreciation rights only during the 30 days immediately following publication of our interim or annual results. No exercise or sale is permitted until after the vesting period, which is three years from date of grant, although vesting restrictions can be waived in certain circumstances such as death or disability. All warrants and warrant appreciation rights expire six years from the date of grant.

        As of February 29, 2004 the warrants outstanding represented the future rights to acquire 24,409,856 of our shares (representing less than 2% of our total outstanding shares), including the future right of the current members of our executive committee to acquire an aggregate of 1,266,378 shares. Also on that date, the warrant appreciation rights represented the future rights to receive the cash equivalent to the market price of 110,285,520 warrants, including the future right of the current members of our executive committee to receive the cash equivalent to the market price of 2,880,000 warrants. Our obligations under the management incentive plan are covered by contingent share capital. See Note 22 to the Consolidated Financial Statements for additional information regarding the management incentive plan.

        The amounts of warrants outstanding include those instruments held by employees of the former ABB ALSTOM POWER joint venture, a discontinued operation. Under the terms and conditions of the management incentive program, employees of the former ABB ALSTOM POWER joint venture retain their entitlements in the management incentive plan.

        As of February 29, 2004, 44,638,060 warrants representing the right to purchase 14,528,416 shares (representing less than 1% of our total outstanding shares) were exercisable and 52,413,520 warrant appreciation rights were exercisable.

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        The following table sets forth the number of warrants outstanding under the management incentive plan as of February 29, 2004.

Launch (Year)		Warrants Outstanding		Exercise Ratio(2) (Warrants: Shares)	Number of Shares Underlying Warrants(2)		Exercise Price(2)	Expiration Date
							(CHF)
2 (1998	)	5,795,000	(1)	1:0.8173	4,736,229	(1)	20.26	12/10/04
3 (1999	)	4,648,060	(1)	1:0.2521	1,171,758	(1)	29.75	06/10/05
4 (1999	)	14,565,000	(1)	1:0.2521	3,671,781	(1)	32.73	11/11/05
5 (2000	)	19,630,000	(1)	1:0.2521	4,948,648	(1)	42.05	06/13/06
6 (2001	)	17,575,000		1:0.2521	4,430,590		13.49	12/10/07
7 (2003	)	27,254,250		1:0.2000	5,450,850		7.00	12/08/09

(1)

All of the warrants from Launches 2, 3, 4 and 5, representing the right to purchase an aggregate of 14,528,416 shares, are currently exercisable.

(2)

The exercise ratio of the warrants, number of shares underlying the warrants and the exercise price of the warrants have been restated to reflect the adjustments made to the terms of the warrants as a result of the rights offering completed in December 2003.

        The following table sets forth the number of warrant appreciation rights outstanding under the management incentive plan as of February 29, 2004.

Launch (Year)		Warrant Appreciation Rights Outstanding(1)	Expiration Date
2 (1998	)	4,443,000	12/09/04
3 (1999	)	345,520	06/09/05
4 (1999	)	16,900,000	11/10/05
5 (2000	)	30,725,000	06/12/06
6 (2001	)	36,772,500	12/09/07
7 (2003	)	21,099,500	12/07/09

(1)

Each warrant appreciation right represents a future right to receive the cash equivalent of the equivalent market price of warrants exercisable at the following exercise ratios and prices:

Launch (Year)		Exercise Ratio(a) (Warrants: Shares)	Exercise Price(a)
			(CHF)
2 (1998	)	1:0.8173	20.26
3 (1999	)	1:0.2521	29.75
4 (1999	)	1:0.2521	32.73
5 (2000	)	1:0.2521	42.05
6 (2001	)	1:0.2521	13.49
7 (2003	)	1:0.2000	7.00

(a)

The exercise ratio and exercise price of the warrants have been restated to reflect the adjustments made to the terms of the warrants as a result of the rights offering completed in December 2003.

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SHARE OWNERSHIP

        Under our management incentive plan, certain members of the executive committee have received warrants and warrant appreciation rights in the years 1998 to 2003, although there were no grants in 2002. The details of the various grants are as follows:

Allotment Year	Term Life	Exercise Ratio(1) (Warrants: Shares)	Exercise Price(1)
			(CHF)
1998	6 years	1:0.8173	20.26
1999	6 years	1:0.2521	32.73
2000	6 years	1:0.2521	42.05
2001	6 years	1:0.2521	13.49
2003	6 years	1:0.2000	7.00

(1)

The exercise ratio and exercise price of the warrants (and warrants underlying warrant appreciation rights) have been restated to reflect the adjustments made as a result of the rights offering completed in December 2003.

        As of March 31, 2004 the current members of the board of directors and executive committee held the following numbers of shares (or ADSs representing such shares), warrants and warrant appreciation rights:

		Number of Warrants and Warrant Appreciation Rights Granted under Management Incentive Plan
	Number of Shares	Allotment Year 1998	Allotment Year 1999	Allotment Year 2000	Allotment Year 2001	Allotment Year 2003
Jürgen Dormann	580,415	—	—	—	—	1,000,000
Roger Agnelli	70,613	—	—	—	—	—
Louis R. Hughes	36,656	—	—	—	—	—
Hans Ulrich Märki	195,577	—	—	—	—	—
Michel de Rosen	55,028	—	—	—	—	—
Michael Treschow	38,083	—	—	—	—	—
Bernd W. Voss	106,138	—	—	—	—	—
Jacob Wallenberg	94,329	—	—	—	—	—
Dinesh Paliwal	119,500	30,000	100,000	250,000	1,000,000	1,000,000
Peter Smits	51,000	—	100,000	250,000	1,000,000	1,000,000
Gary Steel	—	—	—	—	—	1,000,000
Peter Voser	17,000	—	—	—	1,000,000	1,000,000
Total	1,364,339	30,000	200,000	500,000	3,000,000	5,000,000

        The current members of our board of directors and executive committee owned less than 1% of our total shares outstanding as of December 31, 2003.

        No person closely linked to any member of the executive committee holds any shares of ABB or options in ABB shares.

        Share amounts provided in this section do not include the shares beneficially owned by Investor AB, of which Mr. Wallenberg is vice-chairman. See "Item 7. Major Shareholders and Related Party Transactions—Major Shareholders."

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EMPLOYEES

        As of February 29, 2004, we employed approximately 115,000 people. A breakdown of our employees by geographic region for the years ended December 31, 2003, 2002 and 2001 is as follows:

Region	2003	2002	2001
Europe	70,500	91,000	102,500
The Americas	19,000	24,500	27,000
Asia	15,500	16,000	16,500
Middle East and Africa	11,500	7,500	10,500
Total	116,500	139,000	156,500

        We anticipate that, as a result of the Step Change Program, the number of employees will be further reduced. See "Item 4. Information on the Company—Restructuring Expenses—Step Change Program."

        The proportion of our employees that are represented by labor unions or are the subject of collective bargaining agreements varies based on the labor practices of each country in which we operate. We estimate that approximately 65% of all ABB Group employees are covered by collective bargaining agreements. We believe that our employee relations are good.

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Item 7.    Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

        To our knowledge, as of March 31, 2004, the following persons held 5% or more of our total share capital:

Name	Number of Shares Owned	Total Percentage of Share Capital
Investor AB(1)	204,115,142	9.9	%
The Capital Group International, Inc.(2)	133,888,830	6.5	%

(1)

Mr. Jacob Wallenberg, a member of our board of directors, is the vice-chairman of Investor AB. The number of shares indicated above does not include 94,329 shares owned by Mr. Wallenberg as an individual and earned as compensation for services as a member of our board of directors. See "Item 6. Directors, Senior Management and Employees—Compensation."

(2)

Shares held on behalf of funds managed by certain of The Capital Group Companies, Inc.'s subsidiaries, according to a Schedule 13G/A filed with the U.S. Securities and Exchange Commission on February 13, 2004.

        Under our articles of incorporation, each registered share represents one vote. Major shareholders do not have different voting rights.

        To our knowledge, we are not directly or indirectly owned or controlled by any government or by any other corporation or person.

        Under the Swiss Stock Exchange Act, shareholders and groups of shareholders acting in concert who reach, exceed or fall below the thresholds of 5%, 10%, 20%, 33¹/3%, 50% or 66²/3% of the voting rights of a Swiss listed corporation must notify the corporation and the exchange(s) in Switzerland on which such shares are listed of such holdings in writing within four trading days, whether or not the voting rights can be exercised. Following receipt of such a notification, the corporation must inform the public within two trading days.

        An additional disclosure requirement exists under the Swiss Federal Code of Obligations, according to which we must disclose individual shareholders and groups of shareholders and their shareholdings if they hold more than 5% of all voting rights and we know or have reason to know of such major shareholders. Such disclosures must be made once a year in the notes to the financial statements as published in our annual report.

        At March 26, 2004, we had approximately 276,000 shareholders. Approximately 7,000 were U.S. holders, of which approximately 700 were record holders. Based on the share register, U.S. holders (including holders of ADSs) held approximately 5% of the total number of shares issued, including treasury shares, at that date.

RELATED PARTY TRANSACTIONS

        In the normal course of our industrial activities, we sell products and derive certain other revenues from companies in which we hold an equity interest. The revenues derived from these transactions are not material for ABB Ltd. In addition, in the normal course of our industrial activities, we purchase products from companies in which we hold an equity interest. The amounts involved in these transactions are not material for ABB Ltd. Also, in the normal course of our industrial activities, we engage in transactions with businesses that we have divested. We believe that the terms of the transactions we conduct with these companies are negotiated on an arm's length basis.

        ABB Ltd had granted loans to unconsolidated related parties amounting to approximately $76 million as of December 31, 2002 and $22 million as of December 31, 2003.

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        In June 2000, we entered into a share subscription agreement to acquire a 42% interest in b-business partners B.V., a venture capital fund formed to invest in and develop business-to-business e-commerce companies across Europe. Pursuant to the terms of the agreement, we committed to invest a total of $278 million, of which $69 million was paid in 2000 and $134 million was paid during the first half of 2001. In December 2001, Investor AB, another founding shareholder of the fund, acquired 90% of our investment and capital commitments for approximately book value, or $166 million in cash. After these transactions, b-business partners repurchased 50% of its outstanding shares, which resulted in a return of capital to us of $10 million. After these transactions, we retain a 4% investment in b-business partners and we are committed to provide additional capital to it of approximately $4 million (a euro-denominated commitment that may fluctuate with exchange rates). Further, b-business partners retains a put right to compel us to repurchase 150,000 shares of b-business partners at a cost of approximately $19 million (a euro-denominated commitment that may fluctuate with exchange rates). At the time of these transactions, Percy Barnevik, the former chairman of the board of directors of ABB, was the chairman of Investor AB, and Jacob Wallenberg, a member of the board of directors of ABB, was the vice-chairman of Investor AB.

        In December 2001, we entered into, and, in April 2002, we amended and restated, a $3 billion 364-day revolving credit facility. Skandinaviska Enskilda Banken ("SEB") was one of the lenders under the credit facility with a $155 million commitment representing approximately 5% of the total commitment available to us under the credit facility. In December 2002, we replaced that credit facility with a $1.5 billion 364-day revolving credit facility. SEB was also a lender under this credit facility, with a $145 million commitment, representing approximately 9.6% of the total commitment available to us. Jacob Wallenberg is the chairman of SEB and a member of our board of directors. In addition, Dresdner Bank Luxembourg S.A. was a lender under the $1.5 billion credit facility, with a $97 million commitment, representing approximately 6.5% of the total commitment available to us. Bernd Voss is a member of the supervisory board of Dresdner Bank AG ("Dresdner Bank") and one of our board members. We repaid and cancelled the $1.5 billion bank facility in December 2003. In November 2003, we entered into a new $1 billion credit facility. Each of SEB and Dresdner Bank Luxembourg S.A. originally committed to $83 million out of the $1 billion available to us. This amount was reduced following syndication in December 2003 to $71 million.

        We consider our relationships with Skandinaviska Enskilda Banken and Dresdner Bank to be among our primary banking relationships. In addition to participating in the credit facilities described above, each of these banks has from time to time provided commercial banking, lending, investment banking and financial advisory services to us and our affiliates in the ordinary course of business. They have received customary fees and/or commissions for such services. We expect to continue to conduct transactions with them in the future on an arm's length basis.

        In June 2003, we entered into a 10-year global framework agreement with International Business Machines Corporation ("IBM") to outsource our information systems infrastructure services to IBM. This global framework agreement forms the basis for country agreements entered into with IBM in 13 countries in Europe, North America and our headquarters representing a significant portion of our information systems infrastructure. The agreement involved the transfer to IBM of 780 of our employees, in addition to the 380 employees transferred under pilot programs prior to 2003. Our total expenditure in respect of the agreement will amount to approximately $1.7 billion over 10 years, based on the current level of usage of the services. While the agreement was negotiated and transacted at arm's length with IBM, it should be noted that Jürgen Dormann, our chairman and chief executive officer, was a member of the board of directors of IBM until April 29, 2003, and Hans-Ulrich Märki, a member of our board of directors, is General Manager of IBM Europe/Middle East/Africa.

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        During 2003, we were party to several contracts with Companhia Vale do Rio Doce ("CVRD"), a Brazilian company with operations in mining, logistics (railways and ports) and power generation, and its subsidiaries. These contracts relate to ordinary course activities such as technical service and maintenance, engineering services, automation of systems, commissioning, testing or installation of systems, physical and chemical analysis and equipment supply. The largest contracts are for (1) engineering services and supply of equipment of the palletizing plants located at the port of Tubarao complex (Brazil), with a value of approximately $6.3 million, and (2) supply of equipment for the expansion of ALUNORTE (Brazil), with a value of approximately $6.2 million. There are also various purchase orders for spare parts and machinery in general, amounting to approximately $1.2 million. These contracts are not material to ABB in the aggregate. Roger Agnelli, a member of our board of directors, is president and chief executive officer of CVRD.

        There are no cross-shareholdings in excess of 5% of the share capital or the voting rights between ABB and another company.

        For further information, see "Item 5. Operating and Financial Review and Prospects—Related and Certain Other Parties."

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Item 8. Financial Information

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

        See "Item 18. Financial Statements" for a list of financial statements contained in this annual report.

LEGAL PROCEEDINGS

        We are involved in legal proceedings from time to time incidental to the ordinary conduct of our business. These proceedings principally involve matters relating to warranties, personal injury, damage to property, environmental liabilities and intellectual property rights.

        ABB Barranquilla Inc. ("ABB Barranquilla"), a subsidiary of our ABB Equity Ventures Inc. ("ABB Equity Ventures") subsidiary, is an equity investor in Termobarranquilla S.A., Empresa de Servicios Publicos ("TEBSA"), which owns a Colombian independent power generation project known as Termobarranquilla. One of the other shareholders of TEBSA is Corporación Electrica de la Costa Atlántica ("CORELCA"), a government-owned Colombian electric utility. CORELCA also purchases the electricity produced from the Termobarranquilla project. In addition to our equity investment, our former power generation business was EPC contractor for Termobarranquilla. The project was awarded to us and another company, as joint bidders, after a competitive bidding process in 1994. The co-bidder manages the operation and maintenance of the facility. We entered into certain side agreements with the co-bidder for a sharing and reallocation of a portion of the amounts paid to us and to the co-bidder under the EPC contracts and the operation and maintenance contract. These side agreements were not disclosed at the time they were entered into to TEBSA or CORELCA. They also were not disclosed to the lenders who provided financing to TEBSA for the project, including U.S. Overseas Private Investment Corporation and U.S. Export Import Bank, at the time of the closing of such financing, as required pursuant to the lending documents.

        On June 28, 2002, ABB Barranquilla, ABB Equity Ventures, the co-bidder, TEBSA and CORELCA settled all claims and potential claims by TEBSA and CORELCA arising out of the entry into or performance of the side agreements. CORELCA and TEBSA released and discharged ABB and its affiliates from any claims that TEBSA and CORELCA had, may have or may thereafter claim to have, arising on or before June 28, 2002 (the effective date of the settlement) and whether or not previously asserted, which in any way may arise out of or relate to the entry into or the performance of any of the side agreements. As consideration, we terminated the side agreements, paid $13 million to CORELCA, and reimbursed CORELCA for its legal expenses. We also agreed to indemnify (i) TEBSA for any and all penalties, fines and interest, if any, incurred by TEBSA arising out of or in connection with the entry into or performance of the side agreements and (ii) CORELCA for liabilities, costs or expenses related to certain taxes payable by CORELCA as a result of the settlement. On June 28, 2002, TEBSA's project lenders consented to the terms of the settlement and waived all defaults under the project lending documents arising out of the entry into or performance of the side agreements. As consideration for the lenders' consent and waiver, ABB Switzerland Holding Ltd. and the co-bidder agreed to indemnify the project lenders from and against (i) any investigation, litigation or proceeding related to the entry into or performance of the side agreements and (ii) any other exposure as a consequence of, or which might be asserted against any of the project lenders by virtue of, the failure of ABB or the co-bidder to disclose the side agreements. The indemnification obligation is joint but not several and is limited to the credit exposure of the project lenders. On December 31, 2003, the outstanding balance owed by TEBSA to the project lenders was approximately $204 million.

        On February 3, 2003, ABB Ltd, ABB Holding Inc. and ABB Equity Ventures entered into a compliance agreement with U.S. Export-Import Bank. The compliance agreement, among other

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things, requires us to adopt and maintain additional compliance procedures and allow U.S. Export-Import Bank to audit our compliance.

        In response to information provided by our employees, during 2002 and 2003 we undertook an investigation of potentially improper business conduct within our Oil, Gas and Petrochemical division. In such internal investigations, we uncovered a limited number of improper payments by some of our employees and agents in the upstream business in Africa, Central Asia, and South America, which we have voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission. The payments, which violated our internal policies on business ethics, were made in order to obtain from local officials confidential information and commercial advantages, including with respect to contracts on which we were bidding. We are cooperating fully with the U.S. Department of Justice and the U.S. Securities and Exchange Commission. We have hired outside counsel and auditors (other than our auditors) to assist us in a compliance review to determine whether other instances of improper payments exist. The compliance review is being conducted jointly with the purchaser of the upstream part of the Oil, Gas and Petrochemicals business and with the purchaser's outside counsel and auditors. For further information on the sale of the upstream part of the Oil, Gas and Petrochemicals business, see "Item 5. Operating and Financial Review and Prospects—Acquisitions, Investments and Divestitures—Divestitures—Pending Divestitures" and "Item 10. Additional Information—Material Contracts—Sale Agreement for Part of the Oil, Gas and Petrochemicals Business."

        If the U.S. Department of Justice or the U.S. Securities and Exchange Commission determine that violations of law have occurred, they could seek civil or, in the case of the U.S. Department of Justice, criminal sanctions, including monetary penalties against us. We are currently not in a position to predict the final outcome of the compliance review but we expect that any civil or criminal sanctions or proceedings arising from our disclosures to the U.S. Department of Justice and the U.S. Securities and Exchange Commission will be disposed of voluntarily. We have also taken the following voluntary remedial actions: we terminated the improper payments; we have terminated contracts with an individual and companies believed to have been involved in the improper payments; we replaced senior management at the relevant subsidiary; we disciplined the responsible employees with a range of sanctions including severance of employment, loss of compensation and title, formal reprimands and ethics counseling and training; we hired outside experts to assist in the correction of our books and records to properly record the payments; and we have provided and will be providing additional ethics and compliance training.

        For a description of our involvement in asbestos litigation, see "Item 3. Risk Factors—We are subject to ongoing litigation and potentially substantial liabilities arising out of asbestos claims from discontinued operations" and "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Asbestos Liability."

DIVIDENDS AND DIVIDEND POLICY

        See "Item 3. Key Information—Dividends and Dividend Policy."

SIGNIFICANT CHANGES

        Except as otherwise described in this annual report, there has been no significant change in our financial position since December 31, 2003.

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Item 9. The Offer and Listing

MARKETS

        The shares of ABB Ltd are principally traded on virt-x (under the symbol "ABBN") and on the Stockholm Exchange (under the symbol "ABB"). The shares are also traded on the Frankfurt Exchange and the London Stock Exchange.

        ADSs of ABB Ltd have been traded on the New York Stock Exchange under the symbol "ABB" since April 6, 2001. ABB Ltd's ADSs are issued under the Amended and Restated Deposit Agreement, dated May 7, 2001, with Citibank, N.A. as depositary. Each ADS represents one share.

TRADING HISTORY

        The table below sets forth, for the periods indicated, the reported high and low closing sale prices for the shares on virt-x and the Stockholm Exchange and for the ADSs on the New York Stock Exchange. All share prices have been adjusted to reflect the share capital increase completed in December 2003.

		virt-x(1)		Stockholm Exchange		New York Stock Exchange
		High	Low	High	Low	High		Low
		(CHF)		(SEK)		($)
Annual highs and lows
1999 (from June 28, 1999)		38.63	26.92	208.87	151.06
2000		43.24	30.10	232.43	173.22
2001		35.20	7.93	208.66	52.77	18.95	(2)	6.49	(2)
2002		14.52	1.29	91.44	8.30	11.11		1.14
2003		6.66	2.02	39.88	12.81	6.24		1.95
Quarterly highs and lows
2001	First Quarter	35.20	22.71	208.66	139.38
	Second Quarter	26.26	19.83	157.91	122.46	18.95	(2)	14.20	(2)
	Third Quarter	21.90	8.09	134.54	56.80	15.33		6.90
	Fourth Quarter	15.11	7.93	98.29	52.77	11.45		6.49
2002	First Quarter	14.52	8.73	91.44	54.78	11.11		6.60
	Second Quarter	12.50	9.64	79.36	60.83	9.77		7.84
	Third Quarter	10.87	3.86	68.48	24.57	9.07		3.40
	Fourth Quarter	4.26	1.29	26.59	8.30	3.54		1.14
2003	First Quarter	3.74	2.02	24.09	12.81	3.51		1.95
	Second Quarter	4.05	2.56	24.01	16.27	3.95		2.43
	Third Quarter	6.66	3.29	39.88	20.14	6.12		3.01
	Fourth Quarter	6.53	5.39	37.95	32.07	6.24		4.79
Monthly highs and lows
2003	October	6.27	5.39	36.90	32.07	5.98		4.97
	November	6.53	6.23	37.95	36.34	6.24		5.72
	December	6.34	5.96	36.60	34.60	6.21		4.79
2004	January	7.83	6.26	45.90	36.10	6.35		5.08
	February	7.95	7.07	46.40	41.40	6.44		5.68
	March	8.01	6.78	46.70	40.10	6.32		5.39

(1)

Until June 25, 2001, the shares were traded on the SWX Swiss Exchange.

(2)

From April 6, 2001.

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THE SWX SWISS EXCHANGE AND VIRT-X

        ABB Ltd's shares are listed on the main board of the SWX Swiss Exchange and are included in the Swiss Market Index, a capitalization-weighted index of the shares of 27 large Swiss corporations currently traded on virt-x. ABB Ltd is subject to the regulations and listing rules of the SWX Swiss Exchange.

        The SWX Swiss Exchange was founded in 1993 as the successor to the local stock exchanges of Zurich, Basel and Geneva. Trading in foreign equities and derivatives began in December 1995. In August 1996, the SWX Swiss Exchange introduced full electronic trading in Swiss equities, derivatives and bonds. The aggregate value of trading activity of Swiss shares, investment funds, warrants, and bonds as well as other non-Swiss shares, warrants and bonds on the SWX Swiss Exchange and on virt-x was in excess of CHF 1,000 billion in 2003. As of December 31, 2003, the equity securities of 419 corporations, including 130 foreign corporations, were listed and traded on the SWX Swiss Exchange.

        In 2001, virt-x Exchange Limited (formerly Tradepoint Financial Networks plc), a pan-European blue chip trading platform based in London, was created as a collaboration among the SWX Swiss Exchange, the U.K.-based securities exchange TradepointFinancial Networks plc and a consortium of internationally active investment banks and financial services companies (called the TP Consortium) to provide an efficient and cost effective pan-European equities market. virt-x is a Recognized Investment Exchange supervised by the Financial Services Authority in the United Kingdom. On February 2, 2003, the SWX Swiss Exchange announced that as of January 31, 2003, it controlled 94.8% of the equity capital and voting rights of virt-x following a successful public tender offer.

        All trading in the 27 stocks included in the Swiss Market Index, including ABB, was transferred to virt-x on June 25, 2001. The trading of these stocks is conducted in Swiss francs. virt-x uses the SWX Swiss Exchange trading platform and network under a facilities management agreement. Most of the systems operation and development capability is outsourced to the SWX Swiss Exchange in Switzerland.

        Trading begins each business day at 9:00 a.m. (CET) and continues until 5:30 p.m. (CET). At 5:20 p.m. (CET) the exchange moves into "Closing Auction" status. The closing auction stops at 5:30 p.m. (CET). Orders can be placed up to 10:00 p.m. (CET) and again from 6:00 a.m. (CET) onwards.

        Members register incoming orders from their customers in their trading system. These orders are forwarded to the relevant trader and checked, or fed directly into the trading system by the trader. From here they are submitted to the central exchange system of virt-x, which acknowledges receipt of the order, assigns a time stamp to it and verifies its formal correctness.

        Depending on the type of transaction, the orders are also transmitted to data vendors (such as Reuters, Bloomberg and Telekurs). In the fully automated exchange system in use at virt-x, buy and sell orders are matched according to clearly defined matching rules.

        Regardless of their size or origin, incoming orders are executed in the order of price (first priority) and time received (second priority).

        Transactions take place through the automatic matching of orders. Each valid order of at least one share is entered and listed according to its price. In general, orders placed at the best price (known as "market orders") are executed first followed by orders placed with a price limit (known as "limit orders"). If several orders are listed at the same price, they are executed in the order of the time they were entered.

        Any transaction executed under the rules of virt-x must be reported. Order book executions are automatically and immediately reported by the trading system. There are separate provisions for the delayed reporting of certain qualifying trades. Individual elements of portfolio trades must be

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reported within one hour, while block trades and enlarged risk trades must be reported when the business is substantially (80%) completed, or by 5:30 p.m. (CET) on the day of trade, unless the trade is agreed after 4:30 p.m. (CET), in which case the trade must be reported by 5:30 p.m. (CET) the following business day. Block trades and enlarged risk trades are subject to minimum trade size criteria. All other transactions must be reported within three minutes, except when the transaction is conducted in a SWX Swiss Exchange listed security, in which case the trade must be reported within 30 minutes.

        virt-x trades can be settled by CRESTCo, SIS SegaInterSettle AG or Euroclear Bank S.A./N.V. Members may employ one, two or a combination of all three depositories to settle their virt-x transactions. Each depository maintains its own unique service offering and facilitates settlements with the other depositories by real-time links. Exchange transactions are usually settled on a T+3 basis, meaning that delivery against payment of exchange transactions occurs three days after the trade date. Where any settlement is due to take place on a day on which the central bank for the currency in which the transaction is conducted is closed, the settlement due date is adjusted to be the next business day after the currency holiday.

        The traded prices of all securities are constantly monitored. As soon as the difference between two successive trade prices is greater than a specific predefined value, a brief trading suspension, called "stop trading," is automatically triggered. The triggering parameters and length of a stop trading differ according to the security.

THE SWEDISH SECURITIES MARKET

        ABB Ltd's shares are listed on the A-list (consisting of the largest companies in Sweden) on the Stockholm Exchange and are included in the OMX Index, which mirrors the total price changes in the 30 most traded shares on the Stockholm Exchange. ABB Ltd is subject to the regulations and listing rules of the Stockholm Exchange.

Trading System

        Trading on the Stockholm Exchange is conducted on behalf of clients by banks and brokers. While banks and brokers are permitted to act as principal in trading both on and off the Stockholm Exchange, they generally engage in transactions as agents. There are no market maker or specialist systems on the Stockholm Exchange.

        Each trading day on the Stockholm Exchange begins with an open morning call and ends with an open closing call. At 9:15 a.m. (CET) an open call procedure begins for all shares simultaneously, preceding the commencement of trading at 9:30 a.m. (CET), when the first share is assigned its opening price, and then becomes subject to continuous trading. After approximately 8 minutes, at 9:38 a.m. (CET), the opening prices for all the shares have been established and trading continues at prices based on market demand until 5:20 p.m. (CET) when the closing call is initiated. The closing call ends at 5:30 p.m. (CET), which is the Stockholm Exchange's closing time. Buy and sell orders are registered on the Stockholm Automated Exchange System, or SAXESS, a computerized order-matching system, in round lots, typically of 100 shares, and odd lots are matched separately at the last price for round lots.

        The Stockholm Exchange is a fully electronic marketplace. Trading on the SAXESS comprises all Swedish stocks traded on the Stockholm Exchange and the new paperless account-based security system, administered by the VPC, was introduced full scale. Member firms of the Stockholm Exchange are able to operate from an optional geographic location via advanced data communications. The brokers' representatives are able to trade via network stations that have been developed by the Stockholm Exchange or via their own electronic data processing systems which are linked to SAXESS.

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        In addition to official trading on the Stockholm Exchange, there is also trading off the Stockholm Exchange during and after official trading hours. Trades in excess of 20 round lots can be effected off the Stockholm Exchange if the transaction price lies within the spread then appearing on SAXESS. Trades in excess of 500 round lots (for shares on the "Most Traded Shares" list of the Stockholm Exchange) or 250 round lots (for all other shares), however, may be effected off the Stockholm Exchange without regard to that spread. Trades after official trading hours of the Stockholm Exchange must normally be effected at a transaction price that lies within the spread appearing on SAXESS at the time of the closing. If there are no orders in SAXESS at that time, the trade may be effected at a price that otherwise reflects the market situation at that time. If the market situation changes after the closing of SAXESS, trades may be effected outside the spread, provided that it can be shown that the transaction price reflected the market situation prevailing at the time of the trade. Trading on the Stockholm Exchange tends to involve a higher percentage of retail clients, while trading off the Stockholm Exchange, whether through intermediaries or directly, often involves larger Swedish institutions, banks arbitraging between the Swedish market and foreign markets and foreign buyers and sellers purchasing shares from or selling shares to Swedish institutions.

        The Stockholm Exchange is an authorized stock exchange in accordance with the Swedish Stock Exchange and Clearing House Act (lag 1992:543 om börs-och clearingverksamhet) and is subject to regulation by the Swedish Financial Supervisory Authority. The Swedish Stock Exchange and Clearing House Act provides for the regulation and supervision of the Swedish securities markets and market participants and the Swedish Financial Supervisory Authority implements this regulation and supervision.

        The regulatory system governing trading on and off the Stockholm Exchange is intended to achieve transparency and equality of treatment. All trades on the Stockholm Exchange are made through SAXESS to the Stockholm Exchange, which records information as to the banks and the brokers involved, the issuer, the number of shares and the price and the time of the transaction. Each bank or broker is required to maintain records indicating trades carried out as agent or, in the case of banks, as principal. All trades off the Stockholm Exchange by or through members of the Stockholm Exchange must also be reported to the Stockholm Exchange within 5 minutes, unless they are effected after 5:30 p.m. (CET). Trades after 5:30 p.m. (CET) must be reported no later than 15 minutes prior to the opening of the next trading day. All trading information reported on the Stockholm Exchange is publicly available. The Stockholm Exchange also maintains a Market Supervision Unit that reviews trading during the day on a "real time" basis, as described below.

        Under the Act on Reporting Obligations for Certain Holdings of Financial Instruments (lag 2000:1087 om anmälningsskyldighet för vissa innehav av finansiella instrument), certain natural persons may have an obligation to report their shareholdings and changes in shareholdings to the Swedish Financial Supervisory Authority. The persons covered by this obligation are persons who through their position or mandate normally obtain non-public information which can be presumed to affect the price of the listed securities (so called "insider information"), such as members of the board of directors of the listed Swedish company in question, the CEO or deputy CEO. The Swedish Financial Supervisory Authority keeps an insider register containing such reported information, which is publicly available.

        The Swedish Insider Penal Act (insiderstrafflagen 2000:1086) provides sanctions against insider trading. The insider trading rules are policed by the Swedish Financial Supervisory Authority and the Market Supervision Unit of the Stockholm Exchange reviews trading data for indications of unusual market activity or trading behavior.

        The Market Supervision Unit also continually examines information disseminated by listed companies. Accordingly, information such as earnings reports, acquisition and other investment plans and changes in ownership structure, is reviewed on a daily basis. When the Market

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Supervision Unit becomes aware of non-public price sensitive information, it monitors trading in the shares concerned to ensure that if unusual trading activity develops which evidences that persons may be trading on that information, the information is made public as soon as possible.

        Certain types of agreements in connection with financial instruments trading, such as fictitious transactions or transactions aiming to withdraw financial instruments from public trading, if entered into with the intention of improperly influencing the market price of these instruments, constitutes a criminal offense under the Insider Penal Act. Similarly, other measures taken with a view to improperly influencing the market price constitute a criminal offense. Market manipulation may also constitute fraud or swindlery under Swedish law. However, as previously described, trading data is recorded as to all securities and derivative transactions relating to listed securities and data related to trading activity is subject to supervisory review by the Swedish Financial Supervisory Authority. This provides an enforcement mechanism for reducing market manipulation. The Swedish Financial Supervisory Authority may cause the operating license of a bank or broker to be revoked if the bank or broker has engaged in improper conduct. Improper conduct could include behavior constituting market manipulation.

Registration Process

        The shares of ABB are registered in the account-based security system of VPC, and the register of shareholders of ABB is kept by VPC. VPC is an authorized central securities depository under the Swedish Act on Registration of Financial Instruments (lag 1998:1479 om kontoföring av finansiella instrument) and carries out, among other things, the duties of registrar for Swedish companies listed on the Stockholm Exchange.

        The VPC keeps a paperless share registration system. Share certificates in ABB are not issued. Title to shares is ensured only through registration with VPC.

        In accordance with Swedish law and practice and the regulations of VPC:

•

Only one person is normally registered as the holder of a share. Joint holders are not usually recorded on the VPC register. Shareholders may be entered on the register in the name of the beneficial owner or in the name of the person designated as nominee for the beneficial owner. In the latter case, a note is made in the register to the effect that the nominee is holding the share(s) in such capacity. There is also a separate register maintained by VPC for the recording of persons who have other interests in respect of shares, such as the interest of a pledgee.



•

Where the registered holder is a nominee, the nominee receives, for the account of the beneficial owner, dividends and, on capital increases, shares as well as rights in respect of shares such as in relation to a rights issue or a bonus issue. Dividends are remitted in a single payment to the nominee. That nominee is then responsible for the distribution of these dividends to the beneficial owner. A similar procedure is used for share issues.



•

Specific authority to act as a nominee must be given by VPC.



•

A nominee is required to file a report with VPC with regard to any holding on behalf of a single beneficial owner in excess of 500 shares in one company. A list containing this information must be open to public inspection. Such a list must reveal the name of the beneficial owner but need not reveal the name of the nominee in whose name the shares have been registered. The beneficial owner would need to reveal its name if it wishes to vote at a shareholders' meeting, since a holder must re-register nominee-held shares in the name of such beneficial holder no later than ten calendar days prior to the shareholders' meeting (the record day).



•

The rights attaching to shares that are eligible for dividends, rights issues or bonus issues, accrue to those persons whose names are recorded in the register of shareholders on a particular day (the record day). Dividends are paid to an account designated by the shareholder or, in the absence of an account, sent to the shareholder at the address registered with VPC.

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Item 10. Additional Information

DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF INCORPORATION

        This section summarizes the material provisions of ABB Ltd's articles of incorporation and the Swiss Federal Code of Obligations relating to the shares of ABB Ltd. The description is only a summary and is qualified in its entirety by ABB Ltd's articles of incorporation, a copy of which has been filed as Exhibit 1.1 to this annual report, and the commercial registry of the Canton of Zurich (Switzerland) and by Swiss statutory law.

Registration and Business Purpose

        ABB Ltd was registered as a corporation (Aktiengesellschaft) in the commercial register of the Canton of Zurich (Switzerland) on March 5, 1999, under the name of "New ABB Ltd" and its name was subsequently changed to "ABB Ltd." Its commercial registry number is CH-020.3.021.615-2.

        ABB Ltd's purpose, as set forth in Article 2 of its articles of incorporation, is to hold interests in business enterprises, particularly in enterprises active in the area of industry, trade and services. It may acquire, encumber, exploit or sell real estate and intellectual property rights in Switzerland and abroad and may also finance other companies. It may engage in all types of transactions and may take all measures that appear appropriate to promote, or that are related to, its purpose.

Our Shares

        ABB Ltd's shares are registered shares (Namenaktien) with a par value of CHF 2.50 each. The shares are fully paid and non-assessable. The shares rank pari passu in all respects with each other, including in respect of entitlements to dividends, to a share of the liquidation proceeds in the case of a liquidation of ABB Ltd, and to preemptive rights.

        Each share carries one vote in ABB Ltd's general shareholders' meeting. Voting rights may be exercised only after a shareholder has been recorded in ABB Ltd's share register (Aktienbuch) as a shareholder with voting rights, or with VPC in Sweden, which maintains a subregister of ABB Ltd's share register. Registration with voting rights is subject to the restrictions described in "—Transfer of Shares."

        The shares are not issued in certificated form and are held in collective custody at SIS SegaInterSettle AG. Shareholders do not have the right to request printing and delivery of share certificates (aufgehobener Titeldruck), but may at any time request ABB Ltd to issue a confirmation of the number of registered shares held.

The Share Split

        In 2001, the Swiss Federal Code of Obligations was amended to enable Swiss corporations to reduce the former minimal par value of shares from CHF 10 to CHF 0.01. At ABB Ltd's annual general meeting held on March 20, 2001, its shareholders approved a share split in a four-for-one ratio to reduce the par value of the shares from CHF 10 each to CHF 2.50 each. The share split was registered in the Commercial Register effective May 11, 2001.

The Ordinary Capital Increase

        On November 20, 2003, the extraordinary general meeting of shareholders resolved to increase our share capital by CHF 2,100,016,505 by issuing 840,006,602 new shares. Shareholders who did not wish to exercise their rights to subscribe for new shares could sell them. 99.4% of the rights were exercised. The shares related to unexercised rights were sold in the market and the proceeds

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were received by ABB. ABB's new share capital of CHF 5,100,040,085, divided into 2,040,016,034 shares, was registered in the commercial register on December 9, 2003.

The Creation of the Asbestos Shares

        Subsequent to the ordinary capital increase, in December 2003, ABB issued 30,298,913 shares out of its authorized capital for purposes of fulfilling ABB's obligations under the pre-packaged plan of reorganization of Combustion Engineering. In accordance with its then-current articles of incorporation, the pre-emptive rights of shareholders were excluded and allocated to an ABB subsidiary, which has subscribed for these shares and holds them until they will be contributed to the Asbestos PI Trust, once the pre-packaged plan of reorganization of Combustion Engineering has become effective. The new share capital of CHF 5,175,787,367.50 divided into 2,070,314,947 shares was registered in the commercial register on December 15, 2003.

Capital Structure

Issued Shares

        ABB Ltd was incorporated with an initial share capital of CHF 100,000 divided into 10,000 fully paid registered shares with a par value of CHF 10 each. With effect as of June 28, 1999, ABB Ltd's share capital was increased to CHF 3,000,023,580 by the issuance of additional 299,992,358 registered shares with a par value of CHF 10 each. In accordance with the requirements of the Swiss Federal Code of Obligations, the following information was recorded in the commercial register in connection with the capital increase:

        (i)    that 145,807,329 registered shares with par value of CHF 10 each were issued against contribution in kind of 5,453,500 registered shares with a par value of CHF 10 each and 7,904,200 bearer shares with a par value of CHF 50 each of ABB Participation AG (formerly ABB AG) in Baden, Switzerland, as per a contribution agreement of June 26, 1999;

        (ii)    that 142,830,293 registered shares with par value of CHF 10 each were issued against contribution in kind of 651,818,826 A shares and 241,261,761 B shares of ABB Participation AB (formerly ABB AB) in Västerås, Sweden, as per a contribution agreement of June 26, 1999;

        (iii)    that pursuant to an acquisition agreement of June 26, 1999, ABB Ltd acquired 16,383,744 A shares and 28,453,689 B shares of ABB Participation AB (formerly ABB AB) in Västerås, Sweden, for the price of CHF 71,708,860; and

        (iv)    that ABB Ltd intended to acquire, after the capital increase, all shares of ABB Participation AG (formerly ABB AG) in Baden, Switzerland, which were not tendered to ABB Ltd in connection with the exchange offer of March 26, 1999 from the public shareholders or pursuant to the cancellation procedures in accordance with Article 33 of the Swiss Stock Exchange Act. See "Item 4. Information on the Company—Introduction—History of the ABB Group."

        With effect as of May 11, 2001, by way of a share split (see "—The Share Split") each registered share with par value of CHF 10 was split into four registered shares with par value of CHF 2.50 each. The share split had no effect on the total amount of ABB Ltd's share capital.

        With effect as of December 9, 2003, ABB's share capital was increased to CHF 5,100,040,085 (see "—The Ordinary Capital Increase").

        With effect as of December 15, 2003, ABB's share capital was increased to CHF 5,175,787,367.50 (see "—The Creation of the Asbestos Shares").

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        The following table sets forth the changes in the issued share capital of ABB Ltd since ABB Ltd's incorporation in 1999:

Year	Transaction	Change of no. in shares	Change in share capital	Total no. of shares	Total share capital	Nominal value
			(CHF)		(CHF)	(CHF)
1999	Capital increase	299,992,358	2,999,923,580	300,002,358	3,000,023,580	10.00
2001	Share split	900,007,074	—	1,200,009,432	3,000,023,580	2.50
2003	Capital increase	840,006,602	2,100,016,505	2,040,016,034	5,100,040,085	2.50
2003	Capital increase (Asbestos shares)	30,298,913	75,747,282.50	2,070,314,947	5,175,787,367.50	2.50

        The current issued share capital of ABB Ltd (including treasury shares), as registered in the commercial register, is CHF 5,175,787,367.50 divided into 2,070,314,947 fully paid registered shares, with a par value of CHF 2.50 per share.

Contingent Capital

        ABB Ltd's share capital may be increased in an amount not to exceed CHF 550,000,000 through the issuance of up to 220,000,000 fully paid shares with a par value of CHF 2.50 per Share (a) up to the amount of CHF 525,000,000 (equivalent to 210,000,000 shares) through the exercise of conversion rights and/or warrants granted in connection with the issuance on national or international capital markets of newly or already issued bonds or other financial market instruments by ABB Ltd or one of its group companies and (b) up to the amount of CHF 25,000,000 (equivalent to 10,000,000 shares) through the exercise of warrant rights granted to its shareholders by ABB Ltd or by one of its subsidiaries. ABB Ltd's board of directors may grant warrant rights not taken up by shareholders for other purposes in the interest of ABB Ltd.

        The preemptive rights of the shareholders are excluded in connection with the issuance of convertible or warrant-bearing bonds or other financial market instruments or the grant of warrant rights. The then-current owners of conversion rights and/or warrants will be entitled to subscribe for the new shares. The conditions of the conversion rights and/or warrants will be determined by the board of directors of ABB Ltd.

        The acquisition of shares through the exercise of conversion rights and /or warrants and each subsequent transfer of the shares will be subject to the transfer restrictions of ABB Ltd's articles of incorporation. See "—Transfer of Shares."

        In connection with the issuance of convertible or warrant-bearing bonds or other financial market instruments, the board of directors is authorized to restrict or deny the advance subscription rights of shareholders if such bonds or other financial market instruments are for the purpose of financing or refinancing the acquisition of an enterprise, parts of an enterprise, participations or new investments or an issuance on national or international capital markets. If the board of directors denies advance subscription rights, the convertible or warrant-bearing bonds or other financial market instruments will be issued at the relevant market conditions and the new shares will be issued pursuant to the relevant market conditions taking into account the share price and/or other comparable instruments having a market price. Conversion rights may be exercised during a maximum ten-year period, and warrants may be exercised during a maximum seven-year period, in each case from the date of the respective issuance. The advance subscription rights of the shareholders may be granted indirectly.

        ABB Ltd's share capital may be increased by an amount not to exceed CHF 200,000,000 through the issuance of up to 80,000,000 fully paid new shares to employees of ABB Ltd and its group companies. The preemptive and advance subscription rights of ABB Ltd's shareholders are

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excluded. The shares or rights to subscribe for shares will be issued to employees pursuant to one or more regulations to be issued by the board of directors, taking into account performance, functions, levels of responsibility and profitability criteria. ABB Ltd may issue shares or subscription rights to employees at a price lower than that quoted on the stock exchange. The acquisition of shares within the context of employee share ownership and each subsequent transfer of the shares will be subject to the transfer restrictions of ABB Ltd's articles of incorporation. See "—Transfer of Shares."

Authorized Capital

        ABB Ltd's board of directors is authorized to increase ABB Ltd's share capital in an amount not to exceed CHF 174,252,717.50 through the issuance of up to 69,701,087 paid registered shares with a par value of CHF 2.50 per share by not later than May 19, 2005. Increases in partial amounts shall be permitted.

        The subscription and acquisition of the new shares, as well as each subsequent transfer of the shares, will be subject to the transfer restrictions of ABB Ltd's articles of incorporation. See "—Transfer of Shares."

        The board of directors will determine the issue price, the type of payment, the date of issue of new shares, the conditions for the exercise of pre-emptive rights, and the beginning date for any dividend entitlement. In this regard, the board of directors may issue new shares by means of a firm underwriting through a banking institution, a syndicate or another third party and a subsequent offer of these shares to current shareholders. ABB Ltd's board of directors may permit pre-emptive rights that have not been exercised to expire or may place these rights and/or shares as to which pre-emptive rights have been granted but not exercised at market conditions or use them for other purposes in ABB Ltd's interest.

        The board of directors is further authorized to restrict or deny the pre-emptive rights of the shareholders and to allocate such rights to third parties if the shares are to be used (a) for the acquisition of an enterprise, parts of an enterprise, participations or for new investments, or, in case of a share placement, for the financing or refinancing of such transactions, (b) for the purpose of broadening ABB Ltd's shareholder constituency in connection with a listing of shares on domestic or foreign stock exchanges or (c) for employee participation plans

Transfer of Shares

        The transfer of shares is effected by corresponding entry in the books of a bank or depository institution following an assignment in writing by the selling shareholder and notification of such assignment to ABB Ltd by the bank or depository institution. The transfer of shares also requires that the purchaser file a share registration form in order to be registered in ABB Ltd's share register (Aktienbuch) as a shareholder with voting rights. Failing such registration, the purchaser may not be able to participate in or vote at shareholders' meetings, but will be entitled to dividends and liquidation proceeds. Shares and associated pecuniary rights may only be pledged to the depository institution that administers the book entries of those shares for the account of the shareholder.

        A purchaser of shares will be recorded in ABB Ltd's share register with voting rights upon disclosure of its name and address. However, ABB Ltd may decline a registration with voting rights if the shareholder does not declare that it has acquired the shares in its own name and for its own account. If the shareholder refuses to make such declaration, it will be registered as a shareholder without voting rights. If persons fail to expressly declare in their registration application that they hold the shares for their own accounts ("nominees"), the board of directors may still enter such persons in the share register with the right to vote, provided that the nominee has entered into an

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agreement with the board of directors concerning his status, and further provided the nominee is subject to recognized bank or financial market supervision.

        After having given the registered shareholder or nominee the right to be heard, the board of directors may cancel registrations in the share register retroactive to the date of registration if such registrations were made on the basis of incorrect information. The relevant shareholder or nominee will be informed immediately as to the cancellation. The board of directors will regulate the details and issue the instructions necessary for compliance with the preceding regulations. In special cases, it may grant exemptions from the rule concerning nominees.

        Acquirors of registered shares who have chosen to have their shares registered in the share register with VPC do not have to present any written assignment from the selling shareholder nor may they be requested to file a share registration form or declare that they have acquired the shares in their own name and for their own account in order to be registered as a shareholder with voting rights. However, in order to be entitled to vote at a shareholders' meeting those acquirors need to be entered in the VPC share register in their own name no later than ten calendar days prior to the shareholders' meeting. Uncertificated shares registered with VPC may be pledged in accordance with Swedish law.

Shareholders' Meetings

        Under Swiss law, the annual general meeting of shareholders must be held within six months after the end of ABB Ltd's fiscal year. Annual general meetings of shareholders are convened by the board of directors, liquidators or representatives of bondholders or, if necessary, by the statutory auditors. The board of directors is further required to convene an extraordinary general meeting of shareholders if so resolved by the shareholders in a general meeting of shareholders or if so requested by one or more shareholders holding in aggregate at least 10% of ABB Ltd's nominal share capital. A general meeting of shareholders is convened by publishing a notice in the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt) at least 20 days prior to the meeting date. Holders of VPC-registered shares are able to attend shareholders' meetings in respect of such shares. Notices of shareholders' meetings are published in at least three national Swedish daily newspapers, as well as on ABB Ltd's Internet website. Such notices contain information as to procedures to be followed by shareholders in order to participate and exercise voting rights at the shareholders' meetings.

        One or more shareholders whose combined holdings represent an aggregate par value of at least CHF 1,000,000 may request in writing 40 calendar days prior to a general meeting of shareholders that specific items and proposals be included on the agenda and voted on at the next general meeting of shareholders.

        The following powers are vested exclusively in the general meeting of the shareholders:

•

adoption and amendment of the articles of incorporation;



•

election of members of the board of directors, the auditors, the group auditors and the special auditors referred to below;



•

approval of the annual report and the consolidated financial statements;



•

approval of the annual financial statements and decision on the allocation of profits shown on the balance sheet, in particular with regard to dividends;



•

granting discharge to the members of the board of directors and the persons entrusted with management; and

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•

passing resolutions as to all matters reserved to the authority of the shareholders' meeting by law or under the articles of incorporation or that are submitted to the shareholders' meeting by the board of directors to the extent permitted by law.

        There is no provision in ABB Ltd's articles of incorporation requiring a quorum for the holding of shareholders' meetings.

        Resolutions and elections usually require the approval of an "absolute majority" of the shares represented at a shareholders' meeting (i.e., a majority of the shares represented at the shareholders' meeting with abstentions having the effect of votes against the resolution). If the first ballot fails to result in an election and more than one candidate is standing for election, the presiding officer will order a second ballot in which a relative majority shall be decisive.

        A resolution passed with a qualified majority of at least two-thirds of the shares represented at a shareholders' meeting is required for:

•

a modification of the purpose of ABB Ltd;



•

the creation of shares with increased voting powers;



•

restrictions on the transfer of registered shares and the removal of those restrictions;



•

restrictions on the exercise of the right to vote and the removal of those restrictions;



•

an authorized or conditional increase in share capital;



•

an increase in share capital through the conversion of capital surplus, through an in-kind contribution or in exchange for an acquisition of property, and the grant of special benefits;



•

the restriction or denial of preemptive rights;



•

a transfer of ABB Ltd's place of incorporation; and



•

ABB Ltd's dissolution without liquidation.

        In addition, the introduction or abolition of any provision in the articles of incorporation providing for a qualified majority must be resolved in accordance with such qualified majority voting requirements.

        At shareholders' meetings, shareholders can be represented by proxy, but only by their legal representative, another shareholder with the right to vote, a corporate body (Organvertreter), an independent proxy (unabhängiger Stimmrechtsvertreter) or a depository institution (Depotvertreter). All shares held by one shareholder may be represented by only one representative. Votes are taken on a show of hands unless a secret ballot is required by the general meeting of shareholders or the presiding officer. The presiding officer may arrange for resolutions and elections to be carried out by electronic means. As a result, resolutions and elections carried out by electronic means will be deemed to have the same effect as secret ballots. The presiding officer may at any time order that a resolution or election decided by a show of hands be repeated through a secret ballot if, in his view, the results of the vote are in doubt. In this case, the preceding decision by a show of hands shall be deemed to have not occurred.

        Only shareholders registered in ABB Ltd's share register with the right to vote are entitled to participate at shareholders' meetings. See "—Transfer of Shares." For practical reasons, shareholders must be registered in the share register with the right to vote no later than ten calendar days prior to a shareholders' meeting in order to be entitled to participate and vote at such shareholders' meeting.

        Holders of VPC-registered shares are provided with financial and other information on ABB Ltd in the Swedish language in accordance with regulatory requirements and market practice. For

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shares that are registered in the VPC system in the name of a nominee, such information is to be provided by the nominee.

Net Profits and Dividends

        Swiss law requires that ABB Ltd retain at least 5% of its annual net profits as general reserves for so long as these reserves amount to less than 20% of ABB Ltd's nominal share capital. Any net profits remaining in excess of those reserves are at the disposal of the shareholders' meeting.

        Under Swiss law, ABB Ltd may pay dividends only if it has sufficient distributable profits from previous business years, or if its reserves are sufficient to allow distribution of a dividend. In either event, dividends may be paid out only after approval by the shareholders' meeting. The board of directors may propose that a dividend be paid out, but cannot itself set the dividend. The auditors must confirm that the dividend proposal of the board of directors conforms with statutory law. In practice, the shareholders' meeting usually approves the dividend proposal of the board of directors.

        Dividends are usually due and payable after the shareholders' resolution relating to the allocation of profits has been passed by the shareholders' meeting. Under Swiss law, the statute of limitations in respect of dividend payments is five years. Dividends not collected within five years after their due date accrue to ABB Ltd and will be allocated to ABB Ltd's general reserves.

        Payment of dividends on VPC-registered shares is administered by VPC and paid out to the holder that is registered with VPC on the record date. Through the dividend access facility, shareholders with tax residence in Sweden will be entitled to receive, through the VPC system, a dividend in Swedish kronor equivalent to the dividend paid in Swiss francs without deduction of Swiss withholding tax. For further information, see "—Taxation."

Preemptive Rights

        Shareholders of a Swiss corporation have certain preemptive rights to subscribe for new shares issued in connection with capital increases in proportion to the nominal amount of their shares held. A resolution adopted at a shareholders' meeting with a supermajority of two-thirds of the shares represented may, however, repeal, limit or suspend (or authorize the board of directors to repeal, limit or suspend) preemptive rights for cause. Cause includes an acquisition of a business or a part thereof, an acquisition of a participation in a company or the grant of shares to employees. However, based on Article 4bis para. 1 and 4 and Article 4ter para. 4 of the articles of incorporation of ABB Ltd, preemptive rights of the shareholders are excluded in connection with the issuance of convertible or warrant-bearing bonds or other financial market instruments or the grant of warrant rights or may be restricted or denied by the board of directors of ABB Ltd under certain circumstances. See "—Capital Structure—Authorized Capital."

Advance Subscription Rights

        Shareholders of a Swiss corporation may have an advance subscription right with respect to bonds and other instruments issued in connection with options or conversion rights for shares if such option or conversion rights are based on the corporation's conditional capital. However, the shareholders' meeting can, with a supermajority of two-thirds of the shares represented at the meeting, exclude or restrict (or authorize the board of directors to exclude or restrict) such advance subscription rights for cause. See "—Capital Structure—Contingent Capital."

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Borrowing Power

        Neither Swiss law nor ABB Ltd's articles of incorporation restrict in any way ABB Ltd's power to borrow and raise funds. The decision to borrow funds is taken by or under the direction of the board of directors or the executive committee, and no shareholders' resolution is required. The articles of incorporation of ABB Ltd do not contain provisions concerning borrowing powers exercisable by its directors or how such borrowings could be varied.

Repurchase of Shares

        Swiss law limits a corporation's ability to repurchase or hold its own shares. ABB Ltd and its subsidiaries may only repurchase shares if ABB Ltd has sufficient freely distributable reserves to pay the purchase price, and if the aggregate par value of such shares does not exceed 10% of ABB Ltd's nominal share capital. Furthermore, ABB Ltd must create a special reserve on its balance sheet in the amount of the purchase price of the acquired shares. Such shares held by ABB Ltd or its subsidiaries do not carry any rights to vote at shareholders' meetings, but are entitled to the economic benefits applicable to the shares generally and are considered to be "outstanding" under Swiss law.

        At the annual general meeting of ABB Ltd held on March 20, 2001, the shareholders approved a share repurchase in the nominal amount of CHF 60,000,000, corresponding to 6,000,000 shares (24,000,000 shares after implementation of the share split), which at such time represented approximately 2% of ABB Ltd's nominal share capital. This share repurchase took place exclusively on the SWX Swiss Exchange and was completed in May 2001. At the annual general meeting of ABB Ltd held on March 12, 2002, the shareholders took notice that such shares would not be cancelled and would become treasury shares. ABB Ltd sold 80 million treasury shares in the first quarter of 2003. In connection with the capital increase in December 2003, ABB Ltd or its subsidiaries exercised its rights in respect of the remaining 6,830,312 treasury shares and received 4,781,217 shares at the offer price of CHF 4 per share. In December 2003, ABB Ltd issued to a subsidiary 30,298,913 shares for use with the pre-packaged plan of reorganization of its U.S. subsidiary, Combustion Engineering Inc. These shares will be held as treasury shares until used in connection with the pre-packaged plan.

        ABB Ltd may make additional repurchases of shares for treasury from time to time in the future. Treasury shares are available for issuance to satisfy obligations under the management incentive plan and for other corporate purposes. As of December 31, 2003, ABB Ltd held 41,910,442 shares, directly and indirectly through subsidiaries.

Notices

        Written communication by ABB Ltd to its shareholders will be sent by ordinary mail to the last address of the shareholder or authorized recipient entered in the share register. To the extent that personal notification is not mandated by law, all communications to the shareholders are validly made by publication in the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt).

        Notices required under the Listing Rules of the SWX Swiss Exchange will be published in two Swiss newspapers in German and French. ABB Ltd or the SWX Swiss Exchange may also disseminate the relevant information on the online exchange information systems. Notices required under the listing rules of the Stockholm Exchange will be published in three national daily Swedish newspapers, as well as on ABB Ltd's website.

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Duration, Liquidation and Merger

        The duration of ABB Ltd as a legal entity is unlimited. It may be dissolved at any time by a shareholders' resolution which must be approved by (1) an absolute majority of the shares represented at the general meeting of shareholders in the event it is to be dissolved by way of liquidation or (2) a supermajority of two-thirds of the shares represented at the general meeting of shareholders in other events (e.g., in a merger where it is not the surviving entity). Dissolution by court order is possible if it becomes bankrupt or if shareholders holding at least 10% of the share capital can establish cause for dissolution.

        Under Swiss law, any surplus arising out of a liquidation of a corporation (after the settlement of all claims of all creditors) is distributed to the shareholders in proportion to the paid-up par value of shares held but this surplus is subject to Swiss withholding tax of 35% (see "—Taxation").

Disclosure of Major Shareholders

        Under the Swiss Stock Exchange Act, shareholders and groups of shareholders acting in concert who directly or indirectly acquire or sell shares of a listed Swiss corporation and thereby reach, exceed or fall below the thresholds of 5%, 10%, 20%, 33¹/3%, 50% or 66²/3% of the voting rights of the corporation must notify the corporation and the exchange(s) in Switzerland on which such shares are listed of such holdings in writing within four trading days, whether or not the voting rights can be exercised. Following receipt of such a notification, the corporation must inform the public within two trading days.

        An additional disclosure requirement exists under the Swiss Federal Code of Obligations, according to which ABB Ltd must disclose individual shareholders and groups of shareholders acting in concert and their shareholdings if they hold more than 5% of all voting rights and ABB Ltd knows or has reason to know of such major shareholders. Such disclosures must be made once a year in the notes to the financial statements as published in its annual report. For a list of our major shareholders, see "Item 7. Major Shareholders and Related Party Transactions—Major Shareholders."

Mandatory Offering Rules

        Under the Swiss Stock Exchange Act, shareholders and groups of shareholders acting in concert who acquire more than 33¹/3% of the voting rights (whether exercisable or not) of a listed Swiss company have to submit a takeover bid to all remaining shareholders unless the articles of incorporation of the company provide for an alteration of this obligation. ABB Ltd's articles of incorporation do not provide for any alterations of the bidder's obligations under the Swiss Stock Exchange Act. The mandatory offer obligation may be waived under certain circumstances, for example if another shareholder owns a higher percentage of voting rights than the acquiror. A waiver from the mandatory bid rules may be granted by the Swiss Takeover Board or the Swiss Federal Banking Commission. If no waiver is granted, the mandatory takeover bid must be made pursuant to the procedural rules set forth in the Swiss Stock Exchange Act and the implementing ordinances.

        The recommendation concerning public offers for the acquisition of shares by the Swedish Industry and Commerce Stock Exchange Committee in 2003 (the "NBK Recommendation"), which through incorporation by reference is part of ABB Ltd's Listing Agreement of the Stockholm Exchange, contains rules on mandatory offers. In principle, if a shareholder that owns shares representing less than 40% of the votes in the target company acquires additional shares in the target company so that such shareholders' total shareholding represents 40% or more of the votes, the NBK Recommendation stipulates that a public offer (a mandatory takeover bid) must be made to acquire all the remaining shares issued by the target company. A waiver from the mandatory bid

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rules may, under limited circumstances, be granted by the Swedish Securities Council (Sv. Aktiemarknadsnämnden). If no waiver is granted, the mandatory takeover bid must be made pursuant to the procedural rules set forth in the NBK Recommendation.

Cancellation of Remaining Equity Securities

        Under Swiss law, any offeror who has made a tender offer for the shares of a Swiss target company and who, as a result of such offer, holds more than 98% of the voting rights of the target company, may petition the court to cancel the remaining equity securities. The corresponding petition must be filed against the target company within three months after the lapse of the exchange offer period. The remaining shareholders may join in the proceedings. If the court orders cancellation of the remaining equity securities, the target company will reissue the equity securities and deliver such securities to the offeror against performance of the offer for the benefit of the holders of the cancelled equity securities.

Directors and Officers

        For further information regarding the material provisions of ABB Ltd's articles of incorporation and the Swiss Federal Code of Obligations regarding directors and officers, see "Item 6. Directors, Senior Management and Employees—Corporate Governance—Duties of Directors and Officers."

Auditors

        The auditors are subject to confirmation by the shareholders at the annual general meeting on an annual basis. Ernst & Young Ltd, with its registered head office at Bleicherweg 21, CH-8002 Zurich, Switzerland, has been the independent auditor of ABB Ltd and the ABB Group for the years ended December 31, 2001, 2002 and 2003.

        OBT AG, with its registered office at Hardturmstrasse 120, CH-8005 Zurich, Switzerland, has been the special auditor to issue special review reports required in connection with capital increases (if any) for the years ended December 31, 2001, 2002 and 2003. The special auditors are subject to confirmation by the shareholders at the annual general meeting on an annual basis.

        Ernst & Young Ltd assumed the existing auditing mandate as auditor of the ABB Group in 1994. The head auditor responsible for the mandate, Mr. Charles Barone, began serving in this function in May 2003.

        Ernst & Young Ltd periodically reads the approved minutes of meetings of our board of directors. Ernst & Young Ltd is present at the finance and audit committee meetings where audit planning is discussed and the results of our internal audit department's audit procedures are presented. Ernst & Young Ltd also periodically meets with the finance and audit committee to discuss the results of its audit procedures.

        See "Item 16C. Principal Accountant Fees and Services" for information regarding the fees paid to Ernst & Young Ltd.

MATERIAL CONTRACTS

        The following descriptions of the material provisions of the referenced agreements do not purport to be complete and are subject to, and qualified in their entirety by reference to, the agreements which have been filed as exhibits to this annual report.

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Revolving Credit Facility

        On November 17, 2003, we entered into a $1 billion credit facility. For a description of the facility, see "Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Credit Facilities" and Note 15 to the Consolidated Financial Statements. See also Exhibit 4.3 to this annual report.

Sale Agreement for Structured Finance Business

        Pursuant to an agreement dated September 4, 2002 between ABB Financial Services B.V., General Electric Capital Corporation ("GE Capital") and ABB Ltd, as amended and restated by an agreement dated November 29, 2002, we sold most of our structured finance business, including our project finance, export and trade finance and leasing and similar businesses. The cash consideration for the sale was approximately $2,000 million.

        The business was sold with the benefit of customary warranties, covenants and indemnities in addition to those described herein. We agreed to indemnify GE Capital with respect to certain intra-group guarantees granted by ABB entities for the benefit of certain businesses sold to GE Capital, and this indemnity is supported by letters of credit provided by one or more banks. As of December 31, 2003, the aggregate outstanding value of these letters of credit totaled approximately $128 million.

        With respect to certain specified receivables (with a value of approximately $17 million as of December 31, 2003) sold in the transaction, GE Capital agreed to make payments to us if the amount recovered by GE Capital in respect of those receivables exceeded the recovery amount projected by GE Capital. In addition, certain other designated assets were acquired by GE Capital with the understanding that third-party purchasers would be sought for such assets. We have repurchased certain of these assets for an aggregate consideration of approximately $28 million. Letters of credit supporting our obligations to repurchase certain assets have expired without any amounts thereunder having been claimed.

        See Exhibits 4.4 and 4.5 to this annual report and Note 3 to our Consolidated Financial Statements.

ALSTOM Settlement

        Pursuant to a Share Purchase and Settlement Agreement, dated as of March 31, 2000, among ABB Ltd, ALSTOM and ABB ALSTOM POWER, as amended by the Amendment to Share Purchase and Settlement Agreement, dated as of May 11, 2000 (which we refer to collectively as the Settlement Agreement), ALSTOM purchased our 50% interest in the joint venture ABB ALSTOM POWER for a cash payment of €1.25 billion. The Settlement Agreement provided for the termination of various joint venture agreements, the execution of various releases, the settlement of certain disputed items in relation to the joint venture, the unwinding of various financial arrangements between ABB ALSTOM POWER and the ABB Group, the prospective transfer to the joint venture of various assets and liabilities required to have been transferred to the joint venture under the original joint venture agreements, the transfer to us of certain subsidiaries of the joint venture, various payments among members of the ALSTOM group and the ABB Group in connection with the foregoing transactions (separate from the purchase price mentioned above), indemnification and the execution of various ancillary documents. The transaction was consummated on May 11, 2000. See Exhibit 4.1 to this annual report.

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Sale Agreement for Nuclear Business

        On December 21, 1999, our subsidiary, ABB Handels-Und Verwaltungs AG, entered into an agreement to sell our nuclear business to BNFL for $485 million. Under the agreement, we have undertaken not to compete with the divested business during a seven-year period ending April 28, 2007. We have agreed to indemnify BNFL against, among other things, certain environmental and other liabilities arising from specific sites operated by the nuclear business and certain tax liabilities of the nuclear business. These potential liabilities are described in "Item 3. Key Information—Risk Factors" and "Item 5. Operating and Financial Review and Prospects—Contingencies and Retained Liabilities—Environmental." The transaction was consummated on April 28, 2000. See Exhibit 4.2 to this annual report.

Sale Agreement for Part of the Oil, Gas and Petrochemicals Business

        On January 16, 2004 we announced that our subsidiary, ABB Handels-Und Verwaltungs AG, had entered into an agreement to sell the upstream part of our Oil, Gas and Petrochemicals business to Laradew Limited, a new company formed by a private equity consortium consisting of Candover Partners, JP Morgan Partners and 3i Group. The sale includes our U.S.-based Vetco Gray unit and our Norway-based Offshore Systems business. The initial purchase consideration for the business (including the consideration for our separate agreement not to compete with the business for a period of three years) is $925 million. We may receive additional consideration of up to $50 million based on the financial performance of the business in 2004. The sale is expected to close by mid-year 2004, pending receipt of customary regulatory approvals and satisfaction of closing conditions, including the satisfactory completion and disposition of compliance matters under review. For further information on these compliance matters, see "Item 8. Financial Information—Legal Proceedings." As part of the sale we have agreed, among other things, to terminate certain securitization programs and operational leases, to indemnify the purchaser against certain pre-existing environmental and tax liabilities, to reimburse the purchaser against financial losses that may be incurred on certain ongoing projects of the business, to reimburse the purchaser for certain unfunded benefit liabilities and to indemnify the purchaser from liabilities that might arise out of matters revealed by the compliance review. See Exhibit 4.6 to this annual report.

Sale Agreement for the Sale of the Global Reinsurance and Insurance Businesses

        On December 8, 2003, our subsidiary ABB Holding AG (which in December 2003 was merged into ABB Asea Brown Boveri Ltd) entered into an agreement to sell the global reinsurance and insurance businesses which we have operated through the Sirius group of companies to a subsidiary of White Mountains Insurance Group ("WMI") for an initial purchase consideration of SEK 3.22 billion (approximately $425 million). The transaction is expected to close in the second quarter of 2004 and is subject to regulatory approvals and other customary closing conditions. As part of the sale we have undertaken to indemnify WMI, among other things, for potential losses in excess of reserves established in the 2003 financial accounts relating to the future final settlement of certain disputes as well as potential losses arising from certain guarantees issued by the Sirius business. See Exhibit 4.7 to this annual report.

EXCHANGE CONTROLS

        Other than in connection with government sanctions imposed on Yugoslavia, Myanmar, Zimbabwe and persons and organizations with connection to Osama bin Laden, the "al Qaeda" group or the Taliban, there are currently no laws, decrees or regulations in Switzerland that restrict the export or import of capital, including, but not limited to, Swiss foreign exchange controls on payment of dividends, interest or liquidation proceeds, if any, to non-Swiss resident holders of

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shares. In addition, there are no limitations imposed by Swiss law or our articles of incorporation on the rights of non-Swiss residents or non-Swiss citizens to hold or vote our shares.

TAXATION

        The following is a summary of the material Swiss and United States federal income tax consequences of the purchase, ownership and disposition of our shares or ADSs.

Swiss Taxation

Withholding Tax on Dividends and Distributions

        Dividends paid and similar cash or in-kind distributions that we make to a holder of shares or ADSs (including dividends on liquidation proceeds and stock dividends) are subject to a Swiss federal withholding tax at a rate of 35%. We must withhold the tax from the gross distribution and pay it to the Swiss Federal Tax Administration.

Obtaining a Refund of Swiss Withholding Tax for U.S. Residents

        The Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income, which entered into force on December 19, 1997 and which we will refer to in the following discussion as the Treaty, allows U.S. resident individuals or U.S. corporations to seek a refund of the Swiss withholding tax paid on dividends in respect of our shares or ADSs. U.S. resident individuals and U.S. corporations holding less than 10% of the voting rights in respect of our shares or ADSs are entitled to seek a refund of withholding tax to the extent the tax withheld exceeds 15% of the gross dividend. U.S. corporations holding 10% or more of the voting rights of our shares or ADSs are entitled to seek a refund of withholding tax to the extent the tax withheld exceeds 5% of the gross dividend.

        Claims for refunds must be filed with the Swiss Federal Tax Administration, Eigerstrasse 65, 3003 Bern, Switzerland. The form used for obtaining a refund is Swiss Tax Form 82 (82C for companies; 82E for other entities; 82I for individuals). This form may be obtained from any Swiss Consulate General in the United States or from the Swiss Federal Tax Administration at the address above. The form must be filled out in triplicate with each copy duly completed and signed before a notary public in the United States. The form must be accompanied by evidence of the deduction of withholding tax withheld at the source.

Stamp Duties upon Transfer of Securities

        The sale of shares or ADSs, whether by Swiss resident or non-resident holders, may be subject to a Swiss securities transfer stamp duty of up to 0.15% calculated on the sale proceeds if it occurs through or with a Swiss bank or other Swiss securities dealer as defined in the Swiss Federal Stamp Tax Act. In addition to the stamp duty, the sale of shares or ADSs by or through a member of the SWX Swiss Exchange may be subject to a stock exchange levy.

United States Taxes

        The following is a summary of the material U.S. federal income tax consequences of the ownership of shares or ADSs. This summary does not purport to address all of the tax considerations that may be relevant to a decision to purchase, own or dispose of shares or ADSs. This summary assumes that holders are initial purchasers of shares or ADSs and will hold shares or ADSs as capital assets. This summary does not address tax considerations applicable to holders that may be subject to special tax rules, such as dealers or traders in securities or currencies, partnerships owning shares or ADSs, tax-exempt entities, banks, insurance companies, holders that

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own (or are deemed to own) at least 10% or more (by voting power or value) of the stock of ABB, investors whose functional currency is not the U.S. dollar, and persons that will hold shares or ADSs as part of a position in a straddle or as part of a hedging or conversion transaction for U.S. tax purposes. This discussion does not address aspects of U.S. taxation other than U.S. federal income taxation, nor does it address state, local or foreign tax consequences of an investment in shares or ADSs.

        This summary is based (1) on the Internal Revenue Code of 1986, as amended, U.S. Treasury Regulations and judicial and administrative interpretations thereof, in each case as in effect and available on the date of this registration statement and (2) in part, on representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. The U.S. tax laws and the interpretation thereof are subject to change, which change could apply retroactively and could affect the tax consequences described below.

        For purposes of this summary, a U.S. holder is a beneficial owner of shares or ADSs that, for U.S. federal income tax purposes, is:

•

a citizen or resident of the United States;



•

a corporation created or organized in or under the laws of the United States or any state, including the District of Columbia;



•

an estate if its income is subject to U.S. federal income taxation regardless of its source; or



•

a trust if such trust validly has elected to be treated as a U.S. person for U.S. federal income tax purposes or if (1) a U.S. court can exercise primary supervision over its administration and (2) one or more U.S. persons have the authority to control all of its substantial decisions.

        If a partnership (including any entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of shares or ADSs the treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership that holds shares or ADSs you should consult your tax advisor.

        A non-U.S. holder is a beneficial owner of shares or ADSs that is not a U.S. holder.

        Each prospective purchaser should consult the purchaser's tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of acquiring, owning or disposing of shares or ADSs.

Ownership of ADSs in General

        For U.S. federal income tax purposes, a holder of ADSs generally will be treated as the owner of the shares represented by the ADSs.

        The U.S. Treasury Department has expressed concern that depositaries for American depositary receipts, or other intermediaries between the holders of shares of an issuer and the issuer, may be taking actions that are inconsistent with the claiming of U.S. foreign tax credits by U.S. holders of those receipts or shares. Accordingly, the analysis regarding the availability of a U.S. foreign tax credit for Swiss taxes and sourcing rules described below could be affected by future actions that may be taken by the U.S. Treasury Department.

Distributions

        Subject to the discussion below under "—Passive Foreign Investment Company Considerations," if you are a U.S. holder, for U.S. federal income tax purposes, the gross amount of any distribution (other than certain distributions, if any, of shares distributed to all shareholders of

155

ABB, including holders of ADSs) made to you with respect to shares or ADSs, including the amount of any Swiss taxes withheld from the distribution, will constitute dividends to the extent of ABB's current and accumulated earnings and profits (as determined under U.S. federal income tax principles). Subject to the discussion below under "—Passive Foreign Investment Company Considerations," non-corporate U.S. Holders generally will be taxed on such distributions at the lower rates applicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than one year) with respect to taxable years beginning on or before December 31, 2008. These dividends will not be eligible for the dividends received deduction generally allowed to corporate U.S. holders. Subject to the discussion below under "—Passive Foreign Investment Company Considerations," if distributions with respect to shares or ADSs exceed ABB's current and accumulated earnings and profits as determined under U.S. federal income tax principles, the excess would be treated first as a tax-free return of capital to the extent of your adjusted tax basis in the shares or ADSs. Any amount in excess of the amount of the dividend and the return of capital would be treated as capital gain. ABB does not maintain calculations of its earnings and profits under U.S. federal income tax principles.

        If you are a U.S. holder, dividends paid in Swiss francs, including the amount of any Swiss taxes withheld from the dividends, will be included in your gross income in an amount equal to the U.S. dollar value of the Swiss francs calculated by reference to the spot exchange rate in effect on the day the dividends are includible in income. In the case of ADSs, dividends generally are includible in income on the date they are received by the depositary, regardless of whether the payment is in fact converted into U.S. dollars at that time. If dividends paid in Swiss francs are converted into U.S. dollars on the day they are includible in income, you generally should not be required to recognize foreign currency gain or loss with respect to the conversion, if you are a U.S. holder. However, any gains or losses resulting from the conversion of Swiss francs between the time of the receipt of dividends paid in Swiss francs and the time the Swiss francs are converted into U.S. dollars will be treated as ordinary income or loss to you, as the case may be, if you are a U.S. holder. The amount of any distribution of property other than cash will be the fair market value of the property on the date of distribution.

        If you are a U.S. holder, you will have a basis in any Swiss francs received as a refund of Swiss withholding taxes equal to a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt of the dividend on which the tax was withheld. (See "—Swiss Taxation—Obtaining a Refund of Swiss Withholding Tax for U.S. Residents" above.)

        If you are a U.S. holder, dividends received by you with respect to shares or ADSs will be treated as foreign source income, which may be relevant in calculating your foreign tax credit limitation. Subject to certain conditions and limitations, Swiss tax withheld on dividends may be deducted from your taxable income or credited against your United States federal income tax liability. However, to the extent that you are a U.S. holder and would be entitled to a refund of Swiss withholding taxes pursuant to the U.S.—Switzerland tax treaty, you may not be eligible for a United States foreign tax credit with respect to the amount of such withholding taxes which may be refunded, even if you fail to claim such refund. See "—Swiss Taxation—Obtaining a Refund of Swiss Withholding Tax for U.S. Residents." The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by ABB generally will constitute passive income, or, in the case of certain U.S. holders, financial services income. The rules relating to the determination of the U.S. foreign tax credit are complex, and, if you are a U.S. holder, you should consult your tax advisor to determine whether and to what extent you would be entitled to this credit.

        Subject to the discussion below under "—Backup Withholding and Information Reporting," if you are a non-U.S. holder of shares or ADSs, you generally will not be subject to U.S. federal income or withholding tax on dividends received on shares or ADSs, unless the dividends are

156

effectively connected with the conduct by you of a trade or business in the United States, or the dividends are attributable to a permanent establishment or fixed base that is maintained in the United States if that is required by an applicable income tax treaty as a condition for subjecting a non-U.S. holder to U.S. taxation on a net income basis. In such cases, you will be taxed in the same manner as a U.S. holder. Moreover, if you are a corporate non-U.S. holder, you may be subject, under certain circumstances, to an additional branch profits tax on any effectively connected dividends at a 30% rate, or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Sale or Exchange of Shares or ADSs

        Subject to the discussion below under "—Passive Foreign Investment Company Considerations," if you are a U.S. holder that holds shares or ADSs as capital assets, you generally will recognize capital gain or loss for U.S. federal income tax purposes upon a sale or exchange of your shares or ADSs in an amount equal to the difference between your adjusted tax basis in the shares or ADSs and the amount realized on their disposition. If you are a noncorporate U.S. holder, the maximum marginal U.S. federal income tax rate applicable to the gain will be lower than the maximum marginal U.S. federal income tax rate applicable to ordinary income (other than certain dividends) if your holding period for the shares or ADSs exceeds one year (i.e., long-term capital gains). If you are a U.S. holder, the gain or loss, if any, recognized by you generally will be treated as U.S. source income or loss, as the case may be, for U.S. foreign tax credit purposes. Certain limitations exist on the deductibility of capital losses for U.S. federal income tax purposes.

        If you are a U.S. holder and you receive any foreign currency on the sale of shares or ADSs, you may recognize U.S. source ordinary income or loss as a result of currency fluctuations between the date of the sale of the shares or ADS, as the case may be, and the date the sales proceeds are converted into U.S. dollars.

        Subject to the discussion below under "—Backup Withholding and Information Reporting," if you are a non-U.S. holder of shares or ADSs, you generally will not be subject to U.S. federal income or withholding tax on gain realized on the sale or exchange of your shares or ADSs unless (1) the gain is effectively connected with the conduct by you of a trade or business in the United States, or the gain is attributable to a permanent establishment or fixed base that is maintained in the United States if that is required by an applicable income tax treaty as a condition for subjecting a non-U.S. holder to U.S. taxation on a net income basis, or (2) if you are an individual non-U.S. holder, you are present in the United States for 183 days or more in the taxable year of the sale or exchange and certain other conditions are met. Moreover, if you are a corporate non-U.S. holder, you may be subject, under certain circumstances, to an additional branch profits tax on any effectively connected gains at a 30% rate, or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Passive Foreign Investment Company Considerations

        A non-U.S. corporation will be classified as a "passive foreign investment company," or a PFIC, for United States federal income tax purposes in any taxable year in which, after applying certain look-through rules, either

•

at least 75% of its gross income is "passive income"; or



•

at least 50%, on average, of the gross value of its assets is attributable to assets that produce "passive income" or are held for the production of passive income.

        Passive income for this purpose generally includes dividends, interest, certain royalties, certain rents and gains from commodities and securities transactions.

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        Based on certain estimates of its gross income and gross assets and the nature of its business, ABB believes that it will not be classified as a PFIC for the taxable year ending December 31, 2003. ABB's status in future years will depend on its assets and activities in those years. ABB has no reason to believe that its assets or activities will change in a manner that would cause it to be classified as a PFIC. If ABB were a PFIC, and you are a U.S. holder, you generally would be subject to imputed interest charges and other disadvantageous tax treatment with respect to any gain from the sale or exchange of, and certain distributions with respect to, your shares or ADSs, including the denial of the taxation of certain dividends at the lower rates applicable to long-term capital gains (as discussed above in "—Distributions").

        If ABB were a PFIC, you may be able to make a variety of elections which might alleviate certain of the tax consequences referred to above. However, it is expected that the conditions necessary for making such elections will not be present in the case of shares or ADSs. You should consult your own tax advisor regarding the tax consequences that would arise if ABB were treated as a PFIC.

Backup Withholding and Information Reporting

        U.S. backup withholding tax and information reporting requirements generally apply to certain payments to certain noncorporate holders of stock. Information reporting generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, shares or ADSs made within the United States to a holder of shares or ADSs (other than an exempt recipient, including a corporation, a payee that is a non-U.S. holder that provides an appropriate certification, and certain other persons).

        A payor will be required to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of, shares or ADSs within the United States to you, unless you are an exempt recipient, if you fail to furnish your correct taxpayer identification number or otherwise fail to establish an exception from backup withholding tax requirements or otherwise fail to establish an exception from backup withholding. The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the U.S. Internal Revenue Service. The backup withholding tax rate is 28% for years 2004 through 2010.

        In the case of payments made within the United States to a foreign simple trust, foreign grantor trust, or foreign partnership (other than payments to a foreign simple trust, foreign grantor trust, or foreign partnership that qualifies as a withholding foreign trust or withholding foreign partnership within the meaning of the applicable U.S. Treasury Regulations and payments to a foreign simple trust, foreign grantor trust, or foreign partnership that are effectively connected with the conduct of a trade or business in the United States), the beneficiaries of the foreign simple trust, the persons treated as the owners of the foreign grantor trust or the partners of the foreign partnership, as the case may be, will be required to provide the certification discussed above in order to establish an exemption from backup withholding tax and information reporting requirements. Moreover, if you are a non-U.S. holder, a payor may rely on a certification provided by you only if the payor does not have actual knowledge or a reason to know that any information or certification stated in the certificate is incorrect.

THE ABOVE SUMMARIES ARE NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF SHARES OR ADSs. PROSPECTIVE PURCHASERS OF SHARES OR ADSs SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.

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DOCUMENTS ON DISPLAY

        We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and other information with the Securities and Exchange Commission. These materials, including this annual report and the exhibits thereto, may be inspected and copied at prescribed rates at the Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Further information on the operation of the public reference room may be obtained by calling the Commission at 1-800-SEC-0330. The Commission also maintains a web site at http://www.sec.gov that contains reports and other information regarding registrants that file electronically with the Commission. Our annual reports and some of the other information we submit to the Commission may be accessed through this web site. In addition, material that we file can be inspected at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005.

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Item 11. Quantitative and Qualitative Disclosures About Market Risk

Market Risk Disclosure

        The continuously evolving financial markets and the dynamic business environment expose us to changes in foreign exchange, interest rate and other market price risks. We have developed and implemented comprehensive policies, procedures, and controls to identify, mitigate, and monitor financial risk on a firm-wide basis. To efficiently aggregate and manage financial risk that could impact our financial performance, we operate a Group Treasury function. Our Group Treasury function provides an efficient source of liquidity, financing, risk management, and other global financial services to our group companies. The Group does not permit proprietary trading activities. The market risk management activities are focused on mitigating material financial risks resulting from our global operating and financing activities.

        The Group Treasury function maintains risk management control systems to monitor foreign exchange and interest rate risks and exposures arising from our underlying business, as well as the associated hedge positions. Such exposures are governed by written policies. Financial risks are monitored using a number of analytical techniques including market value and sensitivity analysis. The following quantitative analyses are based on sensitivity analysis tests, which assume parallel shifts of interest rate yield curves, and foreign exchange rates and equity prices.

Currency Fluctuations and Foreign Exchange Risk

        It is our policy to identify and manage all transactional foreign exchange exposures to minimize risk. With the exception of certain financing subsidiaries, and to the extent certain operating subsidiaries are domiciled in high inflation environments, the functional currency of each of our companies is considered to be its local currency. Our policies require our subsidiaries to hedge all contracted foreign exchange exposures, as well as a portion of their forecast exposures, against their local currency. These transactions are undertaken mainly with our Group Treasury function.

        We have foreign exchange transaction exposures related to our global operating and financing activities in currencies other than the functional currency in which our entities operate. Specifically, we are exposed to foreign exchange risk related to future earnings, assets or liabilities denominated in foreign currencies. The most significant currency exposures relate to operations in Sweden, Switzerland and Germany. In addition, the Group is exposed to currency risk associated with translating our functional currency financial statements into our reporting currency, which is the U.S. dollar.

        Our operating companies are responsible for identifying their foreign currency exposures and entering into intercompany hedge contracts with the Group Treasury function, where legally possible, or external transactions to hedge this risk. The intercompany transactions have the effect of transferring the operating companies' currency risk to the Group Treasury function, but create no additional market risk to our consolidated results. The Group Treasury function then manages this risk by entering into offsetting transactions with third party financial institutions. According to our policy, material net currency exposures are hedged. Exposures are primarily hedged with forward foreign exchange contracts. The majority of the foreign exchange hedge instruments have, on average, a maturity of less than twelve months. The Group Treasury function also hedges currency risks associated with their financing of other ABB companies. For certain non-U.S. dollar denominated borrowings, we use cross currency swaps to hedge the currency risk and effectively convert the borrowings into U.S. dollar obligations. These swap contracts have maturity dates that exactly match the associated borrowings.

        As of December 31, 2003 and December 31, 2002, the net fair value of financial instruments with exposure to foreign currency rate movements was $164 million and $205 million, respectively.

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The potential loss in fair value of such financial instruments from a hypothetical 10% move in foreign exchange rates against our position would be approximately $91 million and $179 million for December 31, 2003 and December 21, 2002, respectively. The analysis reflects the aggregate adverse foreign exchange impact associated with transaction exposures, as well as translation exposures where appropriate. Our sensitivity analysis assumes a simultaneous shift in exchange rates against our positions exposed to foreign exchange risk and as such assumes an unlikely adverse case scenario. Exchange rates rarely move in the same direction. Therefore, the assumption of a simultaneous shift may overstate the impact of changing rates on assets and liabilities denominated in foreign currencies. The underlying trade-related transaction exposures of the industrial companies are not included in the quantitative analysis. This represents a material limitation of the quantitative risk analysis. If these underlying transaction exposures were included, they would tend to have an offsetting effect on the potential loss in fair value detailed above.

Interest Rate Risk

        We are exposed to interest rate risk due to our financing, investing, and liquidity management activities. Our operating companies primarily invest excess cash with and receive funding from our Group Treasury function on an arm's length basis. It is our policy that the primary third-party funding and investing activities, as well as the monitoring and management of the resulting interest rate risk, are the responsibility of the Group Treasury function. The Group Treasury function adjusts the duration of the overall funding portfolio through derivative instruments in order to better match underlying assets and liabilities, as well as minimize the cost of capital. As of December 31, 2003 and December 31, 2002, the net fair value of interest rate instruments was $(865) million and $(2,430) million, respectively. The potential loss in fair value for such financial instruments from a hypothetical 100 basis point parallel shift in interest rates against ABB's position (or a multiple of 100 basis points where 100 basis points is less than 10% of the applicable interest rate) would be approximately $130 million and $49 million for December 31, 2003 and December 31, 2002, respectively.

        Leases are not included as part of the sensitivity analysis. This represents a limitation of the analysis. While sensitivity analysis includes the interest rate sensitivity of the funding of the lease portfolio, a corresponding change in the lease portfolio was not considered in the sensitivity model.

Equity Risk

        We are exposed to equity risk primarily due to the equity conversion option feature (the right to convert the bonds into shares of ABB Ltd) of the $968 million convertible bonds due 2007. Our shares are denominated in Swiss francs, while the bonds are denominated in U.S. dollars. Under SFAS 133, the equity conversion option must be accounted for as a derivative and the changes in its fair value are recorded through current earnings. As of December 31, 2003, the fair value of this option was $45 million. An increase in the ABB Ltd share price by 10% would result in an adverse impact on earnings of $15 million. As of December 31, 2002 both the fair value of the option and the earnings risk were considered immaterial.

        In addition, certain ABB entities have equity investments that expose the Group to equity price risk. As of December 31, 2003, the net fair value of equity risk sensitive instruments was $477 million. The potential loss in fair value of such financial instruments from a hypothetical 10% move in equity prices against our position would be approximately $48 million. The equity risk of these instruments as of December 31, 2002 was considered to be immaterial.

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Item 12. Description of Securities Other than Equity Securities

        Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

        Not applicable.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

        Not applicable.

Item 15. Controls and Procedures

        Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in this annual report is recorded, processed, summarized and reported on a timely basis. Our chief executive officer, Jürgen Dormann, and our chief financial officer, Peter Voser, with the participation of our key corporate senior management and management of all key Group functions, performed an evaluation of our disclosure controls and procedures as of December 31, 2003. Based on that evaluation, they concluded that our disclosure controls and procedures were effective as of December 31, 2003 to achieve their intended objectives.

        There have not been any changes in our internal control over financial reporting during the year ended December 31, 2003 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

        Our board of directors has determined that Mr. Bernd W. Voss is an audit committee financial expert.

Item 16B. Code of Ethics

        Our chief executive officer, chief financial officer, principal accounting officer and persons performing similar functions are bound to adhere to our code on business ethics, which applies to all employees of all companies in the ABB Group. Our code of business ethics is accessible on our web site at www.abb.com/about.

Item 16C. Principal Accountant Fees and Services

Audit Fees

        We paid to Ernst & Young approximately $21 million and $12 million in 2003 and 2002, respectively, for audit fees. Audit fees include the standard audit work performed each fiscal year necessary to allow the auditor to issue an opinion on our consolidated financial statements and to issue an opinion on the local statutory financial statements of ABB Ltd and its subsidiaries. Audit fees also include services that can be provided only by the group auditor such as assistance with the application of new accounting policies, pre-issuance reviews of quarterly financial results and comfort letters delivered to underwriters in connection with debt and equity offerings.

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Audit-Related Fees

        We paid to Ernst & Young approximately $11 million and $16 million in 2003 and 2002, respectively, for audit-related fees, consisting primarily of accounting consultations and audits in connection with divestments, audits of pension and benefit plans and accounting advisory services.

Tax Fees

        We paid to Ernst & Young approximately $2 million and $1 million in 2003 and 2002, respectively, for tax fees, representing tax compliance fees as well as tax advice and planning fees.

All Other Fees

        ABB paid to Ernst & Young approximately $0.4 million and $0.5 million in 2003 and 2002, respectively, relating to other services not included in the above three categories of fees.

        In accordance with the requirements of the U.S. Sarbanes-Oxley Act of 2002 and rules issued by the Securities and Exchange Commission, we introduced a procedure for the review and pre-approval of any services performed by Ernst & Young. The procedure requires that all proposed engagements of Ernst & Young for audit and permitted non-audit services are submitted to the finance and audit committee for approval prior to the beginning of any such services.

PART III

Item 17. Financial Statements

        We have elected to provide financial statements and the related information pursuant to Item 18.

Item 18. Financial Statements

        See pages F-1 to F-84 and pages S-1 to S-2, which are incorporated herein by reference.

(a)

Independent Auditors' Reports.



(b)

Consolidated Income Statements for the years ended December 31, 2003, 2002 and 2001.



(c)

Consolidated Balance Sheets as of December 31, 2003 and 2002.



(d)

Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001.



(e)

Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001.



(f)

Notes to Consolidated Financial Statements.



(g)

Independent Auditors' Reports on Financial Statement Schedule.



(h)

Schedule II—Valuation and Qualifying Accounts.

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Item 19. Exhibits

1.1	Articles of Incorporation of ABB Ltd as amended to date.
2.1	Form of Amended and Restated Deposit Agreement, by and among ABB Ltd, Citibank, N.A., as Depositary, and the holders and beneficial owners from time to time of the American Depositary Shares issued thereunder (including as an exhibit the form of American Depositary Receipt). Incorporated by reference to Exhibit (a)(i) to Post-Effective Amendment No. 1 on Form F-6 (File No. 333-13346) filed by ABB Ltd on May 7, 2001.
2.2	Form of American Depositary Receipt (included in Exhibit 2.1).
2.3	EMTN Amended and Restated Fiscal Agency Agreement, dated May 30, 2001, between ABB International Finance Limited, ABB Finance Inc., ABB Capital B.V., Banque Generale du Luxembourg S.A., The Chase Manhattan Bank and Banque Generale du Luxembourg (Suisse) S.A. Incorporated by reference to Exhibit 2.3 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
2.4	Supplemental Fiscal Agency Agreement, dated June 11, 2002, between ABB International Finance Limited, ABB Finance Inc. and ABB Capital B.V., Banque Generale du Luxembourg S.A., JPMorgan Chase and Banque Meespierson BGL S.A.
2.5	Second Supplemental Fiscal Agency Agreement, dated November 11, 2003, between ABB International Finance Limited, ABB Finance Inc., ABB Capital B.V., Banque Generale du Luxembourg S.A., JPMorgan Chase Bank and Banque Meespierson BGL S.A.
2.6	EMTN Deed of Covenant, dated March 10, 1993, by ABB International Finance N.V. Incorporated by reference to Exhibit 2.4 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
2.7	EMTN Deed of Covenant, dated March 10, 1993, by ABB Finance Inc. Incorporated by reference to Exhibit 2.5 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
2.8	EMTN Deed of Covenant, dated March 10, 1993, by ABB Capital B.V. Incorporated by reference to Exhibit 2.6 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
	The total amount of long-term debt securities of ABB Ltd authorized under any other instrument does not exceed 10% of the total assets of the ABB Group on a consolidated basis. ABB Ltd hereby agrees to furnish to the Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of ABB Ltd or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
4.1	Share Purchase and Settlement Agreement dated as of March 31, 2000 among ABB Ltd, ALSTOM and ABB ALSTOM POWER N.V., as amended. Incorporated by reference to Exhibit 4.1 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
4.2	Purchase Agreement, dated as of December 21, 1999, between ABB Handels-Und Verwaltungs AG, as Seller, and British Nuclear Fuels plc, as Purchaser, as amended. Incorporated by reference to Exhibit 4.2 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
4.3	$1,000,000,000 Multicurrency Revolving Credit Agreement, dated November 17, 2003.

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4.4	Sale and Purchase Agreement, dated 4 September 2002, between ABB Financial Services B.V., General Electric Capital Corporation and ABB Ltd. Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.5	Amendment Agreement, dated 29 November 2002, between ABB Financial Services B.V., General Electric Capital Corporation and ABB Ltd. Incorporated by reference to Exhibit 4.6 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.6	Stock and Asset Purchase Agreement, dated January 16, 2004, between ABB Handels-und Verwaltungs AG and Laradew Limited.
4.7	Purchase Agreement, dated as of December 8, 2003, between ABB Holding AG, Zurich, and Lagrummet December NR 919 AB (under change of name to "Fund American Holdings AB").
4.8	Employment Agreement of Jürgen Dormann, dated December 5, 2002. Incorporated by reference to Exhibit 4.7 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.9	Employment Agreement of Peter Voser, dated November 21, 2001. Incorporated by reference to Exhibit 4.8 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.10	Employment Agreement of Dinesh Paliwal, dated as of February 21, 2003. Incorporated by reference to Exhibit 4.9 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.11	Employment Agreement of Peter Smits, dated November 1, 2001. Incorporated by reference to Exhibit 4.10 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.12	Employment Agreement of Gary Steel, dated August 27, 2002. Incorporated by reference to Exhibit 4.11 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
8.1	Subsidiaries of ABB Ltd as of March 31, 2004.
12.1	Certification of the chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Certification of the chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certification by the chief executive officer of ABB Ltd pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
13.2	Certification by the chief financial officer of ABB Ltd pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*

This document is being furnished in accordance with SEC Release Nos. 33-8212 and 34-74551.

165

SIGNATURES

        The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

ABB LTD
By:	/s/  PETER VOSER
	Name:	Peter Voser
	Title:	Executive Vice President and Chief Financial Officer
By:	/s/  HANS ENHÖRNING
	Name:	Hans Enhörning
	Title:	Group Vice President

Date: April 9, 2004

166

ABB Ltd
Index to Consolidated Financial Statements and Schedules

Consolidated Financial Statements:
Independent Auditors' Reports	F-2
Consolidated Income Statements for the years ended December 31, 2003, 2002 and 2001	F-7
Consolidated Balance Sheets as of December 31, 2003 and 2002	F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001	F-9
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001	F-10
Notes to the Consolidated Financial Statements	F-11
Financial Statement Schedule:
Independent Auditors' Report	S-1
Schedule II—Valuation and Qualifying Accounts	S-2

F-1

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of ABB Ltd:

        We have audited the accompanying consolidated balance sheets of ABB Ltd as of December 31, 2003 and 2002, and the related consolidated income statements, statements of cash flows and statements of changes in stockholders' equity for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Jorf Lasfar Energy Company, a corporation in which the Company has a 50% interest, (the Company's equity in Jorf Lasfar Energy Company's net income is stated at $60 million in 2003, $66 million in 2002 and $81 million in 2001); we did not audit the 2002 and 2001 consolidated financial statements of ABB Holdings Inc., a wholly-owned subsidiary, which statements reflect total assets constituting 15% in 2002 and total revenues constituting 14% in 2002 and 11% in 2001 of the related consolidated totals; we did not audit the 2002 and 2001 consolidated financial statements of Swedish Export Credit Corporation, a corporation in which the Company had a 35% interest, (the Company's equity in Swedish Export Credit Corporation's consolidated net income (loss) is stated at $89 million in 2002 and $(11) million in 2001); and we did not audit the 2001 financial statements of Scandinavian Reinsurance Company Limited, a wholly-owned subsidiary, which statements reflect total losses of $(346) million reflected as a component of the Company's 2001 loss from discontinued operations. Those statements were audited by other auditors whose reports have been furnished to us. Our opinion, insofar as it relates to amounts included for those companies and their subsidiaries, is based solely on the reports of the other auditors.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

        In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ABB Ltd at December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States.

        As discussed in Note 2 to the consolidated financial statements, in 2003 the Company changed its method of consolidation relating to variable interest entities. As also discussed in Note 2, in 2002 the Company changed its method of accounting for goodwill acquired in business combinations and it also adopted new criteria for classification of items accounted for as discontinued operations, resulting in reclassifications in all periods presented of items meeting the discontinued operations criteria after January 1, 2002. Additionally, as also discussed in Note 2, in 2001 the Company changed its method of accounting for derivative financial instruments.

/s/ERNST & YOUNG LTD
Zurich, Switzerland
February 18, 2004,
except for Note 27, as to which the date is April 5, 2004

F-2

REPORT OF INDEPENDENT AUDITORS

To the Management Committee
and Stockholders of Jorf Lasfar
Energy Company S.C.A.

        We have audited the accompanying balance sheets of Jorf Lasfar Energy Company S.C.A. (the "Company") as of December 31, 2003, 2002 and 2001, and the related statements of income, of stockholders' equity and of cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jorf Lasfar Energy Company S.C.A. at December 31, 2003, 2002 and 2001, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ PRICE WATERHOUSE

Casablanca, Morocco,
February 10, 2004

F-3

INDEPENDENT AUDITORS' REPORT

The Board of Directors
ABB Holdings Inc.:

        We have audited the consolidated balance sheet of ABB Holdings Inc. and subsidiaries (a direct wholly-owned subsidiary of ABB Asea Brown Boveri Ltd.) as of December 31, 2002, and the related consolidated statements of operations, stockholder's equity, and cash flows for each of the years in the two-year period ended December 31, 2002 (not presented separately herein). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ABB Holdings Inc. and subsidiaries as of December 31, 2002, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

        The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company is dependent on the financial support of ABB Ltd, its ultimate parent company. ABB Ltd has suffered recurring net losses in 2002 and 2001, and has a highly leveraged balance sheet. These factors raise substantial doubt about ABB Ltd's ability to continue as a going concern which consequently raises substantial doubt about the Company's ability to continue as a going concern. ABB Ltd's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

        As discussed in Note 2 to the consolidated financial statements, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002.

/s/ KPMG LLP

Stamford, Connecticut
April 21, 2003

F-4

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
AB Svensk Exportkredit:

        We have audited the accompanying consolidated and parent company balance sheets of AB Svensk Exportkredit (Swedish Export Credit Corporation) (the "Company") as of December 31, 2002, and the related consolidated and parent company statements of income and of cash flows for each of the two years in the period ended December 31, 2002 (not presented separately herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated and parent company financial statements referred to above present fairly, in all material respects, the respective financial position of the Company at December 31, 2002, and the respective results of operations and of cash flows for each of the two years in the period ended December 31, 2002, in conformity with generally accepted accounting principles in Sweden.

        Accounting principles generally accepted in Sweden vary in certain significant respects from accounting principles generally accepted in the United States of America. Application of accounting principles generally accepted in the United States of America would have affected consolidated results of operations for each of the two years in the period ended December 31, 2002 and consolidated shareholders' funds as of December 31, 2002, to the extent summarized in Note 33 to the consolidated financial statements (not presented separately herein). As more fully described in Note 33 to the consolidated financial statements, the originally reported amount of net income for the year ended December 31, 2001 under U.S GAAP has been restated (not presented separately herein).

KPMG
By	/s/  Anders Liner        Anders Liner Authorized Public Accountant

Stockholm, Sweden
February 20, 2003 except Note 32 and
Note 33, which are as of March 31, 2003

F-5

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Scandinavian Reinsurance Company Limited:

        We have audited the statements of loss and comprehensive loss, changes in shareholder's deficit and cash flows of Scandinavian Reinsurance Company Limited for the year ended December 31, 2001 (not presented separately herein) before the reclassifications that were applied to reclassify amounts related to discontinued operations. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

        We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

        In our opinion, the financial statements (before the reclassifications that were applied to reclassify amounts related to discontinued operations) referred to above present fairly, in all material respects, the results of operations and cash flows of Scandinavian Reinsurance Company Limited for the year ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.

        The Company restated retained earnings at the beginning of the current year to reflect the change discussed in Note 2(d) to the financial statements (not presented separately herein).

/s/ KPMG

Chartered Accountants
Hamilton, Bermuda
January 31, 2002

F-6

ABB Ltd
Consolidated Income Statements
for the years ended December 31, 2003, 2002 and 2001

		Year ended December 31,
		2003			2002			2001
		(in millions, except per share data)
Revenues		$	18,795		$	17,466		$	18,334
Cost of sales			(14,080	)		(13,067	)		(13,539	)
Gross profit			4,715			4,399			4,795
Selling, general and administrative expenses			(3,830	)		(3,954	)		(3,929	)
Amortization expense			(40	)		(41	)		(188	)
Other income (expense), net			(189	)		(58	)		(161	)
Earnings before interest and taxes			656			346			517
Interest and dividend income			144			189			348
Interest and other finance expense			(554	)		(315	)		(571	)
Income from continuing operations before taxes and minority interest			246			220			294
Provision for taxes			(78	)		(74	)		(87	)
Minority interest			(82	)		(71	)		(36	)
Income from continuing operations			86			75			171
Loss from discontinued operations, net of tax			(853	)		(858	)		(837	)
Cumulative effect of change in accounting principles (SFAS 133), net of tax			—			—			(63	)
Net loss		$	(767	)	$	(783	)	$	(729	)
Basic earnings (loss) per share:
	Income from continuing operations	$	0.07		$	0.07		$	0.15
	Net loss	$	(0.63	)	$	(0.70	)	$	(0.64	)
Diluted earnings (loss) per share:
	Income (loss) from continuing operations	$	0.07		$	(0.10	)	$	0.15
	Net loss	$	(0.63	)	$	(0.83	)	$	(0.64	)

See accompanying Notes to the Consolidated Financial Statements.

F-7

ABB Ltd
Consolidated Balance Sheets
as of December 31, 2003 and 2002

		December 31,
		2003			2002
		(in millions, except share data)
Cash and equivalents		$	4,669		$	2,336
Marketable securities			473			589
Receivables, net			5,337			5,134
Inventories, net			2,605			2,261
Prepaid expenses and other			2,002			2,628
Assets held for sale and in discontinued operations			6,427			7,499
Total current assets			21,513			20,447
Financing receivables, non-current			1,330			1,605
Property, plant and equipment, net			2,840			2,701
Goodwill			2,331			2,221
Other intangible assets, net			549			587
Prepaid pension and other employee benefits			524			537
Investments and other			1,326			1,435
Total assets		$	30,413		$	29,533
Accounts payable, trade		$	2,981		$	2,729
Accounts payable, other			1,394			1,390
Short-term borrowings and current maturities of long-term borrowings			1,597			2,570
Accrued liabilities and other			5,140			6,135
Liabilities held for sale and in discontinued operations			5,100			5,966
Total current liabilities			16,212			18,790
Long-term borrowings			6,290			5,358
Pension and other employee benefits			1,794			1,619
Deferred taxes			969			911
Other liabilities			1,837			1,584
Total liabilities			27,102			28,262
Minority interest			285			258
Stockholders' equity:
	Capital stock and additional paid-in capital		3,067			2,027
	Retained earnings		1,847			2,614
	Accumulated other comprehensive loss		(1,750	)		(1,878	)
	Less: Treasury stock, at cost (11,611,529 and 86,830,312 shares at December 31, 2003 and 2002, respectively)		(138	)		(1,750	)
Total stockholders' equity			3,026			1,013
Total liabilities and stockholders' equity		$	30,413		$	29,533

See accompanying Notes to the Consolidated Financial Statements.

F-8

ABB Ltd
Consolidated Statements of Cash Flows
for the years ended December 31, 2003, 2002 and 2001

			Year ended December 31,
			2003			2002			2001
			(in millions)
Operating activities
Net loss			$	(767	)	$	(783	)	$	(729	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Depreciation and amortization			585			611			787
	Provisions			(726	)		(131	)		1,146
	Pension and post-retirement benefits			21			37			1
	Deferred taxes			50			(140	)		(89	)
	Net gain from sale of property, plant and equipment			(26	)		(23	)		(23	)
	Loss on sale of discontinued operations			38			194			—
	Other			411			(164	)		135
	Changes in operating assets and liabilities:
		Marketable securities (trading)		13			498			72
		Trade receivables		78			627			65
		Inventories		241			367			(106	)
		Trade payables		(370	)		79			736
		Other assets and liabilities, net		291			(1,153	)		(12	)
Net cash provided by (used in) operating activities				(161	)		19			1,983
Investing activities
Changes in financing receivables				390			264			(907	)
Purchases of marketable securities (other than trading)				(2,781	)		(4,377	)		(3,280	)
Purchases of property, plant and equipment				(547	)		(602	)		(761	)
Acquisitions of businesses (net of cash acquired)				(55	)		(144	)		(578	)
Proceeds from sales of marketable securities (other than trading)				3,049			4,525			3,873
Proceeds from sales of property, plant and equipment				155			476			152
Proceeds from sales of businesses (net of cash disposed)				543			2,509			283
Net cash provided by (used in) investing activities				754			2,651			(1,218	)
Financing activities
Net changes in borrowings with maturities of 90 days or less				(99	)		(1,677	)		(69	)
Increases in other borrowings				1,964			9,050			9,357
Repayment of other borrowings				(2,893	)		(10,188	)		(6,649	)
Treasury and capital stock transactions				2,675			—			(1,393	)
Dividends paid				—			—			(502	)
Other				(56	)		3			(67	)
Net cash provided by (used in) financing activities				1,591			(2,812	)		677
Effects of exchange rate changes on cash and equivalents				150			141			(72	)
Adjustment for the net change in cash and equivalents in assets held for sale and in discontinued operations				(1	)		26			(244	)
Net change in cash and equivalents—continuing operations				2,333			25			1,126
Cash and equivalents beginning of year				2,336			2,311			1,185
Cash and equivalents end of year			$	4,669		$	2,336		$	2,311
Interest paid			$	438		$	482		$	702
Taxes paid			$	238		$	298		$	273

See accompanying Notes to the Consolidated Financial Statements.

F-9

ABB Ltd
Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31, 2003, 2002 and 2001

								Accumulated other comprehensive loss
		Capital stock and additional paid-in capital			Retained earnings			Foreign currency translation adjustment			Unrealized gain (loss) on available- for-sale securities			Minimum pension liability adjustment			Unrealized gain (loss) of cash flow hedge derivatives			Total accumulated other comprehensive loss			Treasury stock			Total stockholders' equity
		(in millions)
Balance at January 1, 2001		$	2,082		$	4,628		$	(1,157	)	$	87		$	(52	)	$	—		$	(1,122	)	$	(417	)	$	5,171
Comprehensive loss:
	Net loss					(729	)																				(729	)
	Foreign currency translation adjustments								(366	)											(366	)					(366	)
	Effect of change in fair value of available-for-sale securities, net of tax of $16											(128	)								(128	)					(128	)
	Minimum pension liability adjustments, net of tax of $1														3						3						3
	Cumulative effect of change in accounting principles (SFAS 133), net of tax of $17																	(41	)		(41	)					(41	)
	Change in derivatives qualifying as cash flow hedges, net of tax of $18																	(46	)		(46	)					(46	)
	Total comprehensive loss																										(1,307	)
Dividends paid						(502	)																				(502	)
Purchase of treasury stock																								(1,615	)		(1,615	)
Sale of treasury stock			(101	)																				282			181
Call options			47																								47
Balance at December 31, 2001			2,028			3,397			(1,523	)		(41	)		(49	)		(87	)		(1,700	)		(1,750	)		1,975
Comprehensive loss:
	Net loss					(783	)																				(783	)
	Foreign currency translation adjustments								(295	)											(295	)					(295	)
	Accumulated foreign currency translation adjustments allocated to divestments of businesses								90												90						90
	Effect of change in fair value of available-for-sale securities, net of tax of $1											3									3						3
	Minimum pension liability adjustments, net of tax of $30														(107	)					(107	)					(107	)
	Change in derivatives qualifying as cash flow hedges, net of tax of $52																	131			131						131
	Total comprehensive loss																										(961	)
Other			(1	)																							(1	)
Balance at December 31, 2002			2,027			2,614			(1,728	)		(38	)		(156	)		44			(1,878	)		(1,750	)		1,013
Comprehensive loss:
	Net loss					(767	)																				(767	)
	Foreign currency translation adjustments								40												40						40
	Accumulated foreign currency translation adjustments allocated to divestments of businesses								(37	)											(37	)					(37	)
	Effect of change in fair value of available-for-sale securities, net of tax of $18											65									65						65
	Minimum pension liability adjustments, net of tax of $5														19						19						19
	Change in derivatives qualifying as cash flow hedges, net of tax of $13																	41			41						41
	Total comprehensive loss																										(639	)
Sale of treasury stock			(1,456	)																				1,612			156
Capital stock issued in connection with rights offering, net			2,487																								2,487
Call options			9																								9
Balance at December 31, 2003		$	3,067		$	1,847		$	(1,725	)	$	27		$	(137	)	$	85		$	(1,750	)	$	(138	)	$	3,026

See accompanying Notes to the Consolidated Financial Statements.

F-10

ABB Ltd
Notes to the Consolidated Financial Statements

(U.S. dollar amounts in millions, except per share amounts)

Note 1 The company

        ABB Ltd is a leading global company in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. ABB Ltd works with customers to engineer and install networks, facilities and plants with particular emphasis on enhancing efficiency and productivity for customers that source, transform, transmit and distribute energy.

Note 2 Significant accounting policies

        The following is a summary of significant accounting policies followed in the preparation of these Consolidated Financial Statements.

Basis of presentation

        The Consolidated Financial Statements are prepared on the basis of generally accepted accounting principles (GAAP) in the United States (U.S.) and are presented in U.S. dollars ($) unless otherwise stated. Par value of capital stock is denominated in Swiss francs (CHF).

        The number of shares and earnings per share data in the Consolidated Financial Statements have been presented as if the four-for-one split of ABB Ltd shares in May 2001 had occurred as of the earliest period presented.

Scope of consolidation

        The Consolidated Financial Statements include 100 percent of the assets, liabilities, revenues, expenses, income, loss and cash flows of ABB Ltd and companies in which ABB Ltd has a controlling interest (subsidiaries), as if ABB Ltd and its subsidiaries (collectively, the "Company") were a single company. Significant intercompany accounts and transactions have been eliminated. Minority interest is calculated for entities fully consolidated but not wholly owned. The components of net income and equity attributable to the minority shareholders are presented in the minority interest line items included in the Consolidated Income Statement and Consolidated Balance Sheet.

        In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51. FIN 46 requires variable interest entities (VIEs) to be consolidated by their primary beneficiaries. Accordingly, pursuant to FIN 46, VIEs entered into after January 31, 2003, are consolidated when the Company is considered the primary beneficiary. Also, after January 31, 2003, previously consolidated VIEs would be deconsolidated when a triggering event, as defined by FIN 46, indicates the Company is no longer the primary beneficiary. For those VIEs where the Company is not the primary beneficiary, existing consolidation policies in accordance with U.S. GAAP are applied.

        Investments in joint ventures and affiliated companies in which the Company has significant influence, but not a controlling interest, are accounted for using the equity method. This is generally presumed to exist when the Company owns between 20 percent and 50 percent of the investee. In certain circumstances, the Company's ownership of an investee exceeds 50 percent but it accounts for the investment using the equity method because it does not have a controlling interest due to certain rights of minority shareholders which allow them to participate in significant operating and financial decisions of the investee.

F-11

        Under the equity method, the Company's investment in and amounts due to and from an equity investee are included in the Consolidated Balance Sheet; the Company's share of an investee's earnings is included in the Consolidated Income Statement; and the dividends, cash distributions, loans or other cash received from the investee, additional cash investments, loan repayments or other cash paid to the investee, are included in the Consolidated Balance Sheet and the Consolidated Statement of Cash Flows. Additionally, the carrying values of investments accounted for using the equity method of accounting are adjusted downward to reflect any other-than-temporary declines in value.

        Investments in non-public companies in which the Company does not have a controlling interest or significant influence are accounted for at cost. This is generally presumed to exist when the Company owns less than 20 percent of the investee. Dividends and other distributions of earnings from these investments are included in income when received. The carrying value of investments accounted for using the cost method of accounting are adjusted downward to reflect any other-than-temporary declines in value.

Use of estimates

        The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates.

Reclassifications

        Amounts reported for prior years in these Consolidated Financial Statements and Notes have been reclassified to conform to the current year's presentation, primarily as a result of the treatment of certain businesses as assets and liabilities held for sale and in discontinued operations.

Concentrations of credit risk

        The Company sells a broad range of products, systems and services to a wide range of industrial and commercial customers throughout the world. Concentrations of credit risk with respect to trade receivables are limited, due to the Company's customer base being comprised of a large number of individual customers. Ongoing credit evaluations of customers' financial positions are performed and, generally, no collateral is required.

        Subsequent to the sale of a significant portion of the Company's Structured Finance business during 2002, the Financial Services activities of the Company were substantially reduced. As a consequence of this divestment, the credit risk of the Company's remaining Financial Services activities is primarily concentrated in the remaining lease and loan portfolio. Policies and procedures to control the remaining credit risks include measurements to develop and ensure the maintenance of a diversified portfolio through the active monitoring of counterparty, country and industry exposure.

        The Company maintains reserves for potential credit losses and such losses, in the aggregate, are in line with management's expectations.

F-12

        It is Company policy to invest cash in deposits with banks throughout the world with certain minimum credit ratings and in high quality, low risk, liquid investments. The Company actively manages its credit risk by routinely reviewing the creditworthiness of the banks and the investments held, as well as maintaining such investments in deposits or liquid securities. The Company has not incurred significant credit losses related to such investments.

        The Company's exposure to credit risk on derivative financial instruments is the risk that a counterparty will fail to meet its obligations. To reduce this risk, the Company has credit policies that require the establishment and review of credit limits for individual counterparties. In addition, close-out netting agreements have been entered into with most counterparties. Close-out netting agreements provide for the termination, valuation and net settlement of some or all outstanding transactions between two counterparties on the occurrence of one or more pre-defined trigger events.

Cash and equivalents

        Cash and equivalents include highly liquid investments with original maturities of three months or less. Not included in cash and equivalents is restricted cash of $394 million and $377 million at December 31, 2003 and 2002, respectively.

Marketable securities

        Debt and equity securities are classified as either trading or available-for-sale at the time of purchase and are carried at fair value. Debt and equity securities that are bought and held principally for the purpose of sale in the near term are classified as trading securities and unrealized gains and losses thereon are included in the determination of earnings. Unrealized gains and losses on available-for-sale securities are excluded from the determination of earnings and are instead recognized in the accumulated other comprehensive loss component of stockholders' equity, net of tax (accumulated other comprehensive loss) until realized. Realized gains and losses on available-for-sale securities are computed based upon the historical cost of these securities applied using the specific identification method. Declines in fair values of available-for-sale investments that are other-than-temporary are included in the determination of earnings.

        The Company analyzes its available-for-sale securities for impairment when the fair values of individual securities have been below their cost basis for a period exceeding nine consecutive months or when other events indicate the need for assessment. The Company records an impairment charge through current period earnings and adjusts the cost basis for such other-than-temporary declines in fair value when the fair value is not anticipated to recover above cost within a three-month period after the measurement date unless there are mitigating factors that indicate an impairment charge through earnings may not be required. If an impairment charge is recorded, subsequent recoveries in fair value are not reflected in earnings until sale of the security.

Revenue recognition

        The Company recognizes revenues from the sale of manufactured products when persuasive evidence of an arrangement exists, the price is fixed and determinable, collectibility is reasonably assured and upon transfer of title including the risks and rewards of ownership to the customer. If

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contracts for sale of manufactured products require installation, which can only be performed by the Company, revenues are deferred until installation of the products is complete. In accordance with Emerging Issues Task Force No. 00-21, Revenue Arrangements with Multiple Deliverables, when multiple elements such as products and services are contained in a single arrangement or in related arrangements with the same customer, the Company allocates revenues to each element based on its relative fair value, provided that such element meets the criteria for treatment as a separate unit of accounting. Revenues from short-term contracts to deliver services are recognized upon completion of required services to the customer. Revenues from contracts that contain customer acceptance provisions are deferred until customer acceptance occurs or the contractual acceptance period has lapsed.

        Revenues under long-term contracts are recognized using the percentage-of-completion method of accounting. The Company principally uses the cost-to-cost or delivery events methods to measure progress towards completion on contracts. Management determines the method to be used by type of contract based on its judgment as to which method best measures actual progress towards completion.

        Anticipated costs for warranties are accrued when revenues are recognized. Losses on contracts are recognized in the period when they are identified and are based upon the anticipated excess of contract costs over the related contract revenues.

        Revenues under cost-reimbursement contracts are recognized as costs are incurred. Shipping and handling costs are recorded as a component of cost of sales.

Receivables

        The Company accounts for the securitization of trade receivables in accordance with Statement of Financial Accounting Standards No. 140 (SFAS 140), Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 140 requires an entity to recognize the financial and servicing assets it controls and the liabilities it has incurred and to derecognize financial assets when control has been surrendered, as evaluated in accordance with the criteria provided in SFAS 140.

        The Company accounts for the transfer of its receivables to Qualifying Special Purpose Entities (QSPEs) as a sale of those receivables to the extent that consideration other than beneficial interests in the transferred accounts receivable is received. The Company does not recognize the transfer as a sale unless the receivables have been put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership. In addition, the QSPEs must obtain the right to pledge or exchange the transferred receivables, and the Company cannot retain the ability or obligation to repurchase or redeem the transferred receivables.

        At the time the receivables are sold, the balances are removed from trade receivables and a retained interest or deferred purchase price component is recorded in other receivables. The retained interest is recorded at its estimated fair value. Costs associated with the sale of receivables are included in the determination of earnings.

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        The Company, in its normal course of business, sells receivables outside its securitization programs without recourse (see Note 7). Sales or transfers that do not meet the requirements of SFAS 140 are accounted for as secured borrowings.

Inventories

        Inventories are stated at the lower of cost (determined using either the first-in, first-out or the weighted average cost method) or market. Inventoried costs relating to percentage-of-completion contracts are stated at actual production costs, including overhead incurred to date, reduced by amounts recognized in cost of sales.

Impairment of long-lived assets and accounting for discontinued operations

        Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment or Disposal of Long-Lived Assets, which superseded Statement of Financial Accounting Standards No. 121 (SFAS 121), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, yet retained the fundamental provisions of SFAS 121 related to the recognition and measurement of the impairment of long-lived assets (i.e., property, plant, and equipment and identifiable intangibles) to be "held and used". A long-lived asset is assessed for impairment when events or circumstances indicate the carrying amount of the asset may not be recoverable. If the asset's net carrying value exceeds the asset's net undiscounted cash flows expected to be generated over its remaining useful life, the carrying amount of the asset is reduced to its estimated fair value, pursuant to the measurement criteria of SFAS 144.

        In accordance with SFAS 144, the Company includes in assets and liabilities held for sale and in discontinued operations the assets and liabilities that meet certain criteria with respect to the Company's plans for their sale or abandonment. Depreciation and amortization cease when the asset meets the criteria to be classified as held for sale. If (1) a planned or completed disposal involves a component of the Company whose operations and cash flows can be distinguished operationally and for financial reporting purposes; (2) such operations and cash flows will be (or have been) eliminated from the Company's ongoing operations; and (3) the Company will not have any significant continuing involvement in the component, then the component's results of operations are presented as discontinued operations for all periods. Operating losses from discontinued operations are recognized in the period in which they occur. Long-lived assets (or groups of assets and related liabilities) classified as held for sale, are measured at the lower of carrying amount or fair value less cost to sell.

        In connection with the adoption of SFAS 144, the Company elected to cease presenting cash flows from discontinued operations as a single line and instead presents the relevant amounts within cash flows from operating, investing and financing activities.

        Prior to adoption of SFAS 144, the Company accounted for discontinued operations in accordance with APB Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, in which only the results of operations of a segment or major line of

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business that had been sold, abandoned, otherwise disposed of, or was the subject of a formal plan for disposal, could be classified as discontinued operations.

        In addition to the interest expense contained within businesses classified as discontinued operations, a portion of the Company's interest expense is reclassified from interest and other finance expense to loss from discontinued operations, net of tax, in accordance with Emerging Issues Task Force No. 87-24 (EITF 87-24), Allocation of Interest to Discontinued Operations. Such amounts were $42 million, $50 million and $66 million in 2003, 2002 and 2001, respectively. These amounts were calculated based upon the ratio of net assets of the discontinued business less debt that is required to be paid as a result of the disposal, divided by the sum of total net assets and total debt (other than the portion of debt directly attributable to other operations of the Company, debt of the discontinued operation that will be assumed by the buyer and debt that is required to be paid as a result of the disposal transaction). This ratio was multiplied by the portion of total interest expense not directly attributable to other operations of the Company to arrive at allocable interest attributable to businesses reflected as discontinued operations.

Goodwill and other intangible assets

        The excess of cost over the fair value of net assets of acquired businesses is recorded as goodwill. The Company accounts for its goodwill in accordance with Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangible Assets. Under SFAS 142, goodwill from acquisitions completed after June 30, 2001, has not been amortized. Beginning from January 1, 2002, goodwill has not been amortized. For years prior to January 1, 2002, the goodwill had been amortized on a straight-line basis over periods ranging from 3 to 20 years. In accordance with SFAS 142, goodwill is tested for impairment annually, and also upon the occurrence of a triggering event requiring the re-assessment of a business' carrying value of its goodwill. The Company's annual assessment is performed effective October 1 each year. A fair value approach is used to identify potential goodwill impairment and, when necessary, measure the amount of impairment. The Company uses a discounted cash flow model to determine the fair value of reporting units, unless there is a readily determinable fair market value.

        The cost of acquired intangible assets is amortized on a straight-line basis over their estimated useful lives, typically ranging from 3 to 10 years. Intangible assets are tested for impairment upon the occurrence of certain triggering events.

Capitalized software costs

        Capitalized costs of software for internal use are accounted for in accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and are amortized on a straight-line basis over the estimated useful life of the oftware, typically ranging from 3 to 5 years. Capitalized costs of a software product to be sold are accounted for in accordance with Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, and are carried at the lower of unamortized cost or net realizable value until the product is available for general release to customers, at which time capitalization ceases and costs are amortized on a straight-line basis over the estimated life of the product. The Company expenses costs incurred prior to

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technological feasibility, and thereafter capitalizes costs incurred in developing or obtaining software for internal use and for software products to be sold.

Property, plant and equipment

        Property, plant and equipment is stated at cost, less accumulated depreciation, and is depreciated using the straight-line method over the estimated useful lives of the assets as follows: 10 to 50 years for buildings and leasehold improvements and 3 to 15 years for machinery and equipment.

Derivative financial instruments

        The Company uses derivative financial instruments to manage interest rate and currency exposures, and to a lesser extent commodity exposures, arising from its global operating, financing and investing activities. The Company's policies require that the industrial entities hedge exposure from firm commitments denominated in foreign currencies, as well as at least fifty percent of the anticipated foreign currency denominated sales volume of standard products over the next twelve months. In addition, derivative financial instruments were also used for proprietary trading purposes within the Company's former Financial Services division and within limits determined by the Company's Board of Directors until June 2002, when the Company ceased entering into new positions.

        On January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as subsequently amended (SFAS 133). SFAS 133 requires the Company to recognize all derivatives, other than certain derivatives indexed to the Company's own stock, on the Consolidated Balance Sheet at fair value. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. If the derivatives are designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives will either be offset against the change in fair value of the hedged item through earnings or recognized in accumulated other comprehensive loss until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings.

        The Company accounted for the adoption of SFAS 133 as a change in accounting principle. Based on the Company's outstanding derivatives at January 1, 2001, the Company recognized the cumulative effect of the accounting change as a loss in the Consolidated Income Statement of approximately $63 million, net of tax (basic and diluted loss per share of $0.06), and a reduction to equity of $41 million, in accumulated other comprehensive loss.

        Forward foreign exchange contracts are the primary instrument used to manage foreign exchange risk. Where forward foreign exchange contracts are designated as cash flow hedges under SFAS 133, changes in their fair value are recorded in accumulated other comprehensive loss until the hedged item is recognized in earnings. The Company also enters into forward foreign exchange contracts that serve as economic hedges of existing assets and liabilities. These are not designated as accounting hedges under SFAS 133 and, consequently, changes in their fair value are reported in earnings where they offset the translation gain or loss on the foreign currency denominated asset or liability.

F-17

        To reduce its interest rate and currency exposure arising from its funding activities and to hedge specific assets, the Company uses interest rate and currency swaps. Where interest rate swaps are designated as fair value hedges, the changes in fair value of the swaps are recognized in earnings, as are the changes in the fair value of the underlying assets or liabilities. Where such interest rate swaps do not qualify for the short cut method as defined under SFAS 133, any ineffectiveness is included in earnings. Where interest rate swaps are designated as cash flow hedges, their change in value is recognized in accumulated other comprehensive loss until the hedged item is recognized in earnings.

        All other swaps, futures, options and forwards that are designated as effective hedges of specific assets, liabilities or committed or forecasted transactions are recognized in earnings consistent with the effects of the hedged transactions.

        If an underlying hedged transaction is terminated early, the hedging derivative financial instrument is treated as if terminated simultaneously, with any gain or loss on termination of the derivative immediately recognized in earnings. Where derivative financial instruments have been designated as hedges of forecasted transactions, and such forecasted transactions become probable of not occurring, hedge accounting ceases and any derivative gain or loss previously included in accumulated other comprehensive loss is reclassified into earnings.

        Certain commercial contracts may grant rights to the Company or other counterparties, or contain other provisions considered to be derivatives under SFAS 133. Such embedded derivatives are assessed at inception of the contract and depending on their characteristics accounted for as separate derivative instruments pursuant to SFAS 133.

Sale-leasebacks

        The Company periodically enters into transactions accounted for as sale-leasebacks, in which fixed assets, generally real estate and/or equipment, are sold to a third party and then leased for use by the Company. Under certain circumstances, the necessary criteria to recognize a sale of the assets may not occur, and the transaction is reflected as a financing transaction, with the proceeds received from the transaction reflected as a borrowing or as a deposit liability. When the necessary criteria have been met to recognize a sale, gains or losses on the sale of the assets are generally deferred and amortized over the term of the transaction, except in certain limited instances when a portion of the gain or loss may be recognized. The lease of the assets is accounted for as either an operating lease or a capital lease depending upon its specific terms, as required by Statement of Financial Accounting Standards No. 13, Accounting for Leases. By their nature, sale-leaseback transactions are generally highly structured and complex transactions, which therefore require detailed analyses to be made by the Company in determining the appropriate accounting treatment.

Insurance

        The following accounting policies apply specifically to the Insurance business. In December 2003, the Company has contracted to sell this business and consequently has reflected the results of operations in loss from discontinued operations, net of tax, and the assets and liabilities in assets and liabilities held for sale and in discontinued operations.

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Premiums and acquisition costs

        Premiums are generally earned pro rata over the period coverage is provided. Premiums earned include estimates of certain premiums due, including adjustments on retrospectively rated contracts. Premium receivables include premiums relating to retrospectively rated contracts that represent the estimate of the difference between provisional premiums received and the ultimate premiums due. Unearned premiums represent the portion of premiums written that is applicable to the unexpired terms of reinsurance contracts or certificates in force. These unearned premiums are calculated by the monthly pro rata method or are based on reports from ceding companies. Acquisition costs are costs related to the acquisition of new business and renewals. These costs are deferred and charged against earnings ratably over the terms of the related policy.

Profit commission

        Certain contracts carry terms and conditions that result in the payment of profit commissions. Estimates of profit commissions are reviewed based on underwriting experience to date and, as adjustments become necessary, such adjustments are reflected in discontinued operations.

Loss and loss adjustment expenses

        Loss and loss adjustment expenses are charged to operations as incurred. The liabilities for unpaid loss and loss adjustment expenses are determined on the basis of reports from ceding companies and underwriting associations, as well as estimates by management and in-house actuaries, including those for incurred but not reported losses, salvage and subrogation recoveries. Inherent in the estimates of losses are expected trends of frequency, severity and other factors that could vary significantly as claims are settled. The Company estimates expected trends using actuarial methods widely used in the insurance industry, such as the Bornhuetter-Ferguson method, utilizing the Company's historically paid and incurred losses. Accordingly, ultimate losses could vary from the amounts provided for in these Consolidated Financial Statements.

Fees

        Contracts that neither result in the transfer of insurance risk nor the reasonable possibility of significant loss to the reinsurer are accounted for as financing arrangements rather than reinsurance. Consideration received for such contracts is reflected as accounts payable, other, and is amortized on a pro rata basis over the life of the contract.

Funds withheld

        Under the terms of certain reinsurance agreements, the ceding reinsurer retains a portion of the premium to provide security for expected loss payments. The funds withheld are generally invested by the ceding reinsurer and earn an investment return that becomes additional funds withheld.

Reinsurance

        The Company seeks to reduce the loss that may arise from catastrophes and other events that may cause unfavorable underwriting results by reinsuring certain levels of risks with other insurance

F-19

enterprises or reinsurers. Reinsurance contracts are accounted for by reducing premiums earned by amounts paid to the reinsurers. Recoverable amounts are established for paid and unpaid losses and loss adjustment expense ceded to the reinsurer. Amounts recoverable from the reinsurer are estimated in a manner consistent with the claim liability associated with the reinsurance policy. Contracts where it is not reasonably possible that the reinsurer may realize a significant loss from the insurance risk generally do not meet the conditions for reinsurance accounting and are recorded as deposits. The Company assesses probability of risks transferred in significant loss realization based on the terms in the reinsurance contract that impact the timing and amount of reimbursement under the contract and the present value of all cash flows without regard to how cash flows are characterized, in accordance with Statement of Financial Accounting Standards No. 113, Accounting and Reporting for Reinsurance of Short Duration and Long Duration Contracts.

Translation of foreign currencies and foreign exchange transactions

        The functional currency for most of the Company's operations is the applicable local currency. The translation from the applicable functional currencies into the Company's reporting currency is performed for balance sheet accounts using exchange rates in effect at the balance sheet date, and for income statement accounts using average rates of exchange prevailing during the year. The resulting translation adjustments are excluded from the determination of earnings and are recognized in accumulated other comprehensive loss until the entity is sold, substantially liquidated or being evaluated for impairment in anticipation of disposal.

        Foreign currency exchange gains and losses, such as those resulting from foreign currency denominated receivables or payables, are included in the determination of earnings, except as they relate to intra-Company loans that are equity-like in nature with no reasonable expectation of repayment, which are recognized in accumulated other comprehensive loss.

        In highly inflationary countries, monetary balance sheet positions in local currencies are converted into U.S. dollars at the year-end rate. Fixed assets are kept at historical U.S. dollar values from acquisition dates. Sales and expenses are converted at the exchange rates prevailing upon the date of the transaction. All translation gains and losses from restatement of balance sheet positions are included in the determination of earnings.

Taxes

        The Company uses the asset and liability method to account for deferred taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The deferred tax assets are reduced by a valuation allowance to reflect the amount that is more likely than not to be realized.

        Generally, deferred taxes are not provided on the unremitted earnings of subsidiaries as it is expected that these earnings are permanently reinvested. Such earnings may become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. Deferred taxes are provided in situations where the Company's subsidiaries plan to make future dividend distributions.

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Research and development

        Research and development expense was $613 million, $547 million and $590 million in 2003, 2002 and 2001, respectively. These costs are included in selling, general and administrative expenses.

Earnings per share

        Basic earnings (loss) per share is calculated by dividing income (loss) by the weighted-average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised and that any proceeds from such exercises were used to acquire shares of the Company's stock at the average market price during the year or the period the securities were outstanding, if shorter. Potentially dilutive securities comprise: outstanding written call options, if dilutive; the securities issued under the Company's management incentive plan, to the extent the average market price of the Company's stock exceeded the exercise prices of such instruments; shares issuable in relation to outstanding convertible bonds, if dilutive; and outstanding written put options, for which net share settlement at average market price of the Company's stock was assumed, if dilutive (see Notes 22 and 24).

Stock-based compensation

        The Company has a management incentive plan under which it offers stock warrants to key employees for no consideration. The plan is described more fully in Note 22. The Company accounts for the warrants using the intrinsic value method of APB Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, as permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock Based Compensation. All warrants were issued with exercise prices greater than the market prices of the stock on the dates of grant. Accordingly, the Company has recorded no compensation expense related to the warrants, except in circumstances when a participant ceases to be employed by a consolidated subsidiary, such as after a divestment by the Company. The following table illustrates the effect on net income and earnings per share (see Note 24) if the Company had applied the fair value recognition provisions of

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SFAS 123 to stock-based employee compensation. Fair value of the warrants was determined on the date of grant by using the Binomial option model (see Note 22).

		Year ended December 31,
		2003			2002			2001
Net loss, as reported		$	(767	)	$	(783	)	$	(729	)
Less: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(11	)		(22	)		(22	)
Pro forma net loss		$	(778	)	$	(805	)	$	(751	)
Earnings per share:
	Basic—as reported	$	(0.63	)	$	(0.70	)	$	(0.64	)
	Basic—pro forma	$	(0.64	)	$	(0.72	)	$	(0.66	)
	Diluted—as reported	$	(0.63	)	$	(0.83	)	$	(0.64	)
	Diluted—pro forma	$	(0.64	)	$	(0.85	)	$	(0.66	)

New accounting pronouncements

        In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations, and SFAS 142 which modified the accounting for business combinations, goodwill and identifiable intangible assets. All business combinations initiated after June 30, 2001, must be accounted for by the purchase method. Goodwill from acquisitions completed after that date is not amortized, but charged to operations when specified tests indicate that the goodwill is impaired, that is, when the goodwill's fair value is lower than its carrying value. Certain intangible assets are recognized separately from goodwill, and are amortized over their useful lives. During 2002, all goodwill was required to be tested for impairment as of January 1, 2002, with a transition adjustment recognized for any impairment identified. The Company determined that no impairment of goodwill existed at January 1, 2002. All goodwill amortization also ceased at that date. The Company recognized goodwill amortization expense in continuing operations of $148 million in 2001, and goodwill amortization expense in discontinued operations of $43 million in 2001. Accordingly, income from continuing operations in 2001 would have been $319 million ($0.28 per share), loss from discontinued operations in 2001 would have been $794 million ($0.70 per share) and net loss in 2001 would have been $538 million ($0.48 per share) if the Company had not recognized amortization expense for goodwill that is no longer being amortized in accordance with SFAS 142.

        In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143 (SFAS 143), Accounting for Asset Retirement Obligations, which is effective for fiscal years beginning after June 15, 2002, and requires that the fair value of a legal obligation associated with the retirement of tangible long-lived assets be recognized in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the asset and allocated to expense over its useful life. The Company adopted SFAS 143 effective January 1, 2003. The adoption of SFAS 143 did not have a material impact on the Company's results of operations.

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        In August 2001, the Financial Accounting Standards Board issued SFAS 144. This Statement supersedes SFAS 121, while retaining many of its requirements regarding impairment loss recognition and measurement. In addition, the new Statement broadens the presentation of discontinued operations to include more sold and abandoned businesses. The Company adopted this statement effective January 1, 2002, and, as a result, reflected the assets, liabilities and results of operations of several businesses and groups of assets as discontinued operations for all periods presented to the extent these businesses and groups of assets met the new criteria during 2003 and 2002. Disposals and abandonments in previous years were not re-evaluated or reclassified.

        In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, which rescinds previous requirements to reflect all gains and losses from debt extinguishment as extraordinary. The Company elected to early adopt the new standard effective April 1, 2002, and, as a result, the gains from extinguishment of debt of $12 million recorded as extraordinary items in 2001, are no longer reflected as extraordinary items.

        In June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146 (SFAS 146), Accounting for Costs Associated with Exit or Disposal Activities, which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The standard became effective January 1, 2003 and was applied to restructuring activities initiated after that date. Prior to January 1, 2003, the Company accounted for restructuring activities in accordance with Emerging Issues Task Force No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). The adoption of SFAS 146 did not have a material impact on the Company's financial position or results of operations.

        In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires the guarantor to recognize a liability for the non-contingent component of a guarantee; that is, the obligation to stand ready to perform in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at its inception. The recognition of the liability is required even if it is not probable that payments will occur under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements. FIN 45 also requires additional disclosures related to guarantees. The Company adopted the disclosure requirements of FIN 45 on December 31, 2002. The recognition and measurement provisions of FIN 45 are effective for all guarantees entered into or modified after December 31, 2002. The Company adopted the recognition and measurement requirements of FIN 45 on January 1, 2003. The adoption of the recognition and measurement requirements of FIN 45 did not have a material impact on the Company's financial position or results of operations.

        In November 2002, the Emerging Issues Task Force of the Financial Accounting Standards Board issued Emerging Issues Task Force No. 00-21 (EITF 00-21), Accounting for Revenue Arrangements with Multiple Deliverables, which was amended in January 2003 and requires that (a) revenue should be recognized separately for separate units of accounting in multiple deliverables

F-23

arrangements, (b) revenue for a separate unit of accounting should be recognized only when the arrangement consideration is reliably measurable and the earnings process is substantially complete, and (c) consideration should be allocated among the separate units of accounting based on their relative fair value. EITF 00-21 is applicable to transactions entered into after June 30, 2003. The adoption of EITF 00-21 did not have a material impact on the Company's financial position, or results of operations.

        In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148 (SFAS 148), Accounting for Stock-Based Compensation—Transition and Disclosure, An Amendment of FASB Statement No. 123. The Company has elected to continue with its current practice of applying the recognition and measurement principles of APB No. 25, Accounting for Stock Issued to Employees, as permitted by SFAS 148. The Company has adopted the disclosure requirements of SFAS 148 effective December 31, 2002.

        In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51. FIN 46 requires variable interest entities (VIEs) to be consolidated by their primary beneficiaries. During 2003, the Company adopted the requirements of FIN 46 and applied the guidance to VIEs in which the Company has an interest. See Note 8 for information relating to the impact of adopting FIN 46. FIN 46 was revised in December 2003. The Company will adopt the December revision (FIN 46R) by March 2004. The Company continues to evaluate the effects of the adoption of FIN 46R and does not expect such effects to be material to the Company's financial position or results of operations.

        In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150 (SFAS 150), Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS 150 establishes how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement requires that an issuer classify a financial instrument that is within the scope of the statement as a liability. SFAS 150 applies to all financial instruments entered into after May 31, 2003, and otherwise became effective for the Company after June 15, 2003. In November 2003, SFAS 150 was amended to indefinitely defer the measurement and recognition guidance for non-controlling interests that are classified as equity in a subsidiary of the Company, but that would be classified as a liability in the parent's financial statements under SFAS 150. However, SFAS 150, as amended, provides guidance on classification and disclosure of mandatorily redeemable non-controlling interests. The Company has adopted the measurement, classification and disclosure criteria of SFAS 150, as amended. The adoption of SFAS 150 did not have a material impact on the Company's financial position, or results of operations.

        In May 2003, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on Emerging Issues Task Force No. 03-4 (EITF 03-4), Determining the Classification and Benefit Attribution Method for a "Cash Balance" Plan. EITF 03-4 clarifies that a cash balance plan, as defined by the guidance, should be accounted for as a defined benefit plan using the traditional unit credit attribution method. The Company adopted EITF 03-4 in May 2003. As a result, the Company accounts for certain of its pension plans in Switzerland as cash balance plans in accordance with EITF 03-4. The adoption of EITF 03-4 reduced the unfunded amounts of

F-24

the Company's Swiss pension plans by approximately $406 million but did not have a material impact on the Company's financial position at December 31, 2003, or on its results of operations for the year then ended.

Note 3 Discontinued operations

        In November 2002, the Company completed the sale of most of its Structured Finance business to General Electric Capital Corporation (GE) and received cash proceeds of approximately $2.0 billion, including a contingent payment of $20 million to be released to the Company should amounts ultimately collected by GE, from a portfolio transferred by the Company to GE, reach specified targets. The $20 million contingent payment remains unpaid at December 31, 2003 as the amounts collected by GE to date have not met such specified targets. The Company's Structured Finance business had revenues of $262 million and $220 million in 2002 and 2001, respectively, and a net loss of $183 million in 2002 and net income of $8 million in 2001. The 2002 net loss of $183 million recorded in loss from discontinued operations, net of tax, included a $146 million loss on disposal, loss from operations of $22 million and the allocation of interest expense of $15 million in accordance with EITF 87-24. The loss on disposal of $146 million was principally comprised of asset write-downs of $15 million, goodwill and other intangible write-offs of $2 million, transaction costs of $27 million, the fair value for GE's right to require the Company to repurchase certain designated assets of $38 million, capital tax expense associated with the disposal of $10 million and an accumulated foreign currency translation loss of $54 million.

        Pursuant to the sale and purchase agreement, the Company provided GE with cash collateralized letters of credit aggregating $202 million as security for certain performance-related obligations retained by the Company, of which approximately $128 million were outstanding at December 31, 2003. The remaining cash collateralized letters of credit will further be reduced as the performance-related obligations by the Company expire.

        The sale and purchase agreement provided GE the option to require the Company to repurchase certain designated financial assets transferred to GE upon the occurrence of certain events, but in any event no later than February 1, 2004. The fair value of GE's right to require the Company to repurchase these designated assets was $11 million at December 31, 2003. On January 26, 2004, the Company repurchased the financial assets for an amount of approximately $28 million. Additionally, as a result of the exercise of GE's option, the cash collateralized letters of credit were reduced by $35 million. No further obligation exists for the Company to repurchase any assets under the sale and purchase agreement with GE.

        As a continuation of the Company's divestment of its Structured Finance business, the Company completed the sale of ABB Export Bank in December 2003 for approximately $50 million. ABB Export Bank had revenues of $9 million, $17 million and $29 million in 2003, 2002 and 2001, respectively, and a net loss of $9 million in 2003 and net income of $10 million and $6 million in 2002 and 2001, respectively. The 2003 net loss of $9 million in loss from discontinued operations, net of tax, includes a $12 million loss on disposal, income from operations of $6 million and the allocation of interest expense of $3 million in accordance with EITF 87-24. The loss on disposal of $12 million was principally comprised of an asset write-down of $20 million, transaction costs of

F-25

$1 million, capital tax expense associated with the disposal of $4 million offset by an accumulated foreign currency translation gain of approximately $13 million.

        In December 2002, in connection with the Company's divestment strategy to focus on its core power and automation technology businesses, the Company completed the sale of its Metering business to Ruhrgas Industries GmbH of Essen, Germany, for $223 million, including $15 million held in escrow until certain disputed items were resolved. The cash held in escrow was released after the resolution of these items in 2003. The Metering business sold to Ruhrgas Industries GmbH had revenues of $372 million and $448 million in 2002 and 2001, respectively, and a net loss of $54 million in 2002 and net income of $14 million in 2001. The 2002 net loss of $54 million recorded in loss from discontinued operations, net of tax, included a $48 million loss on disposal, loss from operations of $3 million and the allocation of interest expense of $3 million in accordance with EITF 87-24. The loss on disposal of $48 million for the sold business was principally comprised of goodwill and other intangible write-offs of $65 million, transaction costs and other provisions of $46 million, capital tax expense associated with the disposal of $21 million and an accumulated foreign currency translation loss of $35 million, offset in part by a gain of $119 million, being the difference between the proceeds received and net assets of the business.

        In December 2002, the Company's Board of Directors approved management's plans to sell the Company's Oil, Gas and Petrochemicals businesses. The disposal is in line with the Company's strategy to focus on its core power and automation technology businesses. In January 2004, the Company agreed to sell most of the upstream part of the Oil, Gas and Petrochemicals businesses (Upstream business) to a consortium consisting of Candover Partners Limited, JP Morgan Partners LLC and 3i Group PLC (collectively, the Purchasers) for an initial purchase price of $925 million plus a potential deferred consideration of up to $50 million. The initial purchase price of $925 million is subject to adjustments based on, among other things, the net assets of the Upstream business at closing and further potential adjustments that will be calculated at closing. Additionally, the initial purchase price will be reduced by $85 million to reflect the unfunded benefit liabilities of pension plan obligations assumed by the Purchasers. The $85 million reduction of the purchase price may increase or decrease based on the actual unfunded benefit liability calculated at closing, in accordance with the terms of the purchase agreement. Furthermore, the initial purchase price will be increased or decreased based on the net intercompany balance between the Company and the Upstream business at closing. The potential deferred consideration of up to $50 million can be realized by the Company if the Upstream business meets specified earnings targets in 2004. The Company does not expect a significant gain or loss to be recognized on the sale of the Upstream business.

        The remaining part of the Oil, Gas and Petrochemicals businesses (remaining OGP businesses) is available for immediate sale and continues to be actively marketed. It is unlikely that significant changes to the divestment strategy will be made or that the plan to divest the remaining OGP businesses will be withdrawn in the future. Management anticipates divesting this business in 2004.

        Accordingly, the results of the Oil, Gas and Petrochemical businesses are presented as discontinued operations for all periods presented. The Oil, Gas and Petrochemical businesses had revenues of $3,374 million, $3,854 million and $3,478 million in 2003, 2002 and 2001, respectively and net losses of $496 million and $127 million in 2003 and 2002, respectively, and net income of

F-26

$9 million in 2001. The Upstream business recorded revenues of approximately $1,499 million, $1,535 million and $1,468 million in 2003, 2002 and 2001, respectively, and had a net income of $4 million, $98 million and $93 million in 2003, 2002 and 2001, respectively. The 2003 net income of $4 million included $44 million of costs associated with the future sale of the Upstream business and $13 million of allocated interest expense in accordance with EITF 87-24. The remaining OGP businesses had revenues of $1,875 million, $2,319 million and $2,010 million in 2003, 2002 and 2001, respectively, and had net losses of $500 million, $225 million and $84 million in 2003, 2002 and 2001, respectively. During 2003, the Company recorded a valuation allowance on deferred tax assets of approximately $120 million related to the remaining OGP businesses, as the Company determined it was more likely than not that such deferred tax assets would not be realized.

        In December 2003, the Company agreed to sell its Reinsurance business to White Mountains Insurance Group Limited, a Bermuda-based insurance holding company, for a cash price of 3,220 million Swedish krona, (approximately $425 million). The disposal is in line with the Company's strategy to focus on its core power and automation technology businesses. The Reinsurance business had revenues of $782 million, $644 million and $933 million in 2003, 2002 and 2001, respectively. The Reinsurance business had a net loss of $97 million in 2003, net income of $22 million in 2002, and a net loss of $336 million in 2001. The 2003 net loss of $97 million recorded in loss from discontinued operations, net of tax, includes a $154 million impairment charge, income from operations of approximately $72 million and an allocation of interest of $15 million in accordance with EITF 87-24. The impairment charge recorded from the anticipated disposal of the Reinsurance business of $154 million was principally comprised of an asset write-down of $48 million, goodwill and other intangible write-offs of $89 million, expected selling costs of $25 million, deferred tax write-offs of approximately $16 million, offset in part by an accumulated foreign currency translation gain of $24 million.

        As a consequence of the planned sale of the Reinsurance business, insurance reserves of $1,871 million and $2,014 million at December 31, 2003 and 2002, respectively, were included in liabilities held for sale and in discontinued operations. Through December 2001, the Company recorded these insurance reserves on a discounted basis. As the amount and timing of the ceded claims payments could not be reliably determined at December 31, 2001, the Company could no longer discount its loss reserves. Accordingly, at December 31, 2003 and 2002, the insurance reserves were not presented on a discounted basis. In 2001, a charge of $295 million was recorded due to the elimination of the effect of discounting.

        In December 2003, the Company sold a portion of its Wind Energy business in Germany to GI Ventures AG of Munich, Germany, for proceeds of approximately $35 million including a vendor note of approximately $10 million. The Wind Energy business was no longer a core business and its divestment was part of the Company's ongoing divestment strategy. The Wind Energy business, which began operations in 2002, had revenues of $16 million and $48 million and net losses of $42 million and $1 million in 2003 and 2002, respectively. The 2003 net loss of $42 million recorded in loss from discontinued operations, net of tax, was comprised principally of a $25 million loss from disposal (net of a tax benefit of $10 million), asset write-downs of $9 million and a loss from operations of $8 million.

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        In December 2003, the Company agreed to sell its MDCV cable business based in Germany to the Wilms Group of Menden, Germany. This business, no longer pursued for strategic reasons, was part of the Power Technologies division. It had revenues of $74 million, $78 million and $60 million and had net losses of $24 million, $1 million and $5 million in 2003, 2002 and 2001, respectively. The 2003 net loss of $24 million recorded in loss from discontinued operations, net of tax, was comprised principally of asset write-downs of $10 million and a loss from operations of $14 million.

        Loss from discontinued operations, net of tax, also includes costs related to the Company's potential asbestos obligation of the Company's U.S. subsidiary, Combustion Engineering Inc., of approximately $145 million, $420 million and $470 million in 2003, 2002 and 2001, respectively (see Note 18).

        Loss from discontinued operations, net of tax, also includes other abandoned and/or sold assets, resulting in net losses of $8 million, $104 million, and $63 million in 2003, 2002 and 2001, respectively.

        Operating results of the discontinued businesses are summarized as follows:

	Year ended December 31,
	2003			2002			2001
Revenues	$	4,284		$	5,390		$	5,393
Costs and expenses, finance loss		(4,896	)		(5,963	)		(6,181	)
Loss before taxes and minority interest		(612	)		(573	)		(788	)
Tax expense		(218	)		(50	)		(15	)
Minority interest		14			(41	)		(34	)
Net loss from discontinued operations		(816	)		(664	)		(837	)
Loss from dispositions, net of a tax benefit of $6 million and tax expense of $31 million in 2003 and 2002, respectively		(37	)		(194	)		—
Loss from discontinued operations, net of tax	$	(853	)	$	(858	)	$	(837	)

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        The components of assets and liabilities held for sale and in discontinued operations are summarized as follows:

	December 31,
	2003		2002
Cash and equivalents	$	431	$	435
Marketable securities		1,625		1,554
Receivables, net		2,626		3,326
Inventories, net		337		513
Prepaid expenses and other		224		219
Financing receivables, non-current		52		238
Goodwill and Other intangible assets		609		664
Property, plant and equipment, net		241		212
Other assets		282		338
Assets held for sale and in discontinued operations	$	6,427	$	7,499
Accounts payable	$	2,095	$	2,693
Short-term borrowings and current maturities of long-term borrowings		23		50
Accrued liabilities and other		2,324		2,588
Long-term borrowings		47		18
Other liabilities		611		617
Liabilities held for sale and in discontinued operations	$	5,100	$	5,966

        Included above are the assets and the liabilities held for sale from the Building Systems businesses of approximately $81 million and $42 million, respectively, at December 31, 2003 and $440 million and $455 million, respectively, at December 31, 2002. In accordance with SFAS 144, certain Building Systems businesses met the criteria for the classification of assets as held for sale, but did not meet the additional criteria for its results of operations to be classified as discontinued operations (see Note 4).

        At December 31, 2003 and 2002, the Consolidated Balance Sheets included $79 million and $60 million of pledged cash balances, respectively. Approximately $44 million and $60 million related to the Company's insurance operations and $8 million and $0 million related to the Oil, Gas and Petrochemicals business and, as such, were included in assets held for sale and in discontinued operations in 2003 and 2002, respectively.

Note 4 Business combinations and other divestments

Entrelec Group

        In June 2001, the Company completed the acquisition, through an open-market tender, of Entrelec Group, a France-based supplier of industrial automation and control products operating in 17 countries. The Company's Consolidated Financial Statements include Entrelec's result of operations since June 20, 2001, the transaction closing date.

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        The cash purchase price of the acquisition was approximately $284 million. The excess of the purchase price over the fair value of the assets acquired totaled $294 million and has been recorded as goodwill. The transaction has been accounted for as a purchase. Included in the purchase price allocation was an amount of $21 million for a restructuring of the business.

b-business partners B.V.

        In June 2000, the Company entered into a share subscription agreement to acquire an interest in b-business partners B.V., which at December 31, 2003 remains at a four percent interest. The Company is committed to provide additional capital to b-business partners B.V. of $5 million. Further, b-business partners B.V. retains a put right to compel the Company to purchase 150,000 shares of b-business partners B.V. at a cost of approximately $19 million.

Other acquisitions and investments

        During 2003, 2002, and 2001, the Company invested $55 million, $154 million and $179 million, respectively, in 24, 32 and 60 new businesses, joint ventures or affiliated companies. Of these transactions, 1, 6 and 10, respectively, represented acquisitions accounted for as purchases and accordingly, the results of operations of the acquired businesses have been included in the Company's Consolidated Financial Statements from the respective acquisition dates. The aggregate purchase price of these acquisitions during 2003, 2002 and 2001 was $1 million, $55 million and $45 million, respectively. The aggregate excess of the purchase price over the fair value of the net assets acquired totaled $2 million, $93 million and $29 million, in 2003, 2002 and 2001, respectively, and has been recorded as goodwill. Assuming these acquisitions had occurred on the first day of the year prior to their purchase, the pro forma Consolidated Income Statement for those years would not have materially differed from reported amounts either on an individual or an aggregate basis.

Other divestitures

        In addition to the sold businesses described under discontinued operations, the Company periodically divests businesses and investments not considered by management to be aligned with its focus on power and automation technologies. The results of operations of these divested businesses are included in the Company's Consolidated Income Statement in the respective line items of income from continuing operations, through the date of disposition.

Divestment of Building Systems businesses

        In April 2002, the Company decided to dispose of its Building Systems businesses. The gradual disposal process was envisaged to extend over a non-defined period of time preceded by restructurings in several locations. The disposal of the Building Systems businesses contemplated that the Company would retain an involvement in the disposed operations through a combination of technology license agreements, supplier relationships, retention of certain orders and participation in the Board of Directors of some of the disposed of companies. As a result of these factors, the Company concluded that classification of the Building Systems businesses as discontinued operations according to SFAS 144 was not appropriate. The results of operations of these

F-30

businesses and the results from the disposal of each disposed of business are reported in the Company's Consolidated Income Statement within continuing operations, through the date of disposition.

        In August 2003, the Company completed the sale of its Building Systems businesses located in Sweden, Norway, Denmark, Finland, Russia and the Baltics to YIT Corporation of Helsinki, Finland, for consideration of approximately $213 million. The Company recognized a net gain on disposal of $124 million, which is included in other income (expense), net.

        In 2003, the Company completed the sale of its Building Systems businesses located in several other countries, principally Belgium, the Netherlands, Austria, and the UK for aggregate proceeds of approximately $21 million. The Company recognized a net loss on disposal of $41 million, which is included in other income (expense), net.

        In February 2004, the Company signed an agreement to sell its Building Systems business located in Switzerland to CapVis Equity Partners AG, a Swiss private equity company, for a purchase price of approximately $39 million. During 2003, the Company recorded no impairment charge on this business, based on the estimated sales price of the business. The Company has retained a 10 percent ownership interest and anticipates a net gain on disposal of approximately $3 million.

Divestment of Air Handling business

        In January 2002, the Company sold its Air Handling business to Global Air Movement (Luxembourg) SARL for proceeds of $147 million, including a vendor note of $34 million issued by the purchaser. The Company recognized a net gain on disposal of $74 million, which is included in other income (expense), net.

Other divestitures

        In June 2003, the Company sold its interests in certain equity investees in Australia for approximately $90 million, resulting in a gain on disposal of $28 million recorded in other income (expense), net.

        In June 2003, the Company sold its entire 35 percent interest in Swedish Export Credit Corporation to the Government of Sweden for 1,240 million Swedish krona, resulting in net proceeds of approximately $149 million and a loss on disposal of $80 million recorded in other income (expense), net.

        During 2003, 2002 and 2001, the Company sold several operating units and investments for total proceeds of $31 million, $209 million and $117 million, respectively, and recognized net gains on disposal of $12 million, $24 million and $34 million, respectively, which are included in other income (expense), net. Net income from these businesses and investments was not significant in 2003, 2002 and 2001.

F-31

Note 5 Marketable securities

        Marketable securities consist of the following:

	December 31,
	2003		2002
Trading	$	1	$	48
Available-for-sale		455		532
Securities serving as hedges of the Company's management incentive plan (see Note 22)		17		9
Total	$	473	$	589

        To hedge its exposure to fluctuations in fair value of certain of the Company's warrant appreciation rights (WARs) issued under the Company's management incentive plan, the Company purchases cash-settled call options, which entitle the Company to receive amounts equivalent to its obligations under the outstanding WARs. In accordance with Emerging Issues Task Force No. 00-19 (EITF 00-19), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock, the cash-settled call options have been recorded as assets measured at fair value, with subsequent changes in fair value recorded through earnings as an offset to the compensation expense recorded in connection with the WARs.

        Available-for-sale securities classified as marketable securities consist of the following:

		Cost		Unrealized gains		Unrealized losses			Fair value
At December 31, 2003:
Equity securities		$	76	$	25	$	(1	)	$	100
Debt securities:
	U.S. government obligations		71		2		(1	)		72
	European government obligations		29		1		(1	)		29
	Corporate		5		—		—			5
	Other		228		21		—			249
Total debt securities			333		24		(2	)		355
Total		$	409	$	49	$	(3	)	$	455
At December 31, 2002:
Equity securities		$	96	$	2	$	(26	)	$	72
Debt securities:
	U.S. government obligations		61		3		—			64
	European government obligations		23		1		(1	)		23
	Corporate		28		1		—			29
	Other		326		18		—			344
Total debt securities			438		23		(1	)		460
Total		$	534	$	25	$	(27	)	$	532

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        At December 31, 2003, contractual maturities of the above available-for-sale debt securities consist of the following:

	Cost		Fair value
Less than one year	$	181	$	181
One to five years		19		19
Six to ten years		30		31
Due after ten years		103		124
Total	$	333	$	355

        Gross realized gains on available-for-sale securities were $8 million, $11 million and $22 million in 2003, 2002 and 2001, respectively. Gross realized losses on available-for-sale securities were $2 million, $9 million and $9 million in 2003, 2002 and 2001, respectively. Additionally, in 2003 and 2002, the Company recorded charges of $36 million and $6 million, respectively, related to the impairment of available-for-sale securities. These charges are included in interest and other finance expense and other income (expense), net, respectively.

        The following table reflects gross unrealized losses and the fair value of those available-for-sale securities, aggregated by investment category, that at December 31, 2003, have been in a continuous unrealized loss position. These securities have been in a continuous unrealized loss position for less than 12 months. The Company has no available-for-sale securities that have been in a continuous unrealized loss position for 12 months or more.

Description of securities	Fair value		Unrealized losses
Equity securities	$	3	$	(1	)
US government obligations		56		(1	)
European government obligations		24		(1	)
	$	83	$	(3	)

        Unrealized losses on equity and debt securities held and classified as available-for-sale are judged to be only temporary based on the creditworthiness of the obligors as it relates to debt securities and as it relates to all securities held, the financial position of the underlying companies, the significance of the unrealized losses relative to the asset cost and the duration that the securities have been in an unrealized loss position.

        At December 31, 2002, investments and other included $77 million of available-for-sale securities, which were strategic investments. In 2002, net unrealized losses of $42 million on these investments were included in accumulated other comprehensive loss. In 2003, these investments were sold resulting in realized losses of $40 million, which is recorded in interest and other finance expense.

        At December 31, 2002, the Company contributed a portfolio of available-for-sale securities to a pension trust in Sweden at its then fair value of $260 million. In connection with this transfer, the

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Company recognized the related cumulative net loss of $27 million in interest and other finance expense.

        The net change in unrealized gains and losses in fair values of trading securities was not significant in 2003, 2002 or 2001.

        At December 31, 2003 and 2002, the Company pledged $41 million and $15 million, respectively, of marketable securities as collateral for issued letters of credit, insurance contracts or other security arrangements.

Note 6 Financial instruments

Cash flow hedges

        The Company enters into forward foreign exchange contracts to manage the foreign exchange risk of its operations. To a lesser extent the Company also uses commodity contracts to manage its commodity risks. Where such instruments are designated and qualify as cash flow hedges, the changes in their fair value are recorded in accumulated other comprehensive loss, until the hedged item is recognized in earnings. At such time, the respective amount in accumulated other comprehensive loss is released to earnings and is shown in either revenues or cost of sales consistent with the classification of the earnings impact of the underlying transaction being hedged. Any hedge ineffectiveness is included in revenues and cost of sales but is not significant for 2003 and 2002.

        During 2003 and 2002, the amount of derivative financial instrument net gains or losses reclassified from accumulated other comprehensive loss to earnings were net gains of $58 million for 2003 and net losses of $4 million for 2002. It is anticipated that during 2004, $75 million of the amount included in accumulated other comprehensive loss at December 31, 2003, which represents gains on derivative financial instruments, will be reclassified to earnings when the underlying hedged transaction impacts earnings. Derivative financial instrument gains and losses reclassified to earnings offset the losses and gains on the items being hedged.

        While the Company's cash flow hedges are primarily hedges of exposures over the next twelve months, the amount included in accumulated other comprehensive loss at December 31, 2003 includes hedges of certain exposures maturing up to 2007.

Fair value hedges

        To reduce its interest rate and forreign currency exposure arising primarily from its funding activities, the Company uses interest rate and cross-currency swaps. Where such instruments are designated as fair value hedges, the changes in fair value of these instruments, as well as the changes in fair value of the underlying liabilities, are recorded as offsetting gains and losses in the determination of earnings. The amount of hedge ineffectiveness was $11 million in 2003 and was not significant in 2002.

F-34

Disclosure about fair values of financial instruments

        The Company uses the following methods and assumptions in estimating fair values for financial instruments:

        Cash and equivalents, receivables, accounts payable, short-term borrowings and current maturities of long-term borrowings:    The carrying amounts reported in the Consolidated Balance Sheet approximate the fair values.

        Marketable securities:    Fair values are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

        Financing receivables and loans (non-current portion):    Fair values are determined using a discounted cash flow methodology based upon loan rates of similar instruments. The carrying values and estimated fair values of long-term loans granted at December 31, 2003 were $434 million and $421 million, respectively, and at December 31, 2002 were $629 million and $517 million, respectively.

        Long-term borrowings (non-current portion):    Fair values are based on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or in the case of bond or note issuances, using the relevant borrowing rates derived from interest rate swap curves. Such swap curves are interest rates quoted by market participants for the relevant maturities, excluding any component associated with credit risk of counterparties. As these bonds or note issuances reflect liabilities of the Company, if the Company's credit rating was reflected in these discount rates, the present value calculation would result in a lower fair value liability. The carrying values and estimated fair values of long-term borrowings at December 31, 2003 were $6,290 million and $6,936 million, respectively, and at December 31, 2002 were $5,358 million and $5,763 million, respectively.

        Derivative financial instruments:    Fair values are the amounts by which the contracts could be settled. These fair values are estimated by using a discounted cash flow methodology based on available market data, option pricing models or by obtaining quotes from brokers. At December 31, 2003 and 2002, the carrying values equal fair values. The fair values are disclosed in Notes 10 and 16.

F-35

Note 7 Receivables

        Receivables consist of the following:

		December 31,
		2003			2002
Trade receivables		$	3,481		$	3,164
Other receivables			1,229			1,286
Allowance			(250	)		(210	)
			4,460			4,240
Unbilled receivables, net:
	Costs and estimated profits in excess of billings		1,706			1,594
	Advance payments received		(829	)		(700	)
			877			894
Total		$	5,337		$	5,134

        Trade receivables include contractual retention amounts billed to customers of $85 million and $129 million at December 31, 2003 and 2002, respectively. Management expects the majority of related contracts will be completed and substantially all of the billed amounts retained by the customer will be collected within one year of the respective balance sheet date. Other receivables consist of V.A.T., claims, employee and customer related advances, the current portion of direct finance and sales-type leases and other non-trade receivables, including the retained interests on sold receivables under the Company's securitization programs.

        Costs and estimated profits in excess of billings represent sales earned and recognized under the percentage-of-completion method. Amounts are expected to be collected within one year of the respective balance sheet date.

        During 2003 and 2002, the Company sold trade receivables to two separate QSPEs, unrelated to the Company, in revolving-period securitizations. The Company retains servicing responsibility relating to the sold receivables. Solely for the purpose of credit enhancement from the perspective of the QSPEs, the Company retains an interest in the sold receivables (retained interests). These retained interests are initially measured at estimated fair values, which the Company believes approximate historical carrying values, and are subsequently measured based on a periodic evaluation of collections and delinquencies.

        Given the short-term, lower-risk nature of the assets securitized, market movements in interest rates would not significantly impact the carrying value of the Company's retained interests. An adverse movement in foreign currency rates could have an impact on the carrying value of these retained interests as the retained interests are denominated in the original currencies underlying the sold receivables. While such remeasurements are recognized in earnings, the impact has historically not been significant due to the short-term nature of the receivables and economic hedges in place relating to foreign currency movement risk.

        The Company routinely evaluates its portfolio of trade receivables for risk of non-collection and records an allowance for doubtful debts to reflect the carrying value of its trade receivables at estimated net realizable value. Pursuant to the requirements of the revolving-period securitizations

F-36

through which the Company securitizes certain of its trade receivables, the Company effectively bears the risk of potential delinquency or default associated with trade receivables sold or interests retained. Accordingly, in the normal course of servicing the assets sold, the Company evaluates potential collection losses and delinquencies and updates the estimated fair value of the Company's retained interests. An increase in delinquency rates compared to historic levels would cause an increase in the retained interest. Ultimately, if the customer defaults, the Company will be responsible for absorbing the amount. The fair value of the retained interests at December 31, 2003 and 2002, was approximately $367 million and $497 million, respectively.

        In accordance with SFAS 140, the Company has not recorded a servicing asset or liability as management believes it is not practicable to estimate this value given that verifiable data as to the fair value of the compensation and/or cost related to servicing the types of the assets sold is not readily obtainable nor reliably estimable for the multiple geographic markets in which the entities selling receivables operate.

        During 2003 and 2002, the following cash flows were received from and paid to QSPEs:

	December 31,
	2003			2002
Gross trade receivables sold to QSPEs ($482 and $800)*	$	5,661		$	5,972
Collections made on behalf of and paid to QSPEs (($663) and ($735))*		(5,883	)		(6,074	)
Purchaser's, liquidity and program fees (($2) and ($5))*		(21	)		(37	)
Decrease (increase) in retained interests ($119 and ($91))*		124			(245	)
Net cash paid to QSPEs during the year (($64) and ($31))*	$	(119	)	$	(384	)

*

Related to assets held for sale and in discontinued operations for 2003 and 2002, respectively

        During the fourth quarter of 2002, a number of changes were made to the two securitization programs as a consequence of the Company's credit rating falling below BBB (Standard & Poor's) and Baa2 (Moody's). These changes included, in the case of the first program, twice monthly settlements (instead of monthly), the sale of additional receivables as security, changes in the eligibility criteria for receivables to be sold and the establishment of certain banking and collection procedures in respect of the sold receivables. Changes in the second program included the introduction of net cash settlements twice per month (instead of monthly), the daily transfer of collections of sold receivables, as well as a fixed percentage of retained interest on the sale of new receivables. In 2003, further amendments have been made to the second program, including the return to a dynamic calculation of the retained interest on the receivables sold rather than a fixed percentage. Under the amended terms of the second program, if the Company's rating falls below BB+ (Standard & Poor's) or Ba3 (Moody's) then the Company may be required to relinquish its right to collect the sold receivables on behalf of the QSPE, and instead the cash collection of such sold receivables would be made directly to the account of the QSPE.

        The Company records a loss on sale and the purchaser's, liquidity and program fees at the point of sale of the receivables to the QSPEs. The total cost of $21 million and $37 million in 2003

F-37

and 2002, respectively, related to the securitization of trade receivables, is included in interest and other finance expense.

        The decrease in gross receivables sold in 2003 compared to 2002 is due primarily to the fact that businesses which were either classified as discontinued operations or which were sold by the Company were phased out of the securitization programs during the year.

        The reduction in gross receivables sold, a lower average funded volume, a reduction in default and delinquency rates, as well as the fact that 2002 contained costs related to restructuring the programs, all contributed to lower purchaser's, liquidity and program fees in 2003 compared to 2002. The decrease in retained interests in 2003 of $124 million was mainly due to businesses classified as discontinued operations or held for sale being phased out of the programs. The increased retained interests in 2002 of $245 million were caused by the additional credit enhancement measures taken by the QSPEs in 2002 as described above.

        The following table reconciles total gross receivables to the amounts in the Consolidated Balance Sheet after the effects of securitization at December 31, 2003 and 2002:

	December 31,
	2003			2002
Total trade receivables	$	4,794		$	4,667
Portion derecognized		(508	)		(512	)
Retained interests included in other receivables		(390	)		(514	)
Trade receivables		3,896			3,641
Less: Trade receivables included in assets held for sale and in discontinued operations		(415	)		(477	)
Trade receivables—continuing operations	$	3,481		$	3,164

        At December 31, 2003 and 2002, of the gross trade receivables sold, the total trade receivables for which cash has not been collected at those dates amounted to $898 million and $1,026 million, respectively ($0 million and $183 million related to assets held for sale and in discontinued operations in 2003 and 2002, respectively). At December 31, 2003 and 2002 an amount of $34 million and $96 million, respectively ($0 million and $19 million related to assets held for sale and in discontinued operations in 2003 and 2002, respectively), was more than 90 days past due which is considered delinquent pursuant to the terms of the programs.

        In addition, the Company transfers receivables outside of the above described securitization programs. These transfers were sales, made without recourse, directly to banks and/or sales pursuant to factoring or similar type arrangements. Total sold receivables included in these transactions during 2003 and 2002 were approximately $1,400 million (of which $581 million related to assets held for sale and in discontinued operations) and $534 million (of which $22 million related to assets held for sale and in discontinued operations), respectively. The related costs, including the associated gains and losses, were $12 million ($3 million related to assets held for sale and in discontinued operations) in 2003. In 2002 the related costs were not significant.

F-38

Note 8 Variable interest entities

The following VIEs are consolidated, as the Company is the primary beneficiary as defined by FIN 46.

        In March 2003, the Company sold its aircraft-leasing portfolio in Sweden to a third party. Subsequent to divestment, the Company continued its involvement in this business by providing significant financial support in the form of mezzanine and subordinated financing of approximately $90 million to the VIE formed by the buyer upon acquisition, exclusively for the purpose of servicing the aircraft leasing portfolio. As the primary beneficiary of the VIE, the Company retained approximately $182 million of assets and acquired approximately $76 million of third party long-term borrowings provided to the VIE at December 31, 2003. All of the VIE's assets serve as collateral for the senior debt provided by third parties. The Company has no ownership interest and there is no recourse to the general credit of the Company.

        The Company maintains an immaterial equity interest and provides approximately $1.2 million of financing to a VIE that was established to develop software tools for the process automation industry. The VIE recognized revenues of $0.5 million and a loss before interest and taxes of approximately $0.2 million. The Company has a minority ownership interest and there is no recourse to the general credit of the Company.

        The Company consolidates a VIE that provides energy services through rental and maintenance contracts with third parties. The VIE recognized revenues of approximately $0.5 million and an immaterial loss before interest and taxes. The Company has a minority ownership interest and there is no recourse to the general credit of the Company.

The following VIEs are not consolidated, as the Company is not the primary beneficiary as defined by FIN 46.

        The Company maintains a combined equity and financing interest of approximately $603 million in six VIEs that were established as joint ventures to develop power plants in various countries. The Company's involvement with these VIEs began between 1995 and 2000 at the dates of inception of the VIEs. The purpose of the VIEs is to contract the engineering, procurement, commissioning and financing of the power plants. These VIEs have combined total assets of approximately $2,900 million and reported combined total revenues and earnings before interest and taxes of $589 million and $94 million, respectively. The exposure to loss as a result of involvement with the VIEs is limited to the Company's equity and financing interests.

        In January 2002, the Company sold its Air Handling business for proceeds of $147 million including a vendor note of $34 million issued by the purchaser. The purchaser established a VIE upon acquisition for this business. The Company's exposure to loss as a result of involvement with the VIE is limited to the outstanding vendor note at December 31, 2003.

        The Company maintains a 50 percent equity interest in two VIEs that were established to build four transmission power lines and 22 substations in Mexico. The equity interests are not significant in value. The Company's involvement with these VIEs began in September and November 1997, respectively, when the VIEs were formed. The purpose of the VIEs is to contract the engineering, procurement, commissioning and Company's financing of these projects. These VIEs have total assets of approximately $89 million, and reported combined total revenues and earnings before

F-39

interest and taxes of $8 million and $0.2 million, respectively. The exposure to loss as a result of involvement in the VIEs is limited to the Company's equity interest.

        The Company maintains a minority equity interest, that is insignificant in value, in a VIE that was established with another contractor for executing a project for the construction of two substations and four transmission lines in Mexico. The Company's involvement began in February 2002 when the VIE was formed. The sole purpose of the VIE is to submit a bid to execute, to organize subcontracting and to arrange financing of the project. The entity has assets of $128 million and reported revenues and earnings before interest and taxes of approximately $128 million and $0, respectively. The Company's exposure to loss as a result of involvement with the VIE is limited to the Company's equity interest in the VIE.

        The Company maintains a combined equity and financing interest of $11 million in two VIEs that were established to execute a project in London, England. One VIE was established to serve as a consortium among two third parties and the Company. The purpose of this VIE is to operate, maintain and finance the power distribution project. The second VIE is the financing vehicle for the project. The Company's involvement began at the inception of these VIEs in August 1998. These VIEs have total assets of approximately $412 million and reported combined total revenues and earnings before interest and taxes of $106 million and $17 million, respectively. The Company's exposure to loss as a result of involvement with the VIEs is limited to the Company's equity and financing interest in the VIEs.

        The Company has an equity interest of approximately $0.3 million in two VIEs that were established for developing real estate in Germany. The Company's involvement with these VIEs began at inception in 1995. The VIEs have total assets of approximately $61 million. The Company's exposure to loss as a result of involvement with the VIEs is limited to the Company's equity interest in the VIEs.

        The Company maintains an equity interest of approximately $0.1 million in two VIEs that were established for holding and leasing real estate in Germany. The Company's involvement began when the VIEs were established in 1993 and 1995, respectively. The purpose of the VIEs is to realize real estate savings arising from specific project financing. The VIEs total assets are approximately $20 million and earnings before interest and taxes of the VIEs is approximately break-even. The Company's exposure to loss as a result of involvement with these VIEs is limited to the Company's equity interest.

        The Company maintains an equity and financing interest of approximately $0.2 million in a VIE established to expand and operate an airport in Oman. The Company's involvement began in January 2002. The VIE has assets of $9 million and reported revenues of $18 million. The Company's exposure to loss as a result of involvement with this VIE is limited to the Company's equity and financing interests.

F-40

Note 9 Inventories

        Inventories, including inventories related to long-term contracts, consist of the following:

		December 31,
		2003			2002
Commercial inventories, net:
	Raw materials	$	1,084		$	1,014
	Work in process		1,143			958
	Finished goods		372			318
			2,599			2,290
Contract inventories, net:
	Inventoried costs		352			371
	Contract costs subject to future negotiation		20			23
	Advance payments received related to contracts		(366	)		(423	)
			6			(29	)
Total		$	2,605		$	2,261

        Contract costs subject to future negotiation are deemed probable of recovery through changes in the contract price and are deferred until the parties have agreed on these changes.

Note 10 Prepaid expenses and other

        Prepaid expenses and other current assets consist of the following:

	December 31,
	2003		2002
Prepaid expenses	$	419	$	448
Deferred taxes		553		556
Advances to suppliers and contractors		194		207
Derivatives		682		1,247
Other		154		170
Total	$	2,002	$	2,628

F-41

Note 11 Financing receivables

        Financing receivables consist of the following:

	December 31,
	2003		2002
Loans receivable	$	434	$	629
Finance leases (see Note 17)		425		550
Other		471		426
Total	$	1,330	$	1,605

        Loans receivable primarily represent financing arrangements provided to customers under long-term construction contracts and other activities. Loans receivable include notes receivable from unconsolidated affiliates of $22 million and $76 million at December 31, 2003 and 2002, respectively.

        Included in finance leases at December 31, 2003 and 2002 are $8 million and $7 million, respectively, of assets pledged as security for other liabilities. Additionally, $246 million and $212 million of finance lease receivables were pledged as security for long-term borrowings at December 31, 2003 and 2002, respectively.

        Other financing receivables at December 31, 2003 and 2002 include $312 million and $349 million, respectively, of assets pledged as security for other liabilities. Of these amounts, $54 million and $58 million, respectively, are marketable securities.

        During 2003 and 2002, the Company sold or transferred to financial institutions various portfolios and individual financing receivables (see Note 17). These transfers included sales of finance lease receivables and loan receivables. Financing receivables sold or transferred and derecognized from the Consolidated Balance Sheet in accordance with SFAS 140 totaled $338 million and $295 million in 2003 and 2002, respectively. Related costs of these transactions, including the associated gains and losses, were approximately $3 million and $13 million in 2003 and 2002, respectively.

Note 12 Property, plant and equipment

        Property, plant and equipment consist of the following:

	December 31,
	2003			2002
Land and buildings	$	2,517		$	2,193
Machinery and equipment		4,600			4,176
Construction in progress		104			241
		7,221			6,610
Accumulated depreciation		(4,381	)		(3,909	)
Total	$	2,840		$	2,701

F-42

Note 13 Goodwill and other intangible assets

        The changes in the carrying amount of goodwill for the year ended December 31, 2003, are as follows:

	Automation Technologies			Power Technologies		Non-core activities			Corporate/ Other			Total
Balance at January 1, 2003	$	1,602		$	427	$	134		$	58		$	2,221
Goodwill acquired during the year		1			1		—			—			2
Impairment losses		—			—		—			(2	)		(2	)
Goodwill written off related to sale of businesses		—			—		(2	)		(1	)		(3	)
Other		(4	)		—		—			—			(4	)
Internal reorganization		1			—		(10	)		9			—
Foreign currency translation		98			11		—			8			117
Balance at December 31, 2003	$	1,698		$	439	$	122		$	72		$	2,331

        The changes in the carrying amount of goodwill for the year ended December 31, 2002, are as follows:

	Automation Technologies			Power Technologies			Non-core activities			Corporate/ Other			Total
Balance at January 1, 2002	$	1,572		$	401		$	99		$	38		$	2,110
Goodwill acquired during the year		25			19			33			16			93
Impairment losses		—			—			(7	)		(2	)		(9	)
Goodwill written off related to sale of businesses		(65	)		—			—			(2	)		(67	)
Other		(8	)		(1	)		9			1			1
Foreign currency translation		78			8			—			7			93
Balance at December 31, 2002	$	1,602		$	427		$	134		$	58		$	2,221

        At December 31, 2003, the $122 million of goodwill in Non-core activities is related to New Ventures. At December 31, 2002, the $134 million of goodwill in Non-core activities was comprised of: New Ventures $130 million; Building Systems $2 million; and other Non-core activities $2 million.

        The goodwill acquired in 2003 related to the purchase of minority interest in certain consolidated subsidiaries of the Company for cash and debt consideration of $2 million. Of the $93 million goodwill acquired in 2002, $48 million related to the purchase of minority interest in certain consolidated subsidiaries of the Company for cash consideration of $40 million. The remaining $45 million relates to the purchase of six entities for $52 million.

        The Company decreased goodwill by $4 million in 2003 and increased goodwill by $1 million during 2002 due to adjustments of the purchase price for certain prior period acquisitions.

F-43

        Included in the loss from discontinued operations, net of tax, for 2003 is an $84 million impairment charge relating to the Company's Insurance business. Of the $84 million, $2 million was previously reported in Corporate/Other. This goodwill was written off because the carrying value of the Insurance business exceeded its estimated fair value, based on the estimated sales price for the Insurance business.

        Intangible assets consist of the following:

	December 31,
	2003							2002
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Capitalized software	$	772	$	(439	)	$	333	$	580	$	(272	)	$	308
Other		533		(317	)		216		551		(272	)		279
Total	$	1,305	$	(756	)	$	549	$	1,131	$	(544	)	$	587

        Amortization expense of intangible assets for 2003 and 2002 amounted to $177 million and $143 million, respectively.

        Amortization expense of intangible assets is estimated to be as follows⁽¹⁾

2004	$	153
2005	$	149
2006	$	119
2007	$	73
2008	$	49
Thereafter	$	4

(1)

The estimated amortization expense is calculated as if no future expenditures will be made.

        In 2003 and 2002, the Company did not identify any intangible assets not subject to amortization with the exception of $2 million and $24 million, respectively, related to an intangible pension asset (see Note 21).

        Other intangible assets primarily include intangibles created through acquisitions, such as trademarks and patents.

        For the years ended December 31, 2003 and 2002, the Company acquired intangible assets of $73 million ($69 million of software and $4 million of other intangible assets) and $91 million ($86 million of software and $5 million of other intangible assets), respectively. For items capitalized in 2003 and 2002, the weighted average amortization period for capitalized software is 4 years and for other intangible assets is 6 years.

        The Company recorded write-downs of intangible assets of $11 million, $25 million and $26 million, in 2003, 2002 and 2001, respectively, related to software developed for internal use.

F-44

The write-downs are included in other income (expense), net in the Consolidated Income Statement.

Note 14 Equity accounted companies

        The Company recorded earnings of $80 million, $211 million and $79 million in 2003, 2002, and 2001 respectively, in investments,and other income (expense) net, representing the Company's share of the pre-tax earnings (losses) of investees accounted for under the equity method of accounting. The Company has recorded, at December 31, 2003, and 2002, $562 million and $730 million, respectively, in investments and other, representing the Company's investment in these equity investees. Significant companies accounted for using the equity method of accounting included: Jorf Lasfar Energy Company S.C.A. (JLEC), Morocco (the Company owns 50 percent) and Swedish Export Credit Corporation (SECC), Sweden (the Company owned 35.4 percent). In June 2003, the Company sold its entire interest in SECC to the Government of Sweden. As reflected in its audited financial statements, SECC's total net income (loss) for the year ended December 31, 2002 and 2001 was $254 million and $(32) million, respectively and SECC's shareholders' equity was $441 million and $526 million at December 31, 2002 and 2001, respectively.

					The Company's share of the pre-tax earnings (losses) of equity-accounted investees
	Investment balance 2003		Investment balance 2002
					2003			2002			2001
JLEC	$	372	$	336	$	62		$	73		$	85
SECC		—		206		13			125			(16	)
Other(1)		190		188		5			13			10
Total	$	562	$	730	$	80		$	211		$	79
Less: Current income tax expense						(7	)		(49	)		(7	)
The Company's share of earnings of equity-accounted investees					$	73		$	162		$	72

(1)

encompasses additional investments, none of which are individually significant

        The following table represents selected financial information for JLEC and not the Company's share in this equity accounted company.

	2003		2002		2001
Total current assets	$	277	$	225	$	267
Total non-current assets	$	1,162	$	1,124	$	1,073
Total current liabilities	$	314	$	249	$	188
Total non-current liabilities	$	612	$	621	$	588
Total shareholders' equity	$	513	$	479	$	564
Revenues	$	369	$	364	$	357
Income before taxes	$	122	$	143	$	168
Net income	$	120	$	132	$	161

F-45

        As security for repayment by JLEC of certain of its loans, the Company, JLEC and the other 50 percent shareholder in JLEC have entered into various pledge agreements with several banks and other secured parties. The Company has pledged all of its shares, claims, rights and interest in JLEC in accordance with the pledge agreements. Such security shall continue in effect until the repayment in full of all outstanding principal and interest and other fees, which is scheduled to occur in February 2013.

        The Company has entered into other similar pledge agreements for certain other equity accounted for companies. The Company has also granted lines of credit and has committed to provide additional capital for certain equity accounted companies. At December 31, 2003, the total unused lines of credit amounted to $11 million and the capital commitments amounted to $64 million.

        The Company's 2003 Consolidated Financial Statements include the following aggregate amounts related to transactions with equity accounted investees and other related parties:

	2003		2002
Revenues	$	123	$	93
Receivables	$	98	$	75
Other current assets	$	17	$	27
Financing receivables, non-current	$	22	$	76
Payables	$	6	$	30
Short-term borrowings	$	32	$	39
Long-term borrowings	$	48	$	1
Other current liabilities	$	4	$	21

Note 15 Borrowings

        The Company's total borrowings at December 31, 2003 and 2002 were $7,887 million and $7,928 million, respectively.

Short-term borrowings

        The Company's short-term borrowings consist of the following:

	December 31,
	2003		2002
Commercial paper (weighted-average interest rate of 4.8%)	$	—	$	478
Other short-term borrowings (weighted-average interest rate of 3.8% and 5.3%)		246		428
Current portion of long-term borrowings (weighted-average interest rate of 4.9% and 3.7%)		1,351		1,664
Total	$	1,597	$	2,570

F-46

        Other short-term borrowings primarily represent short-term loans from various banks. Commercial paper outstanding at December 31, 2002 had maturities of less than 3 months.

        On November 17, 2003, the Company entered into a new unsecured syndicated $1.0 billion three-year revolving credit facility, which became available in December 2003 after the fulfillment of certain conditions, including the repayment and cancellation of the existing $1.5 billion 364-day facility entered into in December 2002 and the raising of a specified minimum level of gross proceeds from the rights issue (see Note 23) and from the euro denominated bonds issued in November 2003.

        No amount was drawn under the new facility at December 31, 2003. The interest costs of borrowings under the facility are LIBOR (or EURIBOR in the case of drawings in euro) plus 0.8 percent to 2.25 percent, depending on the Company's senior unsecured long-term debt rating. Commitment fees are paid on the unused portion of the facility and a utilization fee is payable when borrowings are equal to or greater than 33 percent of the facility; the level of these fees is linked to the ratings of the Company's senior unsecured long-term debt.

        The new credit facility contains certain financial covenants in respect of minimum interest coverage, maximum net leverage and a minimum level of consolidated net worth. The Company is required to meet these covenants on a quarterly basis beginning with the period ended December 31, 2003. Should the Company's senior unsecured long-term debt ratings reach certain defined levels, these covenants will only have to be calculated at June and December of each year. The new facility also contains provisions for the mandatory prepayment and cancellation of the facility upon a change of control of the Company.

        The new credit facility imposes restrictions on the amount of third party indebtedness in subsidiaries other than in the obligors under the facility, subject to certain exceptions. The facility also contains certain other undertakings including limitations on disposals of assets, restrictions on mergers and acquisitions, negative pledges and restrictions on the early redemption of capital market instruments, such as bonds having a maturity date beyond that of the facility. However, the facility permits the lengthening of the maturity profile of the Company's debt through the early redemption of any bonds or other capital market instruments out of the net cash proceeds of any capital market instrument issued after November 17, 2003, and having a maturity date not earlier than the capital market instruments being repaid.

        The new facility contains cross-default clauses whereby an event of default would occur if the Company was to default on indebtedness, as defined in the facility, at or above a specified threshold.

        At December 31, 2002, nothing had been drawn under the $1.5 billion facility which was secured by a package of assets with a net carrying value of $3.5 billion at December 31, 2002, and by certain intra-group loans. Beginning January 2003, amounts were drawn under the facility in line with the facility's specified monthly borrowing limits. Commitment fees were paid on the unused portion of the facility. The interest costs on borrowings were LIBOR plus 3.5 percent, or, for any borrowing in euro, EURIBOR plus 3.5 percent. In December 2003, the amount outstanding was repaid, the facility cancelled and the related security released.

F-47

Long-term borrowings

        The Company utilizes a variety of derivative products to modify the characteristics of its long-term borrowings. The Company uses interest rate swaps to effectively convert certain fixed-rate long-term borrowings into floating rate obligations. For certain non-U.S. dollar denominated borrowings, the Company utilizes cross-currency swaps to effectively convert the borrowings into U.S. dollar obligations. As required by SFAS 133, borrowings, which have been designated as being hedged by fair value hedges are stated at their fair values.

        The following table summarizes the Company's long-term borrowings considering the effect of interest rate and currency swaps:

	December 31, 2003							December 31, 2002
	Balance			Nominal rate		Effective rate		Balance			Nominal rate		Effective rate
Floating rate	$	4,241		5.9	%	3.2	%	$	5,242		5.1	%	3.0	%
Fixed rate		1,754		5.8	%	5.8	%		1,027		5.0	%	5.0	%
Convertible bonds		1,646		4.1	%	4.1	%		753		4.6	%	4.6	%
		7,641							7,022
Current portion of long-term borrowings		(1,351	)	4.9	%	1.8	%		(1,664	)	3.7	%	1.9	%
Total	$	6,290						$	5,358

        At December 31, 2003, maturities of long-term borrowings were as follows:

Due in 2004	$	1,351
Due in 2005		1,195
Due in 2006		646
Due in 2007		898
Due in 2008		879
Thereafter		2,672
Total	$	7,641

        In November 2003, the Company issued bonds of an aggregate principal amount of 650 million euro, or approximately $769 million at issuance, due 2011. These bonds pay interest semi-annually in arrears at a fixed annual rate of 6.5 percent. In the event of a change of control of the Company, the terms of the bonds require the Company to offer to repurchase the bonds at 101 percent of the principal amount thereof, plus any accrued interest.

        In September 2003, the Company issued convertible unsubordinated bonds of an aggregate principal amount of 1,000 million Swiss francs, or approximately $722 million at issuance, due 2010. The bonds pay interest annually in arrears at a fixed annual rate of 3.5 percent. On issuance, each 5,000 Swiss francs of principal amount of bonds was convertible into 418.41004 fully paid ordinary shares of the Company at an initial conversion price of 11.95 Swiss francs. The conversion price is subject to adjustment provisions to protect against dilution or change in control. As a result of the decision at the extraordinary general meeting of shareholders on November 20, 2003, to increase

F-48

the share capital of the Company by issuing a further 840,006,602 shares, the conversion price and conversion ratio of the bonds were adjusted to 9.53 Swiss francs and 524.65897 shares respectively, effective December 12, 2003, representing a total of 104,931,794 shares if the bonds were fully converted.

        The bonds are convertible at the option of the bondholder at any time from October 21, 2003 up to and including the tenth business day prior to September 10, 2010. The Company may at any time on or after September 10, 2007 redeem the outstanding bonds at par plus accrued interest if, for a certain number of days during a specified period of time, the official closing price of the Company's ordinary shares on the relevant exchange has been at least 150 percent of the conversion price. In addition, at any time prior to maturity, the Company can redeem the outstanding bonds at par plus accrued interest, if at least 85 percent in aggregate of the principal amount of bonds originally issued have been redeemed, converted or purchased and cancelled. The Company has the option to redeem the bonds when due in cash, ordinary shares or any combination thereof.

        In May 2002, the Company issued $968 million aggregate principal amount of convertible unsubordinated bonds due 2007.The bonds pay interest semi-annually in arrears at a fixed annual rate of 4.625 percent. The bonds were initially convertible into 84,940,935 fully paid ordinary shares of the Company at an initial conversion price of 18.48 Swiss francs (converted into U.S. dollars at a fixed conversion rate of 1.6216 Swiss francs per U.S. dollar). The conversion price is subject to adjustment provisions to protect against dilution or change in control. As a result of the rights issue and resulting increase in the share capital of the Company, the conversion price of the bonds was adjusted, effective November 21, 2003, to 14.64 Swiss francs (converted into U.S. dollars at the fixed exchange rate of 1.6216 Swiss francs per U.S. dollar), representing a total of 107,220,546 shares if the bonds were fully converted.

        The $968 million bonds are convertible at the option of the bondholder at any time from June 26, 2002 up to and including May 2, 2007. The Company may, at any time on or after May 16, 2005, redeem the outstanding bonds at par plus accrued interest if, (1) for a certain number of days during a specified period of time, the official closing price of the Company's ordinary shares on the virt-x exceeds 130 percent of the conversion price, or (2) if at least 85 percent in aggregate principal amount of bonds originally issued have been exchanged, redeemed or purchased and cancelled. The Company has the option to redeem the bonds when due in cash, ordinary shares or any combination thereof.

        The Company's shares are denominated in Swiss francs, while the bonds are denominated in U.S. dollars. Consequently, in accordance with SFAS 133, as clarified in discussions between the Company and the Securities and Exchange Commission, a component of the $968 million convertible bonds must be accounted for as an embedded derivative. A portion of the issuance proceeds is deemed to relate to the value of the derivative on issuance and subsequent changes in value of the derivative are recorded through earnings and as an adjustment to the carrying value of the bonds. The allocation of a portion of the proceeds to the derivative creates a discount on issuance, which is amortized to earnings over the life of the bonds. Through December 31, 2002, primarily as a result of the decline in the Company's share price since issuance of the bonds, the Company recorded a gain from the change in fair value of the derivative, partially offset by

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amortization of the effective discount, resulting in a net decrease to interest and other finance expense of $215 million, with a corresponding reduction in long-term borrowings. At December 31, 2003, as a result of an increase in value of the derivative (related among other factors, to the increase in the Company's share price since December 31, 2002), combined with the continued amortization of the discount on issuance, there was a charge to interest and other finance expense of $84 million in 2003, and a corresponding increase in long-term borrowings, when compared to December 31, 2002.

        In May 2002, the Company issued bonds due in 2009 with an aggregate principal amount of 200 million pounds sterling, or approximately $292 million at the time of issuance, which pay interest semi-annually in arrears at 10 percent per annum. The Company also issued in May 2002 bonds due in 2008 with an aggregate principal amount of 500 million euro, or approximately $466 million at the time of issuance, which pay interest annually in arrears at 9.5 percent per annum.

        The 200 million pounds sterling bonds and the 500 million euro bonds contain certain clauses linking the interest paid on the bonds to the credit rating assigned to the bonds. If the rating assigned to these bonds by both Moody's and Standard & Poor's remains at or above Baa3 and BBB-, respectively, then the interest rate on the bonds remains at the level at issuance, that is 10 percent and 9.5 percent for the sterling and euro bonds, respectively. If the rating assigned by either Moody's or Standard & Poor's decreases below Baa3 or BBB-, respectively, then the annual interest rate on the bonds increases by 1.5 percent per annum to 11.5 percent and 11 percent for the sterling and euro bonds, respectively. If after such a rating decrease, the rating assigned by both Moody's and Standard & Poor's returns to a level at or above Baa3 and BBB-, respectively, then the interest rates on the bonds return to the interest level at issuance. As a result of the downgrade of the Company's long-term credit rating by Moody's to Ba2 on October 31, 2002, this step-up clause in interest was triggered on both bonds. The increase in interest costs is effective for interest periods beginning after the payment of the coupon accruing at the date of the downgrade.

        In line with the Company's policy of reducing its interest and currency exposure, a cross-currency swap has been used to modify the characteristics of the 200 million pounds sterling bonds and an interest rate swap to modify the 500 million euro bonds. After considering the impact of the cross-currency and interest rate swaps, the 200 million pounds sterling bonds effectively became a floating rate U.S. dollar obligation, while the 500 million euro bonds became a floating rate euro obligation. In both cases, the floating rate resets every three months. Accordingly, both the 200 million pounds sterling bonds and the 500 million euro bonds are included as "floating rate" in the table of long-term borrowings above.

        In 2003 and 2002, the Company repurchased outstanding bonds with a face value of $94 million and $109 million, respectively. In connection with these repurchases the Company recorded an insignificant gain on extinguishments of debt. In 2002, the Company cancelled repurchased bonds with a face value of $31 million and subsequently re-issued repurchased bonds totaling a face value of $19 million. The re-issue price became the new cost basis of the bonds.

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        Almost all of the Company's publicly traded bonds contain cross-default clauses which would allow the bondholders to demand repayment if the Company was to default on any borrowing at or above a specified threshold.

Note 16 Accrued liabilities and other

        Accrued liabilities and other consists of the following:

	December 31,
	2003		2002
Asbestos and related costs (see Note 18)	$	813	$	1,091
Accrued personnel costs		650		643
Provisions for warranties and contract penalties		566		434
Contract related reserves		532		505
Taxes payables		425		412
Interest		303		277
Provisions for restructuring		269		232
Derivatives		220		1,102
Deferred taxes		200		236
Pension and other employee benefits		110		101
Other		1,052		1,102
Total	$	5,140	$	6,135

        The amount in "Other" represents provisions for project disputes, other legal related matters and other accrued expenses and deferred income.

Note 17 Leases

Lease obligations

        The Company's lease obligations primarily relate to real estate and office equipment. In the normal course of business, management expects most leases to be renewed or replaced by other leases. During 2002 the Company entered into a sale-leaseback transaction relating to substantially all of the Company's properties in Sweden. This resulted in an increase in minimum rent payments to third parties, as compared to the previous years. Minimum rent expense under operating leases included in the income from continuing operations was $403 million, $323 million and $200 million in 2003, 2002 and 2001, respectively.

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        At December 31, 2003, future net minimum lease payments for operating leases having initial or remaining non-cancelable lease terms in excess of one year consist of the following:

2004	$	363
2005		292
2006		241
2007		187
2008		174
Thereafter		623
		1,880
Sublease income		(82	)
Total	$	1,798

Investments in leases

        The Company's former Financial Services division provided sales support to the Company's industrial entities' customers by means of lease financing and credit arrangements, as well as other direct third-party lease financing. In November 2002, the Company completed the sale of most of its Structured Finance business, part of the former Financial Services division, to GE (see Note 3). The Structured Finance portfolio divested included global infrastructure financing, equipment leasing and financing businesses. During 2003, the Company sold various lease portfolios in Germany, Finland and Switzerland. These transactions are in line with the Company's ongoing strategy to divest non-core businesses to focus on power and automation technologies. The Company retained some leasing assets including investments in sales-type leases, leveraged leases and direct financing leases that are included in financing receivables (see Note 11).

        The Company's non-current investments in direct financing, sales-type and leveraged leases, including $54 million of net investments in an aircraft leasing portfolio, reported by a VIE in Sweden (see Note 8), consist of the following:

	December 31,
	2003			2002
Minimum lease payments receivable	$	415		$	653
Residual values		42			48
Unearned income		(57	)		(145	)
		400			556
Leveraged leases		61			35
		461			591
Current portion		(36	)		(41	)
Total	$	425		$	550

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        At December 31, 2003, minimum lease payments under direct financing and sales-type leases are scheduled to be received as follows:

2004	$	50
2005		47
2006		37
2007		24
2008		21
Thereafter		236
Total	$	415

Note 18 Commitments and contingencies

IBM Outsourcing Agreement

        In 2003, the Company entered into a 10-year global framework agreement with International Business Machines Corporation (IBM) to outsource the Company's information systems infrastructure services to IBM. This global framework agreement forms the basis for country agreements entered into between the Company and IBM in 13 countries in which the Company operates as well as Company headquarters. Pursuant to these agreements, the Company's information technology (IT) personnel were transferred and certain IT equipment was sold to IBM. Costs associated with the transfer of employees have been recognized in 2003 and were not significant. The IT equipment was sold to IBM at its net book value resulting in no gain or loss on disposal.

        Pursuant to the global framework agreement, the Company is permitted to terminate an individual country agreement, on providing to IBM three months notice. On termination, termination charges, which are within standard commercial terms, are payable to IBM. Such termination charges decline over the term of the global framework agreement and are based on the preceding 12-month period's costs and the number of years remaining on the agreement.

        The global framework agreement also includes an obligation for IBM to lease new personal computers and other IT equipment to the Company as older equipment is retired. The Company accounts for these items as capital leases or operating leases based on the terms of the leases.

        Further, pursuant to the global framework agreement, IBM will receive monthly payments from the Company's subsidiaries in the respective countries related to information systems infrastructure services. Expected total annual costs during the 10-year term of the global framework agreement approximate $170 million based on the current level of usage of the services.

        While the above agreement was negotiated and transacted at arms-length between IBM and the Company, it should be noted that Jürgen Dormann, the Company's Chairman and CEO, was a member of the Board of Directors of IBM until April 29, 2003, and Hans-Ulrich Märki, a director on the Company's Board of Directors, is general manager of IBM Europe/Middle East/Africa.

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Contingencies-general

        The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business that have not been finally adjudicated. It is not possible at this time for the Company to predict with any certainty the outcome of such litigation. However, except as stated below, management is of the opinion, based upon information presently available and on advice of external counsel, that it is unlikely that any such liability, to the extent not provided for through insurance or otherwise, would have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

        In response to information provided by the Company's employees, during 2003 and 2002 the Company undertook an investigation of potentially improper business conduct within the Company's Oil, Gas and Petrochemical business. In such internal investigations, the Company uncovered a limited number of improper payments in the Upstream business in Africa, Central Asia and South America, which the Company has voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission. The payments violated the Company's internal policies on business ethics. The Company is cooperating fully with the U.S. Department of Justice and the U.S. Securities and Exchange Commission. The Company has hired outside counsel and auditors (other than its auditors) to assist in a compliance review to determine whether other instances of improper payments exist. The compliance review is being conducted jointly with the purchaser of the Upstream business and with the purchaser's outside counsel and auditors.

        If the U.S. Department of Justice and the U.S. Securities and Exchange Commission determine that violations of the law have occurred, they could seek civil or, in the case of the U.S. Department of Justice, criminal sanctions, including monetary penalties against the Company. The Company is currently not able to predict the final outcome of the compliance review but expects that any civil or criminal sanctions or proceedings arising from disclosures to the U.S. Department of Justice and the U.S. Securities and Exchange Commission will be disposed of voluntarily. The Company has also taken the following remedial actions: terminated the improper payments; terminated contracts with an individual and companies believed to have been involved in the improper payments; replaced senior management at the relevant subsidiary; disciplined the responsible employees with a range of sanctions including severance of employment; loss of compensation and title, formal reprimands and ethics counseling and training; hired outside experts to assist in the correction of books and records to properly record the payments; and has provided and will be providing additional ethics and compliance training.

Contingencies-environmental

        The Company is a participant in several legal and regulatory actions, which result from various U.S. and other federal, state and local environmental protection legislation as well as agreements with third parties. While the Company cannot estimate the impact of future regulations affecting these actions, management believes that the ultimate resolution of these matters will not have a material impact on the Company's financial position, results of operations or cash flows.

        Provisions are recorded when it is probable that losses will result from these actions and the amounts of losses can be reasonably estimated. Estimated losses for environmental remediation obligations are not discounted to their present value. In respect to these matters, the Company may

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be able to recover a portion of the costs from insurers or other third parties. Receivables are recorded when it is probable that recoveries will be collected.

Guarantees-general

        Certain guarantees issued or modified after December 31, 2002 are accounted for in accordance with FASB Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees; Including Indirect Guarantees of Indebtedness of Others. Upon issuance of certain guarantees, a liability, equal to the fair value of the guarantee, is recorded.

Guarantees-performance

        Performance guarantees represent obligations where the Company guarantees the performance of a third party's product or service according to the terms of a contract. Such guarantees may include guarantees that a project will be completed within a specified time. If the third party does not fulfill the obligation, the Company will compensate the guaranteed party in cash or in kind. Performance guarantees include surety bonds, advance payment guarantees, and performance standby letters of credit.

        FIN 45 requires that the Company disclose the "maximum potential exposure" of certain guarantees as well as possible recourse provisions that may allow the Company to recover from third parties amounts paid out under such guarantees. The "maximum potential exposure" as defined by FIN 45 does not allow any discounting of the Company's assessment of actual exposure under the guarantees. The information below reflects the Company's maximum potential exposure under the guarantees, which is higher than management's assessment of the expected exposures.

        The Company retained obligations for guarantees related to the power generation business contributed in mid-1999 to the former ABB ALSTOM POWER NV joint venture. The guarantees primarily consist of performance guarantees, advance payment guarantees, product warranty guarantees, and other miscellaneous guarantees under certain contracts such as indemnification for personal injuries and property damages, taxes, and compliance with labor laws, environmental laws and patents. The guarantees have maturity dates ranging from one to ten years and in some cases have no definite expiry. In May 2000, the Company sold its interest in the ABB ALSTOM POWER NV joint venture to ALSTOM SA (ALSTOM). As a result, ALSTOM and its subsidiaries have primary responsibility for performing the obligations that are the subject of the guarantees. Further, ALSTOM, the parent company, and ALSTOM POWER NV, formerly ABB ALSTOM POWER NV, have undertaken jointly and severally to fully indemnify and hold harmless the Company against any claims arising under such guarantees. Due to the nature of product warranty guarantees and the miscellaneous guarantees, the Company is unable to develop an estimate of the maximum potential amount of future payments for these guarantees issued on behalf of the former power generation business. Management's best estimate of the total "maximum potential exposure" of quantifiable guarantees issued by the Company on behalf of its former power generation business was approximately $1,200 million and $2,200 million at December 31, 2003 and 2002, respectively. The maximum potential exposure is based on the original guarantee or contract amount and does not reflect the completion status of the project. At December 31, 2003, no losses have been recognized relating to guarantees issued on behalf of the former power generation business. Management

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believes that it is not probable that the Company will incur a loss under these guarantees and therefore, in accordance with SFAS 5, a provision has not been recorded at December 31, 2003 and 2002.

        During 2003, the Company was released from the obligations of surety bonds retained related to the sale of its nuclear business to British Nuclear Fuels PLC. As a result, the Company's maximum potential exposure under these bonds has been reduced from $640 million at December 31, 2002 to zero at December 31, 2003.

Guarantees-financial

        Financial guarantees represent irrevocable assurances that the Company will make payment to the beneficiary in the event that a third party fails to fulfill its financial obligations and the beneficiary under the guarantee incurs a loss due to that failure.

        At December 31, 2003 and 2002, the Company had $207 million and $223 million, respectively, of financial guarantees outstanding. Of that amount, $189 million and $206 million, respectively, were issued on behalf of companies in which the Company currently has or formerly had an equity interest. The guarantees have maturity dates ranging from one to thirteen years. Management believes that it is not probable that the Company will incur a loss under these guarantees and therefore, in accordance with SFAS 5, no provision has been recorded at December 31, 2003 and 2002.

Product and order related contingencies

        The Company calculates its provision for product warranties based on historical claims experience and specific review of certain contracts. The provision for warranties and contract penalties in Note 16 includes penalties resulting from delays in contract fulfillment, which is not included in the amounts below.

        Reconciliation of the provision for warranties, including guarantees of product performance is as follows:

	2003			2002
Balance at the beginning of year	$	343		$	331
Claims paid in cash or in kind		(37	)		(46	)
Net increase to provision for changes in estimates, warranties issued, and warranties expired		191			58
Balance at the end of year	$	497		$	343

        In 1998, the Company entered into an engineering, procurement and project management contract with a customer for an oil and petrochemical refinery in India with a contract value of approximately $860 million. The project, which is subject to a reimbursable cost agreement, is approximately 60 percent complete and has been stalled for the past few years due to complications encountered by the customer in obtaining necessary additional financing. Given the uncertainty as to whether the project will be restarted, the Company recorded a loss of $108 million

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in 2003 to write down its remaining net assets associated with this project. If the project is not restarted, the Company will be subject to certain contingent liabilities to third parties.

Asbestos Liability

Overview

        When the Company sold its 50 percent interest in the former ABB ALSTOM POWER NV joint venture to ALSTOM in May 2000, it retained ownership of Combustion Engineering Inc. (Combustion Engineering), a subsidiary that had conducted part of the Company's former power generation business and that now owns commercial real estate that it leases to third parties. Combustion Engineering is a co-defendant, together with other third parties, in numerous lawsuits in the United States in which the plaintiffs claim damages for personal injury arising from exposure to asbestos in equipment or materials that Combustion Engineering allegedly supplied or was responsible for, primarily during the early 1970s and before. Asbestos claims have been brought against other of the Company's entities, including ABB Lummus Global Inc. (Lummus) (which is part of the Company's Oil, Gas and Petrochemicals business and was formerly a subsidiary of Combustion Engineering) and Basic Incorporated (Basic) (which is currently a subsidiary of Asea Brown Boveri Inc. and was formerly a subsidiary of Combustion Engineering). These claims, however, have been less significant than the Combustion Engineering claims and have not had a material impact on the Company's financial position, results of operations or cash flows.

        From 1989 through February 17, 2003 (the date that Combustion Engineering filed for Chapter 11 as described below) approximately 438,000 asbestos-related claims have been filed against Combustion Engineering. On February 17, 2003 there were approximately 164,000 asbestos related personal injury claims pending against Combustion Engineering. There were approximately 138,000 such claims pending against Combustion Engineering on December 31, 2002 and approximately 94,000 such claims were pending on December 31, 2001. Of the approximately 164,000 claims that were pending on February 17, 2003, approximately 111,000 are claims that the Company has treated as settled (including those settled under the Master Settlement Agreement described below) but under which there are continuing payments. Approximately 29,000 new claims were made in the period from January 1, 2003 to February 17, 2003; 79,000 in 2002 and 55,000 in 2001. Approximately 30,000 claims were resolved in the period from January 1, 2003 to February 17, 2003 (all but 111 of which were resolved under the Master settlement Agreement); approximately 34,500 claims were resolved in 2002 and approximately 27,000 claims were resolved in 2001. At December 31, 2003, there were approximately 14,800 claims pending against Basic and Lummus. Additionally, at December 31, 2003, there were 287 cases described below (involving approximately 8,700 claims) against entities of the Company other than Combustion Engineering, Lummus and Basic.

        At December 31, 2003 and 2002, provisions of $813 million and $1,091 million, respectively, were recorded on a consolidated basis in respect of the asbestos claims and related defense costs. These provisions were based on the Company's obligations under Combustion Engineering's Chapter 11 plan of reorganization, as described below, and assumed the confirmation and effectiveness of the pre-packaged plan. These provisions do not reflect probable insurance recoveries on those claims. The Company recorded receivables of approximately $232 million and

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$241 million at December 31, 2003 and 2002, respectively, for probable insurance recoveries, which were established with respect to asbestos claims. During 2002 and 2001, Combustion Engineering experienced a significant increase in the level of new claims and higher total and per-claim settlement costs as compared to prior years. Cash payments, before insurance recoveries, to resolve Combustion Engineering's asbestos claims were $391 million (including $369 million contributed to the CE Settlement Trust, described below), $236 million (including $30 million contributed into the CE Settlement Trust), and $136 million in 2003, 2002 and 2001, respectively. Administration and defense costs were $36 million, $32 million and $13 million in 2003, 2002 and 2001, respectively.

        Cash payments to resolve claims against entities other than Combustion Engineering, Lummus and Basic have been immaterial to date, totalling less than $0.3 million in the aggregate. The Company has not maintained a reserve for the claims pending against such entities. Of the claims outstanding at December 31, 2003, approximately 2,250 claims were brought in Mississippi in 2002 in a single case that names hundreds of co-defendants and makes no specific allegations of any relationship between any of the Company's entities and the plaintiffs. Approximately 3,900 claims have been brought in Ohio by claimants represented by a single law firm in cases that typically name 50 to 60 co-defendants and do not allege any specific linkage between the plaintiffs and any of the Company's entities. The remaining claims are pending in various jurisdictions. The Company generally seeks dismissals from claims where there is no apparent linkage between the plaintiffs and any of the Company's entities. As these claims are unrelated to Combustion Engineering, Lummus or Basic, they will not be resolved pursuant to the pre-packaged bankruptcy plan of Combustion Engineering described below. The Company's experience resolving these claims to date indicates that they have not had a material impact on the Company's consolidated financial position, results of operations or cash flows.

Negotiations with Representatives of Asbestos Claimants and Pre-Packaged Chapter 11 Filing

        In October 2002, the Company and Combustion Engineering determined that it was likely that the expected asbestos-related costs of Combustion Engineering would exceed the value of its assets ($812 million at September 30, 2002 and $828 million at December 31, 2002) if its historical settlement patterns continued into the future. At that time, the Company and Combustion Engineering were actively considering various options for resolving Combustion Engineering's asbestos liabilities, including the possible reorganization of Combustion Engineering under Chapter 11 of the U.S. Bankruptcy Code. In that context, the Company believed that estimating Combustion Engineering's asbestos liabilities based on historical settlement patterns was no longer appropriate. Subsequently, the Company and Combustion Engineering determined to resolve the asbestos liability of Combustion Engineering and its affiliates by reorganizing Combustion Engineering under Chapter 11, the principal business reorganization chapter of the U.S. Bankruptcy Code. The Company and Combustion Engineering determined to structure the Chapter 11 reorganization as a "pre-packaged plan," in which acceptances of the plan would be solicited prior to the filing of the Chapter 11 case, thus reducing the duration and expense of the bankruptcy proceedings.

        Beginning in October 2002, the Company and Combustion Engineering conducted extensive negotiations with representatives of certain asbestos claimants with respect to a pre-packaged plan. On November 22, 2002, Combustion Engineering and the asbestos claimants' representatives

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entered into a Master Settlement Agreement for settling open asbestos-related personal injury claims that had been filed against Combustion Engineering prior to November 15, 2002. Combustion Engineering also agreed, pursuant to the Master Settlement Agreement, to form and fund the CE Settlement Trust to fund and administer the payment of asbestos-related personal injury claims settled under the Master Settlement Agreement. Under the terms of the Master Settlement Agreement, eligible claimants who met all criteria to qualify for payment were entitled to receive a percentage of the value of their claim from the CE Settlement Trust and retain a claim against Combustion Engineering for the unpaid balance. The Master Settlement Agreement divides claims into three categories based on the status of the claim at November 14, 2002, the status of the documentation relating to the claim, and whether or not the documentation establishes a valid claim eligible for settlement and payment by Combustion Engineering. The Master Settlement Agreement was supplemented in January 2003 to clarify the rights of certain claimants whose right to participate in a particular payment category was disputed. The Master Settlement Agreement, as supplemented, settles the amount of and provides for the partial payment on approximately 110,000 open asbestos-related personal injury claims that had been lodged against Combustion Engineering.

        Pursuant to the Master Settlement Agreement, the CE Settlement Trust was funded by:

•

cash contributions from Combustion Engineering in the amount of $5 million;



•

cash contributions from ABB Inc., a subsidiary of ABB Ltd, in the amount of $30 million by December 31, 2003;



•

a promissory note from Combustion Engineering in the principal amount of approximately $101 million (guaranteed by Asea Brown Boveri Inc., a subsidiary of ABB Ltd); and an assignment by Combustion Engineering of the $311 million unpaid balance of principal and interest due to Combustion Engineering from Asea Brown Boveri Inc. under a loan agreement dated May 12, 2000 (guaranteed by ABB Ltd).

Pre-Packaged Plan of Reorganization

        On January 17, 2003, the Company announced that the Company and Combustion Engineering had reached an agreement on a proposed Pre-Packaged Plan of Reorganization for Combustion Engineering under Chapter 11 of the U.S. Bankruptcy Code (the "Plan"). The agreement was reached with certain representatives of asbestos claimants with existing asbestos-related personal injury claims against Combustion Engineering (encompassing claimants who had lodged claims prior to November 15, 2002 and claimants who had filed claims after that date and were not eligible to participate in the Master Settlement Agreement) and with the proposed representative of persons who may be entitled to bring asbestos-related personal injury claims in the future.

        The Plan provides for the creation of the Asbestos PI Trust, an independent trust which is separate and distinct from the CE Settlement Trust and addresses Asbestos PI Trust Claims, which consist of present and future asbestos-related personal injury claims (including the claims previously settled pursuant to the Master Settlement Agreement only to the extent of any unpaid portions thereof) that arise directly or indirectly from any act, omission, products or operations of Combustion Engineering, Lummus or Basic. If the Plan ultimately becomes effective, a channelling

F-59

injunction would be issued under the U.S. Bankruptcy Code pursuant to which the Asbestos PI Trust Claims against ABB Ltd and its affiliates (including Combustion Engineering, Lummus and Basic) would be channelled to the Asbestos PI Trust. This would mean that the sole recourse of a holder of an Asbestos PI Trust Claim would be to the Asbestos PI Trust and such holder would be barred from asserting such a claim against ABB Ltd and its affiliates (including Combustion Engineering, Lummus and Basic). A preliminary injunction is currently in force. The Asbestos PI Trust would be funded with cash and other assets, including approximately 30 million common shares of ABB Ltd. The total package is valued at approximately $800 million.

        The Plan sets forth distribution procedures for the allocation of funds to the claimants. The Plan provides that the unpaid portion of claims that were settled pursuant to the Master Settlement Agreement will also be entitled to distributions from the Asbestos PI Trust.

        On the effective date of the Plan, the Asbestos PI Trust will be funded as follows:

•

a $20 million 5 percent term note with a maximum term of ten years from the effective date of the Plan, issued by Combusting Engineering and secured by its Windsor, Connecticut real estate and real estate leases (under certain specified contingencies, the Asbestos PI Trust may have the right to convert the term note into ownership of 80 percent of the voting securities of the reorganized Combustion Engineering);



•

excess cash held by Combustion Engineering on the effective date of the Plan;



•

a promissory note issued by ABB Inc. and ABB Ltd and guaranteed by certain ABB Ltd subsidiaries, in an aggregate amount of up to $350 million, equal quarterly installments commencing in 2004, with $50 million to be paid during 2004, $100 million to be paid during 2005 and $100 million to be paid during 2006, and further providing for payments amounting to $50 million to be paid no later than 2010 ($25 million of which may be payable as early as 2006) and contingent payments of an additional aggregate amount of $50 million (in equal $25 million installments) in 2008 and 2009 if ABB Ltd meets certain financial performance standards (an EBIT margin of 12 percent in 2007 and 2008);



•

a non-interest bearing promissory note on behalf of Lummus in the amount of $28 million payable in relatively equal annual installments over 12 years;



•

a non-interest bearing promissory note on behalf of Basic in the aggregate amount of $10 million payable in relatively equal annual installments over 12 years;



•

30,298,913 shares of ABB Ltd (the "CE Settlement Shares"), which had a fair value at December 31, 2003 of $154 million and $86 million at December 31, 2002. The obligation to deliver these CE Settlement Shares will continue to be marked to market, with changes in the fair value of the CE Settlement Shares reflected in earnings of the Company until such CE Settlement Shares are contributed to the Asbestos PI Trust;



•

the Company will execute and deliver a nuclear and environmental indemnity with regard to obligations arising out of Combustion Engineering's Windsor, Connecticut site for the benefit of Combustion Engineering;

F-60

•

Combustion Engineering, Lummus and Basic will assign to the Asbestos PI Trust any proceeds under certain insurance policies and insurance settlement agreements. Aggregate unexhausted product liability limits are approximately $200 million for Combustion Engineering, approximately $43 million for Lummus and approximately $28 million for Basic, although amounts ultimately recovered by the Asbestos PI Trust under these policies may be substantially less than the policy limits. In addition, Combustion Engineering will assign to the Asbestos PI Trust scheduled payments under certain of its insurance settlement agreements ($86 million at December 31, 2003); and



•

if Lummus is sold within 18 months after the effective date of the Plan, ABB Inc. will contribute $5 million to the CE Settlement Trust and $5 million to the Asbestos PI Trust. If the CE Settlement Trust has ceased to exist at that time, both $5 million payments will be made to the Asbestos PI Trust, but in no event will this contribution exceed the net proceeds from the sale of Lummus.

Next Steps in the Chapter 11 Process

        The Plan, including the channelling injunction, will become effective when the U.S. Bankruptcy Court recommends the issuance of a confirmation order (which occurred on July 10, 2003), the confirmation order is entered by the U.S. District Court (which occurred on August 8, 2003) and has become a final order that is not subject to appeal, and certain other conditions to the effectiveness of the Plan have been satisfied.

        The solicitation of votes to approve the Plan began on January 19, 2003, and Combustion Engineering filed for Chapter 11 in the U.S. Bankruptcy Court in Delaware on February 17, 2003 based on the previously negotiated Plan. The voting period closed on February 19, 2003, and approximately 97 percent of qualified ballots voted to approve the Plan. A confirmation hearing and related hearings commenced on April 7, 2003 and continued from time to time through early June 2003. On June 23, 2003, the U.S. Bankruptcy Court issued its Order Approving the Disclosure Statement but Recommending Withholding of Confirmation of the Plan of Reorganization for Combustion Engineering for Ten Days (the "Ruling") and related findings of fact. The Ruling approved the disclosure statement that was the document used as the basis for soliciting approval of the Plan from asbestos claimants and verified the voting results that approved the Plan. Although the Ruling did not confirm the Plan, it indicated that the U.S. Bankruptcy Court would recommend that the Plan be confirmed if the Company and Combustion Engineering could establish to the court's satisfaction certain specified information. The Company then submitted the additional information for the court's consideration.

        On July 10, 2003, the U.S. Bankruptcy Court issued a Supplemental and Amendatory Order Making Additional Findings and Recommending Confirmation of Plan of Reorganization (the "Supplemental Ruling"). The Supplemental Ruling recommended to the U.S. District Court, among other things, that the Plan be confirmed.

        Following the issuance of the Supplemental Ruling, interested parties had a period during which they could appeal the Ruling and the Supplemental Ruling. This appeal period expired on July 24, 2003. A number of interested parties, including a small number of asbestos claimants and certain insurance companies which historically have provided insurance coverage to Combustion

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Engineering, Basic and Lummus, filed appeals based on various objections to the Plan, including the following:

•

arguments that Combustion Engineering is not permitted to obtain a channelling injunction that protects Combustion Engineering's affiliates with respect to claims against Combustion Engineering;



•

arguments that asbestos claims against Lummus and Basic cannot be made subject to a channelling injunction;



•

arguments that the disclosure provided in connection with the solicitation of acceptances of the Plan did not satisfy the required standards;



•

arguments that claimants covered by the Plan would fare better outside the Plan;



•

arguments that the Plan and the Bankruptcy Court's rulings improperly affect the rights and obligations of insurance carriers who have continuing obligations to provide insurance coverage with respect to Combustion Engineering's asbestos liabilities;



•

arguments that the Plan and the Bankruptcy Court's rulings fail to address properly the indemnification rights of certain insurers; and



•

arguments that the Bankruptcy Court was in error in not permitting the release of the trust created under the Master Settlement Agreement and certain other entities, under the Plan.

        The U.S. District Court held a hearing on July 31, 2003, with respect to the appeals and entered its confirmation order on August 8, 2003. The U.S. Federal Third Circuit Court of Appeals granted a motion for expedition of appeals and ordered that all briefs were to be filed by October 7, 2003. Although the Circuit Court has set, and then moved, the date for the hearing for December 16, 2003, January 12, 2004 and February 4, 2004, there is not now a scheduled hearing date. Rather the Circuit Court has ordered that oral argument is postponed pending resolution of certain recusal motions against the U.S. District Court Judge in an unrelated case. The Company cannot be certain of when a hearing will be scheduled or the duration or outcome of the appeal process. Regardless of whether or not the Plan becomes effective, the Master Settlement Agreement remains effective.

Effect of the Plan on the Company's Financial Position

        The Company recorded expenses related to asbestos of $145 million, $420 million and $470 million in loss from discontinued operations, net of tax, for 2003, 2002 and 2001, respectively. Loss from discontinued operations, net of tax for 2003 includes a charge of $68 million, net of tax, resulting from the mark-to-market adjustment relating to the CE Settlement Shares, a provision of $41 million, representing the present value of the first two $25 million payments previously considered contingent, as well as $36 million of other costs. The 2002 amount reflected the Company's estimate of incremental total costs to be incurred based upon the terms of the Plan. In 2001, loss from discontinued operations, net of tax, reflected a charge to earnings based on Combustion Engineering's forecasts of the expected cost of future claim settlements over a period of several years and estimates of the amounts recoverable from insurance when the claims were settled.

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        Based upon management's expectation that the Plan will be implemented, the Company has recorded provisions of $813 million at December 31, 2003, in accrued liabilities and other. If the Plan becomes effective, certain amounts will be reclassified as of the effective date to other long-term liabilities based on the timing of the future cash payments to the Asbestos PI Trust. Future earnings will be affected by mark-to-market adjustments relating to the CE Settlement Shares through the effective date of the Plan, as well as contingent payments when they become probable of payment. In the event the Plan does not become effective, the ultimate cost for the resolution of asbestos-related personal injury claims against Combustion Engineering, Lummus and Basic may be significantly higher and could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.

Contingencies related to former Nuclear Technology business

        The Company retained liability for certain specific environmental remediation costs at two sites in the U.S. that were operated by its Nuclear Technology business, which was sold to British Nuclear Fuels PLC (BNFL) in April 2000. Pursuant to the purchase agreement with BNFL, the Company has retained all of the environmental liabilities associated with its Combustion Engineering subsidiary's Windsor, Connecticut facility and a portion of the environmental liabilities associated with its ABB C-E Nuclear Power Inc. subsidiary's Hematite, Missouri facility. The primary environmental liabilities associated with these sites relate to the costs of remediating radiological and chemical contamination at these facilities. Such costs are not payable until a facility is taken out of use and generally are incurred over a number of years. Although it is difficult to predict with accuracy the amount of time it may take to remediate radiological contamination upon decommissioning, based on information that BNFL has made publicly available, the Company believes that it may take until 2013 to remediate the Hematite site. With respect to the Windsor site, the Company believes the remediation may take until 2008. At the Windsor site, a significant portion of the contamination is related to activities that were formerly conducted by or for the U.S. government. The Company believes that a significant portion of the remediation costs will be covered by the U.S. government under the government's Formerly Utilized Sites Remedial Action Program. As a result of the sale of the Nuclear Technology business, during 2000, the Company established in other liabilities a reserve of $300 million in connection with its estimated remediation costs related to these facilities. Expenditures charged to the remediation reserve were $6 million, $12 million and $6 million during 2003, 2002 and 2001, respectively. In connection with the pre-packaged Chapter 11 filing by Combustion Engineering discussed above, the Company will assume any and all remaining environmental liabilities of Combustion Engineering in respect to the Windsor and Hematite sites.

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Note 19 Taxes

        Provision for taxes consists of the following:

	Year ended December 31,
	2003			2002			2001
Current taxes on income	$	191		$	250		$	149
Deferred taxes		(113	)		(176	)		(62	)
Tax expense from continuing operations		78			74			87
Tax expense from discontinued operations		212			81			15

        The weighted average tax rate is the tax rate that would result applying each subsidiary's statutory income tax rate to the income from continuing operations before taxes and minority interest. The Company operates in countries that have differing tax laws and rates. Consequently, the consolidated weighted-average effective rate will vary from year to year according to the source of earnings or losses by country.

	Year ended December 31,
	2003			2002			2001
Reconciliation of taxes:
Income from continuing operations before taxes and minority interest	$	246		$	220		$	294
Weighted-average tax rate		42.7	%		41.4	%		37.8	%
Taxes at weighted-average tax rate		105			91			111
Items taxed at rates other than the weighted-average tax rate		14			(127	)		(1	)
Non-deductible goodwill amortization		—			—			49
Changes in valuation allowance		9			106			(30	)
Changes in enacted tax rates		3			1			6
Other, net		(53	)		3			(48	)
Tax expense from continuing operations	$	78		$	74		$	87
Effective tax rate for the year		31.7	%		33.6	%		29.6	%

        Items taxed at rates other than the weighted-average tax rate in 2003 include $84 million loss comprising the change in fair value of the embedded derivative contained in the Company's $968 million convertible bonds combined with the continued amortization of the discount on issuance of these bonds (see Note 15), partially offset by earnings recognized in relation to certain of the Company's equity accounted investments. In 2002, items taxed at rates other than the weighted-average tax rate include $215 million gain, reflecting the change in fair value of the embedded derivative contained in the Company's $968 million convertible bonds, partially offset by amortization of the discount on issuance of these bonds, as well as earnings recognized in relation to certain of the Company's equity accounted investments.

        Non-deductible goodwill amortization did not impact the reconciliation of taxes in 2003 and 2002, as the Company ceased amortizing goodwill on January 1, 2002, pursuant to the adoption of SFAS 142.

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        The reconciliation of taxes for 2002 includes changes in valuation allowance recorded in certain jurisdictions in respect of deferred tax assets that were recognized for net operating losses incurred in those jurisdictions. The change in the valuation allowance was required as the Company determined it was more likely than not that such deferred tax assets would no longer be realized. In 2001, the reconciliation of taxes includes changes in valuation allowance recorded in certain jurisdictions in respect of deferred tax assets that were recognized for net operating losses incurred in those jurisdictions. The change in the valuation allowance was required as the Company determined it was more likely than not certain deferred tax assets would be realized.

        In 2003 and 2001, the reconciling item other, net of $(53) million and $(48) million includes an amount of $56 million and $50 million, respectively, relating to adjustments with respect to the favorable resolution of certain prior year tax matters.

        In 2003, the income from continuing operations before taxes and minority interest of $246 million includes an $84 million loss comprising the change in fair value of the embedded derivative contained in the Company's $968 million convertible bonds combined with the continued amortization of the discount on issuance of these bonds. Furthermore, the tax expense from continuing operations includes the release of a $38 million tax provision related to a tax case ruled in favor of the Company. The effective tax rate applicable to income from continuing operations excluding the tax effect of these items would be 35.2 percent.

        Deferred income tax assets and liabilities consist of the following:

		Year ended December 31,
		2003			2002
Deferred tax liabilities:
	Financing receivables	$	(244	)	$	(226	)
	Property, plant and equipment		(461	)		(407	)
	Pension and other accrued liabilities		(333	)		(345	)
	Other		(131	)		(169	)
Total deferred tax liability			(1,169	)		(1,147	)
Deferred tax assets:
	Investments and other		20			2
	Property, plant and equipment		172			58
	Pension and other accrued liabilities		680			849
	Unused tax losses and credits		1,419			1,059
	Other		429			331
Total deferred tax asset			2,720			2,299
Valuation allowance			(1,610	)		(1,227	)
Deferred tax asset, net of valuation allowance			1,110			1,072
Net deferred tax liability		$	(59	)	$	(75	)

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        Deferred tax assets and deferred tax liabilities can be allocated between current and non-current as follows:

	Year ended December 31,
	2003						2002
	Current			Non-current			Current			Non-current
Deferred tax liability	$	(200	)	$	(969	)	$	(236	)	$	(911	)
Deferred tax asset, net		553			557			556			516
Net deferred tax asset (liability)	$	353		$	(412	)	$	320		$	(395	)

        The non-current deferred tax asset, net, is included in investments and other.

        Certain entities have deferred tax assets related to net operating loss carry-forwards and other items. Because recognition of these assets is uncertain, valuation allowances of $1,610 million and $1,227 million have been established at December 31, 2003 and 2002, respectively.

        At December 31, 2003, net operating loss carry-forwards of $3,566 million and tax credits of $110 million are available to reduce future taxes of certain subsidiaries, of which $2,210 million loss carry-forwards and $75 million tax credits expire in varying amounts through 2023 and the remainder do not expire. These carry-forwards are predominately related to the Company's U.S. and German operations.

Note 20 Other liabilities

        The Company's other liabilities amount to $1,837 million and $1,584 million at December 31, 2003 and 2002, respectively.

        Other liabilities include non-current provisions of $446 million and $447 million, advances from customers relating to long-term construction contracts of $807 million and $564 million and non-current deferred income of $158 million and $149 million at December 31, 2003 and 2002, respectively. Other liabilities also includes the provision relating to the Company's estimated environmental remediation costs related to its former Nuclear Technology business (see Note 18) of $276 million and $282 million at December 31, 2003 and 2002, respectively.

        The Company entered into tax advantaged leasing transactions with U.S. investors prior to 1999. Prepaid rents that have been received on these transactions are $312 million and $349 million at December 31, 2003 and 2002, respectively, and have been recorded as deposit liabilities. Net gains on these transactions are being recognized over the lease terms.

Note 21 Employee benefits

        The Company operates several pension plans, including defined benefit, defined contribution and termination indemnity plans, in accordance with local regulations and practices. These plans cover the majority of the Company's employees and provide benefits to employees in the event of death, disability, retirement or termination of employment. Certain of these plans are multi-employer plans. The Company also operates postretirement health benefit plans in certain countries.

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        Some of these plans require employees to make contributions and enable employees to earn matching or other contributions from the Company. The funding policies of the Company's plans are consistent with the local government and tax requirements. The Company has several pension plans that are not required to be funded pursuant to local government and tax requirements.

        The Company uses a December 31 measurement date for its plans.

Obligations and Funded Status

        The following tables set forth the change in benefit obligations, the change in plan assets and the funded status recognized in the Consolidated Financial Statements at December 31, 2003 and 2002, for the Company's benefit plans:

		Pension benefits						Other benefits
		2003			2002			2003			2002
Benefit obligation at the beginning of year		$	7,024		$	6,005		$	414		$	389
	Service cost		195			186			3			6
	Interest cost		355			318			24			28
	Contributions from plan participants		47			43			6			4
	Benefit payments		(521	)		(437	)		(34	)		(34	)
	Benefit obligations of businesses acquired		—			46			—			—
	Benefit obligations of businesses disposed		(131	)		(14	)		—			—
	Actuarial (gain) loss		(367	)		(60	)		41			26
	Plan amendments and other		(14	)		(56	)		(88	)		(5	)
	Exchange rate differences		847			993			1			—
Benefit obligation at the end of year			7,435			7,024			367			414
Fair value of plan assets at the beginning of year			5,145			4,226			—			—
	Actual return on plan assets		384			(84	)		—			—
	Contributions from employer		298			717			28			30
	Contributions from plan participants		47			43			6			4
	Benefit payments		(521	)		(437	)		(34	)		(34	)
	Plan assets of businesses acquired		—			44			—			—
	Plan assets of businesses disposed		(127	)		(3	)		—			—
	Other		—			(50	)		—			—
	Exchange rate differences		573			689			—			—
Fair value of plan assets at the end of year			5,799			5,145			—			—
Unfunded amount(1)			1,636			1,879			367			414
Unrecognized transition liability			—			(1	)		(6	)		(60	)
Unrecognized actuarial loss			(737	)		(1,168	)		(160	)		(150	)
Unrecognized prior service cost			(33	)		(57	)		15			—
Net amount recognized		$	866		$	653		$	216		$	204

(1)

These amounts include $1,449 million and $1,181 million at December 31, 2003 and 2002, respectively for pension plans which are not required to be funded pursuant to local government and tax requirements.

        In May 2003, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on Emerging Issues Task Force No. 03-4 (EITF 03-4), Determining the

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Classification and Benefit Attribution Method for a "Cash Balance" Pension Plan. EITF 03-4 clarifies that a cash balance plan, as defined by the guidance, should be accounted for as a defined benefit plan using the traditional unit credit attribution method. The Company adopted EITF 03-4 in May 2003. As a result, the Company accounts for certain of its plans in Switzerland as cash balance plans in accordance with EITF 03-4. The adoption of EITF 03-4 resulted in an actuarial gain of $406 million during 2003.

        The following amounts have been recognized in the Company's Consolidated Balance Sheet at December 31, 2003 and 2002:

	Pension benefits						Other benefits
	2003			2002			2003		2002
Prepaid pension cost	$	(530	)	$	(572	)	$	—	$	—
Accrued pension cost		1,579			1,428			216		204
Intangible assets		(2	)		(24	)		—		—
Accumulated other comprehensive loss		(181	)		(179	)		—		—
Net amount recognized	$	866		$	653		$	216	$	204

        The total pension and other employee benefits liability of $1,904 million and $1,720 million, as reflected in pension and other employee benefits and in accrued liabilities and other (see Note 16), contains an accrual of $109 million and $88 million at December 31, 2003 and 2002, respectively, for employee benefits that do not meet the criteria of Statement of Financial Accounting Standards No. 87, Employers' Accounting for Pensions or Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. Approximately $6 million and $35 million of prepaid pension cost is included as a component of assets held for sale and in discontinued operations at December 31, 2003 and 2002, respectively.

        The pension and other employee benefits liability reported in the Consolidated Balance Sheet includes $183 million and $203 million at December 31, 2003 and 2002, respectively, to record a minimum pension liability. The minimum liability included in other comprehensive loss decreased $19 million in 2003 and increased $107 million in 2002.

        The accumulated benefit obligation for all defined benefit pension plans was $7,156 million and $6,435 million at December 31, 2003 and 2002, respectively.

        The projected benefit obligation (PBO) and fair value of plan assets for pension plans with benefit obligations in excess of plan assets were:

	December 31,
	2003							2002
	PBO		Assets		Difference			PBO		Assets		Difference
PBO exceeds assets	$	4,146	$	2,382	$	1,764		$	6,956	$	5,068	$	1,888
Assets exceed PBO		3,289		3,417		(128	)		68		77		(9	)
Total	$	7,435	$	5,799	$	1,636		$	7,024	$	5,145	$	1,879

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        The accumulated benefit obligation (ABO) and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were:

	December 31,
	2003							2002
	ABO		Assets		Difference			ABO		Assets		Difference
ABO exceeds assets	$	2,199	$	667	$	1,532		$	5,524	$	4,206	$	1,318
Assets exceed ABO		4,957		5,132		(175	)		911		939		(28	)
Total	$	7,156	$	5,799	$	1,357		$	6,435	$	5,145	$	1,290

Components of Net Periodic Benefit Cost

        For the years ended December 31, 2003, 2002 and 2001, net periodic benefit cost consists of the following:

	Pension benefits									Other benefits
	2003			2002			2001			2003			2002		2001
Service cost	$	195		$	186		$	177		$	3		$	6	$	5
Interest cost		355			318			311			24			28		26
Expected return on plan assets		(312	)		(281	)		(291	)		—			—		—
Amortization transition liability		1			13			9			6			6		6
Amortization prior service cost		8			15			14			(1	)		—		—
Amortization of net actuarial (gain) loss		43			22			4			8			6		3
Other		6			9			(19	)		(1	)		—		—
Net periodic benefit cost	$	296		$	282		$	205		$	39		$	46	$	40

Assumptions

        The following weighted-average assumptions were used to determine benefit obligations at December 31, 2003 and 2002:

	Pension benefits				Other benefits
	2003		2002		2003		2002
Discount Rate	4.96	%	5.05	%	6.25	%	6.74	%
Rate of compensation increase	2.25	%	3.05	%	—		—

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        The following weighted-average assumptions were used to determine net periodic benefit cost for years ended December 31, 2003, 2002 and 2001:

	Pension benefits						Other benefits
	2003		2002		2001		2003		2002		2001
Discount rate	5.05	%	5.32	%	5.43	%	6.74	%	7.24	%	7.72	%
Expected long-term return on plan assets	6.01	%	6.15	%	6.81	%	—		—		—
Rate of compensation increase	3.05	%	3.07	%	3.19	%	—		—		—

        The expected long-term rate of return on assets assumption is derived from the current and projected asset allocation, the current and projected types of investments in each asset category and the long-term historical returns for each investment type.

        The Company has multiple non-pension postretirement benefit plans. The Company's health care plans are generally contributory with participants' contributions adjusted annually.

	2003		2002
Health care cost trend rate assumed for next year	11.81	%	12.92	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5.96	%	6.46	%
Year that the rate reaches the ultimate trend rate	2013		2012

        Assumed health care cost trends have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects at December 31, 2003:

	1-percentage- point increase		1-percentage- point decrease
Effect on total of service and interest cost	$	2	$	(2	)
Effect on postretirement benefit obligation	$	23	$	(20	)

        On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law in the U.S. In accordance with FASB Staff Position No. FAS 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, the Company has elected to defer recognition of the potential effect of the Act on the accumulated postretirement benefit obligation and the measurement of expense related to its U.S. plans at and for the year ended December 31, 2003. Authoritative guidance specific to the accounting treatment for the federal subsidy component of the Act is pending and that guidance, when issued by the FASB, may require the Company to change previously reported information.

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Plan Assets

        The Company's pension plan weighted-average asset allocations at December 31, 2003 and 2002, by asset category are as follows:

		Plan assets at December 31,
		2003		2002
Asset category
Equity securities		37	%	33	%
Debt securities		48	%	51	%
Real estate		11	%	11	%
Other		4	%	5	%
	Total	100	%	100	%

        The pension plan assets are invested in accordance with statutory regulations, pension plan rules, and recommendations of the pension fund trustees. The investment allocation strategy is expected to remain consistent with historical averages.

        At December 31, 2003 and 2002, plan assets included approximately $5 million (approximately 1 million shares) and $3 million (approximately 1 million shares), respectively, of the Company's capital stock.

Contributions

        The Company expects to contribute $248 million to its pension plans and $27 million to its other postretirement benefit plans in 2004.

        The Company has a defined benefit pension plan that covers substantially all employees in Sweden. Effective December 31, 2002, the assets which had previously been pledged to the plan were contributed and have been reflected as a component of "Fair value of plan assets" at December 31, 2003 and 2002 (see Note 5).

        During 2002, the Company contributed $188 million of available-for-sale debt securities to certain of the Company's pension plans in the United States and the United Kingdom.

        The Company also maintains several defined contribution plans. The expense for these plans was $23 million, $23 million and $26 million in 2003, 2002 and 2001, respectively. The Company also contributed $143 million, $141 million and $135 million to multi-employer plans in 2003, 2002 and 2001, respectively.

Note 22 Management incentive plan

        The Company maintains a management incentive plan under which it offers stock warrants and warrant appreciation rights (WARs) to key employees for no consideration.

        Warrants granted under this plan allow participants to purchase shares of the Company at predetermined prices. Participants may sell the warrants rather than exercise the right to purchase

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shares. Equivalent warrants are listed on the SWX Swiss Exchange (virt-x), which facilitates valuation and transferability of warrants granted under this plan.

        Each WAR gives the participant the right to receive, in cash, the market price of a warrant on the date of exercise of the WAR. The WARs are non-transferable.

        Participants may exercise or sell warrants and exercise WARs after the vesting period, which is three years from the date of grant. Vesting restrictions can be waived in certain circumstances such as death or disability. All warrants and WARs expire six years from the date of grant. As the primary trading market for shares of ABB Ltd is the SWX Swiss Exchange (virt-x), the exercise prices of warrants and the trading prices of equivalent warrants listed on the SWX Swiss Exchange (virt-x) are denominated in Swiss francs. Accordingly, exercise prices are presented below in Swiss francs. Fair values have been presented in U.S. dollars based upon exchange rates in effect as of the applicable period.

        In November 2003, an extraordinary shareholders' meeting resolved to increase the Company's share capital by approximately 840 million shares through a rights issue. In December 2003, the Company completed the 7-for-10 rights offering for the 840 million new registered shares at an offer price of 4 Swiss francs per share resulting in a net increase of capital stock and additional paid-in capital of approximately $2.5 billion. As a result of the rights offering, the exercise price and conversion ratio of the warrants were adjusted so as to ensure that the intrinsic value of the warrants and WARs immediately after the rights offering was not in excess of the intrinsic value prior to the rights offering, and that the ratio of the exercise price per share to the market value per share was not reduced.

Warrants

        The Company accounts for the warrants using the intrinsic value method of APB Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, as permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock Based Compensation,as amended. All warrants were issued with exercise prices greater than the market prices of the stock on the dates of grant. Accordingly, the Company records no compensation expense related to the warrants, except in circumstances when a participant ceased to be employed by a consolidated subsidiary, such as after a divestment by the Company. In accordance with FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, the Company records compensation expense based on the fair value of warrants retained by participants on the date their employment ceased, with an offset to additional paid in capital. The impact of such expense is not material.

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        Presented below is a summary of warrant activity for the years shown:

	Number of warrants		Number of shares(1)(5)		Weighted-average exercise Price (Swiss francs)(2)(5)
Outstanding at January 1, 2001	55,442,400		19,949,848		30.74
Granted(3)	23,293,750		5,872,266		13.49
Forfeited	(2,240,000	)	(581,651	)	38.50
Outstanding at December 31, 2001	76,496,150		25,240,463		26.55
Forfeited	(8,105,090	)	(2,043,264	)	24.03
Outstanding at December 31, 2002	68,391,060		23,197,199		26.77
Granted(4)	27,254,250		5,450,850		7.00
Forfeited	(1,435,000	)	(361,758	)	19.66
Outstanding at December 31, 2003	94,210,310		28,286,291		23.05
Exercisable at December 31, 2001	10,538,000		8,612,664		22.17
Exercisable at December 31, 2002	29,751,060		13,456,203		25.71
Exercisable at December 31, 2003	49,381,060		18,404,851		30.11

(1)

All warrants granted prior to 1999 require the exercise of 100 warrants for 81.73 registered shares of ABB Ltd. Warrants granted in 1999, 2000 and 2001 require the exercise of 100 warrants for 25.21 registered shares of ABB Ltd. No warrants were granted in 2002. Warrants granted in 2003 require the exercise of five warrants for one registered share of ABB Ltd. Information presented reflects the number of registered shares of ABB Ltd that warrant holders can receive upon exercise.

(2)

Information presented reflects the exercise price per registered share of ABB Ltd.

(3)

The aggregate fair value at date of grant of warrants issued in 2001 was $16 million, assuming a dividend yield of 1.25 percent, expected volatility of 47 percent, risk-free interest rate of 3.5 percent, and an expected life of six years.

(4)

The aggregate fair value at date of grant of warrants issued in 2003 was $12 million, assuming a zero percent dividend yield, expected volatility of 44 percent, risk-free interest rate of 2.41 percent, and an expected life of six years.

(5)

The exercise price of the warrants and number of shares underlying the warrants have been restated to reflect the adjustments made to the terms of the warrants in 2003 as a result of the rights offering.

        Presented below is a summary of warrants outstanding at December 31, 2003.

Exercise price (presented in Swiss francs)(1)(3)	Number of warrants	Number of shares(2)(3)	Weighted-average remaining life
24.51	4,743,000	3,876,435	2 weeks
20.26	5,795,000	4,736,229	0.9 years
29.75	4,648,060	1,171,758	1.4 years
32.73	14,565,000	3,671,781	1.9 years
42.05	19,630,000	4,948,648	2.5 years
13.49	17,575,000	4,430,590	3.9 years
7.00	27,254,250	5,450,850	5.9 years

(1)

Information presented reflects the exercise price per registered share of ABB Ltd.

(2)

Information presented reflects the number of registered shares of ABB Ltd that warrant holders can receive upon exercise of warrants.

(3)

The exercise price of the warrants and number of shares underlying the warrants have been restated to reflect the adjustments made to the terms of the warrants in 2003 as a result of the rights offering.

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WARs

        As each WAR gives the holder the right to receive cash equal to the market price of a warrant on date of exercise, the Company is required by APB 25 to record a liability based upon the fair value of outstanding WARs at each period end, amortized on a straight-line basis over the three-year vesting period. In selling, general and administrative expenses, the Company recorded expense of $1 million for 2003 and income of $14 million and $58 million for 2002 and 2001, respectively, excluding amounts charged to loss from discontinued operations, net of tax, as a result of changes in the fair value of the outstanding WARs and the vested portion. To hedge its exposure to fluctuations in fair value of outstanding WARs, the Company purchases cash-settled call options, which entitle the Company to receive amounts equivalent to its obligations under the outstanding WARs. In accordance with Emerging Issues Task Force No. 00-19 (EITF 00-19), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock, the cash-settled call options have been recorded as assets measured at fair value (see Note 5), with subsequent changes in fair value recorded through earnings as an offset to the compensation expense recorded in connection with the WARs. During 2003, 2002 and 2001, excluding amounts charged to loss from discontinued operations, net of tax, the Company recognized expense of $9 million, $26 million and $54 million, respectively, in interest and other finance expense, related to the cash-settled call options.

        The aggregate fair value of outstanding WARs was $17 million and $9 million at December 31, 2003 and 2002, respectively. Fair value of WARs was determined based upon the trading price of equivalent warrants listed on the SWX Swiss Exchange (virt-x).

        Presented below is a summary of WAR activity for the years shown.

	Number of WARs outstanding
Outstanding at January 1, 2001	65,361,040
Granted	39,978,750
Exercised	(548,000	)
Forfeited	(1,238,720	)
Outstanding at December 31, 2001	103,553,070
Exercised	(1,455,080	)
Forfeited	(3,803,750	)
Outstanding at December 31, 2002	98,294,240
Granted	21,287,000
Exercised	(2,052,500	)
Forfeited	(1,850,000	)
Outstanding at December 31, 2003	115,678,740

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        At December 31, 2003 and 2002, 57,619,240 and 26,974,240 of the WARs were exercisable, respectively. The aggregate fair value at date of grant of WARs issued in 2003 and 2001 was $9 million and $28 million, respectively. No WARs were granted in 2002.

Note 23 Stockholders' equity

        In March 2003, the Company sold 80 million treasury shares in two transactions for approximately $156 million.

        At the Company's annual general meeting held on May 16, 2003, the Company's shareholders approved amendments to its articles of incorporation providing for an increase in authorized share capital and an increase in contingent share capital. The amendments include the creation of 250 million Swiss francs in authorized share capital, replacing 100 million Swiss francs that expired in June 2001. This entitled the Company's Board of Directors to issue up to 100 million new ABB shares, including approximately 30 million CE Settlement Shares (see Note 18). The amendments also include an increase of contingent capital from 200 million Swiss francs to 750 million Swiss francs, allowing the issue of up to a further 300 million new ABB Ltd shares which may be used primarily for the exercise of conversion rights granted in connection with issuance of bonds and other financial market instruments and for the issuance of new shares to employees.

        In October 2003, the Company announced a three-component capital-strengthening program, comprising of a share capital increase, a credit facility agreement and a bond issuance. As part of this program, in November 2003, an extraordinary shareholders' meeting resolved to increase the Company's share capital by approximately 840 million shares through a rights issue. In December 2003, the Company completed the 7-for-10 rights offering for the 840 million new registered shares at an offer price of 4 Swiss francs per share resulting in a net increase of capital stock and additional paid in capital of approximately $2.5 billion.

        At December 31, 2003, the Company had 2,440,016,034 authorized shares. Of these, 2,070,314,947 shares are registered and issued, including 30,298,913 CE Settlement Shares that are reserved for use with the pre-packaged plan of reorganization of Combustion Engineering. The CE Settlement Shares will only become outstanding and carry participation rights once the Plan becomes effective, and the shares are contributed to the Asbestos PI Trust. Should the Plan ultimately not become effective, the CE Settlement Shares reserved for such use would be cancelled by the Company. As these shares are presently held by one of the Company's subsidiaries and carry no participation rights, these shares are not treated as outstanding for the purposes of the Company's Consolidated Financial Statements.

        At December 31, 2003, including the warrants issued under the management incentive plan and call options sold to a bank at fair value during 2001 and 2003, the Company had outstanding obligations to deliver 59 million shares at exercise prices ranging from 7.00 to 42.05 Swiss francs. The call options expire in periods ranging from 2004 to 2009 and were recorded as equity instruments in accordance with EITF 00-19. Also, at December 31, 2003, the Company had obligations to deliver approximately 107 million shares at a conversion price of 14.64 Swiss francs (converted into U.S. dollars at the fixed exchange rate of 1.6216 Swiss francs per U.S. dollar) as a result of the issuance of convertible debt in May 2002 and to deliver approximately 105 million shares at a conversion price of 9.53 Swiss francs as a result of the issuance of convertible debt in

F-75

September 2003. In addition, pursuant to the Plan described above and in Note 18, the Company will contribute the CE Settlement Shares to the Asbestos PI Trust after the Plan is declared effective.

        Dividends are payable to the Company's stockholders based on the requirements of Swiss law, ABB Ltd's Articles of Incorporation, and stockholders' equity as reflected in the unconsolidated financial statements of ABB Ltd prepared in compliance with Swiss law. At December 31, 2003, of the 8,942 million Swiss francs stockholders' equity reflected in such unconsolidated financial statements, 5,176 million Swiss francs is share capital, 2,192 million Swiss francs is restricted, 1,533 million Swiss francs is unrestricted and 41 million Swiss francs is available for distribution.

Note 24 Earnings per share

        Basic earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised and that any proceeds from such exercises were used to acquire shares of the Company's stock at the average market price during the year or the period the securities were outstanding, if shorter. Potentially dilutive securities comprise: outstanding written call options, if dilutive; the securities issued under the Company's management incentive plan, to the extent the average market price of the Company's stock exceeded the exercise prices of such instruments; shares issuable in relation to the convertible bonds, if dilutive; and outstanding written put options, for which net share settlement at average market price of the Company's stock was assumed, if dilutive.

        The shares issuable in relation to the warrants and options outstanding in connection with the Company's management incentive plan were excluded from the computation of diluted earnings per share in all periods presented as their inclusion would have been antidilutive. In 2002, the shares issuable in relation to the convertible bonds were included in the computation of diluted earnings per share for the period they were outstanding. In 2003, the shares issuable in relation to the

F-76

convertible bonds were excluded from the calculation of diluted earnings per share as their inclusion would have been antidilutive.

	Year ended December 31,
	2003			2002			2001
Basic earnings per share:
Income from continuing operations	$	86		$	75		$	171
Loss from discontinued operations, net of tax		(853	)		(858	)		(837	)
Cumulative effect of change in accounting principles (SFAS 133), net of tax		—			—			(63	)
Net loss	$	(767	)	$	(783	)	$	(729	)
Weighted average number of shares outstanding (in millions)		1,220			1,113			1,132
Earnings per share:
Income from continuing operations	$	0.07		$	0.07		$	0.15
Loss from discontinued operations, net of tax		(0.70	)		(0.77	)		(0.73	)
Cumulative effect of change in accounting principles (SFAS 133), net of tax		—			—			(0.06	)
Net loss	$	(0.63	)	$	(0.70	)	$	(0.64	)

F-77

		Year ended December 31,
Diluted earnings per share:
		2003			2002			2001
Income from continuing operations		$	86		$	75		$	171
Effect of dilution:
	Convertible bonds, net of tax		—			(187	)		—
Income (loss) from continuing operations, adjusted			86			(112	)		171
Loss from discontinued operations, net of tax			(853	)		(858	)		(837	)
Cumulative effect of change in accounting principles (SFAS 133), net of tax			—			—			(63	)
Net loss, adjusted		$	(767	)	$	(970	)	$	(729	)
Weighted average number of shares outstanding (in millions)			1,220			1,113			1,132
Dilutive potential shares:
	Convertible bonds		—			53			—
Diluted weighted average number of shares outstanding (in millions)			1,220			1,166			1,132
Earnings per share:
Income (loss) from continuing operations, adjusted		$	0.07		$	(0.10	)	$	0.15
Loss from discontinued operations, net of tax			(0.70	)		(0.73	)		(0.73	)
Cumulative effect of change in accounting principles (SFAS 133), net of tax			—			—			(0.06	)
Net loss, adjusted		$	(0.63	)	$	(0.83	)	$	(0.64	)

Note 25 Restructuring charges

2001 Program

        In July 2001, the Company announced and initiated a restructuring program (2001 Program) in an effort to improve productivity, reduce cost base, simplify product lines, reduce multiple location activities and perform other downsizing in response to weakening markets and consolidation of major customers in certain industries.

        Restructuring charges relating to workforce reductions, lease terminations and other exit costs associated with the 2001 Program are included in other income (expense), net. Termination benefits of $99 million, $149 million and $32 million were paid to approximately 2,270, 4,000 and 2,150 employees in 2003, 2002 and 2001, respectively. Approximately $12 million, $29 million and $31 million were paid to cover costs associated with lease terminations and other exit costs in 2003, 2002 and 2001, respectively. Workforce reductions include production, managerial and administrative employees. Based on changes in management's original estimate a $22 million and $21 million reduction in the amounts accrued for workforce reductions, lease terminations and other exit costs have been included in other income (expense), net in 2003 and 2002, respectively. Currency fluctuations resulted in a $23 million and $25 million increase in the liabilities accrued for workforce reductions, lease terminations and other exit costs in 2003 and 2002, respectively.

F-78

Accrued liabilities included $9 million and $94 million for termination benefits and $27 million and $52 million for lease terminations and other exit costs as of December 31, 2003 and 2002, respectively.

        As a result of the 2001 Program, certain assets, inventories and property, plant and equipment have been identified as impaired or will no longer be used in continuing operations. The Company recorded $18 million and $41 million in 2002 and 2001, respectively, to write down these assets to fair value. These costs are included in cost of sales and other income (expense), net.

Step change program

        In October 2002, the Company announced the Step change program. The Company estimates that restructuring costs under the Step change program will be approximately $200 million in 2004. The goals of the Step change program are to increase competitiveness of the Company's core businesses (see Note 26), reduce overhead costs and streamline operations by approximately $900 million on an annual basis by 2005. The Step change program is expected to be completed by mid-2004.

        Restructuring charges relating to workforce reductions, lease terminations and other exit costs associated with the Step change program are included in other income (expense), net. Termination benefits of $145 million and $13 million were paid to approximately 1,500 and 200 employees in 2003 and 2002, respectively. Approximately $48 million and $1 million were paid to cover costs associated with lease terminations and other exit costs in 2003 and 2002, respectively. Workforce reductions include production, managerial and administrative employees. Based on changes in management's original estimate, a $4 million reduction in the amounts accrued for workforce reductions, lease terminations and other exit costs has been included in other income (expense), net in 2003. Currency fluctuations resulted in a $27 million increase in the liabilities accrued for workforce reductions, lease terminations and other exit costs in 2003. Accrued liabilities included $94 million and $38 million for termination benefits and $37 million and $25 million for lease terminations and other exit costs at December 31, 2003 and 2002, respectively.

        As a result of the Step change program, certain assets, inventories and property, plant and equipment have been identified as impaired or will no longer be used in continuing operations. The Company recorded $3 million and $2 million in 2003 and 2002, respectively, to write down these assets to their fair value. These costs are included in cost of sales and other income (expense), net.

Other

        Certain restructuring programs were initiated during 2003 at specified locations not included in the Step change program. The goals of these programs are to increase efficiencies by reducing headcount and streamlining operations. These programs are expected to increase productivity of the non-core businesses (see Note 26). Anticipated savings will be recognized through the strategic divestments of these operations.

        In 2003, the Company recognized restructuring charges of $83 million related to workforce reductions and $25 million related to lease terminations and other exit costs. These costs are included in other income (expense), net. Termination benefits of $34 million were paid to approximately 1,300 employees and $10 million were paid to cover costs associated with lease

F-79

terminations and other exit costs. Workforce reductions include production, managerial and administrative employees. Based on changes in management's original estimate, a $6 million decrease in the amounts accrued for workforce reductions, lease terminations and other exit costs have been included in other income (expense), net. Currency fluctuations resulted in a $10 million increase in the liabilities accrued for workforce reductions, lease terminations and other exit costs. At December 31, 2003, accrued liabilities included $67 million for termination benefits and $35 million for lease terminations and other exit costs.

        As a result of other restructuring programs, certain assets, inventories and property, plant and equipment have been identified as impaired or will no longer be used in continuing operations. The Company recorded $11 million in 2003, to write down these assets to fair value. These costs are included in cost of sales and other income (expense), net.

        Restructuring charges consist of the following:

		2001 program			Step change			Other			Total
Year ended December 31, 2003
	Restructuring charge for workforce reduction	$	—		$	181		$	83		$	264
	Restructuring charge for lease terminations and other		—			54			25			79
	Write down cost		—			3			11			14
	Change in estimate		(22	)		(4	)		(6	)		(32	)
Total restructuring charges and related asset write-downs		$	(22	)	$	234		$	113		$	325
Year ended December 31, 2002
	Restructuring charge for workforce reduction	$	165		$	51		$	—		$	216
	Restructuring charge for lease terminations and other		38			26			—			64
	Write down cost		18			2			—			20
	Change in estimate		(21	)		—			(9	)		(30	)
Total restructuring charges and related asset write-downs		$	200		$	79		$	(9	)	$	270
Year ended December 31, 2001
	Restructuring charge for workforce reduction	$	109		$	—		$	—		$	109
	Restructuring charge for lease terminations and other		71			—			—			71
	Write down cost		41			—			—			41
	Change in estimate		—			—			—			—
Total restructuring charges and related asset write-downs		$	221		$	—		$	—		$	221

F-80

Cumulative

        The cumulative amounts at December 31, 2003, for each plan are given below:

		2001 program			Step change			Other			Total
	Restructuring charge for workforce reduction	$	274		$	232		$	83		$	589
	Restructuring charge for lease terminations and other		109			80			25			214
	Write down cost		59			5			11			75
	Change in estimate		(43	)		(4	)		(15	)		(62	)
Total restructuring charges and related asset write-downs		$	399		$	313		$	104		$	816

Segment information

        Restructuring charges and related asset write-downs by segment consist of the following:

			Year ended December 31,
			2003		2002		2001
	Power Technologies		$	64	$	62	$	76
	Automation Technologies			140		137		81
	Non-core activities:
		Equity Ventures		—		—		—
		Structured Finance		—		—		—
		Building Systems		43		22		2
		New Ventures		1		2		6
		Other Non-core activities		49		15		13
	Total Non-core activities			93		39		21
	Corporate/Other			28		32		43
Total restructuring charges and related asset write-downs			$	325	$	270	$	221

Note 26 Segment and geographic data

        Effective January 1, 2003, in order to streamline the Company's structure and improve operational performance, the Company put into place two divisions: Power Technologies, which combines the former Power Technology Products and Utilities divisions and employed approximately 38,700 people at December 31, 2003: and Automation Technologies, which combined the former Automation Technology Products and Industries division and employed approximately 55,300 people at December 31, 2003. The remaining operations of the Company are grouped in Non-core activities. All periods presented have been restated to reflect the new organizational structure of the Company.

        The Power Technologies division serves electric, gas, and water utilities as well as industrial and commercial customers, with a broad range of products, systems and services for power transmission, distribution and power plant automation. The division's principal customers are

F-81

electric, gas and water utilities, owners and operators of power transmission systems, utilities that own or operate networks and owners and operators of power generating plants. Other customers include gas transmission companies, local distribution companies and multi-utilities, which are involved in the transmission or distribution of more than one commodity. The division also serves industrial and commercial customers, such as operators of large commercial buildings and heavy industrial plants.

        The Automation Technologies division provides products, systems, software and services for the automation and optimization of industrial and commercial processes. Key technologies include measurement and control, instrumentation, process analysis, drives and motors, power electronics, robots, and low voltage products. These technologies are sold to customers of the automotive, cement, chemical, distribution, electronics, food and beverage, life sciences, marine, metals, mining, paper, petroleum, printing and telecommunications industries with application-specific power and automation technology.

        Non-core activities include the following:

•

The Company's remaining Equity Ventures business;



•

the Company's remaining Structured Finance business;



•

the Company's remaining Building Systems business;



•

the Company's New Ventures business area;



•

the Company's Customer Service, Group Processes, Logistic Systems, and Semiconductors business areas.

        Corporate/Other includes Headquarters, Central Research and Development, Real Estate, Group Treasury Operations and the Financial Advisory business.

        The Company evaluates performance of its segments based on earnings before interest and taxes, which excludes interest and dividend income, interest expense, provision for taxes, minority interest, and loss from discontinued operations, net of tax. In accordance with Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company presents division revenues, depreciation and amortization, earnings before interest and taxes, net operating assets and capital expenditures, all of which have been restated to reflect the changes to the Company's internal structure, including the effect of inter-division transactions.

F-82

        The following tables summarize information for each segment:

2003		Revenues			Depreciation and amortization		Earnings before interest and taxes			Net operating assets(1)			Capital expenditures(2)
Power Technologies		$	7,680		$	180	$	563		$	2,624		$	120
Automation Technologies			9,897			255		773			3,787			157
Non-core cctivities:
	Equity Ventures(3)		26			5		76			1,151			46
	Structured Finance		48			1		(65	)		643			—
	Building Systems		1,829			9		(104	)		9			3
	New Ventures		53			5		(21	)		313			11
	Other Non-core ctivities		581			57		(67	)		(237	)		9
Total Non-core activities			2,537			77		(181	)		1,879			69
Corporate / Other			822			65		(475	)		2,524			53
Inter-division elimination			(2,141	)		—		(24	)		(1,128	)		—
Consolidated		$	18,795		$	577	$	656		$	9,686		$	399

2002		Revenues			Depreciation and amortization		Earnings before interest and taxes			Net operating assets(1)			Capital expenditures(2)
Power Technologies		$	6,963		$	166	$	433		$	2,335		$	114
Automation Technologies			8,464			202		517			3,483			133
Non-core activities:
	Equity Ventures(3)		19			—		43			1,062			—
	Structured Finance		66			1		96			1,165			2
	Building Systems		2,375			11		(113	)		68			9
	New Ventures		50			11		(37	)		262			14
	Other Non-core activities		937			75		(170	)		(159	)		20
Total Non-core activities			3,447			98		(181	)		2,398			45
Corporate / Other			860			78		(350	)		2,346			144
Inter-division elimination			(2,268	)		—		(73	)		(736	)		—
Consolidated		$	17,466		$	544	$	346		$	9,826		$	436

F-83

2001		Revenues			Depreciation and amortization		Earnings before interest and taxes			Net operating assets(1)			Capital expenditures(2)
Power Technologies		$	6,776		$	189	$	405		$	2,054		$	128
Automation Technologies			8,496			296		514			3,173			144
Non-core activities:
	Equity Ventures(3)		34			—		75			1,069			—
	Structured Finance		97			4		1			1,513			8
	Building Systems		2,613			17		18			(35	)		11
	New Ventures		97			15		(143	)		269			32
	Other Non-core activities		1,278			65		(64	)		(527	)		61
Total Non-core activities			4,119			101		(113	)		2,289			112
Corporate / Other			1,596			86		(157	)		2,732			167
Inter-division elimination			(2,653	)		—		(132	)		(770	)		—
Consolidated		$	18,334		$	672	$	517		$	9,478		$	551

(1)

Net operating assets is calculated based upon total assets (excluding cash and equivalents, marketable securities, current loans receivable, taxes and deferred charges) less total liabilities (excluding borrowings, taxes, provisions and pension-related liabilities).

(2)

Capital expenditures reflect purchases of tangible fixed assets.

(3)

Includes the Company's investment in Jorf Lasfar Energy Company S.C.A.

Geographic information

	Revenues Year ended December 31,						Long-lived assets December 31,
	2003		2002		2001		2003		2002
Europe	$	10,332	$	9,739	$	10,368	$	2,084	$	1,952
The Americas		3,572		3,834		4,346		388		403
Asia		3,346		2,587		2,420		307		281
Middle East and Africa		1,545		1,306		1,200		61		65
	$	18,795	$	17,466	$	18,334	$	2,840	$	2,701

        Revenues have been reflected in the regions based on the location of the customer. Long-lived assets primarily represent property, plant and equipment, net, and are shown by the location of the assets.

        The Company does not segregate revenues derived from transactions with external customers for each type or group of products and services. Accordingly, it is not practicable for the Company to present revenues from external customers by product and service type.

        Management estimates that approximately 65 percent of the Company's employees are subject to collective bargaining agreements in various countries. These agreements are subject to various regulatory requirements and are renegotiated on a regular basis in the normal course of business.

Note 27 Subsequent events

        On April 5, 2004, the Company received notification from the U.S. Federal Third Circuit Court of Appeals that the hearing date for the appeals has been set for June 3, 2004. See Note 18 Commitments and Contingencies—Asbestos Liability.

F-84

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE

The Board of Directors and
Stockholders of ABB Ltd:

        We have audited the consolidated financial statements of ABB Ltd as of December 31, 2003 and 2002, and for each of the three years in the period ended December 31, 2003, and have issued our report thereon dated February 18, 2004 (included elsewhere in this annual report on Form 20-F). Our audits also included the financial statement schedule listed in Item 18(h) of this annual report on Form 20-F. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. We did not audit the financial statements of Jorf Lasfar Energy Company, a corporation in which the Company has a 50% interest, (the Company's equity in Jorf Lasfar Energy Company's net income is stated at $60 million in 2003, $66 million in 2002 and $81 million in 2001); we did not audit the 2002 and 2001 consolidated financial statements of ABB Holdings Inc., a wholly-owned subsidiary, which statements reflect total assets constituting 15% in 2002 and total revenues constituting 14% in 2002 and 11% in 2001 of the related consolidated totals; we did not audit the 2002 and 2001 consolidated financial statements of Swedish Export Credit Corporation, a corporation in which the Company had a 35% interest, (the Company's equity in Swedish Export Credit Corporation's consolidated net income (loss) is stated at $89 million in 2002 and $(11) million in 2001); and we did not audit the 2001 financial statements of Scandinavian Reinsurance Company Limited, a wholly-owned subsidiary, which statements reflect total losses of $(346) million reflected as a component of the Company's 2001 loss from discontinued operations. Those statements were audited by other auditors whose reports have been furnished to us. Our opinion, insofar as it relates to amounts included for those companies and their subsidiaries, is based solely on the reports of the other auditors.

        In our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LTD

Zurich, Switzerland
February 18, 2004

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Schedule II—Valuation and Qualifying Accounts

Description	Balance at the beginning of year	Additions	Deductions	Balance at the end of year
	($ in millions)
Accounts Receivable—allowance for doubtful accounts:
Year ending December 31,
2003	210	129	89	250
2002	220	125	135	210
2001	196	100	76	220

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QuickLinks

TABLE OF CONTENTS
INTRODUCTION
FINANCIAL AND OTHER INFORMATION
FORWARD-LOOKING STATEMENTS
PART I

Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information

SELECTED FINANCIAL DATA
DIVIDENDS AND DIVIDEND POLICY
RISK FACTORS

Item 4. Information on the Company

INTRODUCTION
BUSINESS DIVISIONS
DISCONTINUED OPERATIONS
CAPITAL EXPENDITURES
SUPPLIES AND RAW MATERIALS
RESEARCH AND DEVELOPMENT
PATENTS AND TRADEMARKS
ENVIRONMENTAL ACTIVITIES
REGULATION
RECENT DEVELOPMENTS AND SIGNIFICANT TRANSACTIONS
SIGNIFICANT SUBSIDIARIES
DESCRIPTION OF PROPERTY

Item 5. Operating and Financial Review and Prospects

ABOUT ABB
MANAGEMENT OVERVIEW
ORGANIZATIONAL STRUCTURE
APPLICATION OF CRITICAL ACCOUNTING POLICIES
NEW ACCOUNTING PRONOUNCEMENTS
RESTRUCTURING EXPENSES
ACQUISITIONS, INVESTMENTS AND DIVESTITURES
SUMMARY FINANCIAL DATA
EXCHANGE RATES
ORDERS
PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING
PERFORMANCE MEASURES
ANALYSIS OF RESULTS OF OPERATIONS
Basic and Diluted Earnings (Loss) Per Share
Basic and Diluted Earnings (Loss) Per Share
LIQUIDITY AND CAPITAL RESOURCES
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
RELATED AND CERTAIN OTHER PARTIES
CONTINGENCIES AND RETAINED LIABILITIES

Item 6. Directors, Senior Management and Employees

SENIOR MANAGEMENT
CORPORATE GOVERNANCE
COMPENSATION
MANAGEMENT INCENTIVE PLAN
SHARE OWNERSHIP
EMPLOYEES

Item 7. Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS
RELATED PARTY TRANSACTIONS

Item 8. Financial Information

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
LEGAL PROCEEDINGS
DIVIDENDS AND DIVIDEND POLICY
SIGNIFICANT CHANGES

Item 9. The Offer and Listing

MARKETS
TRADING HISTORY
THE SWX SWISS EXCHANGE AND VIRT-X
THE SWEDISH SECURITIES MARKET

Item 10. Additional Information

DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF INCORPORATION
MATERIAL CONTRACTS
EXCHANGE CONTROLS
TAXATION
DOCUMENTS ON DISPLAY

Item 11. Quantitative and Qualitative Disclosures About Market Risk

Item 12. Description of Securities Other than Equity Securities

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services

PART III

Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits

SIGNATURES
ABB Ltd Index to Consolidated Financial Statements and Schedules
INDEPENDENT AUDITORS' REPORT
REPORT OF INDEPENDENT AUDITORS
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
ABB Ltd Consolidated Income Statements for the years ended December 31, 2003, 2002 and 2001
ABB Ltd Consolidated Balance Sheets as of December 31, 2003 and 2002
ABB Ltd Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001
ABB Ltd Consolidated Statements of Changes in Stockholders' Equity For the years ended December 31, 2003, 2002 and 2001
ABB Ltd Notes to the Consolidated Financial Statements (U.S. dollar amounts in millions, except per share amounts)
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
Schedule II—Valuation and Qualifying Accounts

EX-1.1

Exhibit 1.1

Articles of Incorporation of ABB Ltd, Zurich

as of December 9, 2003

This is a translation of the original German version. In case of any discrepancy,

the German version shall prevail.

Section 1: Name, Place of Incorporation, Purpose and Duration

Name, Place of Incorporation

Article 1

Under the name

ABB Ltd

ABB AG

ABB SA

there exists a corporation with its place of incorporation in Zurich.

Purpose

Article 2

1    The purpose of the Company is to hold interests in business enterprises, particularly in enterprises active in the areas of industry, trade and services.

2    The Company may acquire, encumber, exploit or sell real estate and intellectual property rights in Switzerland and abroad and may also finance other companies.

3    The Company may engage in all types of transactions and may take all measures that appear appropriate to promote, or that are related to, the purpose of the Company.

Duration

Article 3

The duration of the Company shall be unlimited.

Section 2: Share Capital

Share Capital

Article 4

1    The share capital of the Company is CHF 5,175,787,367.50 and is divided into 2,070,314,947 fully paid registered shares. Each share has a par value of CHF 2.50.

2    Upon resolution of the General Meeting of Shareholders, registered shares may be converted into bearer shares and bearer shares may be converted into registered shares.

Contingent Share Capital

Article 4bis

1    The share capital may be increased in an amount not to exceed CHF 550,000,000 through the issuance of up to 220,000,000 fully paid registered shares with a par value of CHF 2.50 per share,

a)   up to the amount of CHF 525,000,000 through the exercise of conversion rights and/or warrants granted in connection with the issuance on national or international capital markets of newly or already issued bonds or other financial market instruments by the Company or one of its group companies, and

b)   up to the amount of CHF 25,000,000 through the exercise of warrant rights granted to the shareholders by the Company or one of its group companies. The Board of Directors may grant warrant rights not taken up by shareholders for other purposes in the interest of the Company.

      The pre-emptive rights of the shareholders shall be excluded in connection with the issuance of convertible or warrant-bearing bonds or other financial market instruments or the grant of warrant rights. The then current owners of conversion rights and/or warrants shall be entitled to subscribe for the new shares. The conditions of the conversion rights and/or warrants shall be determined by the Board of Directors.

2    The acquisition of shares through the exercise of conversion rights and/or warrants and each subsequent transfer of the shares shall be subject to the restrictions of art. 5 of these Articles of Incorporation.

3    In connection with the issuance by the Company or one of its group companies of convertible or warrant-bearing bonds or other financial market instruments, the Board of Directors shall be authorized to restrict or deny the advance subscription rights of shareholders if such issuances are for the purpose of financing or refinancing the acquisition of an enterprise, parts of an enterprise, participations or new investments or the issuance on national or international capital markets. If advance subscription rights are denied by the Board of Directors, the following shall apply: the convertible or warrant-bearing bonds or other financial market instruments shall be issued at the relevant market conditions and the new shares shall be issued pursuant to the relevant market conditions taking into account the share price and/or other comparable instruments having a market price. Conversion rights may be exercised during a maximum 10-year period, and warrants may be exercised during a maximum 7-year period, in each case from the date of the respective issuance. The advance subscription rights of the shareholders may be granted indirectly.

4    The share capital may be increased in an amount not to exceed CHF 200,000,000 through the issuance of up to 80,000,000 fully paid registered shares with a par value of CHF 2.50 per share by the issuance of new shares to employees of the Company and group companies. The pre-emptive and advance subscription rights of the shareholders of the Company shall thereby be excluded. The shares or rights to subscribe for shares shall be issued to employees pursuant to one or more regulations to be issued by the Board of Directors, taking into account performance, functions, levels of responsibility and profitability criteria. Shares or subscription rights may be issued to employees at a price lower than that quoted on the stock exchange.

5    The acquisition of shares within the context of employee share ownership and each subsequent transfer of the shares shall be subject to the restrictions of art. 5 of these Articles of Incorporation.

Authorized Share Capital

Article 4ter

1    The Board of Directors shall be authorized to increase the share capital in an amount not to exceed CHF 174,252,717.50 through the issuance of up to 69,701,087 fully paid registered shares with a par value of CHF 2.50 per share by not later than May 19, 2005. Increases in partial amounts shall be permitted.

2    The subscription and acquisition of the new shares, as well as each subsequent transfer of the shares, shall be subject to the restrictions of art. 5 of these Articles of Incorporation.

3    The Board of Directors shall determine the issue price, the type of payment, the date of issue of new shares, the conditions for the exercise of pre-emptive rights, and the beginning date for dividend entitlement. In this regard, the Board of Directors may issue new shares by means of a firm underwriting through a banking institution, a syndicate or another third party and a subsequent offer of these shares to the current shareholders. The Board of Directors may permit

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pre-emptive rights that have not been exercised to expire or it may place these rights and/or shares as to which preemptive rights have been granted but not exercised, at market conditions or use them for other purposes in the interest of the Company.

4    The Board of Directors is further authorized to restrict or deny the pre-emptive rights of shareholders and allocate such rights to third parties if the shares are to be used:

a)   for the acquisition of an enterprise, parts of an enterprise, or participations, or for new investments, or, in case of a share placement, for the financing or refinancing of such transactions; or

b)   for the purpose of broadening the shareholder constituency in connection with a listing of shares on domestic or foreign stock exchanges; or

c)   for employee participation plans.

Share Register and Restrictions on Registration, Nominees

Article 5

1    The Company shall maintain a share register listing the surname and first name (in the case of legal entities, the company name) and address of the holders and usufructuaries of the registered shares.

2    Acquirors of registered shares shall be registered upon request in the share register as shareholders with the right to vote, provided that they expressly declare that they acquired the registered shares in their own name and for their own account.

3    If persons fail to expressly declare in their registration applications that they hold the shares for their own account (the “Nominees”), the Board of Directors shall enter such persons in the share register with the right to vote, provided that the Nominee has entered into an agreement with the Board of Directors concerning his status and is subject to a recognized bank or financial market supervision.

4    After hearing the registered shareholder or Nominee, the Board of Directors may cancel registrations in the share register, retroactive to the date of registration, if such registrations were made based on incorrect information. The relevant shareholder or Nominee shall be informed immediately as to the cancellation.

5    The Board of Directors shall regulate the details and issue the instructions necessary for compliance with the preceding provisions. In special cases, it may grant exemptions from the rule concerning Nominees. The Board of Directors may delegate its duties.

6    Notwithstanding paras. 2—4 of this article, acquirors of registered shares may be registered in the share register with Värdepapperscentralen VPC AB (“VPC”) in accordance with Swedish law.

Share Certificates

Article 6

1    The shareholder may at any time request the Company to issue a confirmation of the number of registered shares held by such shareholder. The shareholder is not entitled, however, to request the printing and delivery of certificates for registered shares. The Company may, on the other hand, at any time print and deliver certificates for registered shares, and may, with the consent of the shareholder, destroy issued certificates that are delivered to it, without replacement.

2    Uncertificated registered shares, including any uncertificated rights arising thereunder, may be transferred only by way of assignment. The assignment must be notified to the Company in order to be valid.

3    Uncertificated registered shares and the pecuniary rights associated therewith may be pledged only by way of a written agreement, and only in favor of the bank at which the shareholder holds

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such shares in book-entry form. Notification to the Company shall not be necessary. Uncertificated registered shares registered with VPC may be pledged in accordance with Swedish law.

4    In the event that shares are printed, they shall bear the signatures of two members of the Board of Directors. These signatures may be facsimile signatures.

5    The Company may in any event issue certificates representing more than one share.

Exercise of Rights

Article 7

1    The Company shall only accept one representative per share.

2    The right to vote and rights relating thereto under a registered share may be exercised vis-à-vis the Company only by a shareholder, usufructuary or Nominee registered in the share register with the right to vote.

Dividend Access Facility

Article 8

1    The Company has established a dividend access facility under which shareholders who are resident in Sweden have the option to be registered with VPC as holders of a total of up to 600,004,716 registered shares of the Company, with suspended dividend entitlement. The claim to dividends against the Company on such registered shares shall be suspended as long as such registered shares are registered with VPC. In lieu thereof, on each such registered share, an amount equivalent to the dividend resolved on a registered share of the Company shall be paid in Swedish kronor by ABB Participation AB based on the dividend entitlement on a preference share.

2    In deciding on the appropriation of dividends, the General Meeting of Shareholders shall take into account that the Company will pay dividends only on shares that do not participate in the dividend access facility.

Section 3: Corporate Bodies

A. General Meeting of Shareholders

Competence

Article 9

      The General Meeting of Shareholders is the supreme body of the Company.

Ordinary General Meetings

Article 10

      The Ordinary General Meeting of Shareholders shall be held each year within six months after the close of the fiscal year of the Company; the business report and the Auditors’ report, together with the Group Auditors’ report, shall be made available for inspection by the shareholders at the place of incorporation of the Company by no later than twenty days prior to the meeting. Each shareholder is entitled to request immediate delivery of a copy of these documents. Shareholders will be notified of this in writing.

Extraordinary General Meetings

Article 11

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1    Extraordinary General Meetings of Shareholders shall be held when deemed necessary by the Board of Directors or the Auditors.

2    Furthermore, Extraordinary General Meetings of Shareholders shall be convened upon resolution of a General Meeting of Shareholders or if this is requested by one or more shareholders who represent an aggregate of at least one-tenth of the share capital and who submit a petition signed by such shareholder(s), specifying the items for the agenda and the proposals.

Notice of General Meetings

Article 12

1    Notice of General Meetings of Shareholders shall be given by the Board of Directors or, if necessary, by the Auditors, by no later than twenty days prior to the meeting date. Notice of the meeting shall be given by way of an announcement appearing once in the official publication organ of the Company. Shareholders may also be informed by ordinary mail. Liquidators and representatives of bondholders shall also be entitled to call a General Meeting of Shareholders.

2    The notice of a meeting shall state the items on the agenda and the proposals of the Board of Directors and of the shareholders who demanded that a General Meeting of Shareholders be held or that an item be included on the agenda and, in case of elections, the names of the nominated candidates.

Agenda

Article 13

1    One or more shareholders whose combined shareholdings represent an aggregate par value of at least CHF 1,000,000 may demand that an item be included on the agenda of a General Meeting of Shareholders. Such inclusion must be requested in writing at least forty days prior to the meeting and shall specify the agenda items and proposals of such shareholder(s).

2    No resolutions may be passed at a General Meeting of Shareholders concerning agenda items for which proper notice was not given. This provision shall not apply, however, to proposals made during a General Meeting of Shareholders to convene an Extraordinary General Meeting of Shareholders or to initiate a special audit.

3    No previous notification shall be required for proposals concerning items included on the agenda and for debates as to which no vote is taken.

Presiding Officer, Minutes, Vote Counters

Article 14

1    The General Meeting of Shareholders shall be held at the place of incorporation of the Company, unless the Board of Directors decides otherwise. The Chairman of the Board or, in his absence, a Vice-Chairman or any other Member appointed by the Board, shall take the chair.

2    The presiding officer shall appoint the secretary and the vote counters. The minutes shall be signed by the presiding officer and the secretary.

3    The presiding officer shall have all powers and authority necessary to ensure the orderly and undisturbed conduct of the General Meeting of Shareholders.

Proxies

Article 15

1    The Board of Directors shall issue procedural rules regarding participation in and representation at the General Meeting of Shareholders.

2    A shareholder may be represented only by his legal representative, another shareholder with the right to vote, a corporate body (Organvertreter), an independent proxy (unabhängiger

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Stimmrechtsvertreter), or a depositary (Depotvertreter). All shares held by one shareholder may be represented by only one representative.

Voting Rights

Article 16

Subject to art. 5 para. 2 of these Articles of Incorporation, each share shall grant the right to one vote.

Resolutions, Elections

Article 17

1    Unless otherwise required by law, the General Meeting of Shareholders shall pass resolutions and decide elections upon an absolute majority of the votes represented.

2    Resolutions and elections shall be decided by a show of hands, unless a secret ballot is resolved by the General Meeting of Shareholders or is ordered by the presiding officer. The presiding officer may also arrange for resolutions and elections to be carried out by electronic means. Resolutions and elections carried out by electronic means are deemed to have the same effect as secret ballots.

3    The presiding officer may at any time order that an election or resolution decided by a show of hands be repeated through a secret ballot if, in his view, the results of the vote are in doubt. In this case, the preceding decision by a show of hands shall be deemed to have not occurred.

4    If the first ballot fails to result in an election and more than one candidate is standing for election, the presiding officer shall order a second ballot in which a relative majority shall be decisive.

Specific Powers of the General Meeting

Article 18

      The following powers shall be vested exclusively in the General Meeting of Shareholders:

a)   adoption and amendment of the Articles of Incorporation;

b)   election of the members of the Board of Directors, the Auditors, the Group Auditors and the Special Auditors;

c)   approval of the annual report and the consolidated financial statements;

d)   approval of the annual financial statements and deciding on the allocation of profits shown on the balance sheet, in particular with regard to dividends;

e)   granting discharge to the members of the Board of Directors and the persons entrusted with management;

f)    passing resolutions as to all matters reserved to the authority of the General Meeting by law or under these Articles of Incorporation or that are submitted to the General Meeting by the Board of Directors, subject to art. 716a Swiss Code of Obligations.

Special Quorum

Article 19

      The approval of at least two-thirds of the votes represented shall be required for resolutions of the General Meeting of Shareholders with respect to:

a)   a modification of the purpose of the Company;

b)   the creation of shares with increased voting powers;

c)   restrictions on the transfer of registered shares and the removal of such restrictions;

d)   restrictions on the exercise of the right to vote and the removal of such restrictions;

e)   an authorized or conditional increase in share capital;

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f)    an increase in share capital through the conversion of capital surplus, through an in-kind contribution or in exchange for an acquisition of property, and a grant of special benefits;

g)   the restriction or denial of pre-emptive rights;

h)   a transfer of the place of incorporation of the Company;

i)    the dissolution of the Company without liquidation.

B. Board of Directors

Number of Directors

Article 20

      The Board of Directors shall consist of no less than 7 and no more than 13 members, all of whom shall be shareholders.

Term of Office

Article 21

1    The term of office of the members of the Board of Directors shall be one year. In this regard, one year shall mean the period between two Ordinary General Meetings of Shareholders.

2    Members of the Board of Directors whose terms of office have expired shall be immediately eligible for re-election.

Organization of the Board, Remuneration

Article 22

1    The Board of Directors shall elect from among its members one Chairman and one or more Vice-Chairmen. It shall appoint a secretary who need not be a member of the Board.

2    The members of the Board of Directors shall be entitled to the reimbursement of all expenses incurred in the interests of the Company, as well as remuneration for their services that is appropriate in view of their functions and responsibilities. The amount of the remuneration shall be fixed by the Board of Directors or a committee of the Board of Directors.

Convening of Meetings

Article 23

      The Chairman shall convene meetings of the Board of Directors if and when the need arises or whenever a member or the chief executive officer so requests in writing.

Resolutions

Article 24

1    In order to pass resolutions, at least a majority of the members of the Board of Directors must be present. No attendance quorum shall be required for resolutions of the Board of Directors providing for the confirmation of capital increases or for the amendment of the Articles of Incorporation in connection therewith.

2    Resolutions of the Board of Directors shall be adopted upon a majority of the votes cast. In the event of a tie, the Chairman shall have the casting vote.

3    Resolutions may be passed by way of circulation (in writing), provided that no member requests oral deliberation.

Specific Powers of the Board

Article 25

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1    The Board of Directors has, in particular, the following nondelegable and inalienable duties:

a)   the ultimate direction of the business of the Company and the issuance of the necessary instructions;

b)   the determination of the organization of the Company;

c)   the administration of accounting, financial control and financial planning;

d)   the appointment and removal of the persons entrusted with management and representation of the Company;

e)   the ultimate supervision of the persons entrusted with management of the Company, specifically in view of their compliance with law, these Articles of Incorporation, the regulations and directives;

f)    the preparation of business reports, the preparations for the General Meetings of Shareholders and the implementation of the resolutions adopted by the General Meetings of Shareholders;

g)   the adoption of resolutions concerning an increase in share capital to the extent that such power is vested in the Board of Directors (art. 651 para. 4 Swiss Code of Obligations) and of resolutions concerning the confirmation of capital increases and corresponding amendments to the Articles of Incorporation, as well as making the required report on the capital increase;

h)   the examination of the professional qualifications of the qualified auditors;

i)    notification of the court if liabilities exceed assets.

2    In addition, the Board of Directors may pass resolutions with respect to all matters that are not reserved to the authority of the General Meeting of Shareholders by law or under these Articles of Incorporation.

Delegation of Powers

Article 26

      Subject to art. 25 of these Articles of Incorporation, the Board of Directors may delegate management of the Company in whole or in part to individual directors or to third persons (Executive Committee) pursuant to regulations governing the internal organization.

Signature Power

Article 27

      The due and valid representation of the Company by members of the Board of Directors or other persons shall be set forth in regulations governing the internal organization.

C. Auditors, Group Auditors and Special Auditors

Term, Powers and Duties

Article 28

1    The Auditors and the Group Auditors, both of which shall be elected by the General Meeting of Shareholders each year, shall have the powers and duties vested in them by law.

2    Special auditors, which shall be elected by the General Meeting of Shareholders each year, shall have the powers and duties vested in them with respect to the special reviews required in connection with capital increases (articles 652f, 653f and 653i Swiss Code of Obligations).

Section 4: Annual Financial Statements, Consolidated Financial Statements and Profit Allocation

Fiscal Year, Business Report

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Article 29

1    The fiscal year shall close as of December 31 of each year, closing for the first time on December 31, 1999.

2    For each fiscal year, the Board of Directors shall prepare a business report including the annual financial statements (consisting of the profit and loss statements, balance sheet and notes to the financial statements), the annual report and the consolidated financial statements.

Allocation of Profit Shown on the Balance Sheet, Reserves

Article 30

1    The profit shown on the balance sheet shall be allocated by the General Meeting of Shareholders within the limits set by applicable law. The Board of Directors shall submit its proposals to the General Meeting of Shareholders.

2    Further reserves may be taken in addition to the reserves required by law.

3    Dividends that have not been collected within five years after their expiry date shall pass to the Company and be allocated to the general reserves.

Section 5: Announcements, Communications

Announcements, Communications

Article 31

1    The official publication organ of the Company shall be the Swiss Official Gazette of Commerce.

2    To the extent that personal notification is not mandated by law, all communications to the shareholders shall be deemed valid if published in the Swiss Official Gazette of Commerce. Written communications by the Company to its shareholders shall be sent by ordinary mail to the last address of the shareholder or authorized recipient entered in the share register.

Section 6: In-Kind Contributions and Acquisitions of Property

In-Kind Contributions

Article 32

1    Pursuant to an in-kind contribution agreement by and between the Company and Credit Suisse First Boston, in Zurich, dated June 26, 1999, the Company, in connection with the capital increase dated June 26, 1999, shall acquire from Credit Suisse First Boston, in Zurich, as trustee of the former shareholders of ABB Participation AG (former ABB AG), in Baden, 5,453,500 fully paid registered shares of ABB Participation AG (former ABB AG) with a par value of CHF 10 per share and 7,904,200 bearer shares of ABB Participation AG (former ABB AG) with a par value of CHF 50 per share. These shares will be acquired at a total value of CHF 3,328,079,400. In consideration for such contribution in-kind, the Company shall issue to Credit Suisse First Boston, as trustee of the former shareholders of ABB Participation AG (former ABB AG), a total of 145,807,329 fully paid registered shares with an aggregate par value of CHF 1,458,073,290. The Company shall allocate the difference between the total par value of the issued shares and the net book value of the in-kind contribution in the total amount of CHF 1,870,006,110 to the reserves.

2    Pursuant to an in-kind contribution agreement by and between the Company and Skandinaviska Enskilda Banken AB (publ), in Stockholm, dated June 26, 1999, the Company, in

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connection with the capital increase dated June 26, 1999, shall acquire from Skandinaviska Enskilda Banken AB (publ), in Stockholm, as trustee of the former shareholders of ABB Participation AB (former ABB AB), in Västerås, 651,813,826 A shares of ABB Participation AB (former ABB AB) and 241,261,761 B shares of ABB Participation AB (former ABB AB). These shares will be acquired at a total value of CHF 3,260,285,190. In consideration for such contribution in-kind, the Company shall issue to Skandinaviska Enskilda Banken AB (publ), as trustee of the former shareholders of ABB Participation AB (former ABB AB), a total of 142,830,293 fully paid registered shares with an aggregate par value of CHF 1,428,302,930. The Company shall allocate the difference between the total par value of the issued shares and the net book value of the in-kind contribution in the total amount of CHF 1,831,982,260 to the reserves.

Acquisitions of Property

Article 33

1    Pursuant to an acquisition of property agreement dated June 26, 1999, the Company, following the capital increase dated June 26, 1999, will acquire from Asea Holding AB, in Västerås, 16,383,744 A shares and 28,453,689 B shares of ABB Participation AB (former ABB AB), in Västerås, at a price of CHF 71,708,860.

2    Following the capital increase dated June 26, 1999, the Company intends to acquire from the remaining public shareholders of ABB Participation AG (former ABB AG), in Baden, or in the cancellation procedure pursuant to art. 33 SESTA all shares of ABB Participation AG (former ABB AG) which were not tendered to the Company in connection with the exchange offer dated March 26, 1999, in exchange for the Company’s own registered shares based on the exchange offer dated March 26, 1999.

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EX-2.4

Exhibit 2.4

LIMITED LIABILITY PARTNERSHIP

EXECUTION COPY

ABB INTERNATIONAL FINANCE LIMITED

ABB FINANCE INC.

ABB CAPITAL B.V.

PROGRAMME FOR THE ISSUANCE OF DEBT INSTRUMENTS

as issuers

SUPPLEMENTAL FISCAL AGENCY AGREEMENT

11 June 2002

CONTENTS

SECTION
1.	Definitions
2.	Amendments
3.	Amendments To The Fiscal Agency Agreement
4.	Governing Law And Jurisdiction
5.	Contracts (Third Party Rights) Act 1999

THIS SUPPLEMENTAL FISCAL AGENCY AGREEMENT is made as of 11 June 2002 and supplements the amended and restated fiscal agency agreement dated 30 May 2001 (the “Fiscal Agency Agreement”).

BETWEEN:

(1)ABB INTERNATIONAL FINANCE LIMITED (“AIFLTD”), ABB FINANCE INC. (“AFI”) and ABB CAPITAL B.V. (“ACBV”) (the “Issuers” and each an “Issuer”, which expression shall, where the context so permits, include any Further Issuer as defined in Clause 16.1 of the Fiscal Agency Agreement);

(2)BANQUE GENERALE DU LUXEMBOURG S.A. in its capacities as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such) and principal registrar (the “Principal Registrar”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such);

(3)JPMORGAN CHASE BANK in its capacity as alternative registrar (the “Alternative Registrar”, which expression shall include any successor to JP Morgan Chase Bank in its capacity as such); and

(4)BANQUE MEESPIERSON BGL S.A. in its capacity as paying agent (the “Paying Agents”, which expression shall include the Fiscal Agent and any substitute or additional paying agents appointed in accordance herewith).

WHEREAS:

(A)The Issuers established a programme (the “Programme”) for the issuance of debt instruments (the “Instruments”) having any maturity up to thirty years, subject to compliance with all legal and/or regulatory requirements in connection with which they entered into a dealership agreement (the “Dealership Agreement”) dated 10 March 1993 and amended and restated on 11 June 2002 and made between the Issuers, ABN AMRO Bank N.V., Credit Suisse First Boston (Europe) Limited, Deutsche Bank AG London, Goldman Sachs International, Lehman Brothers International (Europe), J.P. Morgan Securities Ltd., Morgan Stanley & Co. International Limited, Société Générale and UBS AG, acting through its business group UBS Warburg, (the “Dealers”, which expression shall include any substitute or additional dealers appointed in accordance with the Dealership Agreement).  In respect of bearer Instruments issued in temporary global or permanent global form, each of the Issuers have executed and delivered a deed of covenant (the “Deeds of Covenant”) each dated 10 March 1993.

(B)Instruments may be issued on a listed or unlisted basis.  Each of the Issuers has made an application to the Luxembourg Stock Exchange (the “Luxembourg Stock Exchange”) for Instruments issued by it under the Programme to be listed on the Luxembourg Stock Exchange, in connection with which application an information memorandum dated 11 June 2002 has been prepared to permit Instruments to be so

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listed during the period of twelve months or such other period as may be allowed by the relevant Stock Exchange from the date of such information memorandum.

(C)The parties hereto have agreed to certain amendments to the Fiscal Agency Agreement.

IT IS AGREED as follows:

1.DEFINITIONS

Save where contrary is indicated or the context otherwise requires, any term defined in the Fiscal Agency Agreement shall have the same meaning herein.

2.AMENDMENTS

With effect from the date of this Supplemental Fiscal Agency Agreement, the Fiscal Agency Agreement shall be amended so as to conform with the amendments contained herein.  Thereafter, without prejudice to any existing rights and obligations, the Fiscal Agency Agreement as so amended shall continue in full force and effect.

3.AMENDMENTS TO THE FISCAL AGENCY AGREEMENT

The Fiscal Agency Agreement shall be amended as follows:

(i)All references to the information memorandum dated 30 May 2001 shall be deemed to be references to the information memorandum dated 11 June 2002.

(ii)All references to “Chase Manhattan Bank” shall be deleted and replaced by “JPMorgan Chase Bank”.

(iii)The First, Second, Third, Fourth and Eighth Schedules shall be replaced by the new First, Second, Third, Fourth and Eighth Schedules attached hereto as Schedule 1, Schedule 2, Schedule 3, Schedule 4 and Schedule 5.

4.GOVERNING LAW AND JURISDICTION

This Agreement shall be governed by, and shall be construed in accordance with, English law and the provisions of Clause 18 of the Fiscal Agency Agreement shall apply mutatis mutandis to this Agreement.

5.CONTRACTS (THIRD PARTY RIGHTS) ACT 1999

The parties to this Supplemental Fiscal Agency Agreement have agreed that the Contracts (Third Party Rights) Act 1999 (the “Act”) shall not apply to this Supplemental Fiscal Agency Agreement and, therefore, a person who is not a party to this Supplement Fiscal Agency Agreement has no right under the Act to enforce any term of this Supplemental Fiscal Agency Agreement.

2

SCHEDULE 1

THE FIRST SCHEDULE

FORM OF TEMPORARY GLOBAL INSTRUMENT

Series Number: [      ] Serial Number: [      ]

THE SECURITIES REPRESENTED BY THIS TEMPORARY GLOBAL INSTRUMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[ABB INTERNATIONAL FINANCE LIMITED
(incorporated with limited liability in Guernsey)]

[ABB FINANCE INC.
(incorporated in the State of Delaware with limited liability)]

[ABB CAPITAL B.V.
(incorporated in The Netherlands with limited liability and having its
statutory domicile at Amsterdam)]

TEMPORARY GLOBAL INSTRUMENT
representing up to
[Aggregate principal amount of Tranche]
[Title of Instruments]

This Temporary Global Instrument is issued in respect of an issue of [description of Instruments including aggregate principal amount of Tranche] (the “Instruments”) by [                              ] (the “Issuer”).

The Issuer for value received promises, all in accordance with the terms and conditions [attached hereto/set out in the information memorandum prepared by the Issuer and dated 11 June 2002 and the pricing supplement prepared in relation to the Instruments (“Pricing Supplement”)] to pay to the bearer upon presentation and, if appropriate, surrender hereof on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](1) or on such earlier date as the same may become payable in accordance therewith the principal amount of [aggregate principal amount of Tranche] (as reduced from time to time in accordance with such terms and conditions) or such lesser amount as is equal to the outstanding principal amount of the Instruments represented by this Temporary Global Instrument or such other redemption amount as may be specified

(1)Insert only where Instruments are Instalment Instruments.

3

therein [and to pay in arrear on the dates specified therein interest on the principal amount hereof from time to time at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

Except as specified herein, the bearer of this Temporary Global Instrument is entitled to the benefit of the terms and conditions referred to above and of the same obligations on the part of the Issuer as if such bearer were the bearer of the Instruments represented hereby except that the bearer of this Temporary Global Instrument shall not prior to the Exchange Date (defined below) be entitled to receive payment of [the principal of or] interest on the Instruments except to the extent that, upon due presentation and surrender of this Temporary Global Instrument for exchange, delivery of the Permanent Global Instrument, or as the case may be Definitive Instruments or Registered Instruments is improperly withheld or refused, and all payments under and to the bearer of this Temporary Global Instrument shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Instruments.

This Temporary Global Instrument is exchangeable in whole or in part for a permanent global instrument (the “Permanent Global Instrument”) representing the Instruments and in substantially the form (subject to completion) set out in the Second Schedule to a fiscal agency agreement dated 10 March 1993 and amended and restated on 30 May 2001 (as further supplemented, amended or replaced, the “Fiscal Agency Agreement”) and made between the Issuer and Banque Générale du Luxembourg S.A., in its capacity as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such), Banque Générale du Luxembourg S.A. as principal registrar and certain other financial institutions named therein or, if so specified in the Pricing Supplement, for definitive instruments (“Definitive Instruments”) in substantially the form (subject to completion) set out in the Third Schedule to the Fiscal Agency Agreement [or for registered instruments (“Registered Instruments”) in substantially the form (subject to completion) set out in the Fourth Schedule to the Fiscal Agency Agreement].  An exchange for a Permanent Global Instrument or Definitive Instruments [or Registered Instruments](2) will be made only on or after the date (the “Exchange Date”) which is 40 days after the later of the date of issue of this Temporary Global Instrument and the completion (as notified to the Fiscal Agent by the Issuer) of the distribution of the Instruments represented by this Temporary Global Instrument and upon presentation or, as the case may be, surrender of this Temporary Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and upon and to the extent only of delivery to the Fiscal Agent of a certificate or certificates issued by the Euroclear System or Clearstream, Luxembourg, or by any other relevant clearing system and dated not earlier than the Exchange Date in substantially the form set out in Annex I hereto or, as the case may be, in the form that is customarily issued in such circumstances by such other clearing system.  [An exchange for Registered Instruments will be made at any time upon presentation or, as the case may be, surrender of this Temporary Global Instrument to

(2)Insert only in the case of a Series comprising both Bearer and Registered Instruments issued by ABB Finance Inc. if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

4

the Fiscal Agent at its specified office.](3)  [Any Registered Instruments shall be made available in exchange in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement (which shall apply as if the bearer of this Temporary Global Instrument were the bearer of the Instruments represented hereby).](4)  Payments of interest otherwise falling due before the Exchange Date will be made only upon presentation of the Temporary Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and upon and to the extent only of delivery to the Fiscal Agent of a certificate or certificates issued by the Euroclear System or Clearstream, Luxembourg or by any other relevant clearing system and dated not earlier than the relevant interest payment date in substantially the form set out in Annex II hereto or, as the case may be, in the form that is customarily issued in such circumstances by such other clearing system.

In the event that (i) this Temporary Global Instrument is not duly exchanged, whether in whole or in part, for a Permanent Global Instrument or, as the case may be, Definitive Instruments [or Registered Instruments]6 by 6.00 p.m. (London time) on the thirtieth day after the time at which the preconditions to such exchange are first satisfied or (ii) any Instrument represented hereby becomes immediately redeemable following the occurrence of an Event of Default in relation thereto and is not duly redeemed (and the funds required for such redemption are not available to the Fiscal Agent for the purposes of effecting such redemption and remain available for such purpose) by 6.00 p.m. (London time) on the thirtieth day after the time at which such Instruments become immediately redeemable, then this Temporary Global Instrument will become void and the bearer will have no further rights hereunder (but without prejudice to the rights which such bearer or any other person having an interest in this Temporary Global Instrument immediately prior to it becoming void may have under a deed of covenant dated 10 March 1993 and executed by the Issuer in respect of the Instruments).

[On any occasion on which a payment of interest is made in respect of this Temporary Global Instrument, the Issuer shall procure that the Paying Agent to which such Temporary Global Instrument is presented notes the same on the Schedule hereto.]

On any occasion on which a payment of principal or redemption amount is made in respect of this Temporary Global Instrument or on which this Temporary Global Instrument is exchanged in whole or in part as aforesaid or on which Instruments represented by this Temporary Global Instrument are to be cancelled, the Issuer shall cause the Paying Agent to which such Temporary Global Instrument is presented to procure that (i) the aggregate principal amount of the Instruments in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive [or registered form](4) or which are exchanged for a permanent global instrument or which are to be cancelled and (ii) the remaining principal amount of this Temporary Global Instrument (which shall be the previous principal amount hereof less the amount referred to at (i) above)

(3)Insert only in the case of a Series comprising both Bearer and Registered Instruments issued by ABB International Finance Limited or ABB Capital B.V. (and not ABB Finance Inc.) if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

(4)Insert only in the case of a Series comprising both Bearer and Registered Instruments if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

5

are noted on the Schedule hereto, whereupon the principal amount of this Temporary Global Instrument shall for all purposes be as most recently so noted.

This Temporary Global Instrument is governed by, and shall be construed in accordance with, English law.

This Temporary Global Instrument shall not be valid for any purpose until authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

AS WITNESS the manual signature of two duly authorised officers on behalf of the Issuer.

[                              ][                              ]

By:	[manual signature]	By:  [manual signature]
	(duly authorised)	(duly authorised)

ISSUED in [          ] as of [          ] [   ]

AUTHENTICATED for and on behalf of
BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

By:	[manual signature]
	(duly authorised)

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](5)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](6)

(5)Insert only where either (i) Issuer is AFI and the maturity of the Notes is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Notes is more than one year.

(6)Insert only where Issuer is AFI and the maturity of the Notes is 183 days or less.

6

THE SCHEDULE

Payments, Delivery of Definitive Instruments or Registered Instruments,
Exchange for Permanent Global Instrument and
Cancellation of Instruments

Date of
payment,
delivery or
cancellation Amount of
interest then
paid Amount of
principal or,
as the case
may be,
redemption
amount then
paid Aggregate
principal
amount of
Definitive or
Registered
Instruments
then
delivered Aggregate
principal
amount of
this
Temporary
Global
Instrument
then
exchanged
for the
Permanent
Global
Instrument Aggregate
principal
amount of
Instruments
then
cancelled Remaining
principal
amount of
this
Temporary
Global
Instrument Authorised
signature of
the Fiscal
Agent and/or
the Registrar

7

ANNEX I

[Form of certificate to be given in relation to exchanges of this Temporary Global Instrument for a Permanent Global Instrument or Definitive Instruments or Registered Instruments issued by ABB Finance Inc.  This Certificate is not required for Registered Instruments issued by ABB International Finance Limited or ABB Capital B.V.:]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

[This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “Member Organisations”) substantially to the effect set forth in the Fiscal Agency Agreement as of the date hereof, [   ] principal amount of the above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, estates the income of which is subject to United States Federal income taxation regardless of its source or trusts (a) that are subject to the primary supervision of a court within the United States and with respect to which one or more United States persons have the authority to control all substantial decisions or (b) that have a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (“United States persons”), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“financial institutions”)) purchasing for their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.](7)

This is [also](7) to certify with respect to [          ] principal amount of the above-captioned Securities, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from our Member Organisations entitled to a portion of such principal amount, certifications with respect to such portion, substantially to the effect set forth in the Fiscal Agency Agreement.

8

[As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its possessions include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.](7)

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the Temporary Global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

We understand that this certification is required in connection [with certain tax laws and, if applicable,](7) certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:[          ](8)

[Euroclear Bank S.A./N.V., as operator of the Euroclear System/Clearstream Banking, société anonyme ]

By:[authorised signature]

(7)Delete this paragraph or provision in the case of exchanges of the Temporary Global Instrument for Registered Instruments issued by ABB Finance Inc.

(8)To be dated not earlier than the Exchange Date.

9

ANNEX II

[Form of certificate to be given in relation to payments of interest falling due before the Exchange Date:]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “Member Organisations”) substantially to the effect set forth in the Fiscal Agency Agreement as of the date hereof, [   ] principal amount of the above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, estates or trust the income of which is subject to United States Federal income taxation regardless of its source or trusts (a) that are subject to the primary supervision of a court within the United States and with respect to which one or more United States persons have the authority to control all substantial decisions or (b) that have a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (“United States persons”), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“financial institutions”)) purchasing for their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

This is also to certify with respect to such principal amount of Securities set forth above that, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from our Member Organisations entitled to a portion of such principal amount, certifications with respect to such portion, substantially to the effect set forth in the Fiscal Agency Agreement.

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its possessions include Puerto Rico, the U.S.

10

Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the Temporary Global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:[             ](9)

[Euroclear Bank S.A./N.V., as operator of the Euroclear System/Clearstream Banking, société anonyme ]

By:[authorised signature]

(9)To be dated not earlier than the relevant interest payment date.

11

ANNEX III

[Form of account-holder’s certification referred to in the preceding certificates:]

[Note: This certificate is not required for Registered Instruments issued by ABB International Finance Limited or ABB Capital B.V.]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

[This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, estates or trust the income of which is subject to the United States Federal income taxation regardless of its source or trusts (a) that are subject to the primary supervision of a court within the United States and with respect to which one or more United States persons have the authority to control all substantial decisions or (b) that have a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (“United States persons”), (ii) are owned by United States person(s) that (a) are foreign branches of a United States financial institution (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv)) (“financial institutions”) purchasing for their own account or for resale, or (b) acquired above-captioned the Securities through and are holding through on the date hereof foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the above-captioned Securities is a United States or foreign financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)) this is further to certify that such financial institution has not acquired the above-captioned Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.](10)

[This is [] to certify that, except as set forth below, the above-captioned Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased the Securities in transactions which did not require registration under the U.S. Securities

(10)Delete this paragraph or provision in the case of exchanges of the Temporary Global Instrument for Registered Instruments issued by ABB Finance Inc.

12

Act of 1933, as amended (the “Act”)].  As used in this paragraph the term “U.S. person” has the meaning given to it by Regulation S under the Act.](11)

[This is also to certify that, except as set further below, the above-captioned Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. persons resident outside the United States who purchased the Securities in transactions outside the United States in accordance with Regulation S under the U.S. Securities Act of 1933, as amended the (“Act”).  As used in this paragraph the terms “U.S. person” and “United States” have the meanings given to them by Regulation S under the Act.](12)

[As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.](10)

We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.

This certification excepts and does not relate to [    ] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify.

We understand that this certification is required in connection with [certain tax laws and, if applicable,](12) certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:[          ](13)

[Account-holder] as or as agent for the beneficial owner of the Instruments.

By:[authorised signature]

(11)To be used solely in the case of Instruments issued by ABB Finance Inc.

(12)To be used in the case of Instruments issued by ABB International Finance Limited or ABB Capital B.V.

(13)To be dated not earlier than fifteen days before the Exchange Date or, as the case may be the relevant interest payment date.

13

SCHEDULE 2

THE SECOND SCHEDULE

FORM OF PERMANENT GLOBAL INSTRUMENT

Series Number:  [      ] Serial Number: [   ]

THE SECURITIES REPRESENTED BY THIS PERMANENT GLOBAL INSTRUMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB FINANCE INC.

(incorporated in the State of Delaware with limited liability)]

[ABB CAPITAL B.V.

(incorporated in The Netherlands with limited liability and having its
statutory domicile at Amsterdam)]

PERMANENT GLOBAL INSTRUMENT
representing up to

[Aggregate principal amount of Tranche]
[Title of Instruments]

This Permanent Global Instrument is issued in respect of an issue of [description of Instruments including aggregate principal amount of Tranche] (the “Instruments”) by [                              ] (the “Issuer”).

The Issuer for value received promises, all in accordance with the terms and conditions [attached hereto/set out in the information memorandum prepared by the Issuer and dated 11 June 2002 and the pricing supplement prepared in relation to the Instruments (“Pricing Supplement”)], to pay to the bearer upon presentation and, if appropriate, surrender hereof on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](14) or on such earlier date as the same may become payable in accordance therewith the principal amount of [aggregate principal amount of Tranche] (as reduced from time to time in accordance with such terms and conditions) or such lesser amount as is equal to the outstanding principal amount of the Instruments represented by this Permanent Global Instrument or such other redemption amount as may be specified

(14)Insert only where Instruments are Instalment Instruments.

14

therein [and to pay in arrear on the dates specified therein interest on the principal amount hereof from time to time at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

The bearer of this Permanent Global Instrument is entitled to the benefit of the terms and conditions referred to above and the same obligations on the part of the Issuer as if such bearer were the bearer of the Instruments represented hereby, and all payments under and to the bearer of this Permanent Global Instrument shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Instruments.

This Permanent Global Instrument will be exchangeable for definitive Instruments (“Definitive Instruments”) in substantially the form (subject to completion) set out in the Third Schedule to a fiscal agency agreement dated 10 March 1993 and amended and restated on 30 May 2001 (as further supplemented, amended or replaced, the “Fiscal Agency Agreement”) and made between the Issuer and Banque Générale du Luxembourg S.A. in its capacity as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such), Banque Générale du Luxembourg S.A. as principal registrar and certain other financial institutions [or for registered instruments (“Registered Instruments”) in substantially the form (subject to completion) set out in the Fourth Schedule to the Fiscal Agency Agreement or for a combination of Definitive Instruments and Registered Instruments](15) (a) if Euroclear Bank S.A./N.V., as operator of the Euroclear System (the “Euroclear System”) or Clearstream Banking, société anonyme (“Clearstream, Luxembourg”) or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business; (b) if any of the Instruments represented hereby becomes due and payable following an Event of Default (as defined in Condition 7) of the terms and conditions referred to above; or (c) at the option of the bearer hereof acting on behalf of the relevant beneficial owners of the interests in this Permanent Global Instrument and at the expense of such beneficial owners, and, in each case, upon the request of the bearer hereof on behalf of the relevant beneficial owners of the interests in this Permanent Global Instrument and at the expense of such beneficial owners.  In order to make such request, the bearer hereof must, not less than forty-five days before the date upon which the delivery of such Definitive Instruments [and/or Registered Instruments](17) is required, deposit this Permanent Global Instrument with the Fiscal Agent at its specified office with the form of exchange notice endorsed hereon duly completed.  On an exchange of the whole of this Permanent Global Instrument, this Permanent Global Instrument shall be surrendered to the Fiscal Agent.  [Any Registered Instruments shall be made available in exchange in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement (which shall apply as if the bearer of this Permanent Global Instrument were the bearer of the Instruments represented hereby).](17)  Any Definitive Instruments will be made available for collection by the persons entitled thereto at the specified office of the Fiscal Agent.  If default is made by the Issuer in the required delivery of such Definitive Instruments [and/or, as the case may be, Registered

(15)Insert only in the case of a Series comprising both Bearer and Registered Instruments if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

15

Instruments](17) and such default is continuing at 6.00 p.m. (London time) on the thirtieth day after the day on which the relevant notice period expires, then this Permanent Global Instrument will become void and the bearer will have no further rights hereunder (but without prejudice to the rights which such bearer or any other person(s) having an interest in this Permanent Global Instrument immediately prior to it becoming void may have under a deed of covenant dated 10 March 1993 and executed by the Issuer in respect of the Instruments).

[On any occasion on which a payment of interest is made in respect of this Permanent Global Instrument, the Issuer shall procure that the Paying Agent to which this Permanent Global Instrument is presented notes the same on the Schedule hereto].

On any occasion on which a payment of principal or redemption amount is made in respect of this Permanent Global Instrument or on which this Permanent Global Instrument is exchanged as aforesaid or on which any Instruments represented by this Permanent Global Instrument are to be cancelled, the Issuer shall cause the Paying Agent to which this Permanent Global Instrument is presented to procure that (i) the aggregate principal amount of the Instruments in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive [or registered form](17) or which are to be cancelled and (ii) the remaining principal amount of this Permanent Global Instrument (which shall be the previous principal amount hereof less the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Permanent Global Instrument shall for all purposes be as most recently so noted.

Insofar as the Temporary Global Instrument by which the Instruments were initially represented has been exchanged in part only for this Permanent Global Instrument and is then to be further exchanged as to the remaining principal amount or part thereof for this Permanent Global Instrument, then upon presentation of this Permanent Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and to the extent that the aggregate principal amount of such Temporary Global Instrument is then reduced by reason of such further exchange, the Issuer shall cause the Fiscal Agent to procure that (i) the aggregate principal amount of the Instruments in respect of which such further exchange is then made and (ii) the new principal amount of this Permanent Global Instrument (which shall be the previous principal amount hereof plus the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Permanent Global Instrument shall for all purposes be as most recently noted.

This Permanent Global Instrument is governed by, and shall be construed in accordance with, English law.

This Permanent Global Instrument shall not be valid for any purpose until authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

16

AS WITNESS the manual signature of two duly authorised officers on behalf of the Issuer.

[                              ]		[                              ]
By:	[manual signature]	By:	[manual signature]
	(duly authorised)		(duly authorised)

ISSUED in [          ] on [          ] [  ]

AUTHENTICATED for and on behalf of

BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

By:	[manual signature]
	(duly authorised)

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](16)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](17)

(16)Insert only where either (i) Issuer is AFI and the maturity of the Notes is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Notes is more than one year.

(17)Insert only where Issuer is AFI and the maturity of the Notes is 183 days or less.

17

THE SCHEDULE

Payments, Delivery of Definitive or Registered Instruments, Further Exchanges of the
Temporary Global Instrument and Cancellation of Instruments

Date of
payment,
delivery,
further
exchange of
Temporary
Global
Instrument
or
cancellation Amount of
interest then
paid Amount of
principal or,
as the case
may be,
redemption
amount then
paid Aggregate
principal
amount of
exchanges
for
Definitive
Instruments
or
Registered
Instruments
then
delivered Aggregate
principal
amount of
Instruments
then
cancelled Aggregate
principal
amount of
exchanges
for further
exchanges of
Temporary
Global
Instrument Current
principal
amount of
this
Permanent
Global
Instrument Authorised
signature of
the Fiscal
Agent and/or
the Registrar

18

EXCHANGE NOTICE

                          , being the bearer of this Permanent Global Instrument at the time of its deposit with the Fiscal Agent at its specified office for the purposes of the Instruments, hereby exercises the option set out above to have this Permanent Global Instrument exchanged in whole or in part for Instruments in [definitive/registered form/[    ] in aggregate principal amount of Instruments in definitive form and [   ] in aggregate principal amount of Instruments in registered form]* and directs that such Instruments in definitive form be made available for collection by it from the Fiscal Agent’s specified office and that such Instruments in registered form be made available in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement.

By:

(duly authorised)

*              Delete and complete, as appropriate

19

SCHEDULE 3

THE THIRD SCHEDULE

FORM OF DEFINITIVE INSTRUMENT (“ISMA” FORMAT)

[On the face of the Instrument:]

[<9999999+AAXXXXXXXXX9+XX+999999>]

[Denomination]

THIS INSTRUMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB FINANCE INC.

(incorporated in the State of Delaware with limited liability)]

[ABB CAPITAL B.V.

(incorporated in The Netherlands with limited liability and having its

statutory domicile at Amsterdam)]

[Aggregate principal amount of Tranche]

[Title of Instruments]

[                              ] (the “Issuer”) for value received promises, all in accordance with the terms and conditions [endorsed hereon/attached hereto] [and the pricing supplement referred to therein and prepared in relation to the Instruments (“Pricing Supplement”)] to pay to the bearer upon presentation and, if appropriate, surrender hereof on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](18) or on such earlier date as the same may become payable in accordance therewith the principal amount of:

[denomination in words and numerals]

[(, in the case of payment on such earlier date, as reduced from time to time in accordance with such terms and conditions)](19) or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on such principal amount

(18)   Insert only where Instruments are Instalment Instruments.

20

[(as reduced from time to time in accordance with such terms and conditions)](19) at the rate or rates specified therein, all subject to and in accordance with such terms and conditions].

[This [title of Instrument] shall not/Neither this [title of Instrument] nor any of the interest coupons appertaining hereto shall] be valid for any purpose until this [title of Instrument] has been authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

This [title of Instrument] is governed by, and shall be construed in accordance with, English law.

AS WITNESS the facsimile signature of two duly authorised officers on behalf of the Issuer.

[                              ]               [                              ]

By:	[facsimile signature]	By:	[facsimile signature]
	(duly authorised)		(duly authorised)

ISSUED in [          ] as of [        ] [  ]

AUTHENTICATED for and on behalf of

BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

without recourse, warranty or liability

By:	[manual signature]
	(duly authorised)

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](19)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN

(19)   Insert only where either (i) Issuer is AFI and the maturity of the Notes is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Notes is more than one year.

21

EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](20)

(20)   Insert only where Issuer is AFI and the maturity of the Notes is 183 days or less.

22

[On the reverse of the Instruments:]

TERMS AND CONDITIONS

[As contemplated in the Information Memorandum and as amended by the relevant Pricing Supplement]

[At the foot of the Terms and Conditions:]

FISCAL AGENT

Banque Générale du Luxembourg S.A.

50, Avenue J.F. Kennedy

L-2951 Luxembourg

PAYING AGENT

Banque MeesPierson BGL S.A.

57 Rennweg

CH-8023 Zurich

Switzerland

23

Forms of Coupons

[On the front of Coupon:]

[Attached to the Instruments (interest-bearing, fixed rate and having Coupons):]

[Issuer]

[Amount and title of Instruments]

Coupon for [      ] due on [            ]

Such amount is payable (subject to the terms and conditions [endorsed on/attached to the [title of Instrument] to which this Coupon appertains [and the pricing supplement referred to therein], which shall be binding on the holder of this Coupon whether or not it is for the time being attached to such [title of Instrument]) against surrender of this Coupon at the specified office of the Fiscal Agent or any of the Paying Agents set out on the reverse hereof (or any other or further fiscal or paying agents and/or specified offices from time to time designated for the purpose by notice duly given in accordance with such terms and conditions).

[The attention of Couponholders is drawn to condition 9A.06 of the terms and conditions.  The Instrument to which this Coupon appertains may in certain circumstances specified in such terms and conditions, fall due for redemption before the due date in relation to this Coupon.  In such event, the Paying Agent to which such Instrument is presented for redemption may determine, in accordance with the aforesaid condition 9A.06 that this Coupon is to become void.]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](21)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](22)

(21)Insert only where either (i) Issuer is AFI and the maturity of the Notes is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Notes is more than one year.

(22)   Insert only where Issuer is AFI and the maturity of the Notes is 183 days or less.

24

[<99+9999999+AAXXXXXXXXX9+XX+999999>]

25

[Attached to the Instrument (interest-bearing, floating rate and having Coupons):]

[Issuer]

[Amount and title of Instruments]

Coupon for the amount of interest due on [          ]

Such amount is payable (subject to the terms and conditions [endorsed on/attached to] the [title of Instrument] to which this Coupon appertains [and the pricing supplement referred to therein], which shall be binding on the holder of this Coupon whether or not it is for the time being attached to such [title of Instrument]) against surrender of this Coupon at the specified office of the Fiscal Agent or any of the Paying Agents set out on the reverse hereof (or any other or further fiscal or paying agents and/or specified offices from time to time designated for the purpose by notice duly given in accordance with such terms and conditions).

The Instrument to which this Coupon appertains may, in certain circumstances specified in such terms and conditions, fall due for redemption before the due date in relation to this Coupon.  In such event, this Coupon will become void and no payment will be made in respect hereof.

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](23)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](24)

[<99+9999999+AAXXXXXXXXX9+XX+999999>]

(23)Insert only where either (i) Issuer is AFI and the maturity of the Notes is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Notes is more than one year.

(24)   Insert only where Issuer is AFI and the maturity of the Notes is 183 days or less.

26

[On the reverse of each Coupon:]

FISCAL	Banque Générale du Luxembourg S.A.
AGENT:	50 Avenue J.F. Kennedy
	L-2951 Luxembourg
PAYING	Banque MeesPierson BGL S.A.
AGENT:	57 Rennweg
	CH-8023 Zurich
	Switzerland

27

Form of Talon

No              

[                ]

[Amount and title of Instruments]

Talon for further Coupons

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](25)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](26)

After all the Coupons appertaining to the Instrument to which this Talon appertains have matured further Coupons [(including, where appropriate, a Talon for further Coupons)] will be issued at the specified office of the Fiscal Agent or any of the Paying Agents set out in the reverse hereof (or any other or further paying agents and/or specified offices from time to time designated by notice duly given in accordance with the terms and conditions [endorsed on/attached to] the [title of Instrument] to which this Talon appertains [and the pricing supplement referred to therein] (which shall be binding on the holder of this Talon whether or not it is for the time being attached to such [title of Instrument])) upon production and surrender of this Talon upon and subject to such terms and conditions.  The initial Paying Agents and their specified offices are set out on the reverse hereof.

Under the said terms and conditions, such Instrument may, in certain circumstances, fall due for redemption before the original due date for exchange of this Talon and in any such event this Talon shall become void and no exchange shall be made in respect hereof.

[Issuer]

(25)   Insert only where either (i) Issuer is AFI and the maturity of the Notes is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Notes is more than one year.

(26)   Insert only where Issuer is AFI and the maturity of the Notes is 183 days or less.

28

SCHEDULE 4

THE FOURTH SCHEDULE

FORM OF REGISTERED INSTRUMENT

ISIN Number: [       ]             Series Number: [       ]           Serial Number: [       ]

THIS INSTRUMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB FINANCE INC.

(incorporated in the State of Delaware with limited liability)]

[ABB CAPITAL B.V.

(incorporated in The Netherlands with limited liability and having its

statutory domicile at Amsterdam)]

[Aggregate principal amount of Tranche]

[Title of Instruments]

[                              ] (the “Issuer”) for value received promises, all in accordance with the terms and conditions [endorsed hereon/attached hereto] [and the pricing supplement referred to therein and prepared in relation to the Instruments (“Pricing Supplement”)], to pay to                                                                                                          of                                                                 & nbsp;                                        

                                                                                                                                                     & nbsp;                                                             

(being the person registered in the register referred to below or, if more than one person is so registered, the first-named of such persons) on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](27) or on such earlier date as the same may become payable in accordance therewith the principal sum of                                                                              [(, in the case of payment on such earlier date, as reduced in accordance with such terms and conditions)](34) or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on such principal amount [(as reduced in accordance with such terms and conditions)](34) at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

(27)   Insert only where Instruments are Instalment Instruments.

29

The statements set forth in the legend, if any, set forth above are an integral part of the terms of this Instrument and by acceptance hereof each holder of this Instrument agrees to be subject to and bound by the terms and provisions set forth in such legend, if any.

This Instrument is evidence of entitlement only.  Title to the Instrument passes only on due registration in the Register maintained by [                              ](28), as registrar, and only the duly registered holder or if more than one person is so registered, the first-named of such persons is entitled to payment in respect of this Instrument.

This Instrument is governed by, and shall be construed in accordance with, English law.

This Instrument shall not be valid for any purpose until this Instrument has been authenticated for and on behalf of [                                    ],(36) as registrar.

AS WITNESS the facsimile or manual signatures of two duly authorised officers of the Issuer.

[                              ]		[                            ]
By:	[manual/facsimile signature]		By:	[manual/facsimile signature]
	(duly authorised)			(duly authorised)

ISSUED in [              ] as of [              ] [ ]

AUTHENTICATED for and on behalf of

[                               ]

as registrar without recourse, warranty or liability

By:	[manual signature]
	(duly authorised)

(28)   Insert name of the relevant Registrar.

30

FORM OF TRANSFER

FOR VALUE RECEIVED                              , being the registered holder of this [title of Instrument], hereby transfers to                                                                       of                                                                      ,                                   in principal amount of this [title of Instrument] and irrevocably requests and authorises [                                             ](29), in its capacity as registrar in relation to the [title of Instruments] (or any successor to [                                ](37), in its capacity as such) to effect the relevant transfer by means of appropriate entries in the register kept by it.

Dated:
By:	[manual signature]	[By:	[manual signature
	(duly authorised)		(duly authorised)]

Notes:

The name of the person by or on whose behalf this form of transfer is signed must correspond with the name of the registered holder as it appears on the face of this Instrument.

(i)              A representative of such registered holder should state the capacity in which he signs e.g. executor.

(ii)             The signature of the person effecting a transfer shall conform to any list of duly authorised specimen signatures supplied by the registered holder or be certified by a recognised bank, notary public or in such other manner as the Registrar may require.

(iii)            Any transfer of [title of Instruments] shall be in an amount equal to the minimum denomination as may be specified in the relevant Pricing Supplement or an integral multiple thereof.

(29)   Insert name of the relevant Registrar

31

SCHEDULE 5

THE EIGHTH SCHEDULE

THE SPECIFIED OFFICES OF THE PAYING AGENTS AND THE REGISTRARS

The Fiscal Agent and Principal Registrar:
	Banque Générale du Luxembourg S.A.
	50, Avenue J.F. Kennedy
	L-2951 Luxembourg
	Telex:	3401 BGL lu
	Fax:	+352 4242 4200
	Attention:	Fiscal and Paying Agency Department
The other Paying Agent:
	Banque MeesPierson BGL S.A.
	57 Rennweg
	CH-8023 Zurich
	Switzerland
	Telex:	BGL Zürich 813003 BGL CH
	Fax:	+41 12119908
The Alternative Registrar:
	JPMorgan Chase Bank
	15th Floor
	450 West 33rd Street
	New York, N.Y. 10001 2697
	United States of America
	Telephone:	+1 212 946 3009
	Fax:	+1 212 946 8177
	Attention:	Manager, Institutional Trust Services

32

SIGNATURES

ABB INTERNATIONAL FINANCE LIMITED
By:	/s/ [ILLEGIBLE]					By:	/s/ [ILLEGIBLE]
	[ILLEGIBLE]						[ILLEGIBLE]
ABB FINANCE INC.
By:	/s/ [ILLEGIBLE]					By:	/s/ [ILLEGIBLE]
	[ILLEGIBLE]						[ILLEGIBLE]
ABB CAPITAL B.V.
By:	/s/ [ILLEGIBLE]					By:	/s/ [ILLEGIBLE]
	[ILLEGIBLE]						[ILLEGIBLE]
BANQUE GENERALE DU LUXEMBOURG S.A.
as Fiscal Agent and
Principal Registrar
By:			/s/ Jean Marie Moes	By:	/s/ Karine Antignac
			Jean Marie MOES		Karine ANTIGNAC
			Head of Back-Offices & Securities Handling		Head of Paying Agency Recovery
BANQUE MEESPIERSON BGL S.A.
as Paying Agent
By:		/s/ [ILLEGIBLE]		By:	/s/ Ch. Schenk
		[ILLEGIBLE]			Ch. Schenk
JPMORGAN CHASE BANK
as Alternative Registrar
By:		/s/ Chris Knowles
		Chris Knowles
		Vice President

33

EX-2.5

Exhibit 2.5

LIMITED LIABILITY PARTNERSHIP

EXECUTION VERSION

ABB INTERNATIONAL FINANCE LIMITED

ABB FINANCE INC.

ABB CAPITAL B.V.

as issuers

PROGRAMME FOR THE ISSUANCE OF DEBT INSTRUMENTS

SECOND SUPPLEMENTAL FISCAL AGENCY
AGREEMENT

11 November 2003

CONTENTS

SECTION

1.	Definitions
2.	Amendment
3.	Amendments To The Fiscal Agency Agreement
4.	Governing Law And Jurisdiction
5.	Counterparts
6.	Contracts (Rights Of Third Parties) Act 1999
SCHEDULE 1 THE FIRST SCHEDULE FORM OF TEMPORARY GLOBAL INSTRUMENT (BEARER)
SCHEDULE 2 THE SECOND SCHEDULE FORM OF PERMANENT GLOBAL INSTRUMENT
SCHEDULE 3 THE THIRD SCHEDULE FORM OF DEFINITIVE INSTRUMENT (“ISMA” FORMAT)
SCHEDULE 4 THE FOURTH SCHEDULE FORM OF REGISTERED INSTRUMENT
SCHEDULE 5 THE NINTH SCHEDULE FORM OF TEMPORARY GLOBAL INSTRUMENT (AFI REGISTERED)

THIS AGREEMENT is made as of 11 November 2003 and supplements the amended and restated fiscal agency agreement dated 30 May 2001, as supplemented by a supplemental fiscal agency agreement dated 11 June 2002 (together, the “Fiscal Agency Agreement”).

BETWEEN:

(1)ABB INTERNATIONAL FINANCE LIMITED (“AIFLTD”), ABB FINANCE INC. (“AFI”) and ABB CAPITAL B.V. (“ACBV”) (the “Issuers” and each an “Issuer”, which expression shall, where the context so permits, include any New Issuer as defined in Clause 16.1 of the Fiscal Agency Agreement);

(2)BANQUE GENERALE DU LUXEMBOURG S.A. in its capacities as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such) and principal registrar (the “Principal Registrar”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such);

(3)JPMORGAN CHASE BANK in its capacity as alternative registrar (the “Alternative Registrar”, which expression shall include any successor to JP Morgan Chase Bank in its capacity as such); and

(4)BANQUE MEESPIERSON BGL S.A. in its capacity as paying agent (together with the Fiscal Agent, the “Paying Agents”, which expression shall include any substitute or additional paying agents appointed in accordance herewith).

WHEREAS:

(A)The Issuers have established a programme (the “Programme”) for the issuance of debt instruments (the “Instruments”) having any maturity up to thirty years, subject to compliance with all legal and/or regulatory requirements and in connection with which they have entered into an amended and restated dealership agreement dated 11 November 2003 (the “Dealership Agreement”) and made between the Issuers, ABB Ltd and Morgan Stanley & Co. International Limited.  In respect of Bearer Instruments issued in temporary global or permanent global form, each of the Issuers has executed and delivered a deed of covenant dated 10 March 1993 (each a “Deed of Covenant”).

(B)Instruments may be issued on a listed or unlisted basis.  The Issuers have made an application to the Luxembourg Stock Exchange for Instruments issued under the Programme to be listed, in connection with which application an information memorandum dated 11 November 2003 has been prepared to permit Instruments to be so listed during the period of twelve months from the date of such information memorandum or such other period of time as may be allowed by the Luxembourg Stock Exchange.

(C)The parties hereto have agreed to certain amendments to the Fiscal Agency Agreement.

1

IT IS AGREED as follows:

1.DEFINITIONS

Save where the contrary is indicated or the context otherwise requires, any term defined in the Fiscal Agency Agreement shall have the same meaning herein.

2.AMENDMENT

With effect from the date of this Agreement, the Fiscal Agency Agreement shall be amended so as to conform with the amendments contained herein.  Thereafter, without prejudice to any existing rights and obligations, the Fiscal Agency Agreement as so amended shall continue in full force and effect.

3.AMENDMENTS TO THE FISCAL AGENCY AGREEMENT

The Fiscal Agency Agreement shall be amended as follows:

(i)All references to the information memorandum dated 11 June 2002 shall be deemed to be references to the information memorandum dated 11 November 2003.

(ii)The First, Second, Third and Fourth Schedules shall be replaced by the new First, Second, Third and Fourth Schedules attached hereto as Schedule 1, Schedule 2, Schedule 3 and Schedule 4.

(iii)A new Ninth Schedule shall be added attached hereto as Schedule 5.

(iv)The text “, Registered Instruments” shall be inserted into paragraph (vii) of the definition of “outstanding”, immediately after the words “Definitive Instruments” in the second line of that paragraph.

(v)In clause 3.3, at the commencement of that clause shall be inserted the text “(a)”, and at the ending of that clause shall be inserted the text: “(b) In respect only of Instruments in registered form issued by AFI, other than in the case of a Series comprising both bearer and registered Instruments that is the subject of a temporary global Instrument described in the previous paragraph, the Instruments will initially be represented by a temporary global Instrument in registered form, which will be exchangeable in accordance with its terms only on and from the exchange date applicable to the Instruments represented by such temporary global instrument and upon due certification as described therein.”

(vi)The text “or Registered Instruments” shall be inserted into Clause 4.6 immediately after the words “Definitive Instruments” in the seventh line of that Clause.

(vii)The text “or of a Temporary Global Instrument of AFI in registered form” shall be inserted into (a) Clause 4.6 immediately after the words “Registered

2

Instruments” in the ninth line of that Clause; and (b) Clause 4.7 immediately after the words “Registered Instruments” in the eighth line of that Clause.

(viii)The text in sub-clauses 14.1(b)(vi) and 14.2(vi) shall be deleted and replaced with the following:

“the European Union Directive on the taxation of savings income adopted by the ECOFIN Council on 3 June 2003 being implemented, the Paying Agent appointed in an EU member state that is not obliged to withhold or deduct tax pursuant to the Directive, or”.

4.GOVERNING LAW AND JURISDICTION

This Agreement shall be governed by, and shall be construed in accordance with, English law and the provisions of Clause 18 of the Fiscal Agency Agreement shall apply mutatis mutandis to this Agreement.

5.COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.  Any party may enter into this Agreement by signing any such counterpart.

6.CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.

3

SCHEDULE 1
THE FIRST SCHEDULE

FORM OF TEMPORARY GLOBAL INSTRUMENT (BEARER)

Series Number: [         ] Serial Number: [         ]

THE SECURITIES REPRESENTED BY THIS TEMPORARY GLOBAL INSTRUMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[THIS INSTRUMENT OR ANY INTEREST HEREIN MAY NOT BE SOLD, TRANSFERRED OR DELIVERED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO PROFESSIONAL MARKET PARTIES (“PMP”) WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992.

EACH HOLDER OF INSTRUMENTS (OR ANY INTEREST HEREIN), BY PURCHASING THE INSTRUMENTS, WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT (1) SUCH HOLDER IS A PMP AND IS ACQUIRING SUCH INSTRUMENTS FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP, THAT (2) SUCH INSTRUMENTS MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO A PMP ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP AND THAT (3) THE HOLDER WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE.](1)

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB FINANCE INC.

(incorporated with limited liability in the State of Delaware)]

[ABB CAPITAL B.V.

(incorporated with limited liability in The Netherlands and having its statutory domicile at Amsterdam)]

(1)Insert if the Issuer is ACBV and the Instruments do not qualify as High Denomination Instruments (as defined in the Information Memorandum).

4

TEMPORARY GLOBAL INSTRUMENT

representing up to

[Aggregate principal amount of Tranche]

[Title of Instruments]

This Temporary Global Instrument is issued in respect of an issue of [description of Instruments including aggregate principal amount of Tranche] (the “Instruments”) by [                              ] (the “Issuer”).

The Issuer for value received promises, all in accordance with the terms and conditions [attached hereto/set out in the information memorandum prepared by the Issuer and dated 11 November 2003 and the pricing supplement prepared in relation to the Instruments (the “Pricing Supplement”)] to pay to the bearer upon presentation and, if appropriate, surrender hereof on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](2) or on such earlier date as the same may become payable in accordance therewith the principal amount of [aggregate principal amount of Tranche] (as reduced from time to time in accordance with such terms and conditions) or such lesser amount as is equal to the outstanding principal amount of the Instruments represented by this Temporary Global Instrument or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on the principal amount hereof from time to time at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

Except as specified herein, the bearer of this Temporary Global Instrument is entitled to the benefit of the terms and conditions referred to above and of the same obligations on the part of the Issuer as if such bearer were the bearer of the Instruments represented hereby except that the bearer of this Temporary Global Instrument shall not prior to the Exchange Date (defined below) be entitled to receive payment of [the principal of or] interest on the Instruments except to the extent that, upon due presentation and surrender of this Temporary Global Instrument for exchange, delivery of the Permanent Global Instrument, or as the case may be Definitive Instruments or Registered Instruments is improperly withheld or refused, and all payments under and to the bearer of this Temporary Global Instrument shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Instruments.

This Temporary Global Instrument is exchangeable in whole or in part for a permanent global instrument (the “Permanent Global Instrument”) representing the Instruments and in substantially the form (subject to completion) set out in the Second Schedule to an amended and restated fiscal agency agreement dated 30 May 2001, as supplemented by a supplemental fiscal agency agreement dated 11 June 2002 and a second supplemental fiscal agency agreement dated 11 November 2003 (as further supplemented, amended or replaced, the “Fiscal Agency Agreement”) and made between the Issuer, Banque Générale du Luxembourg S.A., in its capacity as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such), Banque Générale du Luxembourg S.A. as principal registrar and certain other financial

(2)Insert only where Instruments are Instalment Instruments.

5

institutions named therein or, if so specified in the Pricing Supplement, for definitive instruments (“Definitive Instruments”) in substantially the form (subject to completion) set out in the Third Schedule to the Fiscal Agency Agreement [or for registered instruments (“Registered Instruments”) in substantially the form (subject to completion) set out in the Fourth Schedule to the Fiscal Agency Agreement].  An exchange for a Permanent Global Instrument or Definitive Instruments [or Registered Instruments](3) will be made only on or after the date (the “Exchange Date”) which is 40 days after the later of the date of issue of this Temporary Global Instrument and the completion (as notified to the Fiscal Agent by the Issuer) of the distribution of the Instruments represented by this Temporary Global Instrument and upon presentation or, as the case may be, surrender of this Temporary Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and upon and to the extent only of delivery to the Fiscal Agent of a certificate or certificates issued by Euroclear Bank, S.A./N.V., as operator of the Euroclear System (the “Euroclear System”) or Clearstream, société anonyme, Luxembourg (“Clearstream Luxembourg”), or by any other relevant clearing system and dated not earlier than the Exchange Date in substantially the form set out in Annex I hereto or, as the case may be, in the form that is customarily issued in such circumstances by such other clearing system.  [An exchange for Registered Instruments will be made at any time upon presentation or, as the case may be, surrender of this Temporary Global Instrument to the Fiscal Agent at its specified office.](4)  [Any Registered Instruments shall be made available in exchange in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement (which shall apply as if the bearer of this Temporary Global Instrument were the bearer of the Instruments represented hereby).](5)  Payments of interest otherwise falling due before the Exchange Date will be made only upon presentation of the Temporary Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and upon and to the extent only of delivery to the Fiscal Agent of a certificate or certificates issued by the Euroclear System or Clearstream, Luxembourg or by any other relevant clearing system and dated not earlier than the relevant interest payment date in substantially the form set out in Annex II hereto or, as the case may be, in the form that is customarily issued in such circumstances by such other clearing system.

In the event that (i) this Temporary Global Instrument is not duly exchanged, whether in whole or in part, for a Permanent Global Instrument or, as the case may be, Definitive Instruments [or Registered Instruments](6) by 6.00 p.m. (London time) on the thirtieth day after the time at which the preconditions to such exchange are first satisfied or (ii) any Instrument represented hereby becomes immediately redeemable following the occurrence of an Event of Default in relation thereto and is not duly redeemed (and the funds required for such redemption are not available to the Fiscal Agent for the purposes of effecting such

(3)Insert only in the case of a Series comprising both Bearer and Registered Instruments issued by AFI if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

(4)Insert only in the case of a Series comprising both Bearer and Registered Instruments issued by AIFLTD or ACBV (and not AFI) if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

(5)Insert only in the case of a Series comprising both Bearer and Registered Instruments if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

6

redemption and remain available for such purpose) by 6.00 p.m. (London time) on the thirtieth day after the time at which such Instruments become immediately redeemable, then this Temporary Global Instrument will become void and the bearer will have no further rights hereunder (but without prejudice to the rights which such bearer or any other person having an interest in this Temporary Global Instrument immediately prior to it becoming void may have under a deed of covenant dated 10 March 1993 and executed by the Issuer in respect of the Instruments).

[On any occasion on which a payment of interest is made in respect of this Temporary Global Instrument, the Issuer shall procure that the Paying Agent to which such Temporary Global Instrument is presented notes the same on the Schedule hereto.]

On any occasion on which a payment of principal or redemption amount is made in respect of this Temporary Global Instrument or on which this Temporary Global Instrument is exchanged in whole or in part as aforesaid or on which Instruments represented by this Temporary Global Instrument are to be cancelled, the Issuer shall cause the Paying Agent to which such Temporary Global Instrument is presented to procure that (i) the aggregate principal amount of the Instruments in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive [or registered form](4) or which are exchanged for a permanent global instrument or which are to be cancelled and (ii) the remaining principal amount of this Temporary Global Instrument (which shall be the previous principal amount hereof less the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Temporary Global Instrument shall for all purposes be as most recently so noted.

This Temporary Global Instrument is governed by, and shall be construed in accordance with, English law.

This Temporary Global Instrument shall not be valid for any purpose until authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

AS WITNESS the manual signature of two duly authorised officers on behalf of the Issuer.

[                              ]		[                              ]
By:	[manual signature]	By:	[manual signature]
	(duly authorised)		(duly authorised)
ISSUED in [             ] as of [           ] [     ]

7

AUTHENTICATED for and on behalf of

BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

By:	[manual signature]
	(duly authorised)

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](6)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](7)

(6)Insert only where either (i) Issuer is AFI and the maturity of the Instruments is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

(7)Insert only where Issuer is AFI and the maturity of the Instruments is 183 days or less.

8

THE SCHEDULE

Payments, Delivery of Definitive Instruments or Registered Instruments,

Exchange for Permanent Global Instrument and

Cancellation of Instruments

Date of
payment,
delivery or
cancellation Amount of
interest then
paid Amount of
principal or,
as the case
may be,
redemption
amount then
paid Aggregate
principal
amount of
Definitive or
Registered
Instruments
then
delivered Aggregate
principal
amount of
this
Temporary
Global
Instrument
then
exchanged
for the
Permanent
Global
Instrument Aggregate
principal
amount of
Instruments
then
cancelled Remaining
principal
amount of
this
Temporary
Global
Instrument Authorised
signature of
the Fiscal
Agent and/or
the Registrar

9

ANNEX I

[Form of certificate to be given in relation to exchanges of this Temporary Global Instrument for a Permanent Global Instrument or Definitive Instruments or Registered Instruments issued by AFI.  This Certificate is not required for Registered Instruments issued by AIFLTD or ACBV:]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

[This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “Member Organisations”) substantially to the effect set forth in the Fiscal Agency Agreement as of the date hereof, [    ] principal amount of the above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, estates the income of which is subject to United States Federal income taxation regardless of its source or trusts (a) that are subject to the primary supervision of a court within the United States and with respect to which one or more United States persons have the authority to control all substantial decisions or (b) that have a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (“United States persons”), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“financial institutions”)) purchasing for their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.](7)

This is [also](7) to certify with respect to [          ] principal amount of the above-captioned Securities, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from our Member Organisations entitled to a portion of such principal amount, certifications with respect to such portion, substantially to the effect set forth in the Fiscal Agency Agreement.

10

[As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.](8)

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

We understand that this certification is required in connection [with certain tax laws and, if applicable,](7) certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:[          ](9)

[Euroclear Bank S.A./N.V., as operator of the Euroclear System/Clearstream Banking, société anonyme, Luxembourg]

By:[authorised signature]

(8)Delete this paragraph or provision in the case of exchanges of the Temporary Global Instrument for Registered Instruments issued by AFI.

(9)To be dated not earlier than the Exchange Date.

11

ANNEX II

[Form of certificate to be given in relation to payments of interest falling due before the Exchange Date:]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “Member Organisations”) substantially to the effect set forth in the Fiscal Agency Agreement as of the date hereof, [   ] principal amount of the above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, estates or trust the income of which is subject to United States Federal income taxation regardless of its source or trusts (a) that are subject to the primary supervision of a court within the United States and with respect to which one or more United States persons have the authority to control all substantial decisions or (b) that have a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (“United States persons”), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“financial institutions”)) purchasing for their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

This is also to certify with respect to such principal amount of Securities set forth above that, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from our Member Organisations entitled to a portion of such principal amount, certifications with respect to such portion, substantially to the effect set forth in the Fiscal Agency Agreement.

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the

12

U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:[          ](10)

[Euroclear Bank S.A./N.V., as operator of the Euroclear System/Clearstream Banking, société anonyme, Luxembourg]

By:[authorised signature]

(10)To be dated not earlier than the relevant interest payment date.

13

ANNEX III

[Form of account-holder’s certification referred to in the preceding certificates:]

[Note: This certificate is not required for Registered Instruments issued by AIFLTD or ACBV]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

[This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, estates or trust the income of which is subject to the United States Federal income taxation regardless of its source or trusts (a) that are subject to the primary supervision of a court within the United States and with respect to which one or more United States persons have the authority to control all substantial decisions or (b) that have a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (“United States persons”), (ii) are owned by United States person(s) that (a) are foreign branches of a United States financial institution (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv)) (“financial institutions”) purchasing for their own account or for resale, or (b) acquired above-captioned the Securities through and are holding through on the date hereof foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the above-captioned Securities is a United States or foreign financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)) this is further to certify that such financial institution has not acquired the above-captioned Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.](11)

[This is [also] to certify that, except as set forth below, the above-captioned Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased the Securities in transactions which did not require registration under the

(11)Delete this paragraph or provision in the case of exchanges of the Temporary Global Instrument for Registered Instruments issued by AFI.

14

U.S. Securities Act of 1933, as amended (the “Act”)].  As used in this paragraph the term “U.S. person” has the meaning given to it by Regulation S under the Act.](12)

[This is also to certify that, except as set further below, the above-captioned Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. persons resident outside the United States who purchased the Securities in transactions outside the United States in accordance with Regulation S under the U.S. Securities Act of 1933, as amended the (“Act”).  As used in this paragraph the terms “U.S. person” and “United States” have the meanings given to them by Regulation S under the Act.](13)

[As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.](10)

We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.

This certification excepts and does not relate to [    ] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify.

We understand that this certification is required in connection with [certain tax laws and, if applicable,](12) certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:[          ](14)

[Account-holder] as or as agent for the beneficial owner of the Instruments.

By:[authorised signature]

(12) To be used solely in the case of Instruments issued by AFI.

(13) To be used in the case of Instruments issued by AIFLTD or ACBV.

(14) To be dated not earlier than fifteen days before the Exchange Date or, as the case may be, the relevant interest payment date.

15

SCHEDULE 2
THE SECOND SCHEDULE

FORM OF PERMANENT GLOBAL INSTRUMENT

Series Number: [      ] Serial Number: [    ]

THE SECURITIES REPRESENTED BY THIS PERMANENT GLOBAL INSTRUMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[THIS INSTRUMENT OR ANY INTEREST HEREIN MAY NOT BE SOLD, TRANSFERRED OR DELIVERED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO PROFESSIONAL MARKET PARTIES (“PMP”) WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992.

EACH HOLDER OF INSTRUMENTS (OR ANY INTEREST HEREIN), BY PURCHASING THE INSTRUMENTS, WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT (1) SUCH HOLDER IS A PMP AND IS ACQUIRING SUCH INSTRUMENTS FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP, THAT (2) SUCH INSTRUMENTS MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO A PMP ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP AND THAT (3) THE HOLDER WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE.](15)

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB FINANCE INC.

(incorporated with limited liability in the State of Delaware)]

[ABB CAPITAL B.V.

(incorporated with limited liability in The Netherlands and having its statutory domicile at Amsterdam)]

(15) Insert if the Issuer is ACBV and the Instruments do not qualify as High Denomination Instruments (as defined in the Information Memorandum).

16

PERMANENT GLOBAL INSTRUMENT

representing up to

[Aggregate principal amount of Tranche]

[Title of Instruments]

This Permanent Global Instrument is issued in respect of an issue of [description of Instruments including aggregate principal amount of Tranche] (the “Instruments”) by [                              ] (the “Issuer”).

The Issuer for value received promises, all in accordance with the terms and conditions [attached hereto/set out in the information memorandum prepared by the Issuer and dated 11 November 2003 and the pricing supplement prepared in relation to the Instruments (“Pricing Supplement”)], to pay to the bearer upon presentation and, if appropriate, surrender hereof on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](16) or on such earlier date as the same may become payable in accordance therewith the principal amount of [aggregate principal amount of Tranche] (as reduced from time to time in accordance with such terms and conditions) or such lesser amount as is equal to the outstanding principal amount of the Instruments represented by this Permanent Global Instrument or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on the principal amount hereof from time to time at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

The bearer of this Permanent Global Instrument is entitled to the benefit of the terms and conditions referred to above and the same obligations on the part of the Issuer as if such bearer were the bearer of the Instruments represented hereby, and all payments under and to the bearer of this Permanent Global Instrument shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Instruments.

This Permanent Global Instrument will be exchangeable for definitive Instruments (“Definitive Instruments”) in substantially the form (subject to completion) set out in the Third Schedule to an amended and restated fiscal agency agreement dated 30 May 2001, as supplemented by a supplemental fiscal agency agreement dated 11 June 2002 and a second supplemental fiscal agency agreement dated 11 November 2003 (as further supplemented, amended or replaced, the “Fiscal Agency Agreement”) and made between the Issuer, Banque Générale du Luxembourg S.A. in its capacity as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such), Banque Générale du Luxembourg S.A. as principal registrar and certain other financial institutions [or for registered instruments (“Registered Instruments”) in substantially the form (subject to completion) set out in the Fourth Schedule to the Fiscal Agency Agreement or for a combination of Definitive Instruments and Registered Instruments](17) (a) if Euroclear Bank S.A./N.V., as operator of the Euroclear System (the

(16) Insert only where Instruments are Instalment Instruments.

(17) Insert only in the case of a Series comprising both Bearer and Registered Instruments if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

17

“Euroclear System”) or Clearstream Banking, société anonyme, Luxembourg (“Clearstream, Luxembourg”) or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business; (b) if any of the Instruments represented hereby becomes due and payable following an Event of Default (as defined in Condition 7) of the terms and conditions referred to above; or (c) at the option of the bearer hereof acting on behalf of the relevant beneficial owners of the interests in this Permanent Global Instrument and at the expense of such beneficial owners, and, in each case, upon the request of the bearer hereof on behalf of the relevant beneficial owners of the interests in this Permanent Global Instrument and at the expense of such beneficial owners.  In order to make such request, the bearer hereof must, not less than forty-five days before the date upon which the delivery of such Definitive Instruments [and/or Registered Instruments]¹⁷ is required, deposit this Permanent Global Instrument with the Fiscal Agent at its specified office with the form of exchange notice endorsed hereon duly completed.  On an exchange of the whole of this Permanent Global Instrument, this Permanent Global Instrument shall be surrendered to the Fiscal Agent.  [Any Registered Instruments shall be made available in exchange in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement (which shall apply as if the bearer of this Permanent Global Instrument were the bearer of the Instruments represented hereby).](17)  Any Definitive Instruments will be made available for collection by the persons entitled thereto at the specified office of the Fiscal Agent.  If default is made by the Issuer in the required delivery of such Definitive Instruments [and/or, as the case may be, Registered Instruments](17) and such default is continuing at 6.00 p.m. (London time) on the thirtieth day after the day on which the relevant notice period expires, then this Permanent Global Instrument will become void and the bearer will have no further rights hereunder (but without prejudice to the rights which such bearer or any other person(s) having an interest in this Permanent Global Instrument immediately prior to it becoming void may have under a deed of covenant dated 10 March 1993 and executed by the Issuer in respect of the Instruments).

[On any occasion on which a payment of interest is made in respect of this Permanent Global Instrument, the Issuer shall procure that the Paying Agent to which this Permanent Global Instrument is presented notes the same on the Schedule hereto].

On any occasion on which a payment of principal or redemption amount is made in respect of this Permanent Global Instrument or on which this Permanent Global Instrument is exchanged as aforesaid or on which any Instruments represented by this Permanent Global Instrument are to be cancelled, the Issuer shall cause the Paying Agent to which this Permanent Global Instrument is presented to procure that (i) the aggregate principal amount of the Instruments in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive [or registered form](17) or which are to be cancelled and (ii) the remaining principal amount of this Permanent Global Instrument (which shall be the previous principal amount hereof less the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Permanent Global Instrument shall for all purposes be as most recently so noted.

18

Insofar as the Temporary Global Instrument by which the Instruments were initially represented has been exchanged in part only for this Permanent Global Instrument and is then to be further exchanged as to the remaining principal amount or part thereof for this Permanent Global Instrument, then upon presentation of this Permanent Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and to the extent that the aggregate principal amount of such Temporary Global Instrument is then reduced by reason of such further exchange, the Issuer shall cause the Fiscal Agent to procure that (i) the aggregate principal amount of the Instruments in respect of which such further exchange is then made and (ii) the new principal amount of this Permanent Global Instrument (which shall be the previous principal amount hereof plus the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Permanent Global Instrument shall for all purposes be as most recently noted.

This Permanent Global Instrument is governed by, and shall be construed in accordance with, English law.

This Permanent Global Instrument shall not be valid for any purpose until authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

19

AS WITNESS the manual signature of two duly authorised officers on behalf of the Issuer.

[                              ]		[                              ]
By:	[manual signature]	By:	[manual signature]
	(duly authorised)		(duly authorised)
ISSUED in [             ] on [           ] [     ]

AUTHENTICATED for and on behalf of

BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

By:	[manual signature]
	(duly authorised)

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](18)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](19)

(18) Insert only where either (i) Issuer is AFI and the maturity of the Instruments is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

(19) Insert only where Issuer is AFI and the maturity of the Instruments is 183 days or less.

20

THE SCHEDULE

Payments, Delivery of Definitive or Registered Instruments, Further Exchanges of the

Temporary Global Instrument and Cancellation of Instruments

Date of
payment,
delivery,
further
exchange of
Temporary
Global
Instrument
or
cancellation Amount of
interest then
paid Amount of
principal or,
as the case
may be,
redemption
amount then
paid Aggregate
principal
amount of
exchanges
for
Definitive
Instruments
or
Registered
Instruments
then
delivered Aggregate
principal
amount of
Instruments
then
cancelled Aggregate
principal
amount of
exchanges
for further
exchanges of
Temporary
Global
Instrument Current
principal
amount of
this
Permanent
Global
Instrument Authorised
signature of
the Fiscal
Agent and/or
the Registrar

21

EXCHANGE NOTICE

                                           , being the bearer of this Permanent Global Instrument at the time of its deposit with the Fiscal Agent at its specified office for the purposes of the Instruments, hereby exercises the option set out above to have this Permanent Global Instrument exchanged in whole or in part for Instruments in [definitive/registered form/[    ] in aggregate principal amount of Instruments in definitive form and [   ] in aggregate principal amount of Instruments in registered form]* and directs that such Instruments in definitive form be made available for collection by it from the Fiscal Agent’s specified office and that such Instruments in registered form be made available in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement.

By:
	(duly authorised)

*Delete and complete, as appropriate

22

SCHEDULE 3
THE THIRD SCHEDULE

FORM OF DEFINITIVE INSTRUMENT (“ISMA” FORMAT)

[On the face of the Instrument:]

[<9999999+AAXXXXXXXXX9+XX+999999>]

[Denomination]

THIS INSTRUMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[THIS INSTRUMENT MAY NOT BE SOLD, TRANSFERRED OR DELIVERED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO PROFESSIONAL MARKET PARTIES (“PMP”) WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992.

EACH HOLDER OF THIS INSTRUMENT, BY PURCHASING THIS INSTRUMENT, WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT (1) SUCH HOLDER IS A PMP AND IS ACQUIRING SUCH INSTRUMENTS FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP, THAT (2) SUCH INSTRUMENT MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO A PMP ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP AND THAT (3) THE HOLDER WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE.](20)

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB FINANCE INC.

(incorporated with limited liability in the State of Delaware)]

[ABB CAPITAL B.V.

(incorporated with limited liability in The Netherlands and having its statutory domicile at Amsterdam)]

(20) Insert if the Issuer is ACBV and the Instruments do not qualify as High Denomination Instruments (as defined in the Information Memorandum).

23

[Aggregate principal amount of Tranche]

[Title of Instruments]

[                              ] (the “Issuer”) for value received promises, all in accordance with the terms and conditions [endorsed hereon/attached hereto] [and the pricing supplement referred to therein and prepared in relation to the Instruments (the “Pricing Supplement”)] to pay to the bearer upon presentation and, if appropriate, surrender hereof on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](21) or on such earlier date as the same may become payable in accordance therewith the principal amount of:

[denomination in words and numerals]

[(, in the case of payment on such earlier date, as reduced from time to time in accordance with such terms and conditions)](19) or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on such principal amount [(as reduced from time to time in accordance with such terms and conditions)](19) at the rate or rates specified therein, all subject to and in accordance with such terms and conditions].

[This [title of Instrument] shall not/Neither this [title of Instrument] nor any of the interest coupons appertaining hereto shall] be valid for any purpose until this [title of Instrument] has been authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

This [title of Instrument] is governed by, and shall be construed in accordance with, English law.

AS WITNESS the facsimile signature of two duly authorised officers on behalf of the Issuer.

[                              ]		[                              ]
By:	[facsimile signature]	By:	[facsimile signature]
	(duly authorised)		(duly authorised)
ISSUED in [             ] as of [           ] [     ]

(21) Insert only where Instruments are Instalment Instruments.

24

AUTHENTICATED for and on behalf of

BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

without recourse, warranty or liability

By:	[manual signature]
	(duly authorised)

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](22)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](23)

(22) Insert only where either (i) Issuer is AFI and the maturity of the Instruments is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

(23) Insert only where Issuer is AFI and the maturity of the Instruments is 183 days or less.

25

[On the reverse of the Instruments:]

TERMS AND CONDITIONS

[As contemplated in the Information Memorandum and as amended by the relevant Pricing Supplement]

[At the foot of the Terms and Conditions:]

FISCAL AGENT

Banque Générale du Luxembourg S.A.

50, Avenue J.F. Kennedy

L-2951 Luxembourg

PAYING AGENT

Banque MeesPierson BGL S.A.

57 Rennweg

CH-8023 Zurich

Switzerland

26

Forms of Coupons

[On the front of Coupon:]

[Attached to the Instruments (interest-bearing, fixed rate and having Coupons):]

[Issuer]

[Amount and title of Instruments]

Coupon for [       ] due on [            ]

Such amount is payable (subject to the terms and conditions [endorsed on/attached to the [title of Instrument] to which this Coupon appertains [and the pricing supplement referred to therein], which shall be binding on the holder of this Coupon whether or not it is for the time being attached to such [title of Instrument]) against surrender of this Coupon at the specified office of the Fiscal Agent or any of the Paying Agents set out on the reverse hereof (or any other or further fiscal or paying agents and/or specified offices from time to time designated for the purpose by notice duly given in accordance with such terms and conditions).

[The attention of Couponholders is drawn to condition 9A.06 of the terms and conditions.  The Instrument to which this Coupon appertains may in certain circumstances specified in such terms and conditions, fall due for redemption before the due date in relation to this Coupon.  In such event, the Paying Agent to which such Instrument is presented for redemption may determine, in accordance with the aforesaid condition 9A.06 that this Coupon is to become void.]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](24)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](25)

[<99+9999999+AAXXXXXXXXX9+XX+999999>]

(24) Insert only where either (i) Issuer is AFI and the maturity of the Instruments is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

(25) Insert only where Issuer is AFI and the maturity of the Instruments is 183 days or less.

27

[Attached to the Instrument (interest-bearing, floating rate and having Coupons):]

[Issuer]

[Amount and title of Instruments]

Coupon for the amount of interest due on [          ]

Such amount is payable (subject to the terms and conditions [endorsed on/attached to] the [title of Instrument] to which this Coupon appertains [and the pricing supplement referred to therein], which shall be binding on the holder of this Coupon whether or not it is for the time being attached to such [title of Instrument]) against surrender of this Coupon at the specified office of the Fiscal Agent or any of the Paying Agents set out on the reverse hereof (or any other or further fiscal or paying agents and/or specified offices from time to time designated for the purpose by notice duly given in accordance with such terms and conditions).

The Instrument to which this Coupon appertains may, in certain circumstances specified in such terms and conditions, fall due for redemption before the due date in relation to this Coupon.  In such event, this Coupon will become void and no payment will be made in respect hereof.

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](26)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](27)

[<99+9999999+AAXXXXXXXXX9+XX+999999>]

(26) Insert only where either (i) Issuer is AFI and the maturity of the Instruments is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

(27) Insert only where Issuer is AFI and the maturity of the Instruments is 183 days or less.

28

[On the reverse of each Coupon:]

FISCALBanque Générale du Luxembourg S.A.

AGENT:50 Avenue J.F. Kennedy
L-2951 Luxembourg

PAYINGBanque MeesPierson BGL S.A.

AGENT:57 Rennweg
CH-8023 Zurich
Switzerland

29

Form of Talon

No                    

[                       ]

[Amount and title of Instruments]

Talon for further Coupons

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](28)

[BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).](29)

After all the Coupons appertaining to the Instrument to which this Talon appertains have matured, further Coupons [(including, where appropriate, a Talon for further Coupons)] will be issued at the specified office of the Fiscal Agent or any of the Paying Agents set out in the reverse hereof (or any other or further paying agents and/or specified offices from time to time designated by notice duly given in accordance with the terms and conditions [endorsed on/attached to] the [title of Instrument] to which this Talon appertains [and the pricing supplement referred to therein] (which shall be binding on the holder of this Talon whether or not it is for the time being attached to such [title of Instrument])) upon production and surrender of this Talon upon and subject to such terms and conditions.  The initial Paying Agents and their specified offices are set out on the reverse hereof.

Under the said terms and conditions, such Instrument may, in certain circumstances, fall due for redemption before the original due date for exchange of this Talon and in any such event this Talon shall become void and no exchange shall be made in respect hereof.

[Issuer]

(28)  Insert only where either (i) Issuer is AFI and the maturity of the Instruments is more than 183 days or (ii) Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

(29) Insert only where Issuer is AFI and the maturity of the Instruments is 183 days or less.

30

SCHEDULE 4THE FOURTH SCHEDULE

FORM OF REGISTERED INSTRUMENT

ISIN Number: [         ] Series Number: [            ] Serial Number: [           ]

THIS INSTRUMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[THIS INSTRUMENT OR ANY INTEREST HEREIN MAY NOT BE SOLD, TRANSFERRED OR DELIVERED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO PROFESSIONAL MARKET PARTIES (“PMP”) WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992.

EACH HOLDER OF INSTRUMENTS (OR ANY INTEREST HEREIN), BY PURCHASING THE INSTRUMENTS, WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT (1) SUCH HOLDER IS A PMP AND IS ACQUIRING SUCH INSTRUMENTS FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A PMP, THAT (2) SUCH INSTRUMENTS MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO A PMP ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A PMP AND THAT (3) THE HOLDER WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE.](30)

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB FINANCE INC.

(incorporated with limited liability in the State of Delaware)]

[ABB CAPITAL B.V.

(incorporated with limited liability in The Netherlands and having its statutory domicile at Amsterdam)]

[Aggregate principal amount of Tranche]

[Title of Instruments]

(30) Insert if the Issuer is ACBV and the Instruments do not qualify as High Denomination Instruments (as defined in the Information Memorandum).

31

[                              ] (the “Issuer”) for value received promises, all in accordance with the terms and conditions [endorsed hereon/attached hereto] [and the pricing supplement referred to therein and prepared in relation to the Instruments (“Pricing Supplement”)], to pay to                                                                                          of

(being the person registered in the register referred to below or, if more than one person is so registered, the first-named of such persons) on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](31) or on such earlier date as the same may become payable in accordance therewith the principal sum of                                                                                                       [(, in the case of payment on such earlier date, as reduced in accordance with such terms and conditions)](34) or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on such principal amount [(as reduced in accordance with such terms and conditions)](34) at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

The statements set forth in the legend, if any, set forth above are an integral part of the terms of this Instrument and by acceptance hereof each holder of this Instrument agrees to be subject to and bound by the terms and provisions set forth in such legend, if any.

This Instrument is evidence of entitlement only.  Title to the Instrument passes only on due registration in the Register maintained by [                              ](32), as registrar, and only the duly registered holder or if more than one person is so registered, the first-named of such persons is entitled to payment in respect of this Instrument.

This Instrument is governed by, and shall be construed in accordance with, English law.

This Instrument shall not be valid for any purpose until this Instrument has been authenticated for and on behalf of [                                              ],(36) as registrar.

AS WITNESS the facsimile or manual signatures of two duly authorised officers of the Issuer.

[                              ][                              ]
By:	[manual/facsimile signature]	By:	[manual/facsimile signature]
	(duly authorised)		(duly authorised)

(31) Insert only where Instruments are Instalment Instruments.

(32) Insert name of the relevant Registrar.

32

ISSUED in [             ] as of [           ] [   ]

AUTHENTICATED for and on behalf of

[                                     ]

as registrar without recourse, warranty or liability

By:	[manual signature]
	(duly authorised)

33

FORM OF TRANSFER

FOR VALUE RECEIVED                                              , being the registered holder of this [title of Instrument], hereby transfers to                                                                                                     of                                                                         ,                                                     in principal amount of this [title of Instrument] and irrevocably requests and authorises [                                              ](33), in its capacity as registrar in relation to the [title of Instruments] (or any successor to [                                      ](37), in its capacity as such) to effect the relevant transfer by means of appropriate entries in the register kept by it.

Dated:

By:	[manual signature]	[By:	[manual signature]
	(duly authorised)		(duly authorised)

Notes:

The name of the person by or on whose behalf this form of transfer is signed must correspond with the name of the registered holder as it appears on the face of this Instrument.

(i)A representative of such registered holder should state the capacity in which he signs (e.g. executor).

(ii)The signature of the person effecting a transfer shall conform to any list of duly authorised specimen signatures supplied by the registered holder or be certified by a recognised bank, notary public or in such other manner as the Registrar may require.

(iii)Any transfer of [title of Instruments] shall be in an amount equal to the minimum denomination as may be specified in the relevant Pricing Supplement or an integral multiple thereof.

(33) Insert name of the relevant Registrar

34

SCHEDULE 5THE NINTH SCHEDULE

FORM OF TEMPORARY GLOBAL INSTRUMENT (AFI REGISTERED)

Series Number: [         ] Serial Number: [         ]

THE SECURITIES REPRESENTED BY THIS TEMPORARY GLOBAL INSTRUMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

THIS GLOBAL INSTRUMENT IS A TEMPORARY GLOBAL INSTRUMENT FOR PURPOSES OF REGULATION S UNDER THE SECURITIES ACT.  NEITHER THIS TEMPORARY GLOBAL INSTRUMENT NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED UNDER THE FISCAL AGENCY AGREEMENT (AS AMENDED AND SUPPLEMENTED) HEREINAFTER REFERRED TO.

ABB FINANCE INC.

(incorporated with limited liability in the State of Delaware)

TEMPORARY GLOBAL INSTRUMENT

representing up to

[Aggregate principal amount of Tranche]

[Title of Instruments]

This Temporary Global Instrument is issued in respect of an issue of [description of Instruments including aggregate principal amount of Tranche] (the “Instruments”) by [                              ] (the “Issuer”).

The Issuer for value received promises, all in accordance with the terms and conditions [attached hereto/set out in the information memorandum prepared by the Issuer and dated 11 November 2003 and the pricing supplement prepared in relation to the Instruments (“Pricing Supplement”)] to pay to                                                                                                                                                             of

on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](34) or on such earlier date as the same may become

(34) Insert only where Instruments are Instalment Instruments.

35

payable in accordance therewith the principal amount of [aggregate principal amount of Tranche] (as reduced from time to time in accordance with such terms and conditions) or such lesser amount as is equal to the outstanding principal amount of the Instruments represented by this Temporary Global Instrument or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on the principal amount hereof from time to time at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

Except as specified herein, the holder of this Temporary Global Instrument is entitled to the benefit of the terms and conditions referred to above and of the same obligations on the part of the Issuer as if such holder were the holder of the Instruments represented hereby except that the holder of this Temporary Global Instrument shall not prior to the Exchange Date (defined below) be entitled to receive payment of [the principal of or] interest on the Instruments except to the extent that a due request for exchange or delivery of this Temporary Global Instrument for Registered Instruments is improperly withheld or refused, and all payments under and to the bearer of this Temporary Global Instrument shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Instruments.

This Temporary Global Instrument is exchangeable in whole or in part for Instruments in registered form (“Registered Instruments”) and in substantially the form (subject to completion) set out in the Fourth Schedule to an amended and restated fiscal agency agreement dated 30 May 2001, as supplemented by a supplemental fiscal agency agreement dated 11 June 2002 and a second supplemental fiscal agency agreement dated 11 November 2003 (as further supplemented, amended or replaced, the “Fiscal Agency Agreement”) and made between the Issuer, Banque Générale du Luxembourg S.A., in its capacity as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such), Banque Générale du Luxembourg S.A. as principal registrar and certain other financial institutions named therein.  An exchange for Registered Instruments will be made only on or after the date (the “Exchange Date”) which is 40 days after the later of the date of issue of this Temporary Global Instrument and the completion (as notified to the Fiscal Agent by the Issuer) of the distribution of the Instruments represented by this Temporary Global Instrument and upon presentation or, as the case may be, surrender of this Temporary Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and upon and to the extent only of delivery to the Fiscal Agent of a certificate or certificates issued by Euroclear Bank, S.A./N.V., as operator of the Euroclear System (the “Euroclear System”) or Clearstream, société anonyme, Luxembourg (“Clearstream Luxembourg”), or by any other relevant clearing system and dated not earlier than the Exchange Date in substantially the form set out in Annex I hereto or, as the case may be, in the form that is customarily issued in such circumstances by such other clearing system.  Any Registered Instruments shall be made available in exchange in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement (which shall apply as if the holder of this Temporary Global Instrument were the holder of the Instruments represented hereby).  Payments of interest otherwise falling due before the Exchange Date will be made only upon presentation of the Temporary Global Instrument to the Fiscal Agent at its

36

specified office in relation to the Instruments and upon and to the extent only of delivery to the Fiscal Agent of a certificate or certificates issued by the Euroclear System or Clearstream, Luxembourg or by any other relevant clearing system and dated not earlier than the relevant interest payment date in substantially the form set out in Annex II hereto or, as the case may be, in the form that is customarily issued in such circumstances by such other clearing system.

In the event that (i) this Temporary Global Instrument is not duly exchanged, whether in whole or in part, for Registered Instruments by 6.00 p.m. (London time) on the thirtieth day after the time at which the preconditions to such exchange are first satisfied or (ii) any Instrument represented hereby becomes immediately redeemable following the occurrence of an Event of Default in relation thereto and is not duly redeemed (and the funds required for such redemption are not available to the Fiscal Agent for the purposes of effecting such redemption and remain available for such purpose) by 6.00 p.m. (London time) on the thirtieth day after the time at which such Instruments become immediately redeemable, then this Temporary Global Instrument will become void and the holder will have no further rights hereunder (but without prejudice to the rights which such bearer or any other person having an interest in this Temporary Global Instrument immediately prior to it becoming void may have under a deed of covenant dated 10 March 1993 and executed by the Issuer in respect of the Instruments).

On any occasion on which a payment of interest is made in respect of this Temporary Global Instrument, the Issuer shall procure that the Paying Agent to which such Temporary Global Instrument is presented notes the same on the Schedule hereto.

On any occasion on which a payment of principal or redemption amount is made in respect of this Temporary Global Instrument or on which this Temporary Global Instrument is exchanged in whole or in part as aforesaid or on which Instruments represented by this Temporary Global Instrument are to be cancelled, the Issuer shall cause the Paying Agent to which such Temporary Global Instrument is presented to procure that (i) the aggregate principal amount of the Instruments in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in registered form or which are to be cancelled and (ii) the remaining principal amount of this Temporary Global Instrument (which shall be the previous principal amount hereof less the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Temporary Global Instrument shall for all purposes be as most recently so noted.

This Temporary Global Instrument is governed by, and shall be construed in accordance with, English law.

This Temporary Global Instrument shall not be valid for any purpose until authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

AS WITNESS the manual signature of two duly authorised officers on behalf of the Issuer.

37

[                              ]		[                              ]
By:	[manual signature]	By:	[manual signature]
	(duly authorised)		(duly authorised)

ISSUED in [          ] as of [            ] [   ]

AUTHENTICATED for and on behalf of

BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

By:	[manual signature]
	(duly authorised)

38

THE SCHEDULE

Payments, Delivery of Registered Instruments,

and Cancellation of Instruments

Date of
payment,
delivery or
cancellation Amount of
interest then
paid Amount of
principal or,
as the case
may be,
redemption
amount then
paid Aggregate
principal
amount of
Registered
Instruments
then
delivered Aggregate
principal
amount of
Instruments
then
cancelled Remaining
principal
amount of
this
Temporary
Global
Instrument Authorised
signature of
the Fiscal
Agent and/or
the Registrar

39

ANNEX I

[Form of certificate to be given in relation to exchanges of this Temporary Global Instrument for Registered Instruments issued by AFI]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “Member Organisations”) substantially to the effect set forth in the Fiscal Agency Agreement as of the date hereof, except as set forth below, [   ] principal amount of the above-captioned Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased the Securities in transactions which did not require registration under the U.S. Securities Act of 1933, as amended (the “Act”).  As used in this paragraph the term “U.S. person” has the meaning given to it by Regulation S under the Act).

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

This certification excepts and does not relate to [     ] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify.

We understand that this certification is required in connection with certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification

40

is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:[           ](35)

[Euroclear Bank S.A./N.V., as operator of the Euroclear System/Clearstream Banking, société anonyme, Luxembourg]

By:[authorised signature]

(35) To be dated not earlier than the Exchange Date.

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ANNEX II

[Form of certificate to be given in relation to payments of interest falling due before the Exchange Date:]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “Member Organisations”) substantially to the effect set forth in the Fiscal Agency Agreement as of the date hereof, except as set forth below, [   ] principal amount of the above-captioned Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased the Securities in transactions which did not require registration under the U.S. Securities Act of 1933, as amended (the “Act”).  As used in this paragraph the term “U.S. person” has the meaning given to it by Regulation S under the Act.

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

This certification excepts and does not relate to [    ] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify.

We understand that this certification is required in connection with certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification

42

is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:[          ]

[Euroclear Bank S.A./N.V., as operator of the Euroclear System/Clearstream Banking, société anonyme, Luxembourg]

By:[authorised signature]

43

ANNEX III

[Form of account-holder’s certification referred to in the preceding certificates:]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “Member Organisations”) substantially to the effect set forth in the Fiscal Agency Agreement as of the date hereof, except as set forth below, [   ] principal amount of the above-captioned Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased the Securities in transactions which did not require registration under the U.S. Securities Act of 1933, as amended (the “Act”).  As used in this paragraph the term “U.S. person” has the meaning given to it by Regulation S under the Act.

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

This certification excepts and does not relate to [    ] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify.

We understand that this certification is required in connection with certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification

44

is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:[          ](36)

[Account-holder] as or as agent for the beneficial owner of the Instruments.

By:[authorised signature]

(36) To be dated not earlier than fifteen days before the Exchange Date or, as the case may be the relevant interest payment date.

45

FORM OF TRANSFER

FOR VALUE RECEIVED                                            , being the registered holder of this [title of Instrument], hereby transfers to                                                                      of                                             ,                                         in principal amount of this [title of Instrument] and irrevocably requests and authorises [                                           ](37), in its capacity as registrar in relation to the [title of Instruments] (or any successor to [                                ](37), in its capacity as such) to effect the relevant transfer by means of appropriate entries in the register kept by it.

Dated:

By:	[manual signature]	[By:	[manual signature]
	(duly authorised)		(duly authorised)

Notes:

The name of the person by or on whose behalf this form of transfer is signed must correspond with the name of the registered holder as it appears on the face of this Instrument.

(i)A representative of such registered holder should state the capacity in which he signs (e.g. executor).

(ii)The signature of the person effecting a transfer shall conform to any list of duly authorised specimen signatures supplied by the registered holder or be certified by a recognised bank, notary public or in such other manner as the Registrar may require.

Any transfer of [title of Instruments] shall be in an amount equal to the minimum denomination as may be specified in the relevant Pricing Supplement or an integral multiple thereof.

(37) Insert name of the relevant Registrar

46

SIGNATURES

ABB INTERNATIONAL FINANCE LIMITED
By: Christopher Noon	By:  Ann Larsson
ABB FINANCE INC.
By:Alex Hall	By:  Patrick Krähenbühl
ABB CAPITAL B.V.
By:  Ann Larsson	By:  Patrick Krähenbühl
BANQUE GENERALE DU LUXEMBOURG S.A.
as Fiscal Agent and
Principal Registrar
By:	By:
BANQUE MEESPIERSON BGL S.A.
as Paying Agent
By:	By:
JPMORGAN CHASE BANK
as Alternative Registrar
By:

47

EX-4.3

Exhibit 4.3

LIMITED LIABILITY PARTNERSHIP

CONFORMED COPY

17 NOVEMBER 2003

(as amended by a syndication and amendment agreement dated 10 December 2003)

ABB LTD

CERTAIN SUBSIDIARIES OF ABB LTD

as Borrowers and Guarantors

with

BARCLAYS CAPITAL

BAYERISCHE HYPO-UND VEREINSBANK AG

BNP PARIBAS

CITIGROUP GLOBAL MARKETS LIMITED

COMMERZBANK AKTIENGESELLSCHAFT

CREDIT SUISSE FIRST BOSTON

DEUTSCHE BANK AG

DRESDNER KLEINWORT WASSERSTEIN

HSBC BANK PLC

NORDEA BANK SWEDEN AB (PUBL)

SEB MERCHANT BANKING, SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)

SVENSKA HANDELSBANKEN AB (PUBL)

as Mandated Lead Arrangers

and

CREDIT SUISSE FIRST BOSTON

acting as Facility Agent

US$1,000,000,000

MULTI-CURRENCY REVOLVING CREDIT AGREEMENT

CONTENTS

Clause
1.	Definitions And Interpretation
2.	The Facility
3.	Purpose
4.	Conditions Of Utilisation
5.	Utilisation
6.	Optional Currencies
7.	Repayment Of Advances
8.	Prepayment And Cancellation
9.	Interest
10.	Interest Periods
11.	Changes To The Calculation Of Interest
12.	Fees
13.	Tax Gross Up And Indemnities
14.	Increased Costs
15.	Other Indemnities
16.	Mitigation By The Lenders
17.	Costs And Expenses
18.	Guarantee And Indemnity
19.	Representations
20.	Information Undertakings
21.	Financial Covenants
22.	General Undertakings
23.	Events Of Default
24.	Changes To The Lenders
25.	Changes To The Obligors
26.	Role Of The Facility Agent And The Mandated Lead Arrangers
27.	Conduct Of Business By The Finance Parties
28.	Sharing Among The Lenders
29.	Payment Mechanics
30.	Set-Off
31.	Notices

32.	Calculations And Certificates
33.	Partial Invalidity
34.	Remedies And Waivers
35.	Amendments And Waivers
36.	Counterparts
37.	Governing Law
38.	Enforcement
Schedule 1		THE ORIGINAL PARTIES
	Part I	The Original Lenders
	Part II	The Original Obligors
Schedule 2		CONDITIONS PRECEDENT
	Part I	Conditions Precedent To Initial Utilisation
	Part II	Additional Obligor Conditions Precedent
Schedule 3		UTILISATION REQUEST
Schedule 4		THE MARGIN AND UTILISATION FEE
Schedule 5		FORM OF TRANSFER CERTIFICATE
Schedule 6		TIMETABLES
Schedule 7		FORM OF ACCESSION LETTER
Schedule 8		FORM OF RESIGNATION LETTER
Schedule 9		MANDATORY COSTS
Schedule 10		MATERIAL SUBSIDIARIES
Schedule 11		FORM OF COVENANT COMPLIANCE CERTIFICATE

THIS AGREEMENT is dated 17 November 2003 and made between

(1)ABB LTD, a company incorporated in Switzerland whose registered office is at Affolternstrasse 44, CH-8050 Zurich, Switzerland (“ABB”);

(2)THE SUBSIDIARIES of ABB listed in Part 2 of Schedule 1 (The Original Parties) as original borrowers (the “Original Borrowers”);

(3)ABB AND THE SUBSIDIARIES OF ABB listed in Part 2 of Schedule 1 (The Original Parties) as original guarantors (the “Original Guarantors”);

(4)BARCLAYS CAPITAL, BAYERISCHE HYPO-UND VEREINSBANK AG, BNP PARIBAS, CITIGROUP GLOBAL MARKETS LIMITED, COMMERZBANK AKTIENGESELLSCHAFT, CREDIT SUISSE FIRST BOSTON, DEUTSCHE BANK AG, DRESDNER KLEINWORT WASSERSTEIN, HSBC BANK PLC, NORDEA BANK SWEDEN AB (PUBL), SEB MERCHANT BANKING, SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) and SVENSKA HANDELSBANKEN AB (PUBL) in their respective capacities as mandated lead arrangers (the “Mandated Lead Arrangers”);

(5)BANCO BILBAO VIZCAYA ARGENTARIA S.A., CDC IXIS, DEN NORSKE BANK ASA, ING BELGIUM NV, KBC BANK NV and SAUDI AMERICAN BANK (the “Arrangers”);

(6)THE FINANCIAL INSTITUTIONS listed in Part 1 of Schedule 1 (The Original Lenders) in their respective capacities as original lenders (the “Lenders”); and

(7)CREDIT SUISSE FIRST BOSTON in its capacity as facility agent (the “Facility Agent”).

IT IS AGREED as follows:

SECTION 1

INTERPRETATION

1.DEFINITIONS AND INTERPRETATION

1.1Definitions

In this Agreement:

“Accession Letter” means a letter substantially in the form set out in Schedule 7 (Form of Accession Letter).

“Additional Borrower” means any Subsidiary of ABB which has become an Additional Borrower in accordance with Clause 25.2 (Additional Borrowers).

“Additional Guarantor” means any Subsidiary of ABB which has become an Additional Guarantor in accordance with Clause 25.4 (Additional Guarantors).

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“Additional Obligor” means an Additional Borrower or an Additional Guarantor.

“Advance” means an advance made or to be made under the Facility or the principal amount outstanding for the time being of that advance.

“Affiliate” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

“Agreed Form Pledges” means the pledges contemplated from:

(a)ABB Oil & Gas USA Inc. in respect of the shares of ABB Offshore Systems Inc and ABB Vetco Gray Inc; and

(b)ABB Holding AG in respect of the shares of ABB Holding AS,

each in agreed form.

“Agreed Form Trust Deed” means the trust deed contemplated in respect of the Agreed Form Pledges, in agreed form.

“Agreed Jurisdiction” means any of the United States of America, Switzerland, Guernsey, any country that is, at the date of this Agreement, a member of the European Union and any other country approved by all the Lenders.

“Approved Reorganisation” means any of the amalgamations, demergers, mergers or corporate reconstructions set out in the group structure chart provided by ABB prior to the date of this Agreement provided that in relation to any Obligor, the Facility Agent has received a copy of an opinion from external counsel acceptable to the Facility Agent, acting reasonably, that the enforceability of that Obligor’s obligations under the Finance Documents will not be affected thereby.

“Authorisation” means an authorisation, consent, approval, resolution, licence, exemption, filing or registration.

“Availability Period” means the period from and including 10 December 2003 to and including the date falling 1 Month prior to the Final Maturity Date.

“Available Commitment” means a Lender’s Commitment minus:

(a)the Base Currency Amount of its participation in any outstanding Advances; and

(b)in relation to any proposed Utilisation, the Base Currency Amount of its participation in any Advances that are due to be made on or before the proposed Utilisation Date,

other than, in either case, that Lender’s participation in any Advances that are due to be repaid or prepaid on or before the proposed Utilisation Date.

“Available Facility” means the aggregate for the time being of each Lender’s Available Commitment.

2

“Base Currency” means Dollars.

“Base Currency Amount” means, in relation to an Advance, the amount specified in the Utilisation Request delivered by the relevant Borrower for that Advance (or, if the amount requested is not denominated in the Base Currency, that amount converted into the Base Currency at the Facility Agent’s Spot Rate of Exchange on the date which is 3 Business Days before the Utilisation Date or, if later, on the date the Facility Agent receives the Utilisation Request) adjusted to reflect any repayment or prepayment of the Advance.

“Borrowers” means each Original Borrower and each Additional Borrower, provided that it has not been released from its rights and obligations under this Agreement in accordance with Clause 25.3 (Resignation of a Borrower).

“Break Costs” means the amount (if any) by which:

(a)the interest (excluding the Margin), which a Lender should have received for the period from the date of receipt of all or any part of its participation in an Advance or Unpaid Sum to the last day of the current Interest Period in respect of that Advance or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

exceeds:

(b)the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

“Business Day” means:

(a)in relation to any Advance, a day (other than a Saturday or Sunday) on which banks are open for general business in London, and:

(i)(in relation to any date for payment or purchase of a currency other than Euro) the principal financial centre of the country of that currency; or

(ii)(in relation to any date for payment or purchase of Euro) any TARGET Day; and

(b)for all other purposes, a day (other than a Saturday or Sunday) on which banks are open for general business in London.

“Business Plan” means the 3 year business plan (consisting of an income statement and balance sheet of the Group) dated 7 October 2003 prepared by ABB and as updated in accordance with Clause 20.4 (Liquidity Plan and Business Plan).

3

“Commitment” means:

(a)in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading “Commitment” in Part 1 of Schedule 1 (The Original Lenders) and the amount of any other Commitment transferred to it under this Agreement; and

(b)in relation to any other Lender, the amount of any Commitment transferred to it under this Agreement,

to the extent not cancelled, reduced or transferred by it under this Agreement.

“Covenant Compliance Certificate” means a certificate substantially in the form set out in Schedule 11 (Form of Covenant Compliance Certificate).

“Credit Rating” means a senior, unsecured long term debt rating given by S&P or Moody’s.

“Default” means an Event of Default or any event or circumstance specified in Clause 23 (Events of Default) which (with the expiry of a grace period or the giving of any notice specified in Clause 23 (Events of Default)) would be an Event of Default.

“Disposal” means a sale, transfer or other disposal (including by way of lease or loan) by a person of all or part of its assets, whether by one transaction or a series of transactions and whether at the same time or over a period of time.

“Dutch Borrower” means each Borrower incorporated or established in The Netherlands.

“EBITDA” has the meaning given to such term in Clause 21.1 (Financial Definitions).

“Environmental Claim” means any claim or proceeding by any person pursuant to any Environmental Law.

“Environmental Law” means any applicable law in any jurisdiction in which any Group Company conducts business which relates to the pollution or protection of the environment or harm to or the protection of human health or the health of animals or plants.

“ERISA” means the Employee Retirement Income Security Act of 1974 of the United States of America and the regulations promulgated and the rulings issued thereunder.

“EURIBOR” means, in relation to any Advance in Euro:

(a)the applicable Screen Rate; or

(b)(if no Screen Rate is available for the period of that Advance) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request quoted by the Reference Banks to leading banks in the European interbank market,

4

as of the Specified Time on the Quotation Day for the offering of deposits in Euro for a period comparable to the Interest Period of the relevant Advance.

“Event of Default” means any event or circumstance specified as such in Clause 23 (Events of Default).

“Exemption Regulation” means the Dutch exemption regulation dated 26 June 2002 (Vrijstellingsregeling Wtk 1992) (as amended from time to time) as promulgated in connection with the WTK.

“Existing Credit Facility” means the US$1,500,000,000 revolving credit facility made available pursuant to a multicurrency revolving facilities agreement dated 17 December 2002.

“External Debt” means Indebtedness of any member of the Group (other than Project Finance Indebtedness, Indebtedness in respect of any Securitisation, Indebtedness in respect of cash collateralised loans (entered into for Group fiscal or regulatory purposes) and Indebtedness owed by one Group Company to another Group Company) incurred pursuant to the issuance of any note, bond or other debt security (whether issued to the public or by means of a private placement) or pursuant to the entry into any bank facility but excluding any such Indebtedness raised by a member of the Group locally and solely for financing local operating needs.

“Facility” means the revolving loan facility made available under this Agreement as described in Clause 2.1 (The Facility).

“Facility Agent’s Spot Rate of Exchange” means the Facility Agent’s Spot Rate of Exchange for the purchase of the relevant currency with the Base Currency in the London foreign exchange market at or about 11:00 a.m. on a particular day.

“Facility Office” means, in relation to a Lender, the office identified as such opposite such Lender’s name in Part 1 of Schedule 1 (The Original Lenders) (or, in the case of a transferee, at the end of the Transfer Certificate to which it is a party as transferee) or such other office as it may from time to time select.

“Fee Letter” means the letter dated 27 October 2003 between the Mandated Lead Arrangers and ABB and any letter or letters between the Mandated Lead Arrangers and the Borrowers (or the Facility Agent and the Borrower) setting out any of the fees payable in relation to the Facility.

“Final Maturity Date” means the date falling 3 years from the date of this Agreement.

“Finance Document” means this Agreement, the letter dated 27 October 2003 between the Mandated Lead Arrangers and ABB, any Fee Letter, any Accession Letter, any Resignation Letter, any Security Document and any other document designated as such in writing by the Facility Agent and ABB.

“Finance Party” means any of the Facility Agent, the Mandated Lead Arrangers, the Lenders and any trustee appointed under any Security Document.

5

“GAAP” means, in relation to the consolidated financial statements of ABB, generally accepted accounting principles in the United States of America and, in relation to any other company, generally accepted accounting principles in its jurisdiction of incorporation or in the United States of America (as applicable).

“Group” means ABB and its Subsidiaries and “Group Company” means any one of them.

“Guarantors” means each Original Guarantor and each Additional Guarantor provided that it has not been released from its rights and obligations under this Agreement, in accordance with Clause 25.6 (Resignation of a Guarantor).

“Holding Company” means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.

“Indebtedness” means, in relation to a person, its obligations (whether present or future, actual or contingent, as principal or surety) for the payment or repayment of money (whether in respect of interest, principal or otherwise) incurred in respect of:

(a)moneys borrowed;

(b)any bond, note, loan stock, debenture or similar instrument;

(c)any acceptance credit, bill discounting, note purchase, factoring or documentary credit facility;

(d)any lease required under GAAP to be treated as a finance lease;

(e)receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f)any guarantee, bond, stand-by letter of credit or other similar instrument issued in connection with the performance of payment obligations;

(g)any interest rate or currency swap agreement or any other hedging or derivatives instrument or agreement;

(h)any arrangement entered into primarily as a method of raising finance pursuant to which any asset sold or otherwise disposed of by that person is or may be leased to or re-acquired by a Group Company (whether following the exercise of an option or otherwise); or

(i)any guarantee, indemnity or similar insurance against financial loss given in respect of the obligation of any person falling within any of paragraphs (a) to (h) above.

“Information Package” means the summary of the transaction dated 14 October 2003 prepared by ABB and the Original Liquidity Plan.

“Interest Period” means, in relation to an Advance, each period determined in accordance with Clause 10 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 9.3 (Default interest).

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“Lender” means:

(a)any Original Lender; and

(b)any bank which has become a Party as a Lender in accordance with Clause 24 (Changes to the Lenders),

which in each case has not ceased to be a Party in accordance with the terms of this Agreement.

“LIBOR” means, in relation to any Advance:

(a)the applicable Screen Rate; or

(b)(if no Screen Rate is available for the currency or period of that Advance) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request quoted by the Reference Banks to leading banks in the London interbank market,

as of the Specified Time on the Quotation Day for the offering of deposits in the currency of that Advance and for a period comparable to the Interest Period for that Advance.

“Liquidity Plan” means the most recent liquidity plan for the Group certified without personal liability by 2 duly authorised signatories of ABB, calculated using the same principles used for the Original Liquidity Plan consistently applied.

“Majority Lenders” means a Lender or Lenders whose Commitments aggregate 66²/₃% or more of the Total Commitments.

“Mandatory Cost” means the percentage rate per annum calculated by the Facility Agent in accordance with Schedule 9 (Mandatory Costs).

“Margin” means, at any time the rate per annum computed in accordance with the table set out in Schedule 4 (The Margin and Utilisation Fee) provided that:

(a)on any day that ABB has Credit Ratings from S&P and Moody’s which are divergent from each other, the applicable rate per annum for such day shall be the average of the rates applicable to the two Credit Ratings;

(b)on any day that only one of S&P or Moody’s assigns a Credit Rating to ABB, the applicable rate per annum for such day shall be the rate per annum for that Credit Rating; and

(c)on any day that neither S&P nor Moody’s assigns a Credit Rating to ABB the applicable rate per annum for such day shall be 225 basis points per annum,

in each case computed in accordance with the table set out in Schedule 4 (The Margin and Utilisation Fee).

“Material Adverse Effect”means a material adverse effect on:

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(a)the business, operations, property or condition of the Group as a whole;

(b)the ability of the Obligors to perform payment obligations under the Finance Documents or, at any time prior to the Trigger Date, the ability of ABB to comply with its obligations under Clause 21.2 (Financial Condition); or

(c)the validity or enforceability of the Finance Documents.

“Material Subsidiary” means:

(a)those companies listed in Schedule 10 (Material Subsidiaries); and

(b)any Subsidiary that:

(i)is the holding company of a country (and not a region) that, together with its Subsidiaries, has combined third-party revenues or assets (from non-affiliated parties), prepared in accordance with accounting principles generally accepted in the United States, in excess of 5 percent of the consolidated revenues or consolidated total assets of the Group for the most recently completed fiscal year;

(ii)on a non-consolidated basis has combined third-party revenues or assets (from non-affiliated parties), prepared in accordance with accounting principles generally accepted in the United States, in excess of 5 percent of the consolidated revenues or consolidated total assets of the Group for the most recently completed fiscal year; or

(iii)has any notes, bonds, debenture stock, loan stock or other securities outstanding to non-affiliated third parties in respect of which a guarantee, keep-well agreement or other credit support has been provided by ABB;

provided always that for purposes of this definition, the term “revenues” and “assets” shall exclude any revenues or, as the case may be, assets attributable to activities classified by ABB as non-core or as discontinued operations.

“Month” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a)(subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

(b)if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

(c)if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.

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The above rules will only apply to the last Month of any period.

“Moody’s” means Moody’s Investor Services, Inc., or any successor thereto.

“Net Debt” has the meaning given to such term in Clause 21.1 (Financial Definitions).

“New Lender” has the meaning given to such term in Clause 24.1 (Assignments and transfers by the Lenders).

“Obligor” means a Borrower or a Guarantor.

“Obligors’ Agent” has the meaning given to such term in Clause 2.4 (Obligors’ rights and obligations hereunder).

“Obligor Group” means ABB, each Borrower and each Guarantor.

“Optional Currency” means a currency (other than the Base Currency) which complies with the conditions set out in Clause 4.3 (Conditions relating to Optional Currencies).

“Original Financial Statements” means:

(a)in relation to ABB, the audited consolidated financial statements of the Group for the financial year ended 31 December 2002; and

(b)in relation to each Original Obligor other than ABB, its audited financial statements for its financial year ended 31 December 2002.

“Original Liquidity Plan” means the liquidity plan of the Group dated 7 October 2003 in the agreed form.

“Original Obligor” means an Original Borrower or an Original Guarantor.

“Outstandings” means the aggregate of the Base Currency Amount from time to time of each of the Advances.

“Participating Member State” means any member state of the European Communities that adopts or has adopted the Euro as its lawful currency in accordance with legislation of the European Union relating to European Monetary Union.

“Party” means a party to this Agreement and includes its successors in title, permitted assigns and permitted transferees.

“PMP” means a professional market party (professionele marktpartij) within the meaning of the Exemption Regulation.

“Policy Guidelines” means the Dutch Central Bank’s Policy Guidelines (issued in relation to the Exemption Regulation) dated 10 July 2002 (and as amended from time to time) (beleidsregel kernbegrippen markttoetreding en handhaving Wtk 1992).

“Project Company” means any Subsidiary of ABB:

(a)which is a single purpose company whose primary purpose is to invest in, lend to or carry out a specific project or portfolio of projects; and

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(b)none of whose liabilities to repay Project Finance Indebtedness are the subject of security or a guarantee, indemnity or any similar form of assurance, undertaking or support by any Group Company save to the extent described in the definition of Project Finance Indebtedness.

“Project Finance Indebtedness” means:

(a)any Indebtedness of a Project Company incurred to finance the project constituted by the assets and business of such Project Company or any Indebtedness of such Project Company incurred to refinance any such aforementioned Indebtedness; and

(b)where neither the persons to whom such Indebtedness is owed (whether or not a Group Company) nor any other person shall have any recourse whatsoever to any Group Company (other than such Project Company) for the repayment or payment of any sum relating to such Indebtedness other than recourse directly or indirectly to any Group Company under any form of assurance or undertaking, which recourse (1) is limited to the enforcement of any share pledge granted by a Group Company over its shares in such Project Company or the enforcement of any security granted over a shareholder loan between a Group Company and such Project Company and/or (2) is limited to a claim for damages for breach of an obligation (not being a payment obligation) of the person against whom that recourse is available and/or (3) entitles the creditor for that Indebtedness or the relevant Project Company, upon default by the Project Company (or in other circumstances specified in the documentation relating to the project) to require a payment to be made (whether to or for the benefit of that creditor, the Project Company or another person), provided that, in the case of (3), where that payment is capable of being for an amount which is material either alone or as a percentage of the Indebtedness financing that project, such recourse is capable of being called on only during the period on or prior to practical completion of the project or of that portion of that project being financed by that Indebtedness; or

(c)which the Majority Lenders shall have agreed to treat as Project Finance Indebtedness for the purposes of this Agreement.

“Qualifying Lender” has the meaning given to such term in Clause 13.1 (Definitions).

“Quarter Date” has the meaning given to such term in Clause 21.1 (Financial definitions).

“Quotation Day” means, in relation to any period for which an interest rate is to be determined:

(a)(if the currency is Sterling) the first day of that period;

(b)(if the currency is Euro) two TARGET Days before the first day of that period; or

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(c)(for any other currency) two Business Days (which for these purposes only shall mean a day on which banks are open for general business in London) before the first day of that period,

unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will be determined by the Facility Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

“Reference Banks” means, in relation to LIBOR and Mandatory Costs, the principal London offices of Citibank, N.A., Credit Suisse First Boston, London and Dresdner Bank AG and the principal office of Deutsche Bank Luxembourg S.A. and, in relation to EURIBOR, the principal London offices of Citibank, N.A., Credit Suisse First Boston and Dresdner Bank AG and the principal office of Deutsche Bank Luxembourg S.A. or such other banks as may be appointed by the Facility Agent in consultation with ABB.

“Relevant Interbank Market” means in relation to Euro, the European interbank market and, in relation to any other currency, the London interbank market.

“Reservations” means the principle that equitable remedies are remedies which may be granted or refused at the discretion of the court and damages may be regarded as an adequate remedy, the limitation of enforcement by laws relating to bankruptcy, insolvency, liquidation, reorganisation, court schemes, moratoria, fraudulent transfer or obligation, administration and other laws generally affecting the rights of creditors, the principle that a security interest may not be perfected or may be recharacterised if the relevant chargee does not exercise sufficient control over the relevant asset, the time-barring of claims under the Limitation Acts (and similar legislation), the possibility that a court may choose not to give effect to a governing law clause in relation to a contract, the possibility that an undertaking to assume liability for or to indemnify a person against non-payment of stamp duty may be void, the fact that a court may refuse to give effect to a purported contractual obligation to pay costs imposed upon another party in respect of the costs of any unsuccessful litigation brought against that party or may not award by way of costs all of the expenditure incurred by a successful litigant in proceedings brought before that court, or that a court may stay proceedings if concurrent proceedings based on the same grounds and between the same parties have previously been brought before another court, that a court may not give effect to the provisions of Clause 33 (Partial invalidity) (or any similar provision in another Finance Document) and that interest at a default rate on overdue amounts may be a penalty and not recoverable.

“Resignation Letter” means a letter substantially in the form set out in Schedule 8 (Form of Resignation Letter).

“Rollover Advance” means one or more Advances:

(a)made or to be made on the same day that a maturing Advance is due to be repaid;

(b)the aggregate amount of which is equal to or less than the maturing Advance;

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(c)in the same currency as the maturing Advance (unless it arose as a result of the operation of Clause 6.2 (Unavailability of a currency)); and

(d)made or to be made to a Borrower for the purpose of refinancing a maturing Advance made to such Borrower.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies or any successor thereto.

“Screen Rate” means:

(a)in relation to LIBOR, the British Bankers Association Interest Settlement Rate for the relevant currency and period; and

(b)in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union for the relevant period,

displayed on the appropriate page of the Telerate screen.  If the agreed page is replaced or service ceases to be available, the Facility Agent may specify another page or service displaying the appropriate rate after consultation with ABB and the Lenders.

“Securitisations” means:

(a)the securitisation programme established by various Group Companies and Toedi Limited and currently including Credit Suisse First Boston, New York Branch as Programme Administrator, such programme being initially established on 19 December 2000;

(b)the securitisation programme established by various Group Companies and arranged by Citibank, N.A. (as Operating Agent), such programme being initially established on or around 17 December 1999;

(c)any other local or global securitisation programme from time to time established (including as of the date of this Agreement) by any Group Company,

each as may be modified, supplemented, renewed, substituted, varied or amended, provided that:

(i)the aggregate net proceeds of all such programmes does not at any time exceed $1,200,000,000; and

(ii)the terms of such programme are commercially reasonable involving the securitisation of receivables and for the avoidance of doubt not including whole business securitisation.

“Security” means any mortgage, charge, assignment by way of security, pledge, hypothecation, lien and any other security interest of any kind whatsoever.

“Security Documents” means the Agreed Form Pledges if executed, the Agreed Form Trust Deed if executed and any other document designated as such in writing by the Facility Agent and ABB.

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“Sirius” means Sirius International Försakrings AB (publ).

“Specified Time” means a time determined in accordance with Schedule 6 (Timetables).

“Subsidiary” means a subsidiary within the meaning of section 736 of the Companies Act 1985.

“TARGET” means Trans-European Automated Real-time Gross Settlement Express Transfer payment system.

“TARGET Day” means any day on which TARGET is open for the settlement of payments in Euro.

“Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“Taxes Act” means the Income and Corporation Taxes Act 1988.

“Total Commitments” means the aggregate Commitments of the Lenders, being $1,000,000,000 as at the date of this Agreement.

“Total Outstandings” means the aggregate from time to time of the Outstandings.

“Transfer Certificate” means a certificate substantially in the form set out in Schedule 5 (Form of Transfer Certificate) or any other form agreed between the Facility Agent and ABB.

“Transfer Date” means, in relation to a transfer, the later of:

(a)the proposed Transfer Date specified in the Transfer Certificate; and

(b)the date on which the Facility Agent executes the Transfer Certificate.

“Trigger Date” means the date on which either:

(a)the Credit Rating of ABB is investment grade (if at BBB-/Baa3, with stable outlook (or better)) from one of S&P or Moody’s and (if the other agency is not at investment grade) no more than one notch lower from the other (therefore being, for the avoidance of doubt, no lower than BBB-  and Ba1 or BB+ and Baa3); or

(b)

(i)the ratio of Net Debt to EBITDA for the most recently ended two consecutive financial quarters was 2.50:1 or lower; and

(ii)the Credit Rating of ABB is investment grade (if at BBB-/Baa3, with stable outlook (or better)) from either S&P or Moody’s.

“Unpaid Sum” means any sum due and payable but unpaid by an Obligor under the Finance Documents.

“Utilisation” means a utilisation of the Facility.

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“Utilisation Date” means the date of a Utilisation, being the date on which an Advance is to be made.

“Utilisation Request” means a notice substantially in the form set out in Part 1 of Schedule 3 (Utilisation Request).

“VAT” means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature.

“Verifiable PMP” means a PMP whose status as such may be determined on the basis of:

(a)its entry in Dutch public register (including on-line registers available on the internet) as referred to in Clauses 1.e.1 through 1.e.5 of the Exemption Regulation; or

(b)a public register published by a regulator of a country as referred to in Clause 1.e.11 of the Exemption Regulation exercising prudential supervision over the PMP to the extent generally accessible via the internet.

“WTK” means the Dutch Act on the Supervision of Credit Institutions 1992 (Wet toezicht kredietwezen 1992) (as amended from time to time).

1.2Construction

(a)Any reference in this Agreement to:

(i)the “Facility Agent”, any “Mandated Lead Arranger”, any “Finance Party”, any “Lender”, any “Obligor” the “Obligors’ Agent” or any “Party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(ii)“agreed form” is a reference to a document that is initialled by ABB and the Facility Agent on or before the date of this Agreement as being agreed;

(iii)“assets” includes present and future properties, revenues and rights of every description;

(iv)the “European interbank market” means the interbank market for Euro operating in Participating Member States;

(v)a “Finance Document” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended or novated;

(vi)a “person” includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing;

(vii)a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the force of law, the compliance with which is customary) of any

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governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

(viii)a “financial year” in relation to ABB, means a period in respect of which it is required to produce annual audited financial statements;

(ix)a provision of law is a reference to that provision as amended or re-enacted; and

(x)unless a contrary indication appears, a time of day is a reference to London time.

(b)Where there is a reference in this Agreement to any amount, limit or threshold specified in Dollars, in ascertaining whether or not that amount, limit or threshold has been attained, broken or achieved, as the case may be, a non-Dollar amount shall, unless the context otherwise requires or the contrary is indicated, be counted on the basis of the equivalent in Dollars of that amount using the Facility Agent’s Spot Rate of Exchange except for the purposes of calculating the dollar equivalent of Total Gross Debt which is not denominated in dollars for the purposes of the covenant set out in Clause 21.3 (Restriction on Subsidiary Indebtedness), in which case the dollar exchange rate set out in the Financial Times on 1 July 2003 shall be used.

(c)Section, Clause and Schedule headings are for ease of reference only.

(d)Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(e)A Default is “continuing” if it has not been remedied or waived.

(f)For the avoidance of doubt, if Moody’s or S&P place a Credit Rating on credit watch, that shall not (regardless of outlook) constitute a change in such Credit Rating or be deemed to be no Credit Rating.

(g)Dresdner Kleinwort Wasserstein is a reference to the investment banking division of Dresdner Bank AG.

(h)Barclays Capital is a reference to Barclays Capital, the investment banking division of Barclays Bank PLC.

(i)Any certificate delivered by or on behalf of a Group Company shall be signed on behalf of that Group Company without personal liability in respect of the officers or other persons executing such certificate and “certificate”, “certified” and similar provisions shall be construed accordingly.

1.3Currency Symbols and Definitions

“$” and “Dollars” denote the lawful currency of the United States of America, “£” and “Sterling” denote the lawful currency of the United Kingdom and “Euro” denotes the

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single currency unit of the European Union as constituted by the Treaty of Rome (as amended).

1.4Third Party Rights

A person who is not a Party has no right under the Contract (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.

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SECTION 2

THE FACILITY

2.THE FACILITY

2.1The Facility

Subject to the terms of this Agreement, the Lenders make available to the Borrowers a multicurrency revolving credit facility in a maximum aggregate amount of $1,000,000,000.

2.2Lenders’ rights and obligations

(a)The obligations of each Lender under the Finance Documents are several.  Failure by a Lender to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents.  No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.

(b)The rights of each Lender under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Lender from any of the Borrowers shall be a separate and independent debt.

(c)A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.

2.3Facility Offices and nominated affiliate

(a)Subject to paragraph (b) below, a Lender may (i) change its Facility Office for the purpose of this Agreement and/or (ii) nominate a different Facility Office for the purposes of making a particular Advance to any Borrower, in which event such Facility Office shall for the purposes of this Agreement be its Facility Office for that Advance but not otherwise.

(b)If a Lender changes its Facility Office or nominates a different Facility Office, (i) that Lender will notify the Facility Agent and ABB promptly (and, in any event, within 5 Business Days) of such change or, as the case may be, nomination, and until it does so, the Facility Agent and ABB will be entitled to assume that no such change has taken place and (ii) if the country of such Facility Office is not subject to the Financial Action Task Force any such change or, as the case may be, nomination shall be subject to the prior written consent of the Facility Agent.

2.4Obligors’ right and obligations hereunder

(a)Each Obligor (other than ABB) by its execution of this Agreement or an Accession Letter irrevocably appoints ABB to act on its behalf as its agent in relation to the Finance Documents (in this capacity, the “Obligors’ Agent”) and irrevocably authorises (i) ABB on its behalf to supply all information concerning itself contemplated by this Agreement to the Finance Parties and to give all notices and instructions (including, in the case of a Borrower, Utilisation Requests), to execute on its behalf any Accession Letter and to make such agreements capable of being given or made by any Obligor

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notwithstanding that they may affect such Obligor, without further reference to or the consent of such Obligor and (ii) each Finance Party to give any notice, demand or other communication to such Obligor pursuant to the Finance Documents to ABB on its behalf, and in each case such Obligor shall be bound thereby as though such Obligor itself had given such notices and instructions (including, without limitation, any Utilisation Requests) or executed or made such agreements or received any such notice, demand or other communication.

(b)Every act, omission, agreement, undertaking, settlement, waiver, notice or other communication given or made by the Obligors’ Agent or given to the Obligors’ Agent under this Agreement, or in connection with this Agreement (whether or not known to any other Obligor and whether occurring before or after such other Obligor became an Obligor under this Agreement) shall be binding for all purposes on all other Obligors as if the other Obligors had expressly made, given or concurred with the same.  In the event of any conflict between any notices or other communications of the Obligors’ Agent and any other Obligor, those of the Obligors’ Agent shall prevail.

(c)An Obligors’ Agent may resign its appointment hereunder by giving not less than ten Business Days’ prior written notice to that effect to the Facility Agent, provided that no such resignation shall be effective until a successor consents in writing to the Facility Agent to be appointed.

3.PURPOSE

3.1Purpose

Each Borrower shall apply all amounts borrowed by it under the Facility for the general corporate purposes of the Group.

3.2Monitoring

No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4.CONDITIONS OF UTILISATION

4.1Initial Conditions Precedent

No Borrower may deliver a Utilisation Request unless the Facility Agent has received all of the documents and other evidence listed in Part I of Schedule 2 (Conditions precedent) in form and substance reasonably satisfactory to the Facility Agent.  The Facility Agent shall notify ABB and the Lenders promptly upon being so satisfied.

4.2Further Conditions Precedent

(a)The Lenders will only be obliged to comply with Clause 5.4 (Lenders’ participation) if on the date of the Utilisation Request and on the proposed Utilisation Date:

(i)no Event of Default or, in each case other than in the case of a Rollover Advance, Default is continuing or would result from the proposed Advance; and

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(ii)the representations to be made by ABB pursuant to Clause 19.19 (Repetition) are true in all respects.

(b)An Advance will not be made if it would result in the Base Currency Amount of all Advances exceeding the Total Commitments.

4.3Conditions relating to Optional Currencies

A currency will constitute an Optional Currency in relation to an Advance if it is Sterling or Euro, or it is readily available in the amount required and freely convertible into the Base Currency in the Relevant Interbank Market on the Quotation Day and the Utilisation Date for that Advance provided that there may not at any time be Advances outstanding denominated in more than 5 Optional Currencies.

4.4Maximum number of Advances

(a)No Borrower may deliver a Utilisation Request if as a result of the proposed Utilisation more than 10 Advances would be outstanding.

(b)Any Advance made by a single Lender under Clause 6.2 (Unavailability of a currency) shall not be taken into account in this Clause 4.4.

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SECTION 3

UTILISATION

5.UTILISATION

5.1Delivery of a Utilisation Request

A Borrower may utilise the Facility by delivery to the Facility Agent of a duly completed Utilisation Request not later than the Specified Time.

5.2Completion of a Utilisation Request

(a)Each Utilisation Request delivered to the Facility Agent pursuant to Clause 5.1 (Delivery of a Utilisation Request) is irrevocable and will not be regarded as having been duly completed unless:

(i)the proposed Utilisation Date is a Business Day within the Availability Period;

(ii)the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount); and

(iii)the proposed Interest Period complies with Clause 10 (Interest Periods).

(b)Only one Advance may be requested in each Utilisation Request delivered to the Facility Agent pursuant to Clause 5.1 (Delivery of a Utilisation Request).

5.3Currency and amount

(a)The currency specified in a Utilisation Request delivered to the Facility Agent pursuant to Clause 5.1 (Delivery of a Utilisation Request) must be the Base Currency or an Optional Currency.

(b)The amount of the proposed Advance must be:

(i)if the currency selected is the Base Currency, a minimum of $50,000,000 and an integral multiple of $10,000,000; or

(ii)if the currency selected is Euro, a minimum of Euro50,000,000 and an integral multiple of Euro10,000,000; or

(iii)if the currency selected is Sterling, a minimum amount of £25,000,000 and an integral multiple of £5,000,000; or

(iv)if the currency selected is an Optional Currency (other than Euro or Sterling), in such minimum amount and multiple as the Facility Agent and ABB may agree,

or, in any case, the amount of the Available Facility.

5.4Lenders’ participation

(a)Subject to the other terms of this Agreement, each Lender shall, on the relevant Utilisation Date, make its participation in each Advance available through its Facility Office.

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(b)Subject to Clause 6.2 (Unavailability of a currency), the amount of each Lender’s participation in each Advance will be equal to the proportion borne by its Available Commitment to the Available Facility immediately prior to making the Advance.

(c)The Facility Agent shall notify each relevant Lender of the amount, currency and the Base Currency Amount of each Advance at the Specified Time.

6.OPTIONAL CURRENCIES

6.1Selection of currency

The relevant Borrower shall select the currency of an Advance in a Utilisation Request.

6.2Unavailability of a currency

If before the Specified Time on any Quotation Day:

(a)the Facility Agent has received notice from a Lender that the Optional Currency (other than Euro or Sterling) requested is not readily available to it in the amount required; or

(b)a Lender notifies the Facility Agent that compliance with its obligation to participate in an Advance in the proposed Optional Currency (other than Euro or Sterling) would contravene a law or regulation applicable to it,

the Facility Agent will give notice to the relevant Borrower to that effect by the Specified Time on that day.  In this event, any Lender that gives notice pursuant to this Clause 6.2 will be required to participate in the Advance in the Base Currency (in an amount equal to that Lender’s proportion of the Base Currency Amount or, in respect of a Rollover Advance, an amount equal to that Lender’s proportion of the Base Currency Amount of the maturing Advance that is due to be repaid) and its participation will be treated as a separate Advance denominated in the Base Currency during that Interest Period.

6.3Notification

The Facility Agent shall notify the Lenders and the relevant Borrower of Optional Currency amounts (and the Facility Agent’s Spot Rate of Exchange) promptly after they are ascertained.

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SECTION 4

REPAYMENT, PREPAYMENT AND CANCELLATION

7.REPAYMENT OF ADVANCES

(a)Each Borrower shall repay each Advance made to it on the last day of its Interest Period.

(b)All Advances must be repaid in full on the Final Maturity Date.

8.PREPAYMENT AND CANCELLATION

8.1Lender Illegality

If it becomes unlawful in any jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund its participation in any Advance:

(a)that Lender shall promptly notify the Facility Agent upon becoming aware of that event;

(b)unless the repayment referred to in paragraph (c) below avoids such unlawfulness, upon the Facility Agent notifying ABB, the Commitment of that Lender will be immediately cancelled; and

(c)each Borrower shall, to the extent necessary to avoid such unlawfulness, repay that Lender’s participation in the Advances made to it on the last day of the Interest Period for each Advance occurring after the Facility Agent has notified ABB or, if earlier, the date specified by the Lender in the notice delivered to the Facility Agent (being no earlier than 5 Business Days after receipt of such notice or, if earlier, the last day of any applicable grace period permitted by law).

8.2Borrower Illegality

If it is or becomes unlawful for a Borrower to perform any of its obligations under the Finance Documents, that Borrower shall promptly repay all Advances borrowed by it together with accrued interest and all other amounts accrued under the Finance Documents provided that where such obligations are, or could reasonably be considered to be, material to the interests of the Lenders under the Finance Documents, all Borrowers shall within 15 Business Days of being served with notice by the Facility Agent so to do, repay all Advances, together with accrued interest and all other amounts accrued under the Finance Documents.  On the service of any such notice the Facility shall be cancelled and the Commitments will be reduced to zero.

8.3Mandatory Prepayment on Change of Control

(a)If any person (whether alone or together with any associated person) becomes the beneficial owner of shares in the issued share capital of ABB carrying the right to more than 50% of the votes exercisable at a general meeting of ABB:

(i)ABB shall promptly notify the Facility Agent upon becoming aware of that event; and

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(ii)the Facility Agent shall, by not less than 15 Business Days’ notice to ABB and having consulted with ABB, cancel the Facility and declare all Advances, together with accrued interest, and all other amounts accrued under the Finance Documents immediately due and payable, whereupon the Facility will be cancelled and all such outstanding amounts will become immediately due and payable.

For the purposes of this Clause 8.3, “associated person” means, in relation to any person, a person who is (i) “acting in concert” (as defined in the City Code on Takeovers and Mergers) with that person or (ii) a “connected person” (as defined in section 839 of the Income and Corporate Taxes Act 1988) of that person.

(b)On any cancellation of the Facility pursuant to this Clause 8.3, the Commitments will be reduced to zero.

8.4Voluntary cancellation

ABB may, if it gives the Facility Agent not less than 5 Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of $25,000,000 and an integral multiple of $5,000,000) of the Available Facility.  Any cancellation under this Clause 8.4 shall reduce rateably the Commitments.

8.5Voluntary Prepayment

A Borrower may, if it gives the Facility Agent not less than 5 Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of an Advance made to it (but if in part, being an amount that reduces the Base Currency Amount of the Advance by a minimum amount of $25,000,000 and rounded as the Facility Agent may reasonably require).

8.6Right of repayment and cancellation in relation to a single Lender

(a)If:

(i)any sum payable to any Lender by ABB or an Obligor is required to be increased under paragraph (c) of Clause 13.2 (Tax gross-up); or

(ii)any Lender claims indemnification from ABB or a Borrower under Clause 13.3 (Tax indemnity) or Clause 14.1 (Increased costs),

then ABB may, whilst the circumstance giving rise to the requirement or indemnification continues, give the Facility Agent notice of cancellation of the Commitment of that Lender and its intention to procure the repayment of that Lender’s participation in the Advances.

(b)On receipt of a notice referred to in paragraph (a) above, the Commitment of that Lender shall immediately be reduced to zero.

(c)On the last day of each Interest Period in respect of an Advance which ends after ABB has given notice under paragraph (a) above (or, if earlier, the date

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specified by ABB in that notice), each Borrower to which an Advance is outstanding shall repay that Lender’s participation in that Advance.

8.7Restrictions

(a)Any notice of cancellation or prepayment given by any Party under this Clause 8 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

(b)Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

(c)Unless a contrary indication appears in this Agreement, any part of the Facility which is prepaid may be reborrowed in accordance with the terms of this Agreement.

(d)No Borrower shall repay or prepay all or any part of the Advances or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.

(e)No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.

(f)If the Facility Agent receives a notice under this Clause 8 it shall promptly forward a copy of that notice to the affected Borrower or the affected Lender, as appropriate.

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SECTION 5

COSTS OF UTILISATION

9.INTEREST

9.1Calculation of interest

The rate of interest on each Advance for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:

(a)Margin;

(b)LIBOR or, in relation to any Advance in Euro, EURIBOR; and

(c)Mandatory Costs.

9.2Payment of interest

(a)Each Borrower shall pay accrued interest on each Advance made to it on the last day of each Interest Period (and, if the Interest Period is longer than six Months, on the dates falling at six monthly intervals after the first day of the Interest Period).

(b)If a Tax Deduction is required by law to be made by an Obligor in one of the circumstances set out in paragraph (c) of Clause 13.2 (Tax gross-up), the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

9.3Default interest

(a)If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate 1.00 per cent higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted an Advance in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Facility Agent (acting reasonably).  Any interest accruing under this Clause 9.3 shall be immediately payable by the relevant Obligor on demand by the Facility Agent.

(b)Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

9.4Notification of rates of interest

The Facility Agent shall promptly notify the Lenders, ABB and the relevant Borrowers of the determination of a rate of interest under this Agreement.

10.INTEREST PERIODS

(a)The relevant Borrower may select an Interest Period for an Advance in the Utilisation Request for that Advance.

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(b)Subject to this Clause 10, a Borrower may select an Interest Period of 1, 2, 3 or 6 Months or any other period agreed between the relevant Borrower and the Facility Agent (acting on the instructions of all the Lenders).

(c)An Interest Period for an Advance shall not extend beyond the Final Maturity Date.

(d)Each Advance has one Interest Period only.

11.CHANGES TO THE CALCULATION OF INTEREST

11.1Absence of quotations

Subject to Clause 11.2 (Market disruption), if LIBOR or EURIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, the applicable LIBOR or EURIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.

11.2Market disruption

(a)If a Market Disruption Event occurs in relation to an Advance for any Interest Period, then the rate of interest on each Lender’s share of that Advance for the Interest Period shall be the rate per annum which is the sum of:

(i)the Margin;

(ii)the rate notified to the Facility Agent, ABB and the relevant Borrower by that Lender in a certificate (which sets out the details of the computation of the relevant rate and shall be prima facie non-binding evidence of the same) as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in that Advance from whatever source it may reasonably select; and

(iii)the Mandatory Costs, if any, applicable to that Lender’s participation in the Advance.

(b)In this Agreement “Market Disruption Event” means:

(i)at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate is not available and none or only one of the Reference Banks supplies a rate to the Facility Agent to determine LIBOR or, if applicable, EURIBOR for the relevant currency and period; or

(ii)before close of business in London on the Quotation Day for the relevant Interest Period, the Facility Agent receives notifications from a Lender or Lenders (whose participations in an Advance exceed 50 per cent. of that Advance) that the cost to it or them of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR or, if applicable, EURIBOR.

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11.3Alternative basis of interest or funding

(a)If a Market Disruption Event occurs and the Facility Agent or ABB so requires, the Facility Agent and ABB shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.

(b)Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of the Majority Lenders and ABB, be binding on all Parties.

11.4Break Costs

(a)The relevant Borrower shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of an Advance or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Advance or Unpaid Sum.

(b)Each Lender shall, as soon as reasonably practicable after a demand by the Facility Agent, provide to ABB and the relevant Borrower a certificate (which shall constitute prima facie non-binding evidence of the matters to which it refers) addressed to the Facility Agent, ABB and the relevant Borrower confirming the amount of its Break Costs for any Interest Period in which they accrue and setting out the manner of computing such Break Costs.

12.FEES

12.1Commitment Fee

(a)ABB shall pay to the Facility Agent (for the account of each Lender) a commitment fee in the Base Currency computed at the rate of:

(i)at all times prior to the Trigger Date, the lower of 50 per cent. of the Margin from time to time and 0.75 per cent. per annum; and

(ii)at all times on and after the occurrence of the Trigger Date, the lower of 40 per cent. of the applicable Margin from time to time and 0.75 per cent. per annum,

in each case on that Lender’s Available Commitment for the Availability Period.

(b)The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the Availability Period, on the last day of the Availability Period and, if cancelled in full, on the cancelled amount of the relevant Lender’s Commitment at the time the cancellation is effective.

12.2Utilisation Fee

(a)ABB shall pay to the Facility Agent (for the account of the Lenders pro rata to their portion of Total Outstandings) a utilisation fee in respect of the Total Outstandings calculated using the rate per annum computed in accordance with the table set out in Schedule 4 (The Margin and Utilisation Fee) provided that:

(i)on any day that ABB has Credit Ratings from S&P and Moody’s which are divergent from each other, the applicable rate per annum for such day shall be the average of the rates applicable to the two Credit Ratings;

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(ii)on any day that only one of S&P or Moody’s assigns a Credit Rating to ABB, the applicable rate per annum for such day shall be the rate per annum for that Credit Rating; and

(iii)on any day that neither S&P nor Moody’s assigns a Credit Rating to ABB, the applicable rate per annum for such day shall be 50 basis points per annum for each day upon which Total Outstandings equal or exceed 33 per cent. of the Total Commitments and are less than 66% of the Total Commitments and 75 basis points per annum for each day upon which Total Outstandings equal or exceed 66% of the Total Commitments.

(b)The accrued utilisation fee is payable on the last day of each successive period of three Months commencing from the date of this Agreement.

12.3Participation Fee

ABB shall pay to the Mandated Lead Arrangers for and on behalf of the Lenders the participation fees in the amount and at the times agreed in a Fee Letter.

12.4Agency Fee

ABB shall pay to the Facility Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter.

12.5Other Fees

ABB shall pay to the Mandated Lead Arrangers and/or the Facility Agent such other fees in the amounts and at the times as agreed in a Fee Letter.

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SECTION 6

ADDITIONAL PAYMENT OBLIGATIONS

13.TAX GROSS UP AND INDEMNITIES

13.1Definitions

(a)In this Clause 13:

“Initial Borrower Jurisdiction” means any of The Netherlands, the United States of America or Switzerland.

“Protected Party” means a Finance Party which is or will be, for or on account of Tax, subject to any liability or required to make any payment in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

“Qualifying Lender” means:

(a)in respect of a payment by a Borrower incorporated or resident in Switzerland for the purposes of Swiss tax, a Lender which is a bank;

(b)in respect of a payment by a Borrower incorporated in the United States of America, a Lender which is:

(i)created or organised under the laws of the United States of America or of any state (including the District of Columbia) thereof; or

(ii)resident in a jurisdiction having and eligible for the benefit of a double taxation agreement with the United States of America which makes provision for full exemption from tax imposed by the United States of America on interest and which does not carry on a business in the United States of America through a permanent establishment with which that Lender’s participation in the Facility is effectively connected; or

(iii)entitled to receive payments under the Finance Documents without deduction or withholding of any United States federal income taxes,

and which has complied with any procedural requirements within its control necessary to receive such payment without the imposition of United States withholding tax; or

(c)in respect of a payment by a Borrower incorporated in any jurisdiction except the United States of America or Switzerland, any Lender.

“Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

“Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

“Tax Payment” means an increased payment made by ABB or an Obligor to a Finance Party under Clause 13.2 (Tax gross-up) or a payment made by ABB or an Obligor under Clause 13.3 (Tax indemnity).

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(b)In this Clause 13 a reference to “determines” or “determined” means, save where expressly stated to the contrary, a determination made in the absolute discretion of the person making the determination acting in good faith.

13.2Tax gross-up

(a)ABB and each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

(b)ABB, an Obligor or a Lender shall promptly upon becoming aware that ABB or an Obligor (as the case may be) must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Facility Agent accordingly.   If the Facility Agent receives such notification from a Lender it shall notify ABB and the relevant Obligor.

(c)If a Tax Deduction is required by law to be made by ABB or an Obligor in one of the circumstances set out in paragraph (d) below, the amount of the payment due from ABB or that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d)The circumstances referred to in paragraph (c) above are where a person entitled to the payment:

(i)is the Facility Agent or a Mandated Lead Arranger (on its own behalf);

(ii)is a Qualifying Lender; or

(iii)is not or has ceased to be a Qualifying Lender to the extent that this altered status results from any change after the date of this Agreement in (or in the interpretation, administration, or application of) any law or double taxation agreement or any published practice or published concession of any relevant taxing authority.

(e)If ABB or an Obligor is required to make a Tax Deduction, it shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(f)Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, ABB or the relevant Obligor (as the case may be) shall deliver to the Facility Agent for the Finance Party entitled to the payment original receipts or certified copies thereof or if not available, other evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

(g)Each Finance Party, ABB and the Obligors shall co-operate in completing any procedural formalities necessary for ABB or an Obligor to make a payment to which the Finance Party is entitled without a Tax Deduction or with a reduced Tax Deduction.  Each Finance Party shall on the reasonable written request of

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ABB or an Obligor complete and deliver to ABB or that Obligor all documentation reasonably required by ABB or that Obligor in order to enable it to make such payments without a Tax Deduction or with a reduced Tax Deduction (so long as the completion or delivery of such documentation would not materially prejudice the legal or commercial position of the relevant Finance Party).

13.3Tax indemnity

(a)ABB or the Borrowers shall (within three Business Days of written demand by the Facility Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.

(b)Paragraph (a) above shall not apply with respect to any Tax assessed on a Finance Party:

(i)

(A)under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes;

(B)under the law of the jurisdiction in which that Finance Party’s Facility Office is located in respect of amounts received or receivable in that jurisdiction; or

(C)arising by reason of the making of an Advance to a Borrower in an Initial Borrower Jurisdiction under the law of such jurisdiction, except to the extent arising by reason of a change in law or in any regulation occurring after the date of this Agreement, provided that this paragraph (b)(i)(C) shall not apply to any Tax assessed or imposed on the Facility Agent,

if that Tax is imposed on or calculated by reference to the net income received or receivable (including any sum deemed to be received or receivable) by that Finance Party; or

(ii)which is compensated for by Clause 13.2 (Tax Gross Up) (or would have been so compensated but for an exception to that Clause).

(c)A Protected Party making, or intending to make a claim pursuant to paragraph (a) above shall promptly notify the Facility Agent of the event which will give, or has given, rise to the claim, following which the Facility Agent shall notify ABB.

(d)A Protected Party shall, on receiving a payment from ABB under this Clause 13.3, notify the Facility Agent.

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13.4Tax Credit

If ABB or an Obligor makes a Tax Payment and the relevant Finance Party determines that:

(a)a Tax Credit is attributable to that Tax Payment; and

(b)that Finance Party has obtained, utilised and retained that Tax Credit,

the Finance Party shall pay an amount to ABB or (as the case may be) that Obligor which that Finance Party determines, acting in good faith, will leave that Finance Party (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been made by ABB or that Obligor (as the case may be).  The relevant Finance Party shall endeavour, acting in good faith, to obtain, utilise and retain the Tax Credit save that it shall not be obliged to disclose any information relating to its tax or other affairs or any computations in respect thereof.

13.5Qualifying Lenders

Any Lender which ceases, for any reason, to be a Qualifying Lender shall promptly notify ABB and the relevant Obligor(s) of its change of status.

13.6Stamp taxes

The Borrowers shall pay and, within 3 Business Days of demand, indemnify each Finance Party against any cost, loss or liability such Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document, but not in respect of any assignment or transfer pursuant to Clause 24 (Changes to the Lenders).

13.7Value added tax

(a)All consideration payable under a Finance Document by ABB or the Borrowers to a Finance Party shall be deemed to be exclusive of any VAT.  If VAT is chargeable on any supply made by any Finance Party to any Party in connection with a Finance Document, that Party shall pay to the Finance Party (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT.

(b)Where a Finance Document requires ABB or the Borrowers to reimburse a Finance Party for any costs or expenses, ABB or the Borrowers (as the case may be) shall also at the same time pay and indemnify that Finance Party against all VAT directly incurred by that Finance Party in respect of the costs or expenses save to the extent that that Finance Party is entitled to repayment or credit in respect of the VAT.

14.INCREASED COSTS

14.1Increased costs

(a)Subject to Clause 14.3 (Exceptions) ABB or the Borrowers shall, within 3 Business Days of a demand by the Facility Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or

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in the interpretation or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement.

(b)In this Agreement “Increased Costs” means:

(i)a reduction in the rate of return from the Facility or on a Finance Party’s (or its Affiliate’s) overall capital;

(ii)an additional or increased cost; or

(iii)a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.

14.2Increased cost claims

(a)A Finance Party intending to make a claim pursuant to Clause 14.1 (Increased costs) shall promptly notify the Facility Agent of the event giving rise to the claim, following which the Facility Agent shall promptly notify ABB.

(b)Each Finance Party shall, as soon as practicable after a demand by the Facility Agent provide a certificate confirming the amount of its Increased Costs with (subject to any rights or duties of confidentiality the relevant Finance Party has in respect of such information) full supporting details (which certificate shall constitute prima facie non-binding evidence of the matters to which it relates).

14.3Exceptions

(a)Clause 14.1 (Increased costs) does not apply to the extent any Increased Cost is:

(i)attributable to a Tax Deduction required by law to be made by ABB or an Obligor;

(ii)compensated for by Clause 13.3 (Tax indemnity)(or would have been compensated for under Clause 13.3 (Tax indemnity) but was not so compensated solely because one of the exclusions in paragraph (b) of Clause 13.3 (Tax indemnity) applied);

(iii)not payable as provided in Clause 24.2 (Conditions of Assignment or Transfer);

(iv)compensated for by the payment of the Mandatory Costs;

(v)attributable to the breach by the relevant Finance Party or its Affiliates of any law or regulation; or

(vi)not notified to ABB within 3 months of being incurred.

(b)In this Clause 14.3, a reference to a “Tax Deduction” has the same meaning given to the term in Clause 13.1 (Definitions).

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15.OTHER INDEMNITIES

15.1Currency indemnity

(a)If any sum due from ABB or an Obligor under the Finance Documents (a “Sum”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “First Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of:

(i)making or filing a claim or proof against ABB or any of the Obligors;

(ii)obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

ABB or that Obligor (as the case may be) shall as an independent obligation, within 3 Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.

(b)ABB and each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

15.2Other indemnities

ABB or the Borrowers shall indemnify each Lender upon presentation of duly documented evidence thereof against any cost, loss or liability directly incurred by that Lender as a result of:

(a)the occurrence of any Event of Default (but excluding any costs of enforcement save as provided in Clause 17.3 (Enforcement Costs));

(b)a failure by ABB or an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 28 (Sharing among the Lenders);

(c)funding, or making arrangements to fund, its participation in an Advance requested by a Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default, negligence or wilful misconduct by that Lender alone); or

(d)an Advance (or part of an Advance) not being prepaid in accordance with a notice of prepayment given by a Borrower.

15.3Indemnity to the Facility Agent

ABB or the Borrowers shall promptly indemnify the Facility Agent, upon presentation of duly documented evidence thereof, against any reasonable cost, loss or liability properly and directly incurred by the Facility Agent (acting reasonably) as a result of:

(a)investigating any event which it reasonably believes is a Default; or

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(b)entering into or performing any foreign exchange contract for the purposes of Clause 6 (Optional Currencies); or

(c)acting or relying on any notice, request or instruction which it reasonably believes (after due enquiry) to be genuine, correct and appropriately authorised.

16.MITIGATION BY THE LENDERS

16.1Mitigation

(a)Each Finance Party shall, in consultation with ABB, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 8.1 (Lender Illegality), Clause 13 (Tax gross-up and indemnities) or Clause 14 (Increased costs) or which would result in any increased amount being payable under this Agreement by reason of a change in the Mandatory Costs or a change in the reserve requirements imposed by the European Central Bank after the date of this Agreement including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office (in each case in accordance with the terms hereof) and, in such circumstances a Lender will, at the request of ABB but subject to ABB indemnifying it for the costs of so doing, transfer its rights and obligations under the Finance Documents to another Lender.

(b)Paragraph (a) above does not in any way limit the obligations of the Obligors under the Finance Documents.

16.2Limitation of liability

(a)ABB or the Borrowers shall indemnify each Finance Party, upon presentation of duly documented evidence thereof, for all costs and expenses reasonably and directly incurred by that Finance Party as a result of steps taken by it under Clause 16.1 (Mitigation).

(b)A Finance Party is not obliged to take any steps under Clause 16.1 (Mitigation) (other than a transfer of its rights and obligations to another Lender where ABB or a Borrower indemnifies it for the cost of so doing) if, in the opinion of that Finance Party (acting reasonably), to do so could reasonably be expected to be prejudicial to it.

17.COSTS AND EXPENSES

17.1Transaction expenses

ABB or the Borrowers shall promptly on demand pay, upon presentation of duly documented evidence thereof, the Facility Agent and the Mandated Lead Arrangers the amount of all costs and expenses (including, but not limited to, legal fees) reasonably and directly incurred by any of them in connection with the negotiation, preparation, execution and syndication of:

(a)this Agreement and any other documents referred to in this Agreement; and

(b)any other Finance Documents executed after the date of this Agreement.

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17.2Amendment costs

If (a) ABB requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 29.9 (Change of currency), ABB or the Borrowers shall, within 3 Business Days of demand, reimburse the Facility Agent, upon presentation of duly documented evidence thereof, for the amount of all costs and expenses (including legal fees) reasonably and directly incurred by the Facility Agent and which have previously been agreed with ABB in responding to, evaluating, negotiating or complying with that request or requirement.

17.3Enforcement costs

ABB or the Borrowers shall, within 3 Business Days of demand, pay to each Finance Party the amount of all costs and expenses (including legal fees) directly incurred by that Finance Party at any time after the service of a notice by the Facility Agent under Clause 23.13 (Acceleration) in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

17.4FSA and ECB costs

(a)This Clause 17.4 applies if, whether now or in the future, either:

(i)a requirement to pay fees is imposed by the Financial Services Authority under the Fees Rules; or

(ii)a reserve requirement is imposed by the European Central Bank;

which, in either case, is applied to any Lender (and would be applied generally to banks or financial institutions of a similar nature to that Lender) as a consequence of its entering into and/or performing its obligations under this Agreement and/or assuming or maintaining its Commitment under this Agreement and/or making one or more Advances under this Agreement. If, as a result, that Lender’s effective return on its overall capital is reduced, ABB and the Borrowers agree to reimburse that Lender for the amount claimed.

(b)In the event that paragraph (a) above applies, each Lender may submit a certificate setting out a calculation of the amount claimed by it (and, in the case of an amount claimed as a result of a reserve requirement being imposed by the European Central Bank, certifying that such amount has been reasonably determined) to the Facility Agent within the period (the “Certificate Period”) of 10 Business Days after the end of each Relevant Period. The Facility Agent will notify ABB of the amount claimed by that Lender within 5 Business Days after the end of the relevant Certification Period and ABB or the Borrowers shall (absent manifest error in the relevant notice) reimburse that Lender for the amount claimed within 3 Business Days after the date of such notification.

(c)In this Clause 17.4, a “Relevant Period” is, as appropriate:

(i)the period beginning on the date of this Agreement and ending on 30 June 2004; and

(ii)each subsequent period of six months starting on 30 June 2004 and ending on the Final Maturity Date,

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and “Fees Rules” means, as appropriate, either:

(i)the rules on periodic fees contained in the FSA Supervision Manual; or

(ii)such other law or regulations as may be in force from time to time relating to the payment of fees for the acceptance of deposits.

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SECTION 7

GUARANTEE

18.GUARANTEE AND INDEMNITY

18.1Guarantee and indemnity

Subject to the provisos and confirmations contained in Clause 18.9 (Confirmations and Restrictions), each Guarantor irrevocably and unconditionally jointly and severally:

(a)guarantees to each Finance Party punctual performance by each Borrower of all that Borrower’s obligations under the Finance Documents;

(b)undertakes with each Finance Party that whenever a Borrower does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and

(c)indemnifies each Finance Party immediately on demand against any cost, loss or liability suffered by that Finance Party if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal.  The amount of the cost, loss or liability shall be equal to the amount which that Finance Party would otherwise have been entitled to recover.

18.2Continuing guarantee

This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.

18.3Reinstatement

If any payment by an Obligor or any discharge given by a Finance Party (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:

(a)the liability of each Obligor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and

(b)each Finance Party shall be entitled to recover the value or amount of that security or payment from each Obligor, as if the payment, discharge, avoidance or reduction had not occurred.

18.4Waiver of defences

The obligations of each Guarantor under this Clause 18 will not be affected by an act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 18 (without limitation and whether or not known to it or any Finance Party) including:

(a)any time, waiver or consent granted to, or composition with, any Obligor or other person;

(b)the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;

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(c)the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d)any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;

(e)any amendment (however fundamental) or replacement of a Finance Document or any other document or security;

(f)any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or

(g)any insolvency or similar proceedings.

18.5Immediate recourse

Each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 18.  This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

18.6Appropriations

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:

(a)refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and

(b)hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of any Guarantor’s liability under this Clause 18.

18.7Deferral of Guarantors’ rights

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full or the Facility Agent otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:

(a)to be indemnified by an Obligor;

(b)to claim any contribution from any other guarantor of any Obligor’s obligations under the Finance Documents; and/or

(c)to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or

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of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party.

18.8Additional security

This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.

18.9Confirmations and Restrictions

(a)Any term or provision of this Clause 18.9 or any other term in this Agreement or any Finance Document notwithstanding, the maximum aggregate amount of the obligations for which any Guarantor which is incorporated in any state of the United States of America (a “US Guarantor”) shall be liable shall not exceed the maximum amount for which such US Guarantor can be liable without rendering this Agreement or any other Finance Document, as it relates to the US Guarantor, subject to avoidance under applicable law relating to fraudulent conveyance or fraudulent transfer (including section 548 of the Bankruptcy Code of the United States or any applicable provisions of comparable state law) (collectively “Fraudulent Transfer Laws”), in each case after giving effect (a) to all other liabilities of the US Guarantor, contingent or otherwise, that are relevant under such Fraudulent Transfer Laws (specifically excluding, however, any liabilities of the Guarantor in respect of intercompany indebtedness to any Borrower to the extent that such indebtedness would be discharged in an amount equal to the amount paid by the US Guarantor hereunder) and (b) to the value as assets of the US Guarantor (as determined under the applicable provisions of such Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights held by such US Guarantor pursuant to (i) applicable law or (ii) any other agreement providing for an equitable allocation among the US Guarantor and other Subsidiaries or affiliates of any Borrower of obligations arising under this Agreement or any guarantees of the obligations by such parties.

(b)The obligations and liabilities of each Guarantor (excluding ABB) which is incorporated in Switzerland shall in respect of all present and future conditional and unconditional claims of the Finance Parties against any member of the Group other than that Guarantor and its wholly owned Subsidiaries arising from time to time out of the Finance Documents only be deemed to be undertaken or incurred to the extent and in the maximum amount of that Guarantor’s free reserves available for distribution (being the positive difference between the assets of that Guarantor and the aggregate of all liabilities, the amount of the registered share capital and the mandatory reserves at any given time, all these amounts to be established in accordance with Swiss law), taking into account the deduction of Swiss withholding tax at the rate of 35% (or such other rate in force from time to time), subject to any applicable double taxation treaty, levied on any such reserves made available for distribution.

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SECTION 8

REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

19.REPRESENTATIONS

ABB (in respect of itself and, where specified, each Group Company or each Material Subsidiary) and each other Obligor (in respect of itself) makes the representations and warranties set out in this Clause 19 to each Finance Party on the date of this Agreement.

19.1Status

(a)It is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation.

(b)It and each Group Company has the power to own its assets and carry on its business as it is being conducted.

19.2Binding obligations

The obligations expressed to be assumed by it in each Finance Document are, subject to the Reservations, legal, valid, binding and enforceable obligations.

19.3Non-conflict with other obligations

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents to which it is a party do not and will not conflict with:

(a)any law or regulation applicable to it;

(b)its constitutional documents; or

(c)any agreement or instrument binding upon it or any Group Company or any of their assets,

and, in the case of paragraph (c) on any repetition after the date of this Agreement, in a manner that could reasonably be expected to have a Material Adverse Effect.

19.4Power and authority

It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents.

19.5Validity and admissibility in evidence

All Authorisations required by ABB and each other Obligor (including, in the case of any Dutch Obligor and if applicable, any works council advice):

(a)to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party; and

(b)to make the Finance Documents to which it is a party admissible in evidence in its jurisdiction of incorporation,

have been obtained or effected and are in full force and effect.

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19.6Governing law and enforcement

Subject to the Reservations, the choice of governing law of each of the Finance Documents to which it is a party will be recognised and enforced in:

(a)its jurisdiction of incorporation; and

(b)in relation to any Security Document, the jurisdiction where the assets intended to be the subject of security under any Security Document are situated.

19.7Insolvency

Neither it nor any Material Subsidiary (excluding Combustion Engineering Inc.) has taken any action nor have any steps been taken or legal proceedings been started against it for winding-up, dissolution or re-organisation, the enforcement of any Security over its assets or for the appointment of a receiver, administrative receiver, or administrator, trustee or similar officer of it or any of its assets.

19.8No filings or stamp taxes

Under the law of:

(a)its jurisdiction of incorporation; and

(b)in relation to any Security Document, the jurisdiction where the assets intended to be the subject of security under any Security Document are situated,

it is not necessary that the Finance Documents to which it is party be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to those Finance Documents or the transactions contemplated by those Finance Documents, other than in respect of the security granted pursuant to any Security Document, which steps will be taken prior to the first drawdown if required under the provisions of paragraph 2 of Part 1 of Schedule 2 (Conditions Precedent).

19.9No default

(a)No Default or, on repetition, no Event of Default is continuing or might reasonably be expected to result from the making of any Utilisation.

(b)No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on a Group Company or to which their assets are subject which has had or could reasonably be expected to have a Material Adverse Effect.

19.10No misleading information

(a)Any factual information provided by it or any of its Subsidiaries for the purposes of the Information Package was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.

(b)The Business Plan has been prepared on the basis of recent historical information and on the basis of assumptions considered in good faith by ABB to be reasonable.

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(c)Nothing has occurred or been omitted from the information provided by any Group Company in relation to the Information Package and no information has been given or withheld that results in the information contained in the Information Package being untrue or misleading in any material respect as at the date of the relevant component of the Information Package.

(d)All written information supplied by a Group Company after the date hereof in connection herewith is considered in good faith by ABB to be true, complete and accurate in all material respects as at the date it was given and is not misleading in any material respect as at such date.

19.11Financial statements and Liquidity Plans

(a)Its Original Financial Statements were prepared in accordance with GAAP consistently applied.

(b)Its Original Financial Statements fairly present in all material respects its financial condition and operations (consolidated in the case of ABB and, where applicable, any other Obligor) during the relevant financial year.

(c)Each of the latest audited consolidated financial statements required to be delivered under Clause 20.1(a) fairly presents in all material respects the financial position of the Group as at the date to which they were prepared and for the period then ended.

(d)Each of the latest set of consolidated financial statements required to be delivered under Clause 20.1(b) fairly presents in all material respects the financial condition of the Group as at the date to which they were prepared and for the period then ended.

(e)The projections and forecasts contained in the Original Liquidity Plan are fair and based on assumptions considered in good faith by ABB to be reasonable as at the date to which it was drawn up and the Original Liquidity Plan does not omit any information known to ABB which would make such projections and forecasts materially misleading as at the date to which it was drawn up.

(f)The projections and forecasts contained in the Liquidity Plan most recently delivered to the Facility Agent are fair and based on assumptions considered in good faith by ABB to be reasonable on the date of delivery hereunder and such Liquidity Plan does not omit any information known to ABB as at such date which would make such projections and forecasts materially misleading.

19.12No Material Adverse Effect

Since 30 June 2003:

(a)there has been no material adverse change in any of the business, condition (financial or otherwise), operations, performance or properties of the Group (taken as a whole); and

(b)no event or circumstance or series of events or circumstances whether related or not has occurred which has a Material Adverse Effect,

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provided that none of the facts or circumstances referred to in (i) the Information Package or (ii) any public filings, announcements or press releases issued by ABB or the rating agencies prior to the date hereof shall, for the purposes of this representation, constitute a material adverse change or a Material Adverse Effect as contemplated by the paragraphs above.

19.13Pari passu ranking

Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

19.14No proceedings pending or threatened

No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which might reasonably be expected to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against it or any of its Subsidiaries save in relation to asbestos liabilities relating to the business of Combustion Engineering Inc.

19.15Environmental Compliance

Each Group Company has complied in all respects with all Environmental Law save to the extent that non-compliance could not reasonably be expected to have a Material Adverse Effect.

19.16Good Title to Assets

It has good, valid and marketable title to, or valid leases or licences of, and all appropriate Authorisations to use, the material assets necessary to carry on its business as presently conducted.

19.17Pensions

As of the last actuarial report, its pension plan is funded to the levels required by applicable local laws.

19.18Dutch Borrower Regulatory Compliance

The Dutch Borrower represents, warrants and agrees that it has the appropriate exemptive reliefs available pursuant to the Exemption Regulation and that it complies with article 4 of the Exemption Regulation including in particular that:

(a)on the date of this Agreement the Dutch Borrower has verified that each Lender qualifies as a PMP in accordance with the Policy Guidelines; and

(b)if on the date on which a New Lender becomes a party to this Agreement, it is a requirement of Dutch law that it is a PMP and that the Dutch Borrower must verify its PMP status in accordance with the Policy Guidelines, on such date the Dutch Borrower has verified that such New Lender qualifies as a PMP in accordance with the Policy Guidelines.

Each Lender represents and warrants to the Dutch Borrower on the date of this Agreement that it is a PMP and each New Lender to whom a Lender assigns or transfers any or all of its rights under this Agreement (if on the date such assignment or transfer becomes effective it is a requirement under Dutch law that such New Lender is a PMP)

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will be deemed to have represented and warranted to the Dutch Borrower that on such date it is a PMP.

19.19Repetition

(a)The representations and warranties in Clause 19.1 (Status) to Clause 19.6 (Governing law and enforcement), 19.9 (No Default), paragraph (d) of Clause 19.10 (No misleading information), paragraphs (c) and (d) of Clause 19.11 (Financial Statements) and Clause 19.13 (Pari passu ranking) are deemed to be made by each Obligor by reference to the facts and circumstances then existing on the date of each Utilisation Request and the first day of each Interest Period.

(b)The representation and warranty in paragraph (f) of Clause 19.11 (Financial statements) is deemed to be made by ABB on the date of delivery of each Liquidity Plan in relation to that Liquidity Plan.

(c)The representation and warranty in paragraph (b) of Clause 19.10 (No misleading information) is deemed to be made by ABB on the day each Business Plan is delivered to the Facility Agent pursuant to Clause 20.4 (Liquidity Plan and Business Plan).

20.INFORMATION UNDERTAKINGS

The undertakings in this Clause 20 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

20.1Financial statements

(a)ABB and each other Obligor shall supply to the Facility Agent in sufficient copies for all the Lenders, as soon as the same become available, but in any event within 120 days after the end of each of its financial years in the case of ABB and within 150 days in the case of each other Obligor its statutory unconsolidated annual statements for that financial year.

(b)ABB shall supply to the Facility Agent in sufficient copies for all the Lenders, as soon as the same become available, but in any event before the date falling 120 days after the end of each of its financial years, its audited consolidated annual statements.

(c)ABB shall supply to the Facility Agent in sufficient copies for all the Lenders, as soon as the same become available, but in any event within 45 days after the end of each quarter of each of its financial years (except the fourth quarter) its consolidated financial statements for that quarter.

20.2Requirements as to financial statements

(a)Each set of financial statements delivered by an Obligor pursuant to Clause 20.1 (Financial statements) shall be certified without personal liability by a director of the relevant company as fairly representing its financial condition as at the date at which those financial statements were drawn up.

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(b)Each set of financial statements delivered pursuant to Clause 20.1 (Financial statements) shall be prepared using GAAP.

(c)Each set of financial statements of an Obligor delivered pursuant to Clause 20.1 (Financial statements) shall be prepared using GAAP, and accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements unless, in relation to any set of financial statements, ABB or the relevant Obligor notifies the Facility Agent that there has been a change in GAAP, or its accounting practices or reference periods and the relevant Obligor in consultation with its auditors delivers to the Facility Agent:

(i)a description of any change necessary for those consolidated financial statements to reflect the GAAP, accounting practices and reference periods upon which that Obligor’s Original Financial Statements were prepared; and

(ii)in respect of changes affecting the consolidated accounts of the Group, sufficient information, in form and substance as may be reasonably required by the Facility Agent, to enable the Lenders to determine whether Clause 21 (Financial covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and that Obligor’s Original Financial Statements.

Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.

20.3Covenant Compliance Certificate

(a)ABB shall supply to the Facility Agent, with each set of financial statements delivered by ABB pursuant to paragraph (b) or (c) of Clause 20.1 (Financial Statements), a Covenant Compliance Certificate setting out (in reasonable detail):

(i)computations as to compliance with Clause 21.2 (Financial Condition) and Clause 21.3 (Restriction on Subsidiary Indebtedness) as at the date as at which those financial statements were drawn up; and

(ii)a reconciliation of the available cash as set out in the Liquidity Plan delivered with that Covenant Compliance Certificate to the cash position as set out in the consolidated financial statements delivered with that Covenant Compliance Certificate,

provided that, at any time on and following the Trigger Date, a Covenant Compliance Certificate will only be required to be delivered with each set of financial statements delivered by ABB pursuant to paragraph (b) of Clause 20.1 (Financial Statements) and with each set of financial statements delivered by ABB pursuant to paragraph (c) of Clause 20.1 (Financial Statements) that relate to the end of the second quarter in any financial year).

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(b)Each Covenant Compliance Certificate shall be signed by two officers of ABB without personal liability.

20.4Liquidity Plan and Business Plan

(a)ABB shall supply to the Facility Agent (in sufficient copies for all the Lenders) with each Covenant Compliance Certificate delivered prior to the Trigger Date an up to date Liquidity Plan.

(b)ABB shall supply to the Facility Agent (in sufficient copies for all the Lenders), on or prior to 1 December of each financial year ending after 31 December 2003 an updated Business Plan (in respect of financial years ending in 2005 and 2006 for the Business Plan delivered on or prior to 1 December 2004 and in respect of the financial year ending in 2006 for the Business Plan delivered on or prior to 1 December 2005) together with a statement reconciling such updated Business Plan to the most recently delivered Liquidity Plan.

20.5Information: miscellaneous

ABB shall supply to the Facility Agent (in sufficient copies for all the Lenders, if the Facility Agent so requests):

(a)all documents dispatched by it to its shareholders (or any class of them) or its creditors generally at the same time as they are dispatched;

(b)promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings or Environmental Claim which are current, threatened or pending against one or more Group Companies and which could reasonably be expected to have a Material Adverse Effect;

(c)promptly, such further information regarding the financial condition, business and operations of any Group Company as any Finance Party (acting through the Facility Agent) may reasonably request; and

(d)promptly upon becoming aware of a material development, details of the progress of the Combustion Engineering Inc Chapter XI filing and any change in the structure of the Group that is material to the interests of the Lenders.

20.6Notification of default

(a)ABB and each Obligor shall notify the Facility Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).

(b)If any Lender considers in good faith that a Default is continuing, promptly upon a request by the Facility Agent, ABB shall supply to the Facility Agent a certificate signed by two of its authorised signatories (without personal liability) on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).

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20.7Use of Websites

(a)Any Obligor may satisfy its obligation under this Agreement to deliver any information in relation to those Lenders (the “Website Lenders”) who accept this method of communication by posting this information onto an electronic website designated by the Borrower and the Facility Agent (the “Designated Website”) if:

(i)the Facility Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;

(ii)both ABB and the Facility Agent are aware of the address of and any relevant password specifications for the Designated Website; and

(iii)the information is in a format previously agreed between ABB and the Facility Agent.

If any Lender (a “Paper Form Lender”) does not agree to the delivery of information electronically then the Facility Agent shall notify ABB accordingly and ABB shall supply the information to the Facility Agent (in sufficient copies for each Paper Form Lender) in paper form.  In any event ABB shall supply the Facility Agent with at least one copy in paper form of any information required to be provided by it.

(b)The Facility Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by ABB and the Facility Agent.  The Facility Agent shall notify each Website Lender when any document is posted to the Designated Website.

(c)ABB shall promptly upon becoming aware of its occurrence notify the Facility Agent if:

(i)the Designated Website cannot be accessed due to technical failure;

(ii)the password specifications for the Designated Website change;

(iii)any new information which is required to be provided under this Agreement is posted onto the Designated Website;

(iv)any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or

(v)ABB becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.

If the Borrower notifies the Facility Agent under paragraph (c)(i) or paragraph (c)(v) above, all information to be provided by ABB under this Agreement after the date of that notice shall be supplied in paper form unless and until the

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Facility Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.

(d)Any Website Lender may request, through the Facility Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website.  ABB shall comply with any such request within ten Business Days.

20.8“Know your customer” checks

(a)Each Obligor shall promptly upon the request of the Facility Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Facility Agent (for itself or on behalf of any Lender) or any Lender (for itself or on behalf of any prospective New Lender) in order for the Facility Agent, such Lender or any prospective New Lender to carry out and be satisfied with the results of all necessary “know your customer” or other checks in relation to any person that it is required to carry out pursuant to the transactions contemplated in the Finance Documents.

(b)Each Lender shall (save as may be prohibited by law) promptly upon the request of the Facility Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Facility Agent (for itself) in order for the Facility Agent to carry out and be satisfied with the results of all necessary “know your customer” or other checks in relation to any person that it is required to carry out pursuant to the transactions contemplated in the Finance Documents.

(c)ABB shall, by not less than 10 Business Days’ written notice to the Facility Agent, notify the Facility Agent (which shall promptly notify the Lenders) of its intention to request that one of its Subsidiaries becomes an Additional Obligor pursuant to Clause 25 (Changes to the Obligors).

(d)Following the giving of any notice pursuant to paragraph (a) above, ABB shall promptly upon the request of the Facility Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Facility Agent (for itself or on behalf of any Lender) or any Lender (for itself or on behalf of any prospective New Lender) in order for the Facility Agent, such Lender or any prospective New Lender to carry out and be satisfied with the results of all necessary “know your customer” or other checks in relation to any person that it is required to carry out pursuant to the accession of such Subsidiary to this Agreement as an Additional Obligor.

21.FINANCIAL COVENANTS

21.1Financial definitions

In this Clause:

“Asbestos Trusts” means the trusts established for the benefit of present and future claimants in the proceedings relating to Combustion Engineering Inc. under Chapter XI of the US Bankruptcy Code;

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“Consolidated Net Worth” means total stockholders’ equity, calculated disregarding changes in total accumulated other comprehensive income/loss after 30 June 2003 onwards, in each case as reflected in ABB’s consolidated statement of changes in stockholders’ equity (part of the consolidated financial statements of ABB) adjusted:-

(a)by excluding the amount of any adjustment in respect of ABB’s shares to be contributed to the Asbestos Trusts and, when recognised as a provision, the amount of any contingent or prospective liability in respect of the obligation of members of the Group (as at the date hereof) to contribute cash to the Asbestos Trusts;

(b)to disregard capital gains and losses from disposals booked or recorded after 30 June 2003 of assets and businesses classified as non-core or discontinued operations as at 30 June 2003 (such as sales of businesses, long term assets, equity investments and including the abandonment/liquidation of businesses);

(c)to exclude changes since 30 June 2003 in market valuation resulting from the bifurcation of embedded derivatives and in the consequent related amortisation of any premium/discount on issuance in respect of the $968,000,000 convertible bonds issued by a member of the Group as well as any changes in the market value of any derivative put in place by the Group to hedge the embedded derivative in the bond;

(d)to disregard impairments and other write offs in respect of goodwill and other intangible assets to the extent the same occur after 30 June 2003;

(e)to disregard movements on deferred tax assets relating to discontinued operations to the extent the same occur after 30 June 2003; and

(f)to exclude the effects of changes in US GAAP or the application thereof effective after 30 June 2003.

“Consolidated Profits Before Interest and Tax” means, in respect of any Relevant Period, the earnings before interest and taxes, as reflected in ABB’s consolidated income statement.

“EBITDA” means, for any Relevant Period, Consolidated Profits Before Interest and Taxes and Minority Interest before any amount attributable to the impairment, write-off or amortisation of any intangible assets and impairment, write-off or depreciation of tangible assets (in each case to the extent that the same occur after 31 December 2002) adjusted to disregard any impact of:

(a)new accounting standards or the application thereof adopted in 2003 or thereafter;

(b)costs relating to ABB’s announced restructuring programme known as the “step change program” up to a maximum aggregate amount of $750,000,000 during the life of the Facility;

(c)restatements of previous quarters;

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(d)charges or credits in respect of employee share plans and other employee incentive arrangements (including the “management incentive plan”) which are (in each case) in place as at the date hereof;

(e)impairments or write offs relating to marketable securities classified as available for sale and held by group insurance or reinsurance companies; and

(f)gains or losses arising by reasons of disposals (such as the sale of businesses, long term assets, equity investments and including the abandonment/liquidation of businesses) occurring after 30 June 2003.

“Net Debt” means Total Gross Debt less cash available in group treasury operations as disclosed in the Liquidity Plan and the reconciliation to balance sheet cash and equivalents as disclosed in the Covenant Compliance Certificate.

“Quarter Date” means the last day of each Relevant Period.

“Relevant Period” means each period of twelve months ending on the last day of ABB’s financial year and each period of twelve months ending on the last day of each quarter of ABB’s financial year.

“Total Gross Debt” means the aggregate of short-term borrowings and current maturities on long-term borrowings and long-term borrowings in each case as reflected in ABB’s consolidated balance sheet as of the last day of the Relevant Period plus, as reported in the latest available Liquidity Plan, the obligation of members of the Group to make cash payments to the Asbestos Trusts plus (without double counting) the aggregate net proceeds of any Securitisation to the extent that the aggregate net proceeds thereof for the Group at any time exceed $650,000,000 (excluding any amount of such cash proceeds that are not freely transferable under applicable law and regulation to the group treasury operations as disclosed in the Covenant Compliance Certificate) on the last day of the Relevant Period excluding the impact of changes in US GAAP or the application thereof effective after 30 June 2003 and further excluding any changes from 30 June 2003 in the market valuation of derivatives embedded in the $968,000,000 convertible bond issued by a member of the Group and the related amortisation of discount on issuance resulting from the bifurcation of the embedded derivatives in such bond.

“Total Gross Interest” means, in respect of any Relevant Period, the interest expense for financial liabilities and costs of the securitisation programmes of the Group as reflected in ABB’s consolidated income statement (excluding items considered as other finance expense, such as, but not limited to any fees, taxes or commissions, foreign exchange gains or losses, gains or losses on marketable securities, gains or losses on derivatives, the effects arising from the bifurcation of the embedded derivatives in respect of the $968,000,000 convertible bond issued by a member of the Group and charges or credits in relation to management incentive plans).

21.2Financial Condition

ABB shall ensure that:

(a)The ratio of EBITDA to Total Gross Interest for each Relevant Period ended on each Quarter Date specified below (or, after the Trigger Date, each Relevant

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Period ending on each 30 June and 31 December set out below) shall not be less than the ratio set out below opposite such date.

Date	Ratio
31 December 2003	2.45:1
31 March 2004	2.60:1
30 June 2004	2.60:1
30 September 2004	2.75:1
31 December 2004	3.00:1
31 March 2005	3.25:1
30 June 2005, and thereafter	3.50:1

(b)The ratio of Net Debt to EBITDA for each Relevant Period ended on each Quarter Date specified below (or, after the Trigger Date, each Relevant Period ending on each 30 June and 31 December set out below) shall not be more than the ratio set out below opposite such date.

Quarter Date
31 December 2003	4.40:1
31 March 2004	4.25:1
30 June 2004	3.75:1
30 September 2004	3.00:1
31 December 2004	2.75:1
31 March 2005, and thereafter	2.50:1

(c)Consolidated Net Worth shall not, as at any Quarter Date (or, after the Trigger Date, half year of ABB), be less than the relevant amount calculated in accordance with the following formula:

A + B,

where:

A=$3,000,000,000; and

B=in respect of a Quarter Date, 50 per cent. of the Cumulative Consolidated Net Income of the Group for the period from 30 September 2003 until such Quarter Date.  For these purposes, “Cumulative Consolidated Net Income” is the aggregate of the consolidated net income of the Group (adjusted to exclude those amounts set out in (a) to (f) of the definition of Consolidated Net Worth) for the fourth quarter of the 2003 financial year of ABB and

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each completed financial year of ABB ending thereafter plus (if the relevant Quarter Date is not the last day of a financial year of the Group) the cumulative consolidated net income (adjusted as aforesaid) of the Group for the part financial year during which such Quarter Date falls provided that if the consolidated net income (as so adjusted) for any such financial year or the cumulative consolidated net income (as so adjusted) for any such part financial year ending on such Quarter Date is a negative amount, such amount will be deemed to be zero for the purposes of this paragraph (c).

21.3Restriction on Subsidiary Indebtedness

The aggregate amount of Total Gross Debt (other than:

(a)Project Finance Indebtedness;

(b)Indebtedness owed by one Group Company to another Group Company;

(c)amounts borrowed by a finance company which is a Group Company and which are on-lent, and remain on-lent, to a member of the Obligor Group;

(d)amounts borrowed by a Group Company from a bank to which cash-collateral (in a substantially equivalent amount) has been granted by a Group Company in respect of the relevant Group Company’s obligation to repay such amounts;

(e)any amounts borrowed by a Group Company which constitute Total Gross Debt to the extent such amounts are borrowed for the purposes of refinancing other borrowings constituting Total Gross Debt so long as amounts so borrowed are promptly applied in such manner;

(f)Indebtedness relating to Sirius, ABB Export Bank and ABB Credit OY Leases (in each case as at the date of this Agreement);

(g)Indebtedness in respect of bonds and commercial paper issued by members of the Group that are capital market issuers; and

(h)amounts owed to Combustion Engineering Inc. or any trust established in connection with its Chapter XI filing),

of Group Companies which are not members of the Obligor Group shall not at any time after the date of this Agreement exceed $1,000,000,000.

22.GENERAL UNDERTAKINGS

The undertakings in this Clause 22 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

22.1Authorisations

Each Obligor shall promptly:

(a)obtain, comply with and do all that is necessary to maintain in full force and effect; and

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(b)supply certified copies to the Facility Agent of,

any Authorisation (including, in the case of any Dutch Obligor, any applicable works council advice) required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, and, subject to the Reservations (as they apply at the date of this Agreement only) enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document.

22.2Compliance with laws

Each Obligor shall comply in all respects with all laws (including, without limitation, Environmental Law and ERISA) to which it may be subject, if failure so to comply would have a Material Adverse Effect.

22.3Negative pledge

(a)Neither ABB nor any Obligor shall (and ABB shall procure that no other Group Company will) create or permit to subsist any Security over any of its assets.

(b)Paragraph (a) above does not apply to:

(i)any Security over any bank account in favour of the bank with which such account is held, in each case granted by any Group Company in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;

(ii)any Security arising by operation of law;

(iii)any Security contained in a contract for sale or supply entered into in the ordinary course of trading, where such Security is granted to such seller or, as the case may be, supplier and is limited in recourse to the asset sold or, as the case may be, supplied;

(iv)any Security over or affecting any asset acquired by a Group Company after the date of this Agreement if:

(A)the Security was not created in contemplation of the acquisition of that asset by a Group Company; and

(B)the principal amount secured has not been increased in contemplation of, or since the acquisition of that asset by a Group Company;

(C)a Group Company uses all reasonable efforts promptly to discharge such Security within 3 months of the acquisition of that asset by a Group Company and, in any event, such Security is discharged within 6 months of the acquisition of that asset by a Group Company;

(v)any Security over or affecting any asset of a Group Company acquired after the date of this Agreement, where the Security is created prior to the date on which that company becomes a Group Company if:

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(A)the Security was not created in contemplation of the acquisition of that company;

(B)the principal amount secured has not increased in contemplation of or since the acquisition of that company;

(C)a Group Company uses all reasonable efforts promptly to discharge such Security within 3 months of the acquisition of that asset by a Group Company and, in any event, such Security is discharged within 6 months of the acquisition of that asset by a Group Company;

(vi)any Security arising pursuant to the Securitisations;

(vii)any Security over the assets of a Project Company, any shareholder loan made to a Project Company or the shares in a Project Company where such Security was created for the purpose of securing Indebtedness incurred to acquire and/or develop the assets of such Project Company and where such Indebtedness constitutes Project Finance Indebtedness of such Project Company, in each case where the Project Company and Project Finance Indebtedness is created or incurred in accordance with the usual business of the Group carried on at the date of this Agreement;

(viii)any Security securing Indebtedness incurred by a Group Company to refinance Indebtedness secured by Security of the type referred to in paragraphs (iv) or (v) above where such first-mentioned Security and the conditions referred to in paragraph (iv) or, as the case may be, (v) above continue to be satisfied, mutatis mutandis;

(ix)any Security provided by a Group Company which is an insurance or reinsurance company in the ordinary course of its business;

(x)any Security provided in connection with loans to Group Companies cash collateralised by other members of the Group, and interest rate and currency swaps and other derivative contracts, in the ordinary course of Group treasury activities;

(xi)any Security provided in respect of ABB Credit OY Leases as at the date of this Agreement;

(xii)any Security over any real estate assets pursuant to mortgage financings in a principal amount up to $150,000,000;

(xiii)any Security over or affecting any asset created to facilitate the Disposal of an asset by a Group Company (where such Disposal is permitted under paragraph (b) of Clause 22.4 (Disposals));

(xiv)any Security over or affecting assets having an aggregate market value not in excess of $750,000,000 to secure bonding lines of members of the Group;

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(xv)any Security provided over the shares in Sirius securing indebtedness in a principal amount of not more than $200,000,000;

(xvi)any Security provided to or for the benefit of the Finance Parties pursuant to the Finance Documents;

(xvii)any Security provided in connection with any real estate-related defeasance structures, including without limitation U.S. tax leases; and

(xviii)any Security to the extent not falling within any of paragraphs (i) - (xvii) (inclusive) above provided that:

(A)the total amount of Indebtedness secured pursuant to this paragraph (xviii) shall at no time exceed $250,000,000; and

(B)Security may not be provided pursuant to this paragraph (xviii) in respect of Indebtedness in excess of $25,000,000 in relation to any single or series of related debt-financing transactions.

22.4Disposals

(a)Neither ABB nor any Obligor shall (and ABB shall ensure that no other Group Company will), enter into a Disposal.

(b)Paragraph (a) above does not apply to a Disposal:

(i)of any asset, company or business classified as at 30 June 2003 as a non-core activity of ABB or as held for sale/discontinued operations (each a “Non-Core Undertaking”);

(ii)of any asset of a Non-Core Undertaking that is not a core asset of the Group;

(iii)prior to the Trigger Date, of any asset, company or business that is a core asset of the Group (each a “Core Undertaking”) or of any asset of a Core Undertaking:

(A)that when taken with all other such Disposals in the same financial year generates in aggregate net proceeds of not more than $750,000,000; and

(B)where two authorised signatories of ABB have certified in writing to the Lenders that on a historic basis for the most recent Quarter Date prior to such Disposal and looking forward for each Quarter Date during the term of the Facility (calculated in each case on a pro forma basis) such Disposal would not give rise to a breach of Clause 21.2 (Financial Condition),

Provided that any such Disposal that would not be permitted because of the limitation set out in paragraph (A) above may be made if details thereof have been provided to the Lenders and the Majority Lenders have not objected in writing to such Disposal within 30 Business Days;

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(iv)at any time on or after the Trigger Date of a Core Undertaking or of an asset owned by a Core Undertaking provided that (in the case of a sale of the business or shares of a Core Undertaking or a revenue generating asset of a Core Undertaking) two authorised signatories of ABB have certified in writing to the Lenders that on a historic basis for the most recent Quarter Date prior to such Disposal and looking forward for each Quarter Date falling on 30 June and 31 December during the term of the Facility (calculated in each case on a pro forma basis), such Disposal would not give rise to a breach of Clause 21.2 (Financial condition);

(v)to a Group Company;

(vi)of cash or cash equivalents where such Disposal is not otherwise prohibited under this Agreement;

(vii)made in the ordinary course of business of the disposing Group Company;

(viii)of cash and cash equivalents, notes, shares and marketable securities, rights under insurance contracts and real estate to or in connection with the trusts to be established for the purpose of meeting claims in respect of the Chapter XI Filing of CE up to the amount set out in the Original Liquidity Plan;

(ix)of assets which are sold and leased back in circumstances not prohibited by the other terms hereof;

(x)of obsolete assets (not being businesses or shares in a company owning a business) which in the reasonable opinion of a Group Company are not required for the efficient operation of the business of the Group;

(xi)made by way of exchange for assets (not being businesses or shares in a company owning a business) of similar nature and value;

(xii)of receivables pursuant to the Securitisations,

Provided that all Disposals shall be made on arm’s length terms (other than distributions and other intra-group transactions where ABB considers in good faith that the fiscal benefits to the Group to be obtained from such transaction militate against such terms and such transactions would not be materially adverse to the interests of the Lenders hereunder).

(c)Prior to the Trigger Date, any Disposal (not being an intra-Group transaction) having a value in excess of $25,000,000 shall be for a cash consideration of at least 80% of total consideration (or such greater amount or lower percentage as the Majority Lenders may approve in relation to any such Disposal, such approval not to be unreasonably withheld or delayed).

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22.5Claims Pari Passu

ABB shall ensure that at all times the claims of the Finance Parties against each Obligor under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors save those of such Obligor’s creditors whose claims are mandatorily preferred by law applying to companies generally.

22.6Mergers and Acquisitions

(a)No Obligor shall enter into any amalgamation, demerger, merger or corporate reconstruction (excluding any Approved Reorganisation or any Disposal permitted under paragraph (b) of Clause 22.4 (Disposals) and save as permitted under Clause 23.7 (Insolvency Proceedings)) save where the Facility Agent is satisfied, acting reasonably, that ABB or the relevant Obligor’s obligations under the Finance Documents will continue to be ABB’s or the relevant Obligor’s legal, valid, binding and (subject to the Reservations) enforceable obligations.

(b)No Obligor shall (and ABB shall ensure that no Group Company shall) acquire any company, business or undertaking or form or enter into any joint venture, partnership, consortium or other like arrangement (any such joint venture, partnership, consortium or other like arrangement being hereafter a “JV”).

(c)Paragraph (b) above does not apply:

(i)prior to the Trigger Date, to any acquisition of an undertaking (by way of acquisition of shares or otherwise) or to any JV:

(A)that carries on a business currently conducted by a member of the Group or which is reasonably ancillary to any such business; and

(B)

(1)where the aggregate consideration (or, in the case of a JV, investment by Group Companies) is not in excess of $3,500,000; or

(2)where the aggregate consideration (or, in the case of a JV, investment by Group Companies), when taken with all other such acquisitions or investments in the same financial year (other than those in (i)(B)(1) above), is not in excess of $750,000,000 (provided that all or part of such amount may be carried forward from any applicable financial year to the following financial year where a transaction signs in the applicable financial year and closes in the first 3 months of the following financial year); and

(C)where two authorised signatories of ABB have certified in writing to the Lenders that on a historic basis for the most recent Quarter Date prior to such acquisition or other transaction and looking forward to each Quarter Date for the term of the Facility on a pro forma basis, such acquisition would not give rise to a breach of Clause 21.2 (Financial condition),

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Provided that any acquisition or other transaction that would not be permitted because of the limitation set out in paragraph (B) above may be made if details thereof have been provided to the Lenders and the Majority Lenders have not objected in writing to such acquisition or other transaction within 30 Business Days;

(ii)at any time after the Trigger Date, in circumstances where two authorised signatories of ABB have certified in writing to the Lenders that on a historic basis for the most recent Quarter Date prior to such acquisition or other transaction and looking forward for each Date falling on 30 June and 31 December during the term of the Facility on a pro forma basis, such acquisition or other transaction would not give rise to a breach of Clause 21.2 (Financial Condition);

(iii)to a solvent reorganisation not affecting the Obligors or any security contemplated or granted pursuant to the Agreed Form Pledges;

(iv)to JVs entered into by Group Companies provided the formation of such JV is pursuant to the core business of the Group and consistent with the ordinary business practices of the Group as at the date hereof.

22.7Change of business

ABB shall procure that no change is made to the business of the Group which would result in the core business of the Group, taken as a whole, being something other than the business of power and automation technology.

22.8Insurance

Each Obligor shall (and ABB shall ensure that each Group Company will) maintain insurances on and in relation to its business and assets with reputable underwriters or insurance companies against those risks and to the extent as is usual for companies carrying on the same or substantially similar business in the relevant jurisdiction and taking into account the availability of insurance generally.

22.9Prepayment of Group Facilities

Prior to the Trigger Date, ABB shall not (and shall ensure that no other Group Company will) voluntarily prepay, purchase or redeem any bonds or other capital markets instruments issued by a Group Company having in each case a maturity date falling after the Final Maturity Date provided that any Group Company may prepay any bonds or other capital market instruments out of the net cash proceeds of any capital markets instrument issued after the date of this Agreement with a maturity date not earlier than the bonds or capital markets instruments being prepaid.

22.10Restrictions on making loans and guarantees

(a)ABB shall not (and shall ensure that no other Group Company shall) after the date of this Agreement make any loans or grant any credit or other financial accommodation (but excluding for the avoidance of doubt its own bank deposits) to or for the benefit of any person or grant any guarantee or indemnity in respect of the financial obligations or liabilities of any other person.

(b)Paragraph (a) above does not apply to:

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(i)trade credit or indemnities granted in the ordinary course of business and upon terms usual for such trade (including vendor financing in an aggregate amount in respect of the Group not materially greater than the amount outstanding as at the date of this Agreement);

(ii)any loan, credit or other financial accommodation between members of the Group;

(iii)loans to and other credit or financial accommodation to or for the benefit of Project Companies in an aggregate amount in respect of the Group not materially greater than the amount outstanding as at the date of this Agreement;

(iv)any loan, credit or other financial accommodation involving transactions with or for the benefit of employees, officers or directors of Group Companies relating to the provision of motor vehicles;

(v)any other loan, credit or other financial accommodation provided the aggregate amount of such transactions at any time does not exceed $25,000,000;

(vi)any loan, credit, other financial accommodation, guarantee or indemnity to facilitate the Disposal of the Oil, Gas & Petrochemical Division;

(vii)prior to the Trigger Date, any loan, credit, other financial accommodation, guarantee or indemnity to facilitate Disposals permitted under paragraph (b) of Clause 22.4 (Disposals) up to an aggregate amount not exceeding $150,000,000;

(viii)at any time on and after the Trigger Date, any loan, credit, other financial accommodation, guarantee or indemnity to facilitate Disposals permitted under paragraph (b) of Clause 22.4 (Disposals); and

(ix)guarantees or indemnities in respect of the obligations or liabilities of other members of the Group (where the relevant obligation or liability of such other member of the Group is permitted under this Agreement).

22.11Material Subsidiaries

ABB shall maintain 100 per cent. (direct or indirect) ownership of all Material Subsidiaries subject to any Disposals permitted under paragraph (b) of Clause 22.4 (Disposals) and save as permitted under Clauses 22.6 (Mergers and Acquisitions) and 23.7 (Insolvency Proceedings).

22.12Obligor Coverage

ABB shall ensure that if External Debt is incurred at any time on or after the date of this Agreement by a Group Company that is not an Obligor in circumstances where the proceeds of such External Debt are not on-lent to the Group through an Obligor or where the External Debt is incurred pursuant to a guarantee given by a Group Company that is not an Obligor, then, in each case, the Group Company that has incurred such External Debt or the Group Company that has on-lent such External Debt into the Group shall by

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the date falling no later than the date such External Debt is incurred, accede to this Agreement as an Additional Obligor pursuant to Clause 25 (Changes to the Obligors).

23.EVENTS OF DEFAULT

Each of the events or circumstances set out in Clauses 23.1 (Non-payment) to 23.12 (Material Adverse Effect) inclusive is an Event of Default.

23.1Non-payment

An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place, and in the currency, in which it is expressed to be payable unless:

(a)payment is made within 3 Business Days of its due date; and

(b)its failure to pay is due solely to administrative error or technical delays in the transmission of funds.

23.2Financial Covenants

Any requirement of Clause 21 (Financial Covenants) is not satisfied.

23.3Other obligations

An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 23.1 (Non-payment)) and, if the failure to comply is capable of remedy, it is not remedied within 15 Business Days of the Facility Agent giving notice to ABB or ABB becoming aware of the failure to comply.

23.4Misrepresentation

Any representation or statement made or deemed (by virtue of Clause 19.19  (Repetition)) to be made by ABB or any other Obligor in this Agreement is or proves to have been incorrect or misleading in any respect when made or deemed to be made and, where the circumstances making such representation or statement incorrect or misleading are capable of being altered so that such representation or statement is correct, such circumstances are not so altered within 15 Business Days of the Facility Agent giving notice to ABB of such representation or statement being incorrect provided that no Event of Default shall occur under this Clause 23.4 by reason of the representation set out in Clause 19.18(a) or 19.18(b) (Dutch Borrower Regulatory Compliance) being untrue (but without prejudice to the rights of the Finance Parties under this Agreement other than under this Clause 23.4 or under applicable law and without prejudice to any other Event of Default which may occur by reason of any representation set out in Clause 19.18(a) or 19.18(b) (Dutch Borrower Regulatory Compliance) being untrue in any material respect or otherwise by reason of a Lender not being a PMP).

23.5Cross default

(a)Any Indebtedness of all or any of the Group Companies is not paid when due nor within any originally applicable grace period.

(b)Any Indebtedness of all or any of the Group Companies has (i) become capable of being declared and is declared to be or (ii) otherwise becomes due and payable, in any case, prior to its specified maturity as a result of a default or an event of default (however described).

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(c)Any commitment for any Indebtedness of all or any of the Group Companies is cancelled or suspended by a creditor of all or any of the Group Companies as a result of a default or an event of default (however described).

(d)Any creditor of all or any of the Group Companies becomes entitled to declare any Indebtedness of all or any of the Group Companies due and payable prior to its specified maturity as a result of a default or an event of default (however described).

(e)No Event of Default will occur under this Clause 23.5 if (1) the Indebtedness falling within paragraphs (a) to (d) is Project Finance Indebtedness or intra-Group Indebtedness or (2) the aggregate amount of Indebtedness or commitment for Indebtedness falling within paragraphs (a) to (d) (excluding any described in (1) above) above is less than $50,000,000.

23.6Insolvency

(a)Any Obligor or any Material Subsidiary is unable or admits in writing an inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

(b)The value of the assets of any Obligor is less than its liabilities (taking into account contingent and prospective liabilities).

(c)A moratorium is declared in respect of any indebtedness of any Obligor or any Material Subsidiary.

(d)This Clause 23.6 shall not apply in respect of Combustion Engineering Inc.

23.7Insolvency proceedings

Any corporate action, legal proceedings or other procedure or step is taken in relation to:

(a)the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of any Obligor or any Material Subsidiary (excluding Combustion Engineering Inc) other than a solvent liquidation or reorganisation of any Material Subsidiary;

(b)a composition, assignment or arrangement with any creditor of any Obligor or any Material Subsidiary;

(c)the appointment of a liquidator (other than (i) a winding up petition which is frivolous or vexatious and which is, in any event, discharged within 30 days of its presentation or (ii) in respect of a solvent liquidation of any Group Company (other than an Obligor)), receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of any Obligor or Material Subsidiary or any of its assets (having an aggregate value of at least $50,000,000); or

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(d)enforcement of any Security over any assets (having an aggregate value of at least $50,000,000) of any Material Subsidiary or Obligor by reason of a default or event of default (howsoever described) occurring under the relevant agreement relating to the Indebtedness secured by such Security,

or any analogous procedure or step is taken in any jurisdiction provided that this Clause 23.7 shall not apply in respect of Combustion Engineering Inc.

23.8Repudiation

ABB or an Obligor repudiates a Finance Document or evidences in writing an intention to repudiate a Finance Document.

23.9Unlawfulness

Subject to Clause 8.2 (Borrower Illegality), it is or becomes unlawful for an Obligor to perform any of its material obligations under the Finance Documents.

23.10Cessation of business

The Group, taken as a whole, ceases or threatens to cease to carry out its core business.

23.11Material Audit Qualification

The Auditors’ report in respect of the annual consolidated financial statements of ABB contains a qualification under US generally accepted audit standards, excluding any reference to the asbestos related issues of Combustion Engineering Inc, which could reasonably be expected to give rise to a Material Adverse Effect.

23.12Material Adverse Effect

Any event or circumstance occurs which has, or is reasonably likely to have, a Material Adverse Effect.

23.13Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Facility Agent may, and shall if so directed by the Majority Lenders, by notice to ABB:

(a)cancel the Total Commitments whereupon they shall immediately be cancelled;

(b)declare that all or part of the Advances, together with accrued interest, and all other amounts accrued under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or

(c)declare that all or part of the Advances be payable on demand, whereupon they shall immediately become payable on demand by the Facility Agent on the instructions of the Majority Lenders; and/or

(d)exercise any or all of its rights, authorities, remedies and powers under or pursuant to any of the Finance Documents and in accordance with their terms.

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SECTION 9

CHANGES TO PARTIES

24.CHANGES TO THE LENDERS

24.1Assignments and transfers by the Lenders

Subject to this Clause 24 a Lender (the “Existing Lender”) may:

(a)assign any of its rights; or

(b)transfer by novation any of its rights and obligations,

to another bank (the “New Lender”).

24.2Conditions of assignment or transfer

(a)The consent of ABB is required for an assignment or transfer by a Lender, unless the assignment or transfer is to another Lender or an Affiliate of a Lender or unless an Event of Default has occurred and is continuing.

(b)The consent of ABB to an assignment or transfer must not to be unreasonably withheld or delayed.  ABB will be deemed to have given its consent within 10 Business Days of receipt of a request for such consent unless expressly refused by ABB within that time.

(c)Nothing in this Agreement shall prevent any Lender from assigning or pledging all or any part of its rights or interests under this Agreement to any central bank or any supranational bank as security for its borrowings from that central bank or supranational bank, provided that such assignment or pledge does not involve a release of such Lender from any of its obligations under this Agreement.

(d)An assignment or transfer shall be in respect of a Commitment of at least $10,000,000 or, if less, the whole of the Commitment of the relevant assignor or transferor.

(e)An assignment will only be effective on:

(i)receipt by the Facility Agent of written confirmation from the New Lender (in form and substance satisfactory to the Facility Agent) that the New Lender will assume the same obligations to the other Finance Parties and the Obligors as it would have been under if it was an Original Lender and that the New Lender is a Qualifying Lender; and

(ii)performance by the Facility Agent of all “know your customer” or other checks relating to any person that it is required to carry out in relation to such assignment to a New Lender, the completion of which the Facility Agent shall promptly notify to the Existing Lender and the New Lender.

(f)A transfer will only be effective if the procedure set out in Clause 24.5 (Procedure for transfer) is complied with and, unless an Event of Default has occurred and is continuing, if the New Lender is a Qualifying Lender.

(g)If:

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(i)a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and

(ii)as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged, or at such date it is reasonably foreseeable that an Obligor would be obliged, to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 13 (Tax gross-up and indemnities) or Clause 14 (Increased Costs),

then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

(h)For so long as it is a requirement under Dutch law at the time of an assignment or transfer by way of novation that the New Lender qualifies as a PMP, a Lender may only assign or transfer by way of novation all or any of its rights, benefits and obligations hereunder to a New Lender if and to the extent that such new Lender qualifies as a PMP.

(i)For so long as it is a requirement of Dutch law that each Lender is a PMP and that the Dutch Borrower must verify the PMP status of a New Lender, a proposed New Lender which is not a Verifiable PMP shall provide the Dutch Borrower, through the Facility Agent, with information in respect of itself reasonably requested by the Dutch Borrower with a view to enabling the Dutch Borrower to verify its PMP status at least ten Business Days prior to the proposed Transfer Date or the proposed date of assignment in relation to any assignment or transfer pursuant to which it would become a New Lender hereunder.

24.3Assignment or transfer fee

The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Facility Agent (for its own account) a fee of $1,500.

24.4Limitation of responsibility of Existing Lenders

(a)Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:

(i)the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;

(ii)the financial condition of ABB or any Obligor;

(iii)the performance and observance by ABB or any Obligor of its obligations under the Finance Documents or any other documents; or

(iv)the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,

and any representations or warranties implied by law are excluded.

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(b)Each New Lender confirms to the Existing Lender and the other Finance Parties that it:

(i)has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of ABB and each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document; and

(ii)will continue to make its own independent appraisal of the creditworthiness of ABB and each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

(c)Nothing in any Finance Document obliges an Existing Lender to:

(i)accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause 24; or

(ii)support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by ABB or any Obligor of its obligations under the Finance Documents or otherwise.

24.5Procedure for transfer

(a)Subject to the conditions set out in Clause 24.2 (Conditions of assignment or transfer) a transfer is effected in accordance with paragraph (b) below when the Facility Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender.  The Facility Agent shall, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.

(b)The Facility Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender upon its completion of all “know your customer” or other checks relating to any person that it is required to carry out in relation to the transfer to such New Lender.

(c)On the Transfer Date:

(i)to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents each of ABB, the Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another shall be cancelled (being the “Discharged Rights and Obligations”);

(ii)each of ABB, the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as ABB, that

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Obligor and the New Lender have assumed and/or acquired the same in place of ABB, that Obligor and the Existing Lender;

(iii)the Facility Agent, the Mandated Lead Arrangers, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Facility Agent, the Mandated Lead Arrangers and the Existing Lender shall each be released from further obligations to each other under this Agreement; and

(iv)the New Lender shall become a Party as a “Lender”.

24.6Disclosure of information

Any Lender may disclose to any of its Affiliates and any other person:

(a)to (or through) whom that Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under this Agreement;

(b)with (or through) whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, this Agreement or any Obligor; or

(c)to whom, and to the extent that, information is required to be disclosed by any applicable law or regulation,

any information about ABB, any Obligor, the Group and the Finance Documents as that Lender shall consider appropriate if, in relation to paragraphs (a) and (b) above, the person to whom the information is to be given has entered into a confidentiality undertaking unless such person is any central bank or supranational bank in which case no confidentiality undertaking will be required.

Notwithstanding any of the provisions of the Finance Documents, the Obligors and the Finance Parties hereby agree that each Party and each employee, representative or other agent of each Party may disclose to any and all persons, without limitation of any kind, the “tax structure” and “tax treatment” (in each case within the meaning of the U.S. Treasury Regulation Section 1.6011-4) of the Facility and any materials of any kind (including opinions or other tax analyses) that are provided to any of the foregoing relating to such tax structure and tax treatment.

25.CHANGES TO THE OBLIGORS

25.1Assignments and transfer by Obligors

Neither ABB nor any Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

25.2Additional Borrowers

(a)Subject to compliance with the provisions of paragraph (c) and (d) of Clause 20.8 (Know Your Customer Checks), ABB may request by written notice that

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any of its wholly-owned Subsidiaries become an Additional Borrower.  That Subsidiary shall become an Additional Borrower if:

(i)the Subsidiary is incorporated in an Agreed Jurisdiction or all the Lenders approve the addition of that Subsidiary;

(ii)ABB delivers to the Facility Agent a duly completed and executed Accession Letter;

(iii)ABB confirms that no Default is continuing or would occur as a result of that Subsidiary becoming an Additional Borrower;

(iv)the Facility Agent has received all of the documents and other evidence listed in Part II of Schedule 2 (Additional Obligor Conditions Precedent) in relation to that Additional Borrower, each in form and substance reasonably satisfactory to the Facility Agent; and

(v)(unless it would result in the contravention of any applicable law, taking into account the jurisdiction of incorporation of the relevant Subsidiary and subject to sub-paragraph (b) of Clause 25.4 (Additional Guarantors)), the Subsidiary, prior to or at the same time as it becomes an Additional Borrower, becomes an Additional Guarantor in accordance with Clause 25.4 (Additional Guarantors).

(b)The Facility Agent shall notify ABB and the Lenders promptly upon receiving (in form and substance reasonably satisfactory to it) all the documents and other evidence listed in Part II of Schedule 2 (Additional Obligor Conditions Precedent).

25.3Resignation of a Borrower

(a)ABB may request that a Borrower ceases to be a Borrower by delivering to the Facility Agent a Resignation Letter.

(b)The Facility Agent shall accept a Resignation Letter and notify ABB and the Lenders of its acceptance if:

(i)the Majority Lenders approve the resignation of that Borrower;

(ii)no Default would result from the acceptance of the Resignation Letter (and ABB has confirmed this to be the case); and

(iii)the relevant Borrower is under no actual or contingent obligations under any Finance Documents,

whereupon that company shall cease to be a Borrower and shall have no further rights or obligations under the Finance Documents.

25.4Additional Guarantors

(a)Subject to compliance with the provisions of paragraphs (c) and (d) of Clause 20.8 (Know Your Customer Checks), ABB may request that any of its wholly-

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owned Subsidiaries become an Additional Guarantor.  That Subsidiary shall become an Additional Guarantor if:

(i)the Subsidiary is incorporated in an Agreed Jurisdiction, such accession is pursuant to Clause 22.12 (Obligor Coverage) or all the Lenders approve the addition of that Subsidiary;

(ii)ABB delivers to the Facility Agent a duly completed and executed Accession Letter;

(iii)ABB confirms that no Default is continuing or would occur as a result of that Subsidiary becoming an Additional Guarantor; and

(iv)the Facility Agent has received all of the documents and other evidence listed in Part II of Schedule 2 (Additional Obligor Conditions Precedent) in relation to that Additional Guarantor, each in form and substance reasonably satisfactory to the Facility Agent.

(b)If legal counsel in the jurisdiction of incorporation of the relevant Subsidiary so advise, ABB and the Lenders shall enter into negotiations with a view to agreeing such amendments to Clause 18 (Guarantee and Indemnity) as may be necessary to enable the Subsidiary to become an Additional Guarantor without contravening any applicable laws.

(c)The Facility Agent shall notify ABB and the Lenders promptly upon receiving (in form and substance reasonably satisfactory to it) all the documents and other evidence listed in Part II of Schedule 2 (Additional Obligor Conditions Precedent).

25.5Repetition of Representation

Delivery of an Accession Letter constitutes confirmation by the relevant Subsidiary that the representations and warranties in Clause 19.5 (Validity and Admissibility in Evidence) and the representations and warranties deemed to be repeated pursuant to Clause 19.19 (Repetition) are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.

25.6Resignation of a Guarantor

(a)ABB may request that a Guarantor ceases to be a Guarantor by delivering to the Facility Agent a Resignation Letter.

(b)Subject (and without prejudice) to paragraph (c) below, the Facility Agent shall accept a Resignation Letter and notify ABB and the Lenders of its acceptance if:

(i)no Default would result from the acceptance of the Resignation Letter (and ABB has confirmed this is the case); and

(ii)in the case of an Original Guarantor, all the Lenders have consented to ABB’s request.

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SECTION 10

THE FINANCE PARTIES

26.ROLE OF THE FACILITY AGENT AND THE MANDATED LEAD ARRANGERS

26.1Appointment of the Facility Agent

(a)Each of the Mandated Lead Arrangers and the Lenders appoints the Facility Agent to act as its agent under and in connection with the Finance Documents.

(b)Each of the Mandated Lead Arrangers and the Lenders authorises the Facility Agent to exercise the rights, powers, authorities and discretions specifically given to the Facility Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.

(c)The Facility Agent shall, unless ABB agrees otherwise, act out of an office in London.

26.2Duties of the Facility Agent

(a)The Facility Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Facility Agent for that Party by any other Party.

(b)If the Facility Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the Lenders.

(c)The Facility Agent shall promptly notify the Lenders of any Default arising under Clause 23.1 (Non-payment).

(d)The Facility Agent’s duties under the Finance Documents are solely mechanical and administrative in nature.

26.3Role of the Mandated Lead Arrangers

Except as specifically provided in the Finance Documents, the Mandated Lead Arrangers have no obligations of any kind to any other Party under or in connection with any Finance Document.

26.4No fiduciary duties

(a)Nothing in this Agreement constitutes the Facility Agent or a Mandated Lead Arranger as a trustee or fiduciary of any other person.

(b)Neither the Facility Agent nor any of the Mandated Lead Arrangers shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.

26.5Business with the Group

The Facility Agent and each Mandated Lead Arranger may accept deposits from, lend money to and generally engage in any kind of banking or other business with any of the Group Companies.

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26.6Rights and discretions of the Facility Agent

(a)The Facility Agent may rely on:

(i)any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and

(ii)any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.

(b)The Facility Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that:

(i)no Default has occurred (unless it has actual knowledge of a Default arising under Clause 23.1 (Non-payment)); and

(ii)any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised.

(c)The Facility Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.

(d)The Facility Agent may act in relation to the Finance Documents through its personnel and agents.

26.7Majority Lenders’ instructions

(a)Unless a contrary indication appears in a Finance Document, the Facility Agent shall (a) act in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from acting or exercising any right, power, authority or discretion vested in it as Facility Agent) and (b) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with such an instruction of the Majority Lenders.

(b)Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties.

(c)The Facility Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions.

(d)In the absence of instructions from the Majority Lenders, (or, if appropriate, the Lenders) the Facility Agent may act (or refrain from taking action) as it considers to be in the best interest of the Lenders.

(e)The Facility Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document.

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26.8Responsibility for documentation

Neither the Facility Agent nor any of the Mandated Lead Arrangers:

(a)is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Facility Agent, a Mandated Lead Arranger, ABB, any Obligor or any other person given in or in connection with any Finance Document or the Information Memorandum; or

(b)is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document.

26.9Exclusion of liability

(a)Without limiting paragraph (b) below, the Facility Agent will not be liable for any action taken by it under or in connection with any Finance Document, unless directly caused by its negligence, wilful default or wilful misconduct.

(b)No Party may take any proceedings against any officer, employee or agent of the Facility Agent in respect of any claim it might have against the Facility Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Facility Agent may rely on this Clause.

(c)The Facility Agent will not (absent negligence, wilful default or wilful misconduct directly giving rise to such liability) be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Facility Agent if the Facility Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Facility Agent for that purpose.

(d)Nothing in this Agreement shall oblige the Facility Agent or the Mandated Lead Arranger to carry out any “know your customer” or other checks in relation to any person on behalf of any Lender and each Lender confirms to the Facility Agent and the Mandated Lead Arrangers that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Facility Agent or the Mandated Lead Arrangers.

26.10Lenders’ indemnity to the Facility Agent

The Lenders shall (in proportion to their Commitments or, if the Total Commitments are then zero, to their Commitments immediately prior to their reduction to zero) severally indemnify the Facility Agent, within three Business Days of demand, against any cost, loss or liability incurred by the Facility Agent (otherwise than by reason of the Facility Agent’s negligence or wilful misconduct) in acting as Facility Agent under the Finance Documents (unless the Facility Agent has been reimbursed by ABB or the Obligors pursuant to a Finance Document).

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26.11Resignation of the Facility Agent

(a)The Facility Agent may resign and appoint one of its Affiliates as successor by giving notice to the Lenders and ABB provided that such successor shall act out of an office in London.

(b)Alternatively the Facility Agent may resign by giving notice to the Lenders and ABB, in which case the Majority Lenders may appoint a successor Facility Agent which will act out of an office in London.

(c)If the Majority Lenders have not appointed a successor Facility Agent in accordance with paragraph (b) above within 30 days after notice of resignation was given, the resigning Facility Agent may appoint a successor Facility Agent which will act out of an office in London.

(d)A successor Facility Agent may only be appointed with the prior consent of ABB (such consent not to be unreasonably withheld or delayed).

(e)The retiring Facility Agent shall, at its own cost, make available to the successor Facility Agent such documents and records and provide such assistance as the successor Facility Agent may reasonably request for the purposes of performing its functions as Facility Agent under the Finance Documents.

(f)Such Facility Agent’s resignation notice shall only take effect upon the appointment of a successor as contemplated in paragraphs (b) and (c) above.

(g)Upon the appointment of a successor, the retiring Facility Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 26.  Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

(h)After consultation with ABB, the Majority Lenders may, by notice to the Facility Agent, require it to resign in accordance with paragraph (b) above.  In this event, the Facility Agent shall resign in accordance with paragraph (b) above.

26.12Confidentiality

(a)In acting as agent for the Finance Parties, the Facility Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.

(b)If information is received by another division or department of the Facility Agent, it may be treated as confidential to that division or department and the Facility Agent shall not be deemed to have notice of it.

(c)Notwithstanding any other provision of any Finance Document to the contrary, neither the Facility Agent nor any Mandated Lead Arranger is obliged to disclose to any other person (i) any confidential information or (ii) any other

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information if the disclosure would or might in its reasonable opinion constitute a breach of any law or a breach of a fiduciary duty.

26.13Relationship with the Lenders

(a)The Facility Agent may treat each Lender as a Lender, entitled to payments under this Agreement and acting through its Facility Office unless it has received not less than 5 Business Days’ prior notice from that Lender to the contrary in accordance with the terms of this Agreement.

(b)Each Lender shall supply the Facility Agent with any information required by the Facility Agent in order to calculate the Mandatory Costs.

26.14Credit appraisal by the Lenders

Without affecting the responsibility of each of ABB and the Obligors for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to the Facility Agent and each Mandated Lead Arranger that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:

(a)the financial condition, status and nature of each Group Company;

(b)the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document;

(c)whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and

(d)the adequacy, accuracy and/or completeness of the Information Memorandum and any other information provided by the Facility Agent, any other Party or by any other person under or in connection with any Finance Document, a Mandated Lead Arranger the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document.

26.15Reference Banks

If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Facility Agent shall (in consultation with ABB) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.

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27.CONDUCT OF BUSINESS BY THE FINANCE PARTIES

No provision of this Agreement will:

(a)interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

(b)oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

(c)oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

28.SHARING AMONG THE LENDERS

28.1Payments to Lenders

If a Lender (a “Recovering Lender”) receives or recovers any amount from ABB or an Obligor other than in accordance with Clause 29 (Payment mechanics) and applies that amount to a payment due under the Finance Documents then:

(a)the Recovering Lender shall, within 3 Business Days, notify details of the receipt or recovery, to the Facility Agent;

(b)the Facility Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Lender would have been paid had the receipt or recovery been received or made by the Facility Agent and distributed in accordance with Clause 29 (Payment mechanics), without taking account of any Tax which would be imposed on the Facility Agent in relation to the receipt, recovery or distribution; and

(c)the Recovering Lender shall, within three Business Days of demand by the Facility Agent, pay to the Facility Agent an amount (the “Sharing Payment”) equal to such receipt or recovery less any amount which the Facility Agent determines may be retained by the Recovering Lender as its share of any payment to be made, in accordance with Clause 29.5 (Partial payments).

28.2Redistribution of payments

The Facility Agent shall treat the Sharing Payment as if it had been paid by ABB or the relevant Obligor (as the case may be) and distribute it between the Finance Parties (other than the Recovering Lender) in accordance with Clause 29.5 (Partial payments).

28.3Recovering Lender’s rights

(a)On a distribution by the Facility Agent under Clause 28.2 (Redistribution of payments), the Recovering Lender will be subrogated to the rights of the Finance Parties which have shared in the redistribution.

(b)If and to the extent that the Recovering Lender is not able to rely on its rights under paragraph (a) above, ABB or the relevant Obligor (as the case may be) shall be liable to the Recovering Lender for a debt equal to the Sharing Payment which is immediately due and payable.

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28.4Reversal of redistribution

If any part of the Sharing Payment received or recovered by a Recovering Lender becomes repayable and is repaid by that Recovering Lender, then:

(a)each Lender which has received a share of the relevant Sharing Payment pursuant to Clause 28.2 (Redistribution of payments) shall, upon request of the Facility Agent, pay to the Facility Agent for the account of that Recovering Lender an amount equal to its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Lender for its proportion of any interest on the Sharing Payment which that Recovering Lender is required to pay); and

(b)that Recovering Lender’s rights of subrogation in respect of any reimbursement shall be cancelled and ABB or the relevant Obligor (as the case may be) will be liable to the reimbursing Lender for the amount so reimbursed.

28.5Exceptions

(a)This Clause 28 shall not apply to the extent that the Recovering Lender would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against ABB or the relevant Obligor (as the case may be).

(b)A Recovering Lender is not obliged to share with any other Lender any amount which the Recovering Lender has received or recovered as a result of taking legal or arbitration proceedings, if:

(i)it notified the other Lenders of the legal or arbitration proceedings; and

(ii)the other Lender had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice or did not take separate legal or arbitration proceedings.

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SECTION 11

ADMINISTRATION

29.PAYMENT MECHANICS

29.1Payments to the Facility Agent

(a)On each date on which ABB, an Obligor or a Lender is required to make a payment under a Finance Document, ABB, such Obligor or, as the case may be, such Lender shall make the same available to the Facility Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Facility Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

(b)Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to Euro, in a principal financial centre in a Participating Member State or London) with such bank as the Facility Agent specifies.

29.2Distributions by the Facility Agent

Each payment received by the Facility Agent under the Finance Documents for another Party shall, subject to Clause 29.3 (Distributions to the Obligors) and Clause 29.4 (Clawback) be made available by the Facility Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Facility Agent by not less than 5 Business Days’ notice with a bank in the principal financial centre of the country of that currency (or, in relation to Euro, in the principal financial centre of a Participating Member State, Stockholm or London).

29.3Distributions to the Obligors

The Facility Agent may (with the consent of ABB or the relevant Obligor (as the case may be) or in accordance with Clause 30 (Set-off)) apply any amount received by it for ABB or that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from ABB or that Obligor (as the case may be) under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.

29.4Clawback

(a)Where a sum is to be paid to the Facility Agent under the Finance Documents for another Party, the Facility Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its absolute satisfaction that it has actually received that sum (and the Facility Agent shall make such due enquiry as a diligent agent would make in so establishing).

(b)If the Facility Agent pays an amount to another Party and it proves to be the case that the Facility Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Facility Agent shall on demand refund the same to the Facility

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Agent together with interest on that amount from the date of payment to the date of receipt by the Facility Agent, calculated by the Facility Agent to reflect its cost of funds.

(c)In the event that a Lender fails to make its participation in an Advance available to the Facility Agent (as defined in Clause 29.1 (Payments to the Facility Agent)) in accordance with the terms of this Agreement, such Lender hereby indemnifies the Facility Agent on demand against all costs, losses and expenses that the Facility Agent may incur as a result of such failure (including, without limitation, where the Facility Agent, at its sole option, makes arrangements to make available to the relevant Borrower an amount equal to said participation).

(d)For the purposes of paragraph (c) of this Clause 29.4, if a Lender makes its participation available to the Facility Agent after 3.00 p.m. (London time) on the due date, such participation shall be deemed to have been made available on the Business Day immediately succeeding the said due date.

29.5Partial payments

(a)If the Facility Agent receives a payment that is insufficient to discharge all the amounts then due and payable by ABB or the Obligors under the Finance Documents, the Facility Agent shall apply that payment towards the obligations of the Obligors under the Finance Documents in the following order:

(i)first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Facility Agent under the Finance Documents;

(ii)secondly, in or towards payment pro rata of any accrued interest or commission due but unpaid under this Agreement;

(iii)thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and

(iv)fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

(b)The Facility Agent shall, if so directed by the Majority Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.

(c)Paragraphs (a) and (b) above will override any appropriation made by ABB or any Obligor.

29.6No set-off by Obligors

All payments to be made by ABB or the Obligors under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

29.7Business Days

(a)Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

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(b)During any extension of the due date for payment of any principal or an Unpaid Sum under this Agreement interest is payable on the principal at the rate payable on the original due date.

29.8Currency of account

(a)Subject to paragraphs (b) to (e) below, the Base Currency is the currency of account and payment for any sum due from ABB or the Obligors under any Finance Document.

(b)A repayment of an Advance or Unpaid Sum or a part of an Advance or Unpaid Sum shall be made in the currency in which that Advance or Unpaid Sum is denominated on its due date.

(c)Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.

(d)Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

(e)Any amount expressed to be payable in a currency other than the Base Currency shall be paid in that other currency.

29.9Change of currency

(a)Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

(i)any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Facility Agent (after consultation with ABB); and

(ii)any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Facility Agent (acting reasonably).

(b)If a change in any currency of a country occurs, this Agreement will, to the extent the Facility Agent (acting reasonably and after consultation with ABB) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.

30.SET-OFF

Without prejudice to the rights at law of each Finance Party, while an Event of Default is continuing, a Finance Party may set off any matured obligation due from ABB or an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to ABB or that Obligor (as the case may be), regardless of the place of payment, booking branch or currency of

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either obligation.  If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

31.NOTICES

31.1Communications in writing

(a)Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.

(b)With the consent of the relevant Lender, the Facility Agent may serve notices and other information on a Lender by way of electronic mail.

31.2Addresses

(a)The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:

(i)in the case of the Original Obligors, that identified in Part II of Schedule 1 (The Original Obligors), with a copy to ABB and ABB Capital B.V., Zurich Branch;

(ii)in the case of ABB, that identified in Clause 31.2(b);

(iii)in the case of an Additional Obligor, that identified in the Accession Letter relating to that Additional Obligor, with a copy to ABB and ABB Capital B.V., Zurich Branch;

(iv)in the case of ABB Capital B.V., Zurich Branch, that identified in Clause 31.2(b);

(v)in the case of each Lender, that notified in writing to the Facility Agent on or prior to the date on which it becomes a Party; and

(vi)in the case of the Facility Agent, that identified in Clause 31.2(b),

or any substitute address, fax number or department or officer as the Party may notify to the Facility Agent (or the Facility Agent may notify to the other Parties, if a change is made by the Facility Agent) by not less than 5 Business Days’ notice.

(b)

(i)the Facility Agent:

Credit Suisse First Boston

1 Cabot Square

Canary Wharf

London  E14 4LB

Attn:Loans Agency

Tel:+44 20 7888 8361

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Fax:+ 44 20 7458 8204 / +44 20 7888 8398

(ii)ABB Capital B.V., Zurich Branch

Thurgauerstrasse 54

CH-8050 Zurich

Switzerland

Attn:Group Treasurer

Fax:+41 1 318 5252

Copy:Legal Department

Fax:+ 41 43 317 7992

(iii)ABB Ltd and ABB Asea Brown Boveri Ltd

Affolternstrasse 44

CH-8050 Zurich

Switzerland

Attn:Deputy CFO

Fax:+ 41 43 317 3929

Copy:Legal Department

Fax:+ 41 43 317 7992

31.3Delivery

(a)Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

(i)if by way of fax, when received in legible form; or

(ii)if by way of letter, when it has been left at the relevant address or 5 (in the case of domestic mail) or 10 (in the case of air mail) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or

(iii)if by way of electronic mail, when received.

and, if a particular department or officer is specified as part of its address details provided under Clause 31.2 (Addresses), if addressed to that department or officer, provided that if receipt is on a day that is not a working day in the country of receipt or is at a time outside normal business hours, such communication shall be effective on the next succeeding working day.

(b)Any communication or document to be made or delivered to the Facility Agent will be effective only when actually received by the Facility Agent and then only if it is expressly marked for the attention of the department or officer identified in Clause 31.2 (Addresses) (or any substitute department or officer as the Facility Agent shall specify for this purpose).

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(c)All notices from or to ABB or an Obligor shall be sent through the Facility Agent.

31.4Notification of address and fax number

Promptly upon receipt of notification of an address, fax number or change of address or fax number pursuant to Clause 31.2 (Addresses) or changing its own address or fax number, the Facility Agent shall notify the other Parties.

31.5English language

(a)Any notice given under or in connection with any Finance Document must be in English.

(b)All other documents provided under or in connection with any Finance Document must be:

(i)in English; or

(ii)if not in English, and if so required by the Facility Agent, accompanied by a certified English translation.

32.CALCULATIONS AND CERTIFICATES

32.1Accounts

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.

32.2Certificates and Determinations

Except where otherwise indicated, any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

32.3Day count convention

Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.

33.PARTIAL INVALIDITY

If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

34.REMEDIES AND WAIVERS

No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or

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the exercise of any other right or remedy.  The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

35.AMENDMENTS AND WAIVERS

35.1Required consents

(a)Subject to Clause 35.2 (Exceptions) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and ABB and any such amendment or waiver will be binding on all Parties.

(b)The Facility Agent may effect (and is hereby so authorised by each Finance Party), on behalf of any Finance Party, any amendment or waiver permitted by this Clause.

35.2Exceptions

(a)An amendment or waiver that has the effect of changing or which relates to:

(i)the definition of “Majority Lenders” in Clause 1.1 (Definitions);

(ii)an extension to the date of payment of any amount under the Finance Documents;

(iii)a reduction in the Margin or the amount of any payment of principal, interest, fees or commission payable;

(iv)an increase in or an extension of any Commitment;

(v)any provision which expressly requires the consent of all the Lenders;

(vi)Clause 2.2 (Lenders’ rights and obligations), Clause 4.1 (Initial Conditions Precedent), Clause 24 (Changes to the Lenders), Clause 25  (Changes to the Obligors), Clause 28  (Sharing among the Lenders) or this Clause 35;

(vii)any change to the Obligors other than in accordance with Clause 25  (Changes to the Obligors); or

(viii)the nature or scope of the property secured under the Agreed Form Pledges (if executed) or the manner in which the proceeds of enforcement of such security are distributed,

shall not be made without the prior consent of all the Lenders.

(b)An amendment or waiver which relates to the rights or obligations of the Facility Agent or any Mandated Lead Arranger may not be effected without the consent of the Facility Agent or such Mandated Lead Arranger.

36.COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

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SECTION 12

GOVERNING LAW AND ENFORCEMENT

37.GOVERNING LAW

This Agreement is governed by English law.

38.ENFORCEMENT

(a)The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute”).

(b)The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

(c)This Clause 38 is for the benefit of the Finance Parties only.  As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute (“Proceedings”) in any other courts with jurisdiction.

(d)If ABB Capital B.V. is represented by an attorney or attorneys in connection with the signing and/or execution and/or delivery of this Agreement or any agreement or document referred to herein or made pursuant hereto and the relevant power or powers of attorney is or are expressed to be governed by the laws of a particular jurisdiction, it is hereby expressly acknowledged and accepted by the other parties hereto that such laws shall govern the existence and extent of such attorney’s or attorneys’ authority and the effects of the exercise thereof.

(e)Service of Process

ABB and each Obligor incorporated in a jurisdiction other than England and Wales agree that the documents which start any Proceedings in England and any other documents required to be served in relation to those Proceedings may be served on ABB Limited, at 20 Bedfordbury, London, WC2N 4BL or, if different, its registered office, with a copy to ABB.  If the appointment of the person mentioned in this Clause 38(e) ceases to be effective, ABB and each Obligor shall immediately appoint another person in England to accept service of process on its behalf in England.  If ABB or any Obligor fails to do so (and such failure continues for a period of not less than fourteen days), the Facility Agent shall be entitled to appoint such a person by notice to ABB or the relevant Obligor (as the case may be).  Nothing contained herein shall restrict the right to serve process in any other manner allowed by law.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

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SCHEDULE 1
THE ORIGINAL PARTIES

Part I
The Original Lenders

Name of Lender	Commitment ($)
Barclays Bank PLC	70,833,333
Bayerische Hypo-und Vereinsbank AG	70,833,333
BNP Paribas SA	70,833,333
Citibank, N.A.	70,833,334
Commerzbank Aktiengesellschaft	70,833,333
Credit Suisse First Boston	70,833,334
Deutsche Bank Luxembourg S.A.	70,833,334
Dresdner Bank Luxembourg S.A.	70,833,334
HSBC Bank plc	70,833,333
Nordea Bank Sweden AB (publ)	70,833,333
Skandinaviska Enskilda Banken AB (publ)	70,833,333
Svenska Handelsbanken AB (publ)	70,833,333
Banco Bilbao Vizcaya Argentaria S.A.	25,000,000
CDC IXIS	25,000,000
Den norske Bank ASA	25,000,000
ING Belgium NV	25,000,000
KBC Bank NV	25,000,000
Saudi American Bank	25,000,000
Total	1,000,000,000

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Part II
The Original Obligors

Name of Borrower	Address	Jurisdiction of incorporation
ABB Capital B.V.	Burgemeester Haspelslaan 65, 5/F PO Box 74690 Amstelveen NL-1181 NB Netherlands Attention:Managing Director  Fax:+ 31 20 445 9844 Copy: Legal Department Fax: + 41 43 317 7992	Netherlands
ABB Asea Brown Boveri Ltd	Affolternstrasse 44 CH-8050 Zurich Switzerland Attention:Deputy CFO Fax:+41 43 317 3929 Copy: Legal Department Fax: +41 43 317 7992	Switzerland

Name of Guarantor	Address	Jurisdiction of Incorporation
ABB Capital B.V.	Burgemeester Haspelslaan 65, 5/F PO Box 74690 Amstelveen NL-1181 NB Netherlands Attention:Managing Director Fax:+ 31 20 445 9844 Copy: Legal Department Fax: + 41 43 317 7992	Netherlands
ABB Asea Brown Boveri Ltd	Affolternstrasse 44 CH-8050 Zurich Switzerland	Switzerland

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	Attention:Deputy CFO Fax:+41 43 317 3929 Copy: Legal Department Fax: + 41 43 317 7992
ABB Ltd	Affolternstrasse 44 CH-8050 Zurich Switzerland Attention: Deputy CFO Fax:+41 43 317 3929 Copy: Legal Department Fax: +41 43 317 7992	Switzerland

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SCHEDULE 2
CONDITIONS PRECEDENT

Part I
Conditions Precedent to initial Utilisation

1.Corporate Documents

(a)A copy of the constitutional documents of each Obligor.

(b)A copy of a resolution of the board of directors of each Obligor (if applicable) or, in the case of the Dutch Obligors, a copy of a resolution of the board of managing directors (directie) or, in the case of ABB, a copy of an excerpt of the minutes of the board of directors of ABB:

(i)approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;

(ii)authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and

(iii)authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, any Utilisation Request) to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party.

(c)A copy of the Shareholders resolutions of the Dutch Obligor in form and substance reasonably satisfactory to the Facility Agent.

(d)A copy of a shareholders resolution of ABB Asea Brown Boveri Ltd.

(e)A specimen of the signature of each person authorised by the resolution referred to in paragraph (b) above.

(f)A certificate of each Obligor (signed without personal liability by an authorised signatory of each Obligor) confirming that borrowing or guaranteeing, as appropriate, the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on that relevant Obligor to be exceeded.

(g)A certificate of an authorised signatory of the relevant Obligor, certifying without personal liability that each copy document relating to it specified in paragraph 1 (a) - (f) of this Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.

(h)The group structure chart signed for the purposes of identification by an authorised signatory (without personal liability) of the Group.

2.Agreed Form Security Documents

If the sale of the Oil, Gas & Petrochemical Division (Upstream) has not completed:

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(a)a copy of each of the Agreed Form Pledges and the Agreed Form Trust Deed duly executed by each relevant Obligor;

(b)a copy of the constitutional documents of each Group Company entering into an Agreed Form Pledge;

(c)a copy of a resolution of the board of directors of each Group Company entering into an Agreed Form Pledge and/or the Agreed Form Trust Deed:

(i)approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;

(ii)authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and

(iii)authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party;

(d)a copy of a shareholder’s resolution of ABB Holding AG;

(e)a specimen of the signature of each person authorised by the resolution referred to in paragraph (b) above;

(f)a certificate of an authorised signatory of the relevant Group Company certifying without personal liability that each copy document relating to it specified in paragraph 2(b)-(e) of this Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement;

(g)a legal opinion of Clifford Chance LLP, New York, US counsel to the Mandated Lead Arrangers, substantially in the form distributed to the Original Lenders prior to signing this Agreement;

(h)a legal opinion of Wikborg, Rein & Co, Norwegian counsel to the Mandated Lead Arrangers, substantially in the form distributed to the Original Lenders prior to signing this Agreement;

(i)a legal opinion of Baker & McKenzie, Swiss counsel to the Mandated Lead Arrangers, substantially in the form distributed to the Original Lenders prior to signing this Agreement;

(j)with respect to a pledgor in respect of a security interest granted in the shares of a Group Company incorporated in the United States of America, all share certificates, stock transfer forms duly executed in blank in relation to the shares, a copy of the register of members and constitutional documents of each member of the Group whose shares are expressed to be the subject to Security;

(k)With respect to the pledgor in respect of a security interest granted in the shares of a Group Company incorporated in Norway:

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(i)a notice addressed to that Group Company that its shares have been made subject to a security interest in favour of the Secured Parties in the form prescribed in the Security Document relating to the pledge of such shares and executed by authorised signatories of the pledgor; and

(ii)with respect to any recipient of a notice pursuant to sub-paragraph (i) above, acknowledgement by its authorised signatories of receipt of the notice referred to in (i) above together with evidence that the security interest has been noted in the register of shareholders of such Group Company; and

(iii)a power of attorney in favour of the Trustee in the form prescribed in the Security Document relating to the pledge of such shares executed by the authorised signatories of the pledgor.

Provided that if two authorised signatories of ABB certify in writing to the Lenders that ABB has received gross cash proceeds from Project Phoenix, a proposed bond issue (which will be unsecured and have a maturity on or beyond 1 January 2008 and which may include a tap issue) and/or asset sales in an amount equal to at least $3,000,000,000 and the gross cash proceeds of Project Phoenix and the asset sales equals at least $2,250,000,000 (of which the amount of the proceeds from asset sales cannot exceed $250,000,000), then nothing shall be required under this paragraph 2.

3.Legal Opinions

(a)A legal opinion of Clifford Chance LLP legal advisers to the Mandated Lead Arrangers and the Facility Agent in England, substantially in the form distributed to the Original Lenders prior to signing this Agreement.

(b)If an Obligor is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Mandated Lead Arranger and the Facility Agent in the Relevant Jurisdiction, substantially in the form distributed to the Original Lenders prior to signing this Agreement.

4.Other documents and evidence

(a)Repayment and cancellation in full of the Existing Credit Facility.

(b)The Fee Letters executed on behalf of ABB.

(c)Evidence that any process agent referred to in Clause 38(e) (Service of process), if not an Obligor, has accepted its appointment.

(d)The Original Financial Statements of each Obligor.

(e)The Business Plan in form and substance reasonably satisfactory to the Lenders.

(f)The Original Liquidity Plan in form and substance reasonably satisfactory to the Lenders.

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(g)Evidence that the fees, costs and expenses then due from ABB pursuant to Clause 12 (Fees), Clause 17 (Costs and Expenses) and Clause 13.6 (Stamp Taxes) have been paid or will be paid by the first Utilisation Date.

(h)Completion of Project Phoenix raising a gross amount of at least SFR 2,300,000,000 (approximately $1,750,000,000).

(i)The receipt by ABB of gross proceeds (excluding the amount of any deferred payment) from the sale of the Oil, Gas & Petrochemical Division and/or the gross proceeds from Project Phoenix and/or the gross proceeds of a proposed bond issue (which will be unsecured and have a maturity on or beyond 1 January 2008, and which may include a tap issue) and/or the gross proceeds of any other disposals (excluding the Oil, Gas & Petrochemical Division) made after the date of this Agreement (up to a maximum aggregate amount of $250,000,000) providing ABB with, in aggregate, gross cash proceeds in an amount of at least SFR 3,250,000,000.

In this Schedule, “Project Phoenix” means the share capital increase of ABB announced on 28 October 2003.

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Part IIAdditional Obligor Conditions Precedent

1.An Accession Letter, duly executed by the Additional Obligor and ABB.

2.A copy of the constitutional documents of the Additional Obligor.

3.A copy of a resolution of the board of directors, or other suitable authority, of the Additional Obligor:

(a)approving the terms of, and the transactions contemplated by, the Accession Letter and the Finance Documents and resolving that it execute the Accession Letter;

(b)authorising a specified person or persons to execute the Accession Letter on its behalf; and

(c)authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices (including any Utilisation Request) to be signed and/or despatched by it under or in connection with the Finance Documents.

4.If required under applicable law, a copy of a resolution of the Additional Obligor as Guarantor stating that the shareholders resolve and approve the entering into, and the terms and conditions of, this Agreement, in particular, in relation to any Additional Obligor incorporated in Switzerland that is acceding as a Guarantor, the guarantee to be provided by such Additional Obligor as Guarantor for the purpose of securing the prompt and complete satisfaction of all present and future conditional and unconditional claims of the Finance Parties against any member of the Group other than such Additional Obligor as Guarantor and its wholly owned subsidiaries arising from time to time out of the Finance Documents.

5.A specimen of the signature of each person authorised by the resolution referred to in paragraph 3 above.

6.A certificate of the Additional Obligor (signed by two duly authorised signatories) confirming that borrowing or guaranteeing (as the case may be) the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on it to be exceeded.

7.A certificate of an authorised signatory of the Additional Obligor certifying that each copy document listed in this Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Accession Letter.

8.A copy of any other Authorisation or other document, opinion or assurance which the Facility Agent reasonably considers to be necessary in connection with the entry into and performance of the transactions contemplated by the Accession Letter or for the validity and enforceability of any Finance Document.

9.If available, the latest audited financial statements of the Additional Obligor.

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10.A legal opinion of Clifford Chance Limited Liability Partnership, legal advisers to the Mandated Lead Arrangers and the Facility Agent in England.

11.If the Additional Obligor is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Mandated Lead Arrangers and the Facility Agent in the jurisdiction in which the Additional Obligor is incorporated.

12.If the proposed Additional Obligor is incorporated in a jurisdiction other than England and Wales, evidence that the process agent specified in Clause 38(e) (Service of process), if not an Obligor, has accepted its appointment in relation to the proposed Additional Obligor.

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SCHEDULE 3
UTILISATION REQUEST

From:[Name of Borrower]

To:Credit Suisse First Boston as Facility Agent

Dated:[•]

Dear Sirs

ABB Ltd – $1,000,000,000 Credit Agreement dated [•]
(the “Credit Agreement”)

1.Words and expressions defined in the Credit Agreement have the same meaning when used herein.

2.We wish to borrow an Advance on the following terms:

Proposed Utilisation Date:	[ • ] (or, if that is not a Business Day, the next Business Day)
Currency of Advance:	[ • ]
Amount:	[ • ]
Interest Period:	[ • ]

3.We confirm that each condition specified in Clause 4.1 (Initial Conditions Precedent) is satisfied on the date of this Utilisation Request.

4.The proceeds of this Advance should be credited to [account].

5.This Utilisation Request is irrevocable.

Yours faithfully

authorised signatory for

[Name of Borrower]

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SCHEDULE 4
THE MARGIN AND UTILISATION FEE

Margin and Utilisation Fee (basis points per annum)
	CREDIT RATING OF ABB LTD
	BBB/Baa2 or higher	BBB-/Baa3	BB+/Ba1	BB/Ba2	BB-/Ba3 or lower
Margin	80	110	145	185	225
Utilisation(1) Fee	12.5	12.5	25	25	50
Utilisation(2) Fee	25	25	50	50	75

Any adjustment to the Margin or Utilisation Fee will apply from:

(i)the date of publication of any relevant change to the Credit Rating of ABB; and/or

(ii)the date on which a Credit Rating ceases to be assigned to ABB by either S&P or Moody’s.

(1)Each day upon which Outstandings equal or exceed 33% of the Total Commitments and are less than 66% of the Total Commitments.

(2)Each day upon which Outstandings equal or exceed 66% of the Total Commitments.

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SCHEDULE 5
FORM OF TRANSFER CERTIFICATE

To:Credit Suisse First Boston as Facility Agent

From:[The Existing Lender] (the “Existing Lender”) and [The New Lender] (the “New Lender”)

Dated:

ABB Ltd – $1,000,000,000 Credit Agreement dated [•]
(the “Credit Agreement”)

1.Words and expressions defined in the Credit Agreement have the same meaning when used herein.

2.We refer to Clause 24.5 (Procedure for transfer) of the Credit Agreement:

(a)The Existing Lender and the New Lender agree to the Existing Lender and the New Lender transferring by novation all or part of the Existing Lender’s Commitment, rights and obligations referred to in the Schedule in accordance with Clause 24.5 (Procedure for transfer).

(b)The proposed Transfer Date is [            ].

(c)The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 31.2 (Addresses) are set out in the Schedule.

3.The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 24.4 (Limitation of responsibility of Existing Lenders).

4.The New Lender confirms on the Transfer Date that it is a PMP.

5.This Transfer Certificate is governed by English law.

THE SCHEDULE

Commitment/rights and obligations to be transferred

[insert relevant details]
[Facility Office address, fax number and attention details for notices and account details for payments,]

[Existing Lender]	[New Lender]
By:	By:

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This Transfer Certificate is accepted by the Facility Agent and the Transfer Date is confirmed as [           ].

[Facility Agent]

By:

(1)Only to be included if it is a requirement under Dutch law at the time of such assignment or transfer, that the New Lender qualifies as a PMP.

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SCHEDULE 6
TIMETABLES

	Advances in Euro	Advances in Dollars	Advances in Sterling	Advances in other currencies
Delivery of a duly completed Utilisation Request in accordance with Clause 5.1 (Delivery of a Utilisation Request)	10 a.m. London time, 3 Business Days prior to the proposed Utilisation Date	11 a.m. London time, 3 Business Days prior to the proposed Utilisation Date	11 a.m. London time, 1 Business Day prior to the proposed Utilisation Date	11 a.m. London time, 3 Business Days prior to the proposed Utilisation Date
Facility Agent determines (in relation to a Utilisation) the Base Currency Amount of the Advance, if required under Clause 5.4 (Lenders’ participation)	11 a.m. London time, 3 Business Days prior to the proposed Utilisation Date	N/A	11 a.m. London time, 1 Business Day prior to the proposed Utilisation Date	11 a.m. London time, 3 Business Days prior to the proposed Utilisation Date
Facility Agent notifies the Lenders of the Advance in accordance with Clause 5.4 (Lenders’ participation)	Promptly upon receipt from the relevant Borrower	Promptly upon receipt from the relevant Borrower	Promptly upon receipt from the relevant Borrower	Promptly upon receipt from the relevant Borrower
Facility Agent receives a notification from a Lender under Clause 6.2 (Unavailability of a currency)	N/A	N/A	N/A	Quotation Day as of 9 a.m. London time

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	Advances in Euro	Advances in Dollars	Advances in Sterling	Advances in other currencies
Facility Agent gives notice in accordance with Clause 6.2 (Unavailability of a currency)	N/A	N/A	N/A	Upon receipt of notification from the Lenders
LIBOR or EURIBOR is fixed	Quotation Day as of 11.00 a.m. Brussels time	Quotation Day as of 11.00 a.m. London time	Quotation Day as of 11.00 a.m. London time	Quotation Day as of 11. 00 a.m. London time

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SCHEDULE 7
FORM OF ACCESSION LETTER

To:Credit Suisse First Boston as Facility Agent

From:[Subsidiary] and ABB Ltd

Dated:[ • ]

Dear Sirs

ABB Ltd – $1,000,000,000 Revolving Credit Agreement dated [•]
(the “Agreement”)

1.We refer to the Agreement.  This is an Accession Letter.  Terms defined in the Agreement have the same meaning in this Accession Letter unless given a different meaning in this Accession Letter.

2.[Subsidiary] agrees to become an [Additional Borrower]/[Additional Guarantor] and to be bound by the terms of the Agreement as an [Additional Borrower]/[ Additional Guarantor] pursuant to [Clause 25.2 (Additional Borrowers)]/[Clause 25.4 (Additional Guarantors)] of the Agreement.

3.[Subsidiary] is a company duly incorporated under the laws of [name of relevant jurisdiction].

4.[Subsidiary] is a Subsidiary of ABB Ltd.

5.[Subsidiary’s] administrative details are as follows:

Address:

Fax No:

Attention:

6.This Accession Letter is governed by English law.

[This Guarantor Accession Letter is entered into by deed].

ABB Ltd	[Subsidiary]
By:	By:

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SCHEDULE 8
FORM OF RESIGNATION LETTER

To:Credit Suisse First Boston as Facility Agent

From:[resigning Obligor] and ABB Ltd

Dated:[ • ]

Dear Sirs

ABB Ltd – $1,000,000,000 Revolving Credit Agreement dated [•]
(the “Agreement”)

1.We refer to the Agreement.  This is a Resignation Letter.  Terms defined in the Agreement have the same meaning in this Resignation Letter unless given a different meaning in this Resignation Letter.

2.Pursuant to [Clause 25.3 (Resignation of a Borrower)]/[Clause 25.6 (Resignation of a Guarantor)], we request that [resigning Obligor] be released from its obligations as a [Borrower]/[Guarantor] under the Agreement.

3.We confirm that:

(a)no Default would result from the acceptance of this request; and

(b)[resigning Obligor] is under no actual or contingent liability under the Agreement.

4.This Resignation Letter is governed by English law.

ABB Ltd	[Subsidiary]
By:	By:

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SCHEDULE 9
MANDATORY COSTS

The Mandatory Costs is an addition to the interest rate on an Advance denominated in Sterling to compensate the Lenders for the cost attributable to such Advance resulting from the imposition from time to time under or pursuant to the Bank of England Act 1998 (the “BoE Act”) of a requirement to place non-interest-bearing or Special Deposits (whether interest bearing or not) with the Bank of England calculated by reference to liabilities used to fund the Advance.

The Mandatory Costs shall be the rate determined by the Facility Agent to be equal to the arithmetic mean (rounded upward, if necessary, to 4 decimal places) of the respective rates notified by each Reference Bank to the Facility Agent as the rate resulting from the application (as appropriate) of the following formulae:

XL + S(L - D)
100 - (X + S)

where on the day of application of a formula:

Xis the percentage of Eligible Liabilities (in excess of any stated minimum) by reference to which that Reference Bank is required under or pursuant to the BoE Act to maintain cash ratio deposits with the Bank of England;

Lis LIBOR applicable to the relevant Advance;

Sis the level of interest bearing Special Deposits, expressed as a percentage of Eligible Liabilities, which that Reference Bank is required to maintain by the Bank of England (or other United Kingdom governmental authorities or agencies); and

Dis the percentage rate per annum payable by the Bank of England to that Reference Bank on Special Deposits.

(X, L, S and D shall be expressed in the formula as numbers and not as percentages, e.g. if X = 0.15% and L = 7%, XL will be calculated as 0.15 x 7 and not as 0.15% x 7%.  A negative result obtained from subtracting D from L shall be counted as zero.)

If any Reference Bank fails to notify any such rate to the Facility Agent, the Mandatory Costs shall be determined on the basis of the rate(s) notified to the Facility Agent by the remaining Reference Bank(s).

The Mandatory Costs attributable to an Advance or other sum for any period shall be calculated at or about 11.00 a.m. on the first day of that period for the duration of that period.

The determination of the Mandatory Costs in relation to any period shall, in the absence of manifest error, be conclusive and binding on the Parties.

If there is any change in circumstance (including the imposition of alternative or additional requirements) which in the reasonable opinion of the Facility Agent renders or will render the above formula (or any element of the formula, or any defined term used in the formula) inappropriate or inapplicable, the Facility Agent (following consultation with ABB and the

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Majority Lenders) shall be entitled to vary the same by giving notice to the Parties.  Any such variation shall, in the absence of manifest error, be conclusive and binding on the Parties and shall apply from the date specified in such notice.

For the purposes of this Schedule, Eligible Liabilities and Special Deposits have the meanings given to those terms under or pursuant to the BoE Act or by the Bank of England (as may be appropriate), on the day of the application of the formula.

103

SCHEDULE 10MATERIAL SUBSIDIARIES

Company Name	Jurisdiction	ABB Interest (%)
ABB Finance B.V.	Netherlands	100
ABB Capital B.V.	Netherlands	100
ABB International Finance Limited	Guernsey	100
ABB Finance Inc.	United States	100
ABB Holdings Inc.	United States	100
ABB AG	Germany	100
ABB AB	Sweden	100
ABB S.p.A.	Italy	100
ABB Schweiz Holding AG	Switzerland	100
ABB Financial Services AB	Sweden	100
ABB Treasury Center (Asia Pacific) Pte. Ltd	Singapore	100
ABB Financial Services Australia Limited	Australia	100
ABB Treasury Center (USA) Inc.	United States	100
ABB Vetco Gray Inc.	United States	100
ABB Offshore Systems AS	Norway	100
ABB Oy	Finland	100
ABB Ltd.	England	100
ABB Holding AS	Norway	100
ABB S.A.	France	100
Asea Brown Boveri S.A.	Spain	100
ABB (China) Ltd	China	100
ABB Australia Pty Limited	Australia	100
Sirius International Försakrings AB (publ)	Sweden	100

104

Company Name	Jurisdiction	ABB Interest (%)
ABB Inc.	United States	100
ABB Ltda.	Brazil	100

105

SCHEDULE 11
FORM OF COVENANT COMPLIANCE CERTIFICATE

To:Credit Suisse First Boston as Facility Agent

From:ABB Ltd

Dated:

Dear Sirs

ABB Ltd $1,000,000,000 Multicurrency Revolving Credit Agreement dated [•] (the “Agreement”)

We refer to the Agreement.  This is a Covenant Compliance Certificate delivered with the consolidated accounts of ABB dated [31 March, 30 June, 30 September] [2003] (the “Reference Date”).  Terms defined in the Agreement have the same meaning when used in this Covenant Compliance Certificate unless given a different meaning.

We confirm that:

(a)EBITDA: Total Gross Interest

In respect of the Relevant Period ending on the Reference Date:

(i)EBITDA was [     ].

(ii)Total Gross Interest was [     ].

Therefore the ratio of EBITDA to Total Gross Interest in respect of such period was [    ] : [    ] and the covenant contained in paragraph 21.2(a) of Clause 21 (Financial Covenants) [has/has not] been complied with.

(b)Net Debt of the Group

(i)Short-term borrowings of the Group on the Reference Date were [     ].

(ii)Long Term Borrowings of the Group on the Reference Date were [     ].

(iii)Cash available in group treasury operations and disclosed (prior to the Trigger Date) in the Liquidity Plan and the reconciliation to balance sheet cash as disclosed in the quarterly compliance certificate was [•].

(iv)Total Gross Debt was [           ].

Therefore the ratio of Net Debt to EBITDA in respect of such period was [   ]:[   ] and the covenant contained in paragraph 21.2(b) of Clause 21 (Financial Covenants) [has/has not] been complied with.

(c)Consolidated Net Worth

(i)Consolidated Net Worth on the Reference Date was [     ].

106

(ii)Cumulative Consolidated Net Income of the Group from [date] to the reference Date was [     ].

Accordingly the calculation set out in clause 20.2(c) is as follows:

$3,000,000,000 + [insert 50% of consolidated net income figure or 0 if that figure is negative] = zero

Therefore Consolidated Net Worth on the Reference Date was at least [     ] and the covenant contained in paragraph 21.2(c) of Clause 21 (Financial Covenants) [has/has not] been complied with.

(d)Total Gross Debt of the Group excluding the Obligor Group

The aggregate amount of Total Gross Debt of Group Companies that are not members of the Obligor Group (excluding items set out in paragraphs (i) to (v) of paragraph 21.3 of Clause 21 (Financial Covenants)) [has/has not] since the date of the Credit Agreement exceeded $1,000,000,000.

Officer of ABB Ltd	Officer of ABB Ltd
(without personal liability)	(without personal liability)

107

SIGNATURES

The Original Borrowers

ABB CAPITAL B.V.

By:  PATRICK KRAHENBUHL      BRIAN VAN REIJN

ABB ASEA BROWN BOVERI LTD

By:     ANN LARSSON       ALEX HALL

The Original Guarantors

ABB LTD

By:      ALFRED STORCK    URS ARNOLD

ABB CAPITAL B.V.

By:      PATRICK KRAHENBUHL        BRIAN VAN REIJN

ABB ASEA BROWN BOVERI LTD

By:      ANN LARSSON       ALEX HALL

The Mandated Lead Arrangers

BARCLAYS CAPITAL

By:        TIM AUSTRUP

BAYERISCHE HYPO-UND VEREINSBANK AG

By:        FRANK SCHMIDT       THOMAS PENTENRIEDER

BNP PARIBAS

By:         LIONEL BORDARIER     CHRISTIAN LEROY

108

CITIGROUP GLOBAL MARKETS LIMITED

By:        CAMILO MORI

COMMERZBANK AKTIENGESELLSCHAFT

By:        MARTINA BOLLER        AXEL RICHEBAECHER

CREDIT SUISSE FIRST BOSTON

By:         THOMAS MUOIO        MARK WALSH

DEUTSCHE BANK AG

By:        MATTHIAS GAAB        KARL-HEINZ HERWECK

DRESDNER KLEINWORT WASSERSTEIN

By:        ANDREAS SCHEER        MATTHIAS WITTENBURG

HSBC BANK PLC

By:        PER OLOV SYNNEMAR        JAN-CARL DE GEER

NORDEA BANK SWEDEN AB (PUBL)

By:       ARNE LJUNG              BIRGITTA HOOG

SEB MERCHANT BANKING, SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)

By:       MICHAEL DICKS

SVENSKA HANDELSBANKEN AB (PUBL)

By:     HELENA LIND SCHOGARNE

The Arrangers

109

BANCO BILBAO VIZCAYA ARGENTARIA S.A.

By:   CHRIS METHERELL       PAUL GRAHAM

CDC IXIS

By:       FLORENCE SOULE DE LAFONT        HENRI MALICK

DEN NORSKE BANK ASA

By:      SIGURD KAYSER        KRISTI BIRKELAND

ING BELGIUM NV

By:      NICK SMIT       YVES ADLER

KBC BANK NV

By:      HERLINDA WOUTERS        ADRIAAN LOEFF

SAUDI AMERICAN BANK

By:      SYED HASAN ALI

The Facility Agent

CREDIT SUISSE FIRST BOSTON

By:      THOMAS MUOIO        MARK WALSH

The Lenders

BARCLAYS BANK PLC

By:        TIM AUSTRUP

BAYERISCHE HYPO-UND VERINSBANK AG

By:        FRANK SCHMIDT       THOMAS PENTENRIEDER

110

BNP PARIBAS SA

By:        LIONEL BORDARIER     CHRISTIAN LEROY

CITIBANK, N.A.

By:        CAMILO MORI

COMMERZBANK AKTIENGESELLSCHAFT

By:        MARTINA BOLLER        AXEL RICHEBAECHER

CREDIT SUISSE FIRST BOSTON

By:        THOMAS MUOIO        MARK WALSH

DEUTSCHE BANK LUXEMBOURG S.A.

By:        ASTRID SCHNEIDER        STEPHANIE SCHREINER

DRESDNER BANK LUXEMBOURG S.A.

By:        ANDREAS SCHEER        MATTHIAS WITTENBURG

HSBC BANK PLC

By:        PER OLOV SYNNEMAR        JAN-CARL DE GEER

NORDEA BANK SWEDEN AB (PUBL)

By:       ARNE LJUNG              BIRGITTA HOOG

SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)

By:        MICHAEL DICKS

111

SVENSKA HANDELSBANKEN AB (PUBL)

By:        HELENA LIND SCHOGARNE

BANCO BILBAO VIZCAYA ARGENTARIA S.A.

By:       CHRIS METHERELL           PAUL GRAHAM

CDC IXIS

By:       FLORENCE SOULE DE LAFONT             HENRI MALICK

DEN NORSKE BANK ASA

By:       SIGURD KAYSER           KRISTI BIRKELAND

ING BELGIUM NV

By:       NICK SMIT          YVES ADLER

KBC BANK NV

By:       HERLINDA WOUTERS             ADRIAAN LOEFF

SAUDI AMERICAN BANK

By:       SYED HASAN ALI

112

EX-4.6

Exhibit 4.6

CONFORMED COPY

STOCK AND ASSET PURCHASE AGREEMENT

between

ABB HANDELS- UND VERWALTUNGS AG

and

LARADEW LIMITED

DATED AS OF JANUARY 16, 2004

TABLE OF CONTENTS

ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01.	Defined Terms
SECTION 1.02.	Interpretation
ARTICLE II
PURCHASE AND SALE
SECTION 2.01.	Purchase and Sale of the Shares
SECTION 2.02.	Purchase and Sale of the Purchased Assets
SECTION 2.03.	Assumption and Exclusion of Liabilities
SECTION 2.04.	Purchase Price
SECTION 2.05.	Closing
SECTION 2.06.	Deferred Closings
SECTION 2.07.	Closing Deliveries by Purchaser
SECTION 2.08.	Closing Deliveries by ABB
SECTION 2.09.	Pre-Closing Adjustment; Estimated Effective Date Net Assets; Intercompany Settlement Payment
SECTION 2.10.	Post-Closing Adjustment
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ABB
SECTION 3.01.	Organization and Authority of ABB and the Sellers
SECTION 3.02.	Organization and Authority of the OGP Subsidiaries; Capital Stock of the OGP Subsidiaries; Ownership of the Shares
SECTION 3.03.	No Conflict
SECTION 3.04.	Consents and Approvals
SECTION 3.05.	Financial Information
SECTION 3.06.	Conduct of the OGP Business in the Ordinary Course; Absence of Certain Changes, Events and Conditions
SECTION 3.07.	Compliance with Laws
SECTION 3.08.	Litigation
SECTION 3.09.	Material Contracts
SECTION 3.10.	Intellectual Property
SECTION 3.11.	Real Property

i

SECTION 3.12.	Taxes
SECTION 3.13.	Employee Benefit Matters
SECTION 3.14.	Labor Matters
SECTION 3.15.	Environmental Matters
SECTION 3.16.	Assets
SECTION 3.17.	Insurance
SECTION 3.18.	Brokers
SECTION 3.19.	Inventory
SECTION 3.20.	Constitution; Registers; Powers of Attorney
SECTION 3.21.	Related Party Transactions
SECTION 3.22.	Insolvency; Winding Up
SECTION 3.23.	Guarantees
SECTION 3.24.	No Other Representations
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 4.01.	Organization and Authority of Purchaser and the OGP Purchasers
SECTION 4.02.	No Conflict
SECTION 4.03.	Consents and Approvals
SECTION 4.04.	Investment Purpose
SECTION 4.05.	Litigation
SECTION 4.06.	Financing
SECTION 4.07.	Brokers
SECTION 4.08.	No Other Representations
ARTICLE V
COVENANTS AND AGREEMENTS
SECTION 5.01.	Reorganization
SECTION 5.02.	Related Agreements
SECTION 5.03.	Conduct of the Business Prior to the Closing
SECTION 5.04.	Access to Information; Books and Records; Monthly Review Protocol
SECTION 5.05.	Confidentiality
SECTION 5.06.	Regulatory Authorizations; Notices and Consents
SECTION 5.07.	Retained Names and Marks
SECTION 5.08.	Guarantees
SECTION 5.09.	Third Party Consents
SECTION 5.10.	Termination of Certain Existing Intercompany Contracts and Arrangements
SECTION 5.11.	Discharge of Directors and Related Matters
SECTION 5.12.	Insurance

ii

SECTION 5.13.	Certain Contracts
SECTION 5.14.	Transaction Financing
SECTION 5.15.	Notification
SECTION 5.16.	Other Bidders
SECTION 5.17.	Further Action
SECTION 5.18.	Misplaced Assets
SECTION 5.19.	Information and Funds Received Covenants
SECTION 5.20.	Perfection of Intellectual Property Assignments
SECTION 5.21.	Grayloc Note
SECTION 5.22.	Shared Real Property
SECTION 5.23.	Derivatives
SECTION 5.24.	Migration Plan
SECTION 5.25.	Software Matters
SECTION 5.26.	Waiver of Termination Rights Under Norwegian Leases
SECTION 5.27.	Amendments to Subleases at Briarpark, Houston, Texas
SECTION 5.28.	Non-Competition Agreement Payment
SECTION 5.29.	Brazilian Reorganization
SECTION 5.30.	Certain Purchaser Reimbursement Obligations
SECTION 5.31.	Sao Paulo Property
SECTION 5.32.	Norwegian Debt
SECTION 5.33.	Angolan Property
SECTION 5.34.	Compliance Review
SECTION 5.35.	No Solicitation of Transactions
SECTION 5.36.	Kizomba B Matter
SECTION 5.37.	Purchaser Financing Documents
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01.	Collective Bargaining Agreements
SECTION 6.02.	Service Recognition
SECTION 6.03.	Purchaser Welfare Benefit Plans
SECTION 6.04.	Assumed Obligations
SECTION 6.05.	U.S. Employee Plans
SECTION 6.06.	Non-U.S. Retirement Plans
SECTION 6.07.	Post-Retirement Health and Welfare Benefits
SECTION 6.08.	Vesting of Benefits Under Certain Employee Plans
SECTION 6.09.	Continued Employment of Transferred Employees
SECTION 6.10.	Purchase Price Adjustment for Unfunded Benefit Liabilities
SECTION 6.11.	Cooperation

iii

ARTICLE VII
TAX MATTERS
SECTION 7.01.	Indemnity
SECTION 7.02.	Preparation of Tax Returns
SECTION 7.03.	Refunds
SECTION 7.04.	Contests
SECTION 7.05.	Cooperation and Exchange of Information
SECTION 7.06.	Conveyance Taxes
SECTION 7.07.	Tax Covenants
SECTION 7.08.	Elections
SECTION 7.09.	Miscellaneous
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01.	Conditions to the Parties’ Obligations
SECTION 8.02.	Additional Conditions to Obligations of ABB
SECTION 8.03.	Additional Conditions to the Obligations of Purchaser
SECTION 8.04.	Additional Conditions to the Consummation of Certain Transactions
ARTICLE IX
INDEMNIFICATION
SECTION 9.01.	Survival of Representations and Warranties
SECTION 9.02.	Indemnification by Purchaser
SECTION 9.03.	Indemnification by ABB
SECTION 9.04.	Indemnification Procedures
SECTION 9.05.	Environmental Remediation
SECTION 9.06.	Certain Projects Relating to the Business
SECTION 9.07.	Additional Indemnification Provisions; Exclusive Remedies
SECTION 9.08.	Certain Procedures Governing the Bank Guarantees
SECTION 9.09.	Interest
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01.	Termination
SECTION 10.02.	Effect of Termination
SECTION 10.03.	Waiver
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01.	Expenses

iv

SECTION 11.02.	Notices
SECTION 11.03.	Public Announcements
SECTION 11.04.	Severability
SECTION 11.05.	Entire Agreement
SECTION 11.06.	Assignment
SECTION 11.07.	No Third Party Beneficiaries
SECTION 11.08.	Amendment
SECTION 11.09.	Specific Performance
SECTION 11.10.	Currency
SECTION 11.11.	Governing Law
SECTION 11.12.	Arbitration
SECTION 11.13.	Default Judgment Claim
SECTION 11.14.	Waivers.
SECTION 11.15.	Counterparts

EXHIBITS
Exhibit A	-	Defined Terms
Exhibit B-1	-	Transaction Information
Exhibit B-2	-	Asset Sellers
Exhibit C	-	Purchase Price and Non-Competition Agreement Allocation
Exhibit D	-	Form of Transition Services Agreement
Exhibit E	-	Closing Accounting Principles
Exhibit F-1	-	Form of Local Share Sale and Purchase Agreement
Exhibit F-2	-	Form of Local Asset Sale and Purchase Agreement
Exhibit G	-	Form of Non-Competition Agreement
Exhibit H	-	Form of Shared IP License Agreement
Exhibit I	-	Form of Surety
Exhibit J-1	-	Form of Adjustment and Indemnity Bank Guarantee
Exhibit J-2	-	Form of Repayment Bank Guarantee
Exhibit J-3	-	Form of Tax Election Bank Guarantee
Exhibit K	-	Form of Deferred Transfer Agreement
Exhibit L	-	List of Included Transactions
Exhibit M	-	Additional Approvals
Exhibit N	-	Form of Director Resignation Letter
Exhibit O	-	Form of Patent Assignments
Exhibit P	-	Pension
Exhibit Q	-	Pension Obligation Purchase Price Adjustment Assumptions
Exhibit R	-	Form of Swiss Legal Opinion
Exhibit S-1	-	Deferred Consideration Provisions
Exhibit S-2	-	Deferred Consideration Accounting Principles
Exhibit S-3	-	Certain OGP EBITDA Principles
Exhibit T	-	Terms of Compliance Review
Exhibit U	-	Form of Capital Modernization Program Payoff Letter
Exhibit V	-	Form of Norway Securitization Program Termination Letter
Exhibit W	-	Monthly Review Protocol

v

STOCK AND ASSET PURCHASE AGREEMENT, dated as of January 16, 2004, between ABB Handels- und Verwaltungs AG, a company incorporated under the laws of Switzerland (“ABB”), and Laradew Limited (registered number 4765054), a company incorporated under the laws of England and Wales (“Purchaser”).

PRELIMINARY STATEMENTS

1.Affiliates of ABB listed in column 1 of Exhibit B-1 (each such Affiliate being a “Share Seller”; and, collectively, the “Share Sellers”) own, or will own at the Closing, all of the issued and outstanding shares (the “Shares”) of the companies (the “Seller Subsidiaries”) set out against their respective names in column 2 of Exhibit B-1, through which, together with the subsidiaries of the Seller Subsidiaries listed in column 5 of Exhibit B-1 and further described in Schedule 3.02(b) of the Disclosure Schedule (together with the Seller Subsidiaries, the “OGP Subsidiaries”) and the JV Companies, ABB is engaged in the Business;

2.Affiliates of ABB listed on Exhibit B-2 (each such Affiliate being an “Asset Seller”; and, collectively, the “Asset Sellers”, and together with the Share Sellers, the “Sellers”) are also engaged in the Business as well as in other businesses; and

3.Upon the terms and subject to the conditions of this Agreement, ABB wishes to, and shall cause the Sellers and the IPR Assignors to, sell to Purchaser or to an OGP Purchaser, and Purchaser wishes to, or shall cause the OGP Purchasers to, purchase from the Sellers the OGP Business as a going concern;

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, ABB and Purchaser hereby agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

SECTION 1.01.Defined Terms.  Capitalized terms used in this Agreement shall have the meanings specified in Exhibit A to this Agreement unless the context otherwise requires; provided that in the event capitalized terms are used in Exhibit E or Exhibits S-1, S-2 and S-3 to this Agreement and attributed meanings inconsistent with those specified in Exhibit A, then for purposes of Exhibit E or Exhibits S-1, S-2 and S-3 only the meanings specified in Exhibit E or Exhibits S-1, S-2 and S-3, respectively, shall govern.

SECTION 1.02.Interpretation.  The following provisions shall apply in connection with the interpretation of this Agreement:

(a)Any reference to the singular includes the plural and vice versa, any reference to natural persons includes legal persons and vice versa, and any reference to a gender includes the other gender.

(b)Any reference to the Preamble, Preliminary Statements, Articles, Sections, Exhibits and Disclosure Schedules are, unless otherwise stated, references to the

Preamble, Preliminary Statements, Articles, Sections, Exhibits and Disclosure Schedules of or to this Agreement.

(c)The words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

(d)Whenever the words “include”, “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”.

(e)All Exhibits and Schedules form an integral part of this Agreement and are equally binding herewith.  Any reference to “this Agreement” shall include such Exhibits and Schedules.

(f)Any reference to a statutory provision shall include a reference to the provision as modified, amended or supplemented from time to time and any subordinate legislation made under such statutory provision which in either case is in force on the date of this Agreement.

(g)Subject to Section 11.06, references to a Person shall include any permitted assignee or successor to such Party in accordance with this Agreement.

(h)If any period is referred to in this Agreement by way of reference to a number of days, the days shall be reckoned exclusively of the first and inclusively of the last day unless the last day falls on a day that is not a Business Day, in which case the last day shall be the next succeeding Business Day.

(i)The terms “dollars” or “$” or “U.S. dollars” shall mean United States dollars and all payments hereunder shall be made in United States dollars.

(j)The use of “or” is not intended to be exclusive unless explicitly indicated otherwise.

(k)The table of contents and the descriptive headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

(l)Any legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than New York State be deemed to include what most nearly approximates in that other jurisdiction such legal term and any reference to a New York State or United States federal Law shall be construed so as to include equivalent or analogous Laws of any other relevant jurisdiction.

2

ARTICLE II

PURCHASE AND SALE

SECTION 2.01.Purchase and Sale of the Shares.  Upon the terms and subject to the conditions of this Agreement, at the Closing, ABB shall cause each Share Seller to sell the Shares that such Share Seller owns as set forth in column 3 of Exhibit B-1 to Purchaser or to an OGP Purchaser, and Purchaser shall purchase or cause an OGP Purchaser to purchase the Shares and each right attaching to the Shares at the Closing free and clear of any Encumbrances.  Effective upon the Closing, ABB waives, and at the Closing ABB shall cause ABB Ltd. and each of the Share Sellers to waive on its own behalf and on behalf of its and their respective Affiliates, all applicable rights of pre-emption and other restrictions on transfer in their favor over the Shares.

SECTION 2.02.Purchase and Sale of the Purchased Assets.  (a)  Upon the terms and subject to the conditions of this Agreement, at the Closing ABB shall cause the Asset Sellers and the IPR Assignors to sell, convey, assign, transfer and deliver to Purchaser or to an OGP Purchaser, and Purchaser shall purchase or cause an OGP Purchaser to purchase from the Asset Sellers and the IPR Assignors, all of the Asset Sellers’ and the IPR Assignors’ right, title and interest in and to the Purchased Assets (and in respect of the IPR Assignors such Intellectual Property in respect of the OGP Business owned by the IPR Assignors) free and clear of any Encumbrances other than Permitted Encumbrances.

(b)Notwithstanding anything in Section 2.02(a) to the contrary, the Asset Sellers shall not sell, convey, assign, transfer or deliver to Purchaser or an OGP Purchaser, and Purchaser shall not purchase, nor cause an OGP Purchaser to purchase, and the Purchased Assets shall not include, the right, title and interest of any Asset Seller in and to any of the Excluded Assets.

SECTION 2.03.Assumption and Exclusion of Liabilities.  (a)  Purchaser, from and after the Closing, shall assume and shall duly and punctually pay, perform and discharge when due in accordance with their respective terms, or shall cause an OGP Purchaser to assume and so pay, perform and discharge, the Assumed Liabilities.

(b)Notwithstanding anything in Section 2.03(a) to the contrary, each Asset Seller shall retain, and shall be responsible for paying, performing and discharging when due, and Purchaser and the OGP Purchasers shall not assume or have any responsibility for, the Excluded Liabilities.

SECTION 2.04.Purchase Price.  (a)  The amount to be paid in cash at the Closing by Purchaser (for itself and on behalf of the OGP Purchasers) for the Shares and the Purchased Assets and the assumption of the Assumed Liabilities shall be $847,000,000, as adjusted in accordance with Sections 2.09 and 6.10(a) (the “Initial Purchase Price”).  The purchase price shall be the Initial Purchase Price, as adjusted in accordance with Sections 2.10 and 6.10 after the Closing, plus the Deferred Consideration (the “Purchase Price”).  Following the Closing, any payment made by either ABB or Purchaser or any Affiliate of ABB or Purchaser Affiliate, as applicable, pursuant to the Deferred Transfer Agreement or any provision

3

of this Agreement shall be treated as either an increase or decrease in the Purchase Price, as the case may be.

(b)All monies to be transferred pursuant to this Agreement shall be made by electronic transfer of immediately available funds to (i) ABB’s Bank Account if a payment is due to ABB, the Sellers or any of their Affiliates (other than Affiliates which form a part of the OGP Business), or, as the case may be, to (ii) the Purchaser’s Bank Account if a payment is due to Purchaser or any of the Purchaser Affiliates.  Except as required by Law or as otherwise specifically provided in this Agreement, such payments will be made without setoff, restriction or condition and without any deduction or withholding.  Receipt of such monies into either ABB’s Bank Account or Purchaser’s Bank Account shall be received as agent for the relevant Affiliate of ABB or Purchaser Affiliate, as the case may be, to whom such monies are owed and shall be an absolute discharge to Purchaser, the Purchaser Affiliates, ABB or any of its Affiliates who in each case shall not be concerned to see application of any such amount thereafter.

(c)Purchaser and ABB agree that the Purchase Price shall be allocated as set forth in Exhibit C (as may be restated pursuant to this Section 2.04(c)) and that the Parties shall report for all Tax purposes the transactions contemplated by this Agreement in a manner consistent with the terms of this Agreement, including the allocation method utilized in the preparation of Exhibit C for the purchase and sale of the OGP Shares and the Purchased Assets and the assumption of the Assumed Liabilities.  The allocation shall be restated as agreed between the Parties to account for any adjustment pursuant to Sections 2.04(a), 2.09, 2.10, 6.10 and Article IX (with such restatement being based on the principles applied in connection with the original allocation).  Neither Party shall take, and ABB shall cause its Affiliates and Purchaser shall cause the Purchaser Affiliates not to take, any position inconsistent therewith in any Tax Return, in any refund claim, in any litigation or other document or otherwise take any position inconsistent with the allocation determined pursuant to this Section 2.04(c), except to the extent required to comply with a Change of Law or as required to comply with a change in GAAP.

SECTION 2.05.Closing.  (a)  Upon the terms and subject to the conditions of this Agreement, (i) the sale and purchase of the Shares and (ii) the sale and purchase of the Purchased Assets and the assumption of the Assumed Liabilities contemplated by this Agreement shall take place at a closing (the “Closing”) to be held at the offices of Shearman & Sterling LLP, Broadgate West, 9 Appold Street, London, England EC2A 2AP, on the later of (x) the third Business Day following the satisfaction or waiver of the conditions to the obligations of the Parties set forth in Sections 8.01(a), 8.02(c), 8.03(d) and 8.03(j) (assuming that on such date all other conditions to the Closing have been satisfied) and (y) the expiry of ten Business Days from receipt by Purchaser of the Pre-Closing Notice as contemplated by Section 2.09(a), or at such other place or at such other date or time as ABB and Purchaser may mutually agree upon in writing (the day on which the Closing takes place being the “Closing Date”).

(b)At the Closing, the Parties shall consummate the Primary Transactions as well as each of the Secondary Transactions for which all of the Additional Approvals set forth in Section 8.04 shall then have been satisfied, including payment of the Initial Purchase Price.

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(c)On the date which is the calendar month end preceding the Longstop Date (or such other date as the Parties mutually agree), ABB and Purchaser shall jointly undertake a physical inventory of inventory of the OGP Business.  If the Effective Date occurs after the date which is the calendar month end preceding the Longstop Date (or such other date as the Parties mutually agree), the Parties shall only roll forward, taking into account all relevant facts and circumstances, the results of such inventory of inventory, and shall not undertake a further physical inventory of inventory of the OGP Business.

SECTION 2.06.Deferred Closings.  In the event that one or more of the conditions set forth in Section 8.04 with respect to one or more Secondary Transactions have not been satisfied or waived prior to the date fixed for the Closing pursuant to Section 2.05(a), the Secondary Transactions requiring such Additional Approvals, as set forth on Exhibit M, shall not be consummated at the Closing and ABB shall not be required to deliver the Provisionally Retained Business.  In such event, at the Closing, (i) ABB and Purchaser shall cause the applicable Seller, on the one hand, and the applicable OGP Purchaser, on the other hand, respectively, to execute and deliver a deferred transfer agreement, substantially in the form of Exhibit K (the “Deferred Transfer Agreement”) with respect to the Provisionally Retained Businesses and (ii) ABB shall cause to be issued in favor of and delivered to Purchaser the Repayment Bank Guarantee in an aggregate principal amount equal to the amounts allocated to the Provisionally Retained Business as set forth in the column titled “Allocation Amounts” set forth in Exhibit L (the “Allocation Amount”).  The Deferred Transfer Agreement and, when executed pursuant to the Deferred Transfer Agreement, the relevant Local Agreements, shall govern the terms and conditions of the consummation of each Secondary Transaction.

SECTION 2.07.Closing Deliveries by Purchaser.  At the Closing, Purchaser shall deliver, or cause to be delivered, to ABB:

(i)the Initial Purchase Price as contemplated by Section 2.04(a);

(ii)a receipt for the certificates or other instruments evidencing the Shares and the shares of capital stock of the Material Subsidiaries;

(iii)the Intercompany Settlement Payment as contemplated by Section 2.09(d), if applicable;

(iv)a receipt for the Intercompany Settlement Payment, if applicable;

(v)a certificate from Purchaser, signed by a duly authorized officer thereof, confirming the matters described in Section 8.02(a) hereof;

(vi)a true and complete copy, certified by the Secretary or an Assistant Secretary of Purchaser, of the resolutions duly and validly adopted by Purchaser’s Board of Directors evidencing its authorization of the execution and delivery of the Transaction Agreements to which it is a party and the consummation of the transactions contemplated thereby;

(vii)a true and complete copy, certified by a duly authorized officer of Purchaser, of the applicable resolutions duly and validly adopted by the Board of

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Directors of each applicable OGP Purchaser evidencing such Board’s authorization of the execution and delivery of the respective Local Agreements to which it is a party and the consummation of the transactions contemplated thereby;

(viii)a duly executed counterpart of each of the Related Agreements, except for the Non-Competition Agreement;

(ix)a true and complete copy, certified by a duly authorized officer of Purchaser, of the Purchaser Financing Documents; and

(x)a duly executed counterpart of a joint acknowledgement of the Closing Date (the “Closing Date Acknowledgement”).

SECTION 2.08.Closing Deliveries by ABB.  At the Closing, ABB shall deliver, or cause to be delivered, to Purchaser or its designee:

(i)evidence of the release and discharge of the OGP Subsidiaries from the Capital Modernization Program in a form reasonably satisfactory to Purchaser;

(ii)evidence of the release and discharge of the OGP Subsidiaries from the Eureka Program in a form reasonably satisfactory to Purchaser;

(iii)the Intercompany Settlement Payment as contemplated by Section 2.09(d), if applicable;

(iv)a receipt for the Initial Purchase Price (including the anticipated Stub Payment) and the estimated Intercompany Settlement Payment, if applicable;

(v)a certificate from ABB, signed by a duly authorized officer thereof, confirming the matters described in Sections 8.03(a), (d) and (e) hereof;

(vi)a true and complete copy, certified by a duly authorized officer of ABB, of the resolutions duly and validly adopted by ABB’s Board of Directors evidencing its authorization of the execution and delivery of the Transaction Agreements to which it is a party and the consummation of the transactions contemplated thereby;

(vii)a true and complete copy, certified by a duly authorized officer of ABB, of the applicable resolutions duly and validly adopted by the Board of Directors of each applicable Seller evidencing such Board’s authorization of the execution and delivery of the respective Local Agreement to which it is a party and the consummation of the transactions contemplated thereby;

(viii)the resignation letters contemplated by Section 5.11(a);

(ix)a duly executed counterpart of each of the Related Agreements, except for the Non-Competition Agreement;

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(x)evidence that the Aberdeen Lease and the Houston Lease have been terminated in accordance with Section 8.03(h) in a form reasonably satisfactory to Purchaser; and

(xi)a duly executed counterpart of the Closing Date Acknowledgement.

SECTION 2.09.Pre-Closing Adjustment; Estimated Effective Date Net Assets; Intercompany Settlement Payment.  (a)  Not less than ten (10) Business Days prior to the anticipated Closing Date, ABB shall deliver to Purchaser a notice (the “Pre-Closing Notice”) setting forth ABB’s good faith estimate of:

(i)the Net Assets of the OGP Business (including, for the avoidance of doubt, the Provisionally Retained Business, if any) determined in accordance with the Closing Accounting Principles (the “Estimated Effective Date Net Assets”);

(ii)the related Pre-Closing Adjustment, if any;

(iii)the estimated Intercompany Settlement Payment as of the Closing Date, if any, and, if different, the estimated amount of the Intercompany Settlement Payment assuming such amounts were determined as of the Effective Date;

(iv)the amount expected to be outstanding under the External Debt Contracts on the Closing Date;

(v)the amount of cash expected to be reflected on the Effective Date Balance Sheet and, if different, the amount of cash expected to be included in the OGP Business as of the Closing Date, including confirmation as to the amount to be paid, declared or set aside for payment as a dividend or other distribution to ABB or any of its Affiliates;

(vi)confirmation of any additional Indebtedness (amount and material borrowing terms) for money borrowed from any Person other than ABB or any of its affiliates, such confirmation to evidence the amount and the material terms upon which it is borrowed;

(vii)a revised Exhibit C reflecting the proposed Initial Purchase Price; and

(viii)the anticipated Stub Payment required to be paid by Purchaser to ABB pursuant to Section 2.09(c), if any, and the projected Closing Date.

(b)           Subject to Section 2.09(e), the “Pre-Closing Adjustment” shall be equal to the amount of (x) the Estimated Effective Date Net Assets less (y) $623,000,000 plus (z) the anticipated Stub Payment contemplated by Section 2.09(c) as set forth in the Pre-Closing Notice.  Subject to Section 2.09(e), if the Pre-Closing Adjustment is a positive amount, then the Initial Purchase Price shall be increased by an amount equal to such excess amount and if the Pre-Closing Adjustment is a negative amount, then the Initial Purchase Price shall be decreased by an amount equal to such negative amount.

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(c)           Subject to Section 2.09(e), if the Closing occurs on any date other than the last day of a calendar month, Purchaser shall pay to ABB an amount equal to the product of $202,740.00 multiplied by the calendar date of the month in which the Closing occurs (for the purpose of clarity, if the Closing Date is the 12th day of the month, $202,740.00 shall be multiplied by 12) (such payment being the “Stub Payment”) and if the Closing Date occurs on the last day of a calendar month, no Stub Payment shall be made by Purchaser to ABB.

(d)           The Intercompany Settlement Payment shall be deemed to settle in full, subject to Section 2.10(e), all outstanding obligations for money owed (including all non-trade accounts) between ABB or its Affiliates (other than any OGP Subsidiary) and any OGP Subsidiary, other than the Intra-Group Trading Amount, as of the Closing Date.  The “Net Intercompany Balance” shall mean the difference of (i) the sum of all outstanding obligations as of the Closing Date for money owed (including all non-trade accounts) by ABB and/or any of its Affiliates (other than any OGP Subsidiary), on the one hand, to any OGP Subsidiary, on the other hand, other than obligations that reflect the Intra-Group Trading Amount less (ii) the sum of all outstanding obligations as of the Closing Date for money owed (including all non-trade accounts by any OGP Subsidiary, on the one hand, to ABB and/or any of its Affiliates (other than any OGP Subsidiary), on the other hand, other than the Intra-Group Trading Amount.  Subject to Section 2.09(e), if the Net Intercompany Balance is positive, ABB shall pay an amount equal to such positive balance to Purchaser and if the Net Intercompany Balance is negative, Purchaser shall pay an amount equal to such negative balance to ABB.  For purposes of this Agreement, such payment amount is referred to as the “Intercompany Settlement Payment”.

(e)           If the aggregate sum of (w) $847,000,000 plus (x) the Pre-Closing Adjustment contemplated by Section 2.09(b) plus (y) the Intercompany Settlement Payment contemplated by Section 2.09(d) less (z) the adjustment in relation to pensions contemplated by Section 6.10(a) equals a net amount owed by Purchaser to ABB in excess of $816,000,000 (if prior to or on the Closing Date ABB has made the June 2004 payroll payments to the OGP Employees of ABB Offshore Systems AS and its subsidiaries) or $802,000,000 (if prior to or on the Closing Date ABB has not made the June 2004 payroll payments to the OGP Employees of ABB Offshore Systems AS and its subsidiaries), as the case may be (such excess amount being, the “Delayed Amount”), then Purchaser shall, subject to Section 2.10(g), be obligated only to pay to ABB on the Closing Date an amount equal to $816,000,000 or $802,000,000, as the case may be; provided, however, that such amounts shall be increased by the amount of cash and cash equivalents included in the balance sheet from which the Estimated Effective Date Net Assets was derived up to but not in excess of $16,000,000.  The supporting calculation to each of the figures of $816,000,000 and $802,000,000 (as may be adjusted as provided in this Section 2.09(e)) referenced in this Section 2.09(e) is set forth in Section 2.09(e) of the Disclosure Schedule.  For the avoidance of doubt, such calculations are for illustrative purposes only and serve no other purpose other than to determine the agreed balances in this Section 2.09(e).  To the extent that the Argentinean Debt has not been discharged and released in full by the Closing Date, then the figures of $816,000,000 and $802,000,000 (as may be adjusted as provided in this Section 2.09(e)) referenced in this Section 2.09(e) shall be reduced only to the extent of the Indebtedness (including all reasonable costs of termination) outstanding under the Argentinean Debt at the Closing Date.  For the purpose of this Section 2.09(e), “Argentinean Debt” means the Indebtedness set forth in line 1 of Section 3.09(a)(i) to the Scope I Operations Disclosure Schedules.

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(f)            Prior to and following the delivery of the Pre-Closing Notice, Purchaser and the Purchaser Representatives shall have the ability to consult with ABB and the ABB Representatives with respect to the determination of the items set forth in the Pre-Closing Notice.  If upon such consultation the Parties agree that any of the amounts set forth in the Pre-Closing Notice should be changed, ABB shall deliver to Purchaser an amended Pre-Closing Notice setting forth such agreed amounts, and such amended Pre-Closing Notice shall be deemed to be the Pre-Closing Notice for all other purposes of this Agreement.  If ABB and Purchaser do not agree upon any amendments to the Pre-Closing Notice, the Pre-Closing Adjustments shall be calculated based on the amounts set forth in the Pre-Closing Notice.

(g)           If between the Effective Date and the Closing Date, ABB causes one or more OGP Subsidiaries to pay to the DOJ monetary penalties required by applicable Law to be paid upon completion of the Compliance Review which penalties in the aggregate are in excess of the provisions for such penalties set forth in the Closing Accounting Principles, the Estimated Effective Date Net Assets set forth in the Pre-Closing Notice shall be deemed for purposes of this Section 2.09 and Section 2.10 to be reduced by the aggregate amount of such penalties in excess of the provisions for such penalties set forth in the Closing Accounting Principles.

SECTION 2.10.Post-Closing Adjustment.  The Purchase Price shall be subject to adjustment after the Closing as set forth in this Section 2.10:

(a)Effective Date Balance Sheet.  As promptly as practicable, but in any event within seventy-five (75) calendar days following the Closing Date, Purchaser shall deliver to ABB (i) an unaudited combined statement of assets and liabilities of the OGP Business, excluding the Excluded Assets and Excluded Liabilities and including, for the avoidance of doubt, the Provisionally Retained Businesses (the “Effective Date Balance Sheet”), if any, as of the last calendar day of the calendar month immediately preceding the Closing Date or, if such date is the last calendar day of the month, as of the Closing Date (the “Effective Date”), (ii) a report setting forth the Net Intercompany Balance and the related Intercompany Settlement Payment and (iii) a report setting forth the Stub Payment and the related adjustment to the Initial Purchase Price, based on the Closing Date Acknowledgement (collectively, the “Purchase Price Documentation”).  The Effective Date Balance Sheet shall be prepared in accordance with the Closing Accounting Principles, and with the cooperation of, and in consultation with, ABB.  Purchaser shall, and shall cause the Purchaser Affiliates to, and Purchaser shall use its reasonable efforts to cause the officers, employees, authorized agents, Purchaser’s Accountants, counsel and other representatives of Purchaser (the “Purchaser Representatives”) to afford ABB and the officers, employees and authorized agents, ABB’s Accountants, counsel and other representatives of ABB (the “ABB Representatives”) reasonable access, during normal business hours, to the offices, employees, properties, plants, other facilities, books and records of Purchaser and the OGP Purchasers, as the case may be, with respect to the OGP Business reasonably required by ABB and/or the ABB Representatives for the purpose of participating in the preparation of the Purchase Price Documentation and/or for the purpose of agreeing or settling any dispute in relation thereto and to allow ABB and the ABB Representatives to take copies of such documents; provided, however, that Purchaser’s Accountants or any other auditors or accountants of Purchaser or any Purchaser Affiliate shall not be obliged

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to make any work papers available to any Person unless and until such Person has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such auditors or accountants.

(b)Disputes.  (i)  Subject to clauses (ii), (iii) and (iv) of this Section 2.10(b), the Purchase Price Documentation delivered by Purchaser to ABB shall be final, binding and conclusive on the Parties.

(ii)ABB may dispute any amount reflected on the Purchase Price Documentation; provided, however, that ABB shall have delivered to Purchaser a written notice (the “Dispute Notice”) of each disputed item, specifying the amount thereof in dispute and setting forth, in reasonable detail, the basis for such dispute, within thirty (30) Business Days of Purchaser’s delivery of the Purchase Price Documentation to ABB.  In the event of such a dispute, Purchaser, together with Purchaser’s Accountants, and ABB, together with ABB’s Accountants, shall attempt to reconcile their differences, and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the Parties.

(iii)If the Parties are unable to resolve any such dispute within ten (10) Business Days of receipt by Purchaser of the Dispute Notice, ABB and Purchaser shall, within five (5) Business Days, submit those items remaining in dispute for joint resolution by the London and New York offices of PricewaterhouseCoopers or, failing its appointment and in the absence of the Parties being able to agree upon a suitable replacement within ten (10) Business Days of such failure to appoint PricewaterhouseCoopers, such other internationally recognized independent accounting firm appointed upon the application of either Party by the President at such time of the Institute of Chartered Accountants of England and Wales (the “Independent Accounting Firm”), which shall, within thirty (30) Business Days after such submission, make a final determination, binding on the Parties, of the appropriate amount of each of the items of the Purchase Price Documentation set forth in the Dispute Notice.  The Parties shall each provide the Independent Accounting Firm with all information relating to the items in dispute which the Independent Accounting Firm may reasonably request and the Independent Accounting Firm shall be entitled (to the extent it considers appropriate) to base its determination on such information.  During such determination period, the Independent Accounting Firm shall also adjust the Purchase Price Documentation delivered by Purchaser to ABB to reflect the items determined by the Independent Accounting Firm, and indicate the required payor and payment amount as a result of such adjustments, if any, and deliver a copy of such Purchase Price Documentation to each of the Parties and to the bank providing the Adjustment and Indemnity Bank Guarantee.  The Purchase Price Documentation prepared by the Independent Accounting Firm shall be final, binding and conclusive upon the parties.  None of ABB, its Affiliates, Purchaser or any Purchaser Affiliate shall, from the date of this Agreement until such time as the Purchase Price Documentation shall have been finally determined as set forth herein, retain the Independent Accounting Firm to provide any material accounting, auditing, consulting or other similar services to such Person in connection with any matter, mandate or undertaking.

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(iv)The fees and disbursements of the Independent Accounting Firm shall be paid by ABB in the same proportion that the aggregate of the amounts represented by such remaining disputed items so submitted to the Independent Accounting Firm that are unsuccessfully disputed by ABB (as finally determined by the Independent Accounting Firm) bears to the aggregate of such amounts represented by such remaining disputed items so submitted, and the balance shall be paid by Purchaser.  In acting under this Agreement, the Independent Accounting Firm shall be entitled to the privileges and immunities of arbitrators.

(c)Final Purchase Price Documentation.  Each of (i) the statement of assets and liabilities of the OGP Business set out within the Effective Date Balance Sheet, (ii) the Net Intercompany Balance (the “Final Net Intercompany Balance”) and the final related Intercompany Settlement Payment and (iii) the Stub Payment, that is final and binding upon the Parties as determined (x) due to the failure of ABB to deliver a Dispute Notice within 30 Business Days of Purchaser’s delivery of the Purchase Price Documentation, (y) through the agreement of the Parties pursuant to Section 2.10(b)(ii) or (z) through the action of the Independent Accounting Firm pursuant to Section 2.10(b)(iii), is referred to as the “Final Effective Date Balance Sheet”, the “Final Intercompany Settlement Payment” and the “Final Stub Payment”, respectively.

(d)Purchase Price Adjustment.  Within ten (10) Business Days of the Effective Date Balance Sheet being deemed final, an adjustment to the Initial Purchase Price shall be paid as follows:

(i)in the event that the amount of Net Assets reflected on the Final Effective Date Balance Sheet is less than the amount of Estimated Effective Date Net Assets, then ABB shall pay to Purchaser an amount equal to such shortfall by wire transfer in immediately available funds to Purchaser’s Bank Account; or

(ii)in the event that the amount of Net Assets reflected on the Final Effective Date Balance Sheet exceeds the amount of Estimated Effective Date Net Assets, then Purchaser shall pay to ABB an amount equal to such excess.

(e)Final Intercompany Settlement Payment.  Within ten (10) Business Days of the Intercompany Settlement Payment being deemed final:

(i)in the event the Final Net Intercompany Balance is greater than the Net Intercompany Balance set forth in the Pre-Closing Notice, then ABB shall pay to Purchaser an amount equal to such excess; or

(ii)in the event the Final Net Intercompany Balance is less than the Net Intercompany Balance set forth in the Pre-Closing Notice, then Purchaser shall pay to ABB an amount equal to such shortfall.

(f)Final Stub Payment.  Within ten Business Days of the Stub Payment being deemed final, in the event the Closing Date was a date other than anticipated in the Pre-Closing Notice, an adjustment to the Initial Purchase Price shall be paid as follows:

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(i)in the event the Final Stub Payment is less than the Stub Payment set forth in the Pre-Closing Notice, then ABB shall pay to Purchaser an amount equal to such shortfall; or

(ii)in the event the Final Stub Payment exceeds the Stub Payment set forth in the Pre-Closing Notice, then Purchaser shall pay to ABB an amount equal to such excess.

(g)Delayed Amount.  Within ten (10) Business Days of the Effective Date Balance Sheet being deemed final, Purchaser shall pay to ABB the Delayed Amount.

(h)Netting of Payment Amounts; Interest.  (i)  Any payments required to be made pursuant to Sections 2.10(d), (e), (f) and (g) shall be netted.  No payment shall be made pursuant to Sections 2.10(d), (e), (f) and (g) until the Purchase Price Documentation has been determined in full.  ABB and Purchaser agree on behalf of themselves and of their Affiliates or the Purchaser Affiliates, as applicable, that any such payment made pursuant to Section 2.10(d) and 2.10(f) will be an adjustment to the Purchase Price; and

(ii)           The net amount of the payments required to be made by either Party pursuant to Sections 2.10(d), (e), (f) and (g) shall be paid, together with interest thereon determined as provided by Section 9.09, from the Closing Date to the date of payment (the “Net Payment”).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF ABB

As an inducement to Purchaser to enter into this Agreement, ABB hereby represents and warrants to Purchaser as follows:

SECTION 3.01.Organization and Authority of ABB and the Sellers.  (a)  ABB is a corporation duly incorporated, validly existing and in good standing under the laws of Switzerland and has all necessary corporate power and authority to enter into, execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated by the Transaction Agreements.  The execution and delivery of this Agreement by ABB, the performance by ABB of its obligations hereunder and under the Related Agreements to which it is, or will be when executed as provided in this Agreement, a party and the consummation by ABB of the transactions contemplated by the Transaction Agreements have been duly authorized by all requisite action on the part of ABB.  This Agreement has been, and upon their execution each of the Related Agreements will be, duly executed and delivered by ABB to the extent ABB is a party thereto, and, assuming due authorization, execution and delivery by Purchaser and the other parties thereto, if any, this Agreement is, and each of the Related Agreements to which ABB is a party will be, a legal, valid and binding obligation of ABB enforceable against it in accordance with its terms, subject to the effect of any applicable

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bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or similar laws relating to or affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

(b)Each Seller and IPR Assignor is a corporation duly incorporated, validly existing and, where applicable, in good standing under the Laws of the jurisdiction of its incorporation, and will have when executed as provided in this Agreement all necessary corporate power and authority to enter into, execute and deliver each Related Agreement to which it will be a party, to carry out its obligations thereunder and to consummate the transactions contemplated thereby.  The execution and delivery by each Seller and IPR Assignor of each Related Agreement to which it is a party, the performance by such Seller or such IPR Assignor of its obligations thereunder and the consummation by such Seller or such IPR Assignor of the transactions contemplated thereby will be, when executed as provided in this Agreement, duly authorized by all requisite action on the part of such Seller or such IPR Assignor.  Each Related Agreement to which each Seller and IPR Assignor will be a party will be, when executed as provided in this Agreement, duly executed and delivered by such Seller or such IPR Assignor and, assuming due authorization, execution and delivery by the other parties thereto, if any, will constitute, when executed as provided in this Agreement, a legal, valid and binding obligation of such Seller or such IPR Assignor enforceable against it in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or similar laws relating to or affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

SECTION 3.02.Organization and Authority of the OGP Subsidiaries; Capital Stock of the OGP Subsidiaries; Ownership of the Shares.  (a)  Each OGP Subsidiary is a corporation duly incorporated or organized, validly existing and, where applicable, in good standing under the Laws of its jurisdiction of incorporation or organization and has all necessary corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the OGP Business as such business is currently being conducted by such OGP Subsidiary.  Each Asset Seller has all necessary power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the OGP Business as such business is currently being conducted by such Asset Seller.  Each of the OGP Subsidiaries and each of the Asset Sellers relating to the OGP Business is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business, in each case relating to the OGP Business, makes such licensing or qualification necessary, except to the extent that the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect.

(b)(i)  Each Seller is, or will be at the Closing, the beneficial and record owner of the Shares set forth opposite such Seller’s name in column 3 of Exhibit B-1 hereto; and

(ii)all of the Shares set forth in column 3 of Exhibit B-1 hereto are, or will be at the Closing, duly authorized, validly issued, fully paid and nonassessable.  The issued and outstanding capital stock of each OGP Subsidiary is set forth in Section 3.02(b) of the Disclosure Schedule.  Each Seller Subsidiary is the beneficial and record owner of the shares of capital

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stock of the OGP Subsidiaries set forth in Section 3.02(b) of the Disclosure Schedule (together with the Shares, the “OGP Shares”) opposite such Seller Subsidiary’s name, and all of such shares are duly authorized, validly issued, fully paid and nonassessable.  The directors of each Material Subsidiary are set forth in Section 3.02(b) of the Disclosure Schedule.  Except as set forth in Section 3.02(b) of the Disclosure Schedule, (A) there are no options, warrants or rights of conversion or other rights, agreements, arrangements or commitments obligating any OGP Subsidiary to issue or sell or granting to any Person other than another OGP Subsidiary the right to acquire any of its shares of capital stock or securities convertible into or exchangeable for shares of its capital stock, (B) there are no voting trusts, stockholder agreements, proxies or other agreements in effect with respect to the voting or transfer of such shares of capital stock and (C) there are no Encumbrances or agreements, arrangements or obligations to create or give any Encumbrance, relating to any of the OGP Shares.  To the knowledge of ABB, there is no outstanding or pending call for funding or other assumption of liability in respect to any OGP Subsidiary which is not cancelable by ABB or its Affiliates without payment of any penalty.

(c)Each JV Company is an entity duly incorporated, validly existing and, where applicable, in good standing under the laws of the jurisdiction of its incorporation.  An OGP Subsidiary is the beneficial and record owner of the shares of capital stock of the JV Company set forth in Section 3.02(c) of the Disclosure Schedule opposite such JV Company’s name, and all of such shares are duly authorized, validly issued, fully paid and nonassessable.  Except as set forth in Section 3.02(c) of the Disclosure Schedule, there are no (i) voting trusts, stockholder agreements, proxies or other agreements in effect with respect to the voting or transfer of such shares of capital stock or (ii) Encumbrances or agreements, arrangements or obligations to create or give any Encumbrance, relating to any such shares of capital stock of a JV Company owned by an OGP Subsidiary.  With respect to each JV Company and each OGP Subsidiary that is not wholly owned by a Seller or another OGP Subsidiary, true and complete copies of the agreements creating or governing such entities have been provided to Purchaser in Section 3.02(c) of the Disclosure Schedule, and, to the knowledge of ABB, such documentation contains all material binding contractual terms relating to the arrangements described therein.  To the knowledge of ABB, (i) there is no outstanding or pending call for funding or other assumption of liability in respect of any of the JV Companies and (ii) no JV Company has an interest in or has agreed to acquire an interest in or merge or consolidate with a Person other than an OGP Subsidiary.

SECTION 3.03.No Conflict.  Assuming that all consents, approvals, authorizations and other actions described in Section 3.04 have been obtained and all filings and notifications listed in Section 3.04 of the Disclosure Schedule have been made, the execution, delivery and performance by ABB and the Sellers of the Transaction Agreements to which any of them is a party do not and will not (a) violate, conflict with or result in the breach of any provision of the charter or by-laws (or similar organizational documents) of ABB, the Sellers, the IPR Assignors, any OGP Subsidiary, or, to the knowledge of ABB, a JV Company, (b) conflict with or violate any Law or Order, or (c) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, or, in the case of any OGP Subsidiary, to the knowledge of ABB, a JV Company and the Purchased Assets, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on any of the OGP Shares, to the knowledge of ABB, the shares of any JV

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Company or of any Encumbrance other than a Permitted Encumbrance on any of the OGP Assets pursuant to, any note, grant, subsidy, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement (including all Material Contracts and Material Permits) entered into in the OGP Business and to which any OGP Subsidiary, Asset Seller or IPR Assignor is a party except, in the case of clause (b) or (c), as set forth in Section 3.03 of the Disclosure Schedule or as would not reasonably be expected to create a liability in excess of $500,000 in any individual case or $2,000,000 in the aggregate.

SECTION 3.04.Consents and Approvals.  (a)  The execution, delivery and performance by ABB, the Sellers and the IPR Assignors of the Transaction Agreements to which any of them is a party do not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to any Governmental Authority except for (i) consents, appeals, authorizations or other orders, actions, filings or notifications not related to merger control or competition Laws set forth in Section 3.04(a) of the Disclosure Schedule, (ii) the notification and waiting period requirements of the HSR Act and (iii) applicable filings under non-United States antitrust and competition Laws that are required by Law to be made prior to the Closing and which are set forth in Section 3.04(a) of the Disclosure Schedule.

(b)Neither the OGP Subsidiaries, the Asset Sellers relating to the OGP Business nor the IPR Assignors relating to the OGP Business have given an undertaking or written assurance (legally binding or not) or are subject to such an undertaking or written assurance to a Governmental Authority under the U.K. Fair Trading Act 1973, U.K. Competition Act 1980, U.K. Restrictive Trade Practices Acts 1976 and 1977, U.K. Resale Prices Act 1976, U.K. Competition Act 1998, Treaty of Rome, Agreement on the European Economic Area or any other similar law.  Neither the Sellers relating to the OGP Business, the OGP Subsidiaries nor the IPR Assignors relating to the OGP Business are subject to an Order or decision (not generally applicable) made under the U.K. Fair Trading Act 1973 or the U.K. Competition Act 1980 or by any guidance or decision of the Director General of Fair Trading or the Chairman of the Office of Fair Trading, or by a decision of the European Commission or a Governmental Authority, that would reasonably be expected to have a Material Adverse Effect.

(c)None of the Asset Sellers relating to the OGP Business, the OGP Subsidiaries, the IPR Assignors or, to the knowledge of ABB, the JV Companies have ever received, nor have any of them made an application to receive, any aid (as that term is understood for the purposes of Articles 87 to 89 of the Treaty of Rome) from a member state of the European Community which could give rise to a reimbursement obligation as a result of the consummation of the transactions contemplated by this Agreement.

SECTION 3.05.Financial Information.  (a)  Section 3.05 of the Disclosure Schedule sets forth true and complete copies of (i) the audited combined balance sheets for each of the Scope 1 Operations and the Scope 2 Operations, respectively, for the three years ending December 31, 2000, 2001 and 2002 and the related audited combined statements of income and cash flows for the Scope 1 Operations and the Scope 2 Operations, as the case may be, for the periods ended on such dates (together, the “Financial Statements”), (ii) the unaudited management report for the OGP Business as at and for the eleven-month period ending November 30, 2003 (the “Monthly Management Report”) and (iii) the P.90 Base Case EBITDA.  The Financial Statements present fairly, in all material respects, the financial position, the

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statement of operations, cash flows, stockholders’ equity and results of operations of the Scope 1 Operations and the Scope 2 Operations, as the case may be, as at such date in conformity with GAAP.  The Financial Statements have been prepared from the books and records of the OGP Subsidiaries and the Asset Sellers relating to the OGP Business and have been derived from the monthly financial reports provided to management of the OGP Business.  The Financial Statements accurately reflect, in all material respects, the assets and operations of ABB Óleo e Gás Ltda. and ABB Óleo e Gás Manutencão & Modificação, Ltda. as of December 31, 2002.

(b)The statutory books and accounting records of the OGP Subsidiaries and the Asset Sellers relating to the OGP Business have been maintained in accordance with applicable Law and pursuant to OGP Business policies.  All such books and records are the property of the OGP Subsidiaries and the Asset Sellers relating to the OGP Business or in their possession (or under their control), and no written notice has been received alleging that such books or records are materially incorrect or should be rectified to correct a material error.

(c)Except as set forth in Section 3.05(c) of the Disclosure Schedule, the financial statements included in the Monthly Management Report have been derived directly from the books and records of the OGP Business (relating to each OGP Subsidiary or business reporting unit forming part of the OGP Business), have been prepared in all material respects on a basis consistent with the past practice of the OGP Business having regard to the purpose for which they were created and are accurate in all material respects and are not misleading in any material respect.

(d)As at September 30, 2003, the aggregate of (w) the consolidated order backlog of ABB Vetco Gray (as defined in Exhibit E), (x) the consolidated order backlog of ABB Offshore Systems AS and its subsidiaries, (y) the order backlog of ABB Óleo e Gás Ltda. and (z) the order backlog of ABB Óleo e Gás, Manutenção e Modificação, Ltda., determined in accordance with ABB’s customary management reporting practices, was $981,400,000.

SECTION 3.06.Conduct of the OGP Business in the Ordinary Course; Absence of Certain Changes, Events and Conditions.  Since December 31, 2002 through the date of this Agreement, except as set forth in Section 3.06 of the Disclosure Schedule, the OGP Business has been conducted in the ordinary course and consistent with past practice.  Without limiting the foregoing, except as set forth in Section 3.06 of the Disclosure Schedule, since December 31, 2002 through the date of this Agreement, none of the OGP Subsidiaries or the Asset Sellers relating to the OGP Business has:

(i)made any loan, guaranteed any Indebtedness or otherwise incurred any Indebtedness (other than by an Asset Seller or by and between an OGP Subsidiary, on the one hand, and either another OGP Subsidiary, ABB or an Affiliate of ABB, on the other hand) having an aggregate value exceeding $5,000,000;

(ii)sold, transferred, leased, subleased, licensed or otherwise disposed of any of the OGP Real Property or Purchased Assets (other than the Transferred Intellectual Property) having an aggregate value exceeding $5,000,000;

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(iii)sold, transferred, licensed (other than licenses of Business Intellectual Property ancillary to the sale of products or services in the ordinary course of business) or otherwise disposed (other than by expiration or lapse) of any Business Intellectual Property having an aggregate value exceeding $1,000,000;

(iv)suffered any damage, destruction or loss not covered by insurance with respect to the OGP Assets having a replacement cost of more than $500,000 for any single loss or $1,000,000 in the aggregate for all such losses;

(v)entered into any amendment, termination or relinquishment of any Material Contract, other than in the ordinary course of business consistent with past practice;

(vi)declared any dividend or other distribution of capital or income which has not been paid prior to the date hereof;

(vii)agreed to redeem or purchase any of its share capital, or agreed to repay any of its loan capital except for redemptions, repurchases or repayments that have been completed prior to the date hereof;

(viii)made any material change to the policies of the OGP Business with respect to the settlement of accounts payable or collection of accounts receivable;

(ix)made any change in any method of accounting or accounting practice or policy, other than such changes required by GAAP or as set forth in Exhibit E;

(x)created or incurred any Encumbrance other than a Permitted Encumbrance on any OGP Asset nor sold or factored any customer receivables other than pursuant to the Securitization Programs; or

(xi)agreed, whether in writing or otherwise, to take any of the actions specified in this Section 3.06.

SECTION 3.07.Compliance with Laws.  Except as set forth in Section 3.07 of the Disclosure Schedule:

(i)the OGP Business is being conducted in all material respects in compliance with all Laws and Orders applicable to the OGP Business;

(ii)one or more of the OGP Subsidiaries or the Asset Sellers has all material governmental licenses, permits and authorizations necessary to conduct the OGP Business as conducted as of the date hereof (the “Material Permits”), and none of the OGP Subsidiaries or the Asset Sellers has, within the last twelve months, received written notice that has not been subsequently withdrawn that any Governmental Authority intends to cancel or terminate any Material Permit;

(iii)there is no pending investigation, enquiry or disciplinary proceeding by any Governmental Authority concerning a material breach of or alleged material

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noncompliance with Law with respect to the OGP Business or any OGP Asset and, to the knowledge of ABB, no such investigation, enquiry or proceeding is threatened;

(iv)none of the OGP Subsidiaries or the Asset Sellers relating to the OGP Business nor any person for whose acts or defaults the OGP Subsidiaries or the Asset Sellers relating to the OGP Business may be vicariously liable has (A) induced a person to enter into an agreement or arrangement with any OGP Subsidiary or Asset Seller by means of an unlawful payment, contribution, gift or inducement or (B) offered or made an unlawful payment, contribution, gift or inducement to a government official or employee, and there is no pending investigation, inquiry or disciplinary proceeding by any Governmental Authority concerning the matters described in clauses (A) and (B) above.  Except as set forth in Section 3.07(iv) of the Disclosure Schedule, to the best knowledge of ABB, no other holder of shares of capital stock of an OGP Subsidiary which is not a wholly owned subsidiary of ABB has been a party to, participated in, or had prior knowledge of any such activity; and

(v)there are no ongoing and have not been any material breaches by the OGP Subsidiaries, the Asset Sellers relating to the OGP Business or, to the knowledge of ABB, the JV Companies of the U.S. Antiboycott Laws and Regulations as at the date of this Agreement.  To ABB’s knowledge, no written notice has been received from any Governmental Authority claiming that the OGP Subsidiaries, the Asset Sellers or the JV Companies relating to the OGP Business are not in compliance with the U.S. Antiboycott Laws and Regulations.

SECTION 3.08.Litigation.  (a)  Except as set forth in Section 3.08 of the Disclosure Schedule, there are no Actions pending or, to ABB’s knowledge, threatened in writing against any of the OGP Subsidiaries, any of the Asset Sellers relating to the OGP Business or any other Person for whose acts or defaults the OGP Subsidiaries or an Asset Seller may be vicariously liable that would reasonably be expected to have a value in excess of $500,000 or could prevent or materially delay the ability of ABB or any of the Sellers to consummate the transactions contemplated by the Transaction Agreements.  To the knowledge of ABB, no circumstances exist which could reasonably be expected to give rise to such a claim.  Except as set forth in Section 3.08 of the Disclosure Schedule, none of the OGP Subsidiaries or any of the Asset Sellers relating to the OGP Business is subject to any Order (nor, to ABB’s knowledge, are there any such Orders threatened in writing) that would reasonably be expected to have a Material Adverse Effect.

(b)To the knowledge of ABB, except as set forth in Section 3.08(b) of the Disclosure Schedule:  (i) none of the Asset Sellers (in connection with the OGP Business only) or any of the OGP Subsidiaries or JV Companies has, since 1991, had an Asbestos Claim asserted against it or has, since 1991, manufactured any product or equipment containing any asbestos; (ii) at all times during the years 1991 to the present the Asset Sellers (in connection with the OGP Business only) and the OGP Subsidiaries maintained (or had maintained on their behalf, and including through self-insurance) and had in force general liability insurance including coverage for product liability claims in amounts which at the time of issuance were on terms and conditions usual and customary for similarly situated companies and which, to the extent such coverage was available on commercially reasonable terms, did not exclude liability

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for asbestos claims and no claim has ever been asserted under any of said insurance in respect of any claimed asbestos liability; and (iii) no person has a valid Asbestos Claim against the Asset Sellers (in connection with the OGP Business only), the OGP Subsidiaries or the JV Companies, and no fact or circumstance exists which could reasonably be expected to result in an Asbestos Claim, which in the opinion of ABB is reasonably likely to succeed on the merits, being asserted against the Asset Sellers (in connection with the OGP Business only), the OGP Subsidiaries or the JV Companies.

SECTION 3.09.Material Contracts.  (a)  Section 3.09(a) of the Disclosure Schedule lists each of the following contracts and agreements, whether written or oral, in force as of the date hereof to which any OGP Subsidiary or Asset Seller is a party (but only to the extent such contracts and agreements relate to the OGP Business and, subject to Section 5.09, would be transferred to Purchaser or an OGP Purchaser hereunder) (together with the Business IP Licenses and the Key Contracts, the “Material Contracts”):

(i)all contracts or agreements relating to the External Debt Contracts, the Capital Modernization Program and the Securitization Programs where an OGP Subsidiary or an Asset Seller is a borrower from a third party that is not an Affiliate having an aggregate outstanding amount thereunder;

(ii)all contracts, grants, subsidies or other agreements with any Governmental Authority providing for payments to or from such Governmental Authority or to or from an OGP Subsidiary or an Asset Seller in excess of $1,000,000 individually, or $5,000,000 in the aggregate, over the remaining life of such contracts, grants, subsidies or other agreements;

(iii)all contracts or agreements that limit or purport to limit the ability of any OGP Subsidiary or an Asset Seller to compete in any line of business or with any Person or in any geographic area or during any period of time that will not expire upon consummation of the transactions contemplated by the Transaction Agreements and that are not cancelable without penalty or further payment and without more than 30 days’ notice;

(iv)all contracts or agreements relating to the retention of an OGP Subsidiary or an Asset Seller, other than with another OGP Subsidiary or Asset Seller with respect to a project, in connection with a project involving payments or receipts over the remaining term of such contract or agreement in excess of $15,000,000 that will not expire upon consummation of the transactions contemplated by the Transaction Agreements and that are not cancelable without penalty or further payment and without more than 30 days’ notice;

(v)all contracts or agreements with an independent contractor or consultant, other than with another OGP Subsidiary or Asset Seller with respect to a project, relating to a contract described in clause (iv) above involving payments over the remaining term of such contract or agreement in excess of $10,000,000 that is not cancelable without penalty or further payment and without more than 30 days’ notice;

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(vi)all contracts or agreements which during the past five (5) years have been registered with any Governmental Authority pursuant to any competition Law;

(vii)all contracts or agreements relating to the acquisition by an OGP Subsidiary or Asset Seller of an interest in, or the merger or consolidation of an OGP Subsidiary with, a Person other than another OGP Subsidiary executed after the date five (5) years prior to the date of this Agreement;

(viii)all contracts or agreements relating to the formation or governance of any partnership, joint venture, consortium or other unincorporated association, body or undertaking in which an OGP Subsidiary or Asset Seller relating to the OGP Business is to participate with any other person in any business or investment other than in connection with sales projects in the ordinary course of business for consideration with respect to the investment in such entity aggregating not more than $1,000,000; and

(ix)all hire purchase or lease contracts for assets with an aggregate outstanding liability in excess of $1,000,000 individually or $10,000,000 in the aggregate.

(b)Except as set forth in Section 3.09(b) of the Disclosure Schedule, each Material Contract (i) is valid and binding on the OGP Subsidiary or Asset Seller party to such contract and, to the knowledge of ABB, the counterparties thereto and (ii) is in full force and effect.  To ABB’s knowledge, none of the counterparties to any of the Material Contracts has given notice of its intention to terminate, repudiate or disclaim a Material Contract to which it is a party.  Except as set forth in Section 3.09(b) of the Disclosure Schedule, none of the OGP Subsidiaries or the Asset Sellers and, to the knowledge of ABB, none of the counterparties thereto is in material breach of, or material default under, any Material Contract, and to ABB’s knowledge there are no facts or circumstances that could reasonably be expected to result in such a breach or default, except for such breaches or defaults as would not give rise to the right of a party not in breach or default to terminate such agreement or to claim damages in excess of $500,000.

(c)True and complete copies of each Key Contract and the contracts listed in response to Section 3.09(a)(i) have been provided to Purchaser and are deemed to form part of the Disclosure Schedule.

(d)None of the OGP Subsidiaries or Asset Sellers relating to the OGP Business is a party to any securitization or similar program other than the Securitization Programs.

(e)All material contracts or agreements (other than those contracts and agreements terminated pursuant to Section 5.10) entered into between an OGP Subsidiary or an Asset Seller relating to the OGP Business and ABB or an Affiliate of ABB (other than an Affiliate which forms part of the OGP Business) were, when entered into, on arm’s-length commercial terms.

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SECTION 3.10.Intellectual Property.  (a)  Section 3.10(a) of the Disclosure Schedule sets forth a list of all (i) patents, patent applications, trademark and service mark registrations and applications and copyright registrations included in the Business Intellectual Property and (ii) Business IP Licenses.

(b)Except as set forth in Section 3.10(b) of the Disclosure Schedule, the registered Business Intellectual Property, which registered Business Intellectual Property would reasonably be expected to have a value in excess of $500,000, is valid and enforceable and has not been adjudged invalid or unenforceable.

(c)Except as set forth in Section 3.10(c) of the Disclosure Schedule, there are no Actions against or involving any OGP Subsidiary, any Asset Seller or any IPR Assignor, including claims or opposition brought by an employee of an OGP Subsidiary, Asset Seller or IPR Assignor relating to the OGP Business, that are pending before any Governmental Authority alleging that the use of the Business Intellectual Property infringes upon or misappropriates the Intellectual Property of third parties or questions the title, validity, enforceability or entitlement of the Business Intellectual Property, which individual Action would reasonably be expected to have a value in excess of $500,000 or all Actions in the aggregate would reasonably be expected to have a value in excess of $2,000,000.  To the knowledge of ABB, no third party is infringing upon the Business Intellectual Property in any material respect except as set forth in Section 3.10(c) of the Disclosure Schedule.  To the knowledge of ABB and except as set forth in Section 3.10(c) of the Disclosure Schedule:  (i) the conduct of the OGP Business does not infringe or misappropriate the Intellectual Property of any third party and (ii) no fact or circumstance specific to the OGP Business exists which could reasonably be expected to give rise to such a claim.

(d)The consummation of the transactions contemplated by this Agreement and the Related Agreements will not result in the termination or impairment of any of the Business Intellectual Property or Business IP Licenses, which impairment or termination would reasonably be expected to have a value in excess of $500,000.

(e)All renewal, maintenance and other fees due and payable by the OGP Subsidiaries, the Asset Sellers and the IPR Assignors to Governmental Authorities in respect of the Business Intellectual Property prior to the Closing have been or will be paid prior to the Closing.

(f)All material trade secrets and technical know-how owned by the OGP Subsidiaries and used in the OGP Business are adequately and properly documented in accordance with reasonable industry standards.  To the knowledge of ABB, no OGP Subsidiary, Asset Seller or IPR Assignor has disclosed or is contractually obligated to disclose any material trade secret or confidential technical know-how related to the OGP Business to any Person other than its employees, agents, authorized representatives or licensees who are bound by obligations of confidence, or except in the ordinary course of business on the condition that the disclosure is subject to obligations of confidence, or as required by Governmental Authorities or by Law.

SECTION 3.11.Real Property.  (a)  With respect to the Owned Real Property, except as would not reasonably be expected to have a Material Adverse Effect:

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(i)each OGP Subsidiary and Asset Seller indicated in Section 3.11 of the Disclosure Schedule has or will have at the Closing good and marketable fee simple title to the applicable Owned Real Property subject only to the Permitted Encumbrances;

(ii)there are no Actions affecting any of the Owned Real Property pending or, to ABB’s knowledge, threatened in writing, which would reasonably be expected to materially impair the value or materially interfere with the present use of the Owned Real Property; and

(iii)no OGP Subsidiary or Asset Seller listed in Section 3.11 of the Disclosure Schedule has received written notice of a violation of any Law.

(b)With respect to the Leased Real Property, except as would not reasonably be expected to have a Material Adverse Effect:

(i)each OGP Subsidiary and Asset Seller indicated in Section 3.11 of the Disclosure Schedule has or will have at the Closing valid leasehold interests in the applicable Leased Real Property subject only to Permitted Encumbrances;

(ii)there are no Actions affecting any of the Leased Real Property pending or, to ABB’s knowledge, threatened in writing which would reasonably be expected to materially impair the value or materially interfere with the present use of the Leased Real Property;

(iii)each of the leases (collectively, the “Leases”) relating to the Leased Real Property is valid and binding on the applicable OGP Subsidiary or Asset Seller indicated in Section 3.11 of the Disclosure Schedule and, to the knowledge of ABB, the counterparties thereto, and is in full force and effect;

(iv)no OGP Subsidiary or Asset Seller listed in Schedule 3.11 has received written notice of any event of default under any of the Leases and, to ABB’s knowledge, no event of default exists under any of the Leases with respect to any counterparty under the Leases; and

(v)no OGP Subsidiary has any contingent liability in respect of any leasehold property in England and Wales other than the Leased Real Property.

(c)The information set forth in Section 3.11 of the Disclosure Schedule under the following headings is true and accurate in all material respects with respect to Owned and Leased Real Property:  “No.”, “Owned/Leased”, “Asset Seller or OGP Subsidiary as Owner or Tenant (as applicable)”, “Other Occupant(s) of Property”, “Legal owner of land & building”, “Site Address”, “Country”, “Nature of Operations”, “Land (area in sqm)”, “Building/Facility (area in sqm)”, “% of sqm Occupied”, “Sqm Occupied”, “Description of Lease (if Leased Real Property)”, “Expiration Date of Lease (subject to the terms of the lease)” and “Estimated Annual Occupancy Cost”.  The OGP Real Property comprises all of the land and premises owned, occupied or used by, or in the possession of, the OGP Subsidiaries necessary for the operation of the OGP Business as such business is operated as of the date hereof.  Except for information with respect to “Expiration Date of Lease (subject to the terms of the lease)”, notwithstanding the

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above, the Parties agree that there will be no damages to Purchaser pursuant to this Section 3.11(c); provided that, from and after the Closing, Purchaser may continue to use any Owned or Leased Real Property in the manner in which such property was used prior to the Closing and pursuant to the same terms and conditions as were actually in existence prior to the Closing.

SECTION 3.12.Taxes.  Except as set forth in Section 3.12 of the Disclosure Schedule:

(a)the OGP Subsidiaries and the Asset Sellers relating to the OGP Business have filed all material Tax Returns that they were required to file and have maintained all records necessary to calculate any pre-Closing Tax liability and any Tax payable on the disposal of any of the Purchased Assets.  All such Tax Returns were correct and complete in all material respects.  All material Taxes owed by the OGP Subsidiaries or relating to the OGP Business (whether or not shown on any Tax Return) have been paid or adequate reserves have been established with respect thereto.  To ABB’s knowledge, no claim has ever been made by an authority in a jurisdiction where an OGP Subsidiary or an Asset Seller with respect to the OGP Business does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.  There are no liens or security interests on any assets of the OGP Business or the assets of any of the OGP Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax except for liens for Taxes, assessments and governmental charges or levies not yet due and payable or which are being contested in good faith in proper proceedings;

(b)the OGP Subsidiaries and the Asset Sellers relating to the OGP Business have withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party;

(c)there is no dispute or claim concerning any Tax liability of the OGP Subsidiaries or with respect to the OGP Business either (i) claimed or raised by any authority in writing or (ii) as to which any of the Sellers and the directors and officers (and employees responsible for Tax matters) of the OGP Subsidiaries or Asset Sellers relating to the OGP Business has knowledge based upon personal contact with any agent of such authority;

(d)no power of attorney currently in force has been granted to a Person by the OGP Subsidiaries or the Asset Sellers relating to the OGP Business with respect to any Tax matter relating to the OGP Subsidiaries or the OGP Business;

(e)the OGP Subsidiaries and the Asset Sellers relating to the OGP Business have not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency;

(f)none of the OGP Subsidiaries has filed a consent under Section 341(f) of the Code concerning collapsible corporations.  None of the OGP Subsidiaries is required to include in income any adjustment pursuant to Section 481(a) of the Code by reason of a change in accounting method or has an application pending with the IRS or any other

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Taxing Authority requesting permission for any change in accounting method.  None of the OGP Subsidiaries or Asset Sellers relating to the OGP Business has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Section 162(m) or 280G of the Code.  No acceleration of the vesting schedule for any property that is substantially nonvested within the meaning of the regulations under Section 83 of the Code will occur in connection with the transactions contemplated under this Agreement.  None of the OGP Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.  None of the assets of the OGP Business that are being acquired from foreign persons is a U.S. real property interest as defined in Section 897(c)(i) of the Code.  None of the OGP Subsidiaries is currently a party to any Tax allocation or Tax sharing agreement or has an obligation to make a payment under such an agreement.  None of the OGP Subsidiaries has been a member of an Affiliated Group filing a consolidated U.S. federal income Tax Return (other than an Affiliated Group the common parent of which is a member of the Sellers’ group).  To ABB’s knowledge, none of the OGP Subsidiaries or Asset Sellers relating to the OGP Business will be obligated to pay any amount for the Taxes of Seller’s consolidated group or any other Person (other than an OGP Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee, successor, by contract or otherwise;

(g)the unpaid Taxes of the OGP Subsidiaries (i) did not, as of the most recent fiscal month end, exceed the reserve for Tax liability (other than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the most recent balance sheet (other than in any notes thereto) and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the OGP Subsidiaries in filing their Tax Returns;

(h)none of the OGP Subsidiaries (i) to ABB’s knowledge, has a branch, permanent establishment or office or fixed place of business outside the United States other than in its country of organization and (ii) has a material item of income or gain reported for financial accounting purposes in a Pre-Closing Taxable Period or otherwise attributable to a Pre-Closing Taxable Period which is not reserved for on the Final Effective Date Balance Sheet and which is required to be included in taxable income for a post-Closing period;

(i)to ABB’s knowledge, none of the OGP Subsidiaries has constituted a “distributing corporation” or a “controlled corporation” within the meaning of Section 355 of the Code in a distribution described under Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) as part of a “plan” or “series of distributions” in connection with this Agreement, the other transaction documents or the transaction under Section 355(e) of the Code;

(j)to ABB’s knowledge, none of the assets of the OGP Business is (i) tax-exempt use property under Section 168(h) of the Code, (ii) tax-exempt bond financed

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property under Section 168(g) of the Code, (iii) limited use property under Revenue Procedure 76-30, (iv) treated as owned by any other person under Section 168 of the Code, or (v) located in a country outside the relevant OGP Subsidiary or Asset Seller’s country(ies) of incorporation.  None of the OGP Subsidiaries is a party (other than as an investor) to any industrial development bond;

(k)none of the Purchased Assets is a, and none of the OGP Subsidiaries owns shares of any, controlled foreign corporation as described in Section 957 of the Code (except for the OGP Subsidiaries).  To ABB’s knowledge, none of the OGP Subsidiaries is a passive foreign investment company as described in Section 1297 of the Code or a foreign investment company as described in Section 1246 of the Code;

(l)none of the OGP Subsidiaries which are organized outside the United States (i) has any United States real property interests as described in Section 897 of the Code or (ii) generates material amounts of Subpart F income as described in Section 952 of the Code;

(m)none of the OGP Subsidiaries which are organized outside the United States has made an election under U.S. law with respect to its status or classification for U.S. federal income tax purposes;

(n)to ABB’s knowledge, none of the OGP Subsidiaries which are organized outside the United States is engaged in the conduct of a trade or business in the United States or has a branch, office or fixed place of business or permanent establishment in the United States;

(o)ABB represents that the relevant Seller is eligible to make an election under Section 338(h)(10) of the Code (and any comparable election under state or local tax law) (the “338(h)(10) Election”) with respect to the OGP Subsidiaries organized in the United States;

(p)no transaction has taken place within the last six years for which UK Treasury consent is required under Section 765 of the Income and Corporation Taxes Act of 1988;

(q)to ABB’s knowledge, all documents the enforcement in which any of the OGP Subsidiaries or Asset Sellers relating to the OGP Business is interested have been duly stamped and all such duty, interest and penalties have been duly paid;

(r)between the date hereof and the Closing Date, neither ABB nor any of the OGP Subsidiaries has entered into or amended any agreement or settlement with any Taxing Authority; and

(s)with respect to the reorganization of the entities through which the OGP Business is carried out in Norway, which took place in December 2002, the Tax Returns of the OGP Subsidiaries, the Asset Sellers in relation to the OGP Business and the JV Companies involved in the reorganization reflected the transfers carried out as transfers

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subject to Tax and no election has been made to treat these transfers not subject to Tax under Sections 11-21 of the General Tax Act of Norway (and associated transactions).

SECTION 3.13.Employee Benefit Matters.  (a)  With respect to each employee benefit plan, program, arrangement, agreement or contract (including any “employee benefit plan”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and each incentive, change of control, bonus, medical, option, deferred compensation, vacation, cafeteria, severance, termination, disability plan, program, agreement, policy or arrangement maintained or contributed to by any of the OGP Subsidiaries for the benefit of any current employees of the OGP Subsidiaries (collectively, the “OGP Employees”) or former employees of the OGP Subsidiaries (collectively, the “OGP Former Employees”) or for the benefit of the Transferred Employees or with respect to which the OGP Subsidiaries could reasonably be expected to incur any material liability under Title IV of ERISA or Section 412 of the Code or the OGP Assets could be subject to a material lien or other material impairment, and which is subject to or governed by the Law of the United States or any state or commonwealth of the United States (collectively, the “U.S. Employee Plans”), ABB has made available to Purchaser, where applicable, a true and correct copy of (i) the most recent annual report (Form 5500) filed with the IRS, (ii) each such U.S. Employee Plan, (iii) each trust agreement relating to such U.S. Employee Plan, (iv) the most recent summary plan description for each U.S. Employee Plan for which a summary plan description is required, and (v) the most recent determination letter, if any, issued by the IRS with respect to any U.S. Employee Plan intended to be qualified under Section 401(a) of the Code.  Section 3.13(a) of the Disclosure Schedule sets forth each material U.S. Employee Plan.

(b)Except as otherwise set forth in Section 3.13(b) of the Disclosure Schedule, none of the U.S. Employee Plans (i) is a “multiemployer plan”, within the meaning of Section 3(37) of ERISA, or a “single-employer plan”, within the meaning of Section 4001(a)(15) of ERISA, for which any of the OGP Subsidiaries could incur material liability under Section 4063 or 4064 of ERISA or is otherwise subject to Title IV of ERISA or Section 412 of the Code or (ii) provides or promises to provide retiree medical or life insurance benefits.  None of the OGP Subsidiaries has maintained, sponsored or contributed to any “multiemployer plan” within the six-year period prior to the date hereof.

(c)With respect to the U.S. Employee Plans, no event has occurred and there exists no condition or set of circumstances in connection with which any of the OGP Subsidiaries or any of the Asset Sellers could be subject to any liability under the terms of or as a result of such U.S. Employee Plans, ERISA, the Code or any other applicable Law which would reasonably be expected to have a Material Adverse Effect.

(d)ABB has made available to Purchaser (i) copies of all bonus, incentive, stock option, restricted stock, stock appreciation rights, deferred compensation, severance plans or agreements and any forms of employment agreements of ABB or any of the OGP Subsidiaries relating to the OGP Employees employed in the United States or any person who has been offered employment in the OGP Business and (ii) copies of all plans, programs, agreements and other arrangements of ABB, any of the OGP Subsidiaries or any of the Asset Sellers with or relating to the OGP Employees or the Transferred Employees employed in the United States which contain change of control provisions.

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(e)Section 3.13(e) of the Disclosure Schedule sets forth each material Non-U.S. Plan not required under applicable Law.  In addition to the foregoing, with respect to each Non-U.S. Plan:

(i)all employer and employee contributions to each Non-U.S. Plan (if applicable) have been made or, if applicable, accrued in accordance with applicable Law and the terms of such Non-U.S. Plan, and a pro  rata contribution for the period prior to and including the Closing Date has been made or accrued except for a failure to comply with such matters that would not reasonably be expected to have a Material Adverse Effect;

(ii)each Non-U.S. Plan required to be registered has been registered and maintained in good standing with applicable regulatory and Tax authorities (and, to the knowledge of ABB, no circumstances have occurred which could reasonably be expected to result in tax approval being withdrawn).  Each Non-U.S. Plan has been operated in material compliance with all applicable Laws;

(iii)ABB has made available to Purchaser, where applicable, true and complete copies of all Non-U.S. Plans, including, without limitation, all material information relating to benefits payable or prospectively payable under each Non-U.S. Plan (including supplemental benefits) membership data, most recent actuarial valuations and all material plan summaries and announcements to members with respect to OGP Employees, OGP Former Employees and Transferred Employees; and

(iv)ABB has made available to Purchaser a complete and accurate copy of all the material documentation (including the trust deeds, rules and booklets) governing each Non-U.S. Plan.

(f)Each of the U.S. Employee Plans which is intended to be tax-qualified under Section 401(a) or 401(k) of the Code has been determined by the IRS to be so qualified and such determination has not been modified, revoked or limited, and, to the knowledge of ABB, no circumstances have occurred which could reasonably be expected to have a Material Adverse Effect.

(g)Except as otherwise set forth in Section 3.13(g) of the Disclosure Schedule, no plan exists which could result in the payment of money or any other property or rights, or accelerate or provide any other rights or benefits, to OGP Employees, OGP Former Employees or Transferred Employees (or other current or former service providers thereto) that would not have been required but for the transactions contemplated by this Agreement.

(h)There are no pending suits, actions, claims, arbitrations, administrative or governmental investigations or, to the knowledge of ABB, threatened in writing, alleging any breach of the terms of any U.S. Employee Plan or Non-U.S. Plan or of any fiduciary duties thereunder or violation of any applicable Law with respect to the operation of such plans (other than routine benefit claims).

(i)Purchaser acknowledges that (i) the representations and warranties contained in this Section 3.13 and Section 3.14 are the only representations and warranties being

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made with respect to employee benefit matters related to this Agreement or its subject matter and (ii) no other representation contained in this Agreement shall apply to any such matters and no other representation or warranty, express or implied, is being made with respect thereto.

SECTION 3.14.Labor Matters.  (a)  Except as set forth in Section 3.14(a) of the Disclosure Schedule, (i) there are no grievances outstanding against any of the OGP Subsidiaries or any of the Asset Sellers primarily relating to the OGP Business under any collective bargaining agreement or other union contract applicable to the OGP Employees or the Transferred Employees; (ii) there are no material unfair labor practice complaints pending against any of the OGP Subsidiaries or any of the Asset Sellers primarily relating to the OGP Business before the National Labor Relations Board (or similar non-United States Governmental Authority); (iii) there is no strike or lockout, or, to the knowledge of ABB, threatened in writing, by or with respect to the OGP Employees or the Transferred Employees; and (iv) none of the OGP Subsidiaries, ABB or any of its Affiliates or the Asset Sellers with respect to the OGP Business or, to the knowledge of ABB, the JV Companies (A) has any agreements or arrangements with or recognize a trade union, works council, staff association or other body representing any of the OGP Employees or the Transferred Employees or (B) are involved in any ongoing industrial or trade dispute or any dispute or negotiation regarding a material claim with any OGP Employees, Transferred Employees or OGP Former Employees or, to the knowledge of ABB, any employee of a JV Company, and, to the knowledge of ABB, there are no circumstances which could reasonably be expected to give rise to any such dispute.

(b)Except as otherwise set forth in Section 3.14(b) of the Disclosure Schedule, during the twelve-month period ending on the date of this Agreement, none of the OGP Subsidiaries or the Asset Sellers with respect to the OGP Business has (i) given notice of multiple redundancies to, or started consultations with, appropriate representatives under Redundancy Laws or failed to comply in any material respects with its notification or consultation obligations with appropriate representatives under the Redundancy Laws or (ii) been a party to a relevant transfer (as defined in the Transfer Regulations) or failed to comply in all material respects with a duty to inform and consult appropriate representatives under such Law.

(c)Except as otherwise set forth in Section 3.14(c) of the Disclosure Schedule, there is no contract of employment, service agreement or agreement for services with any OGP Employee or Transferred Employee which cannot be terminated by the relevant OGP Subsidiary or Asset Sellers by the giving of six months’ or less notice of such termination or which provides for any payment on termination in excess of six months’ base salary other than for severance or termination payments due under any applicable Law.

(d)Except as set forth in Section 3.14(d) of the Disclosure Schedule or as otherwise required by applicable Law or contract, from December 31, 2002 until the date of this Agreement, none of ABB nor any of its Affiliates has increased, or made provisions to increase, the compensation or benefits payable to OGP Employees or Transferred Employees in excess of two percent in the aggregate of the value of such compensation or benefits on December 31, 2002.

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(e)Except as set forth in Section 3.14(e) of the Disclosure Schedule, none of the OGP Subsidiaries or the Asset Sellers has made a written offer of employment to any person, which has yet to be accepted or declined, offering such person an annual base salary greater than $100,000.

SECTION 3.15.Environmental Matters.  (a)  Except as set forth in Section 3.15(a) of the Disclosure Schedule:

(i)The OGP Subsidiaries and, with respect to the OGP Assets, the Asset Sellers are and have been for the last three years in compliance in all material respects with and have no liability under any and all applicable Environmental Laws and Environmental Agreements and, in the last three years, have not received any written notification of any such liability or lack of compliance which has not been fully resolved.  To ABB’s knowledge, no fact or circumstance specific to the OGP Business, the OGP Real Properties, the OGP Assets or the Former Properties exists which could reasonably be expected to give rise to any non-compliance with or liability under any applicable Environmental Law or Environmental Agreement.

(ii)(A)  The OGP Subsidiaries and, with respect to the OGP Assets, the Asset Sellers have obtained and are complying in all material respects, and have complied in all material respects for the last three years, with all applicable Environmental Permits, and none of the OGP Subsidiaries or, with respect to the OGP Assets, the Asset Sellers, has received any written notification, in the last three years, that any Environmental Permit is or will be cancelled, terminated or not renewed, or amended or renewed with one or more conditions that are more onerous than current permit conditions.

(B)Without prejudice to part (A) of this clause (ii), to ABB’s knowledge there are no facts or circumstances specific to the OGP Business, the OGP Real Properties, the OGP Assets or the Former Properties indicating that in the next two years any Environmental Permit will be cancelled, terminated or not renewed, or amended or renewed with one or more conditions that are more onerous than current permit conditions.

(C)All Environmental Permits associated with the OGP Assets are capable of transfer in substantially the same form to Purchaser.

(iii)There are no applicable Environmental Permits, Environmental Laws or legally enforceable agreements between an OGP Subsidiary or, with respect to the OGP Assets, an Asset Seller, and a Governmental Authority, that, by their express terms or provisions, require, or will require within the next two years, any specific capital upgrade other than as provided for in the Financial Statements.

(iv)None of the OGP Subsidiaries or, with respect to the OGP Assets, the Asset Sellers is a party to or subject to any Environmental Claim, and none of the OGP Real Property is the subject of any Environmental Claim, and there are no such Environmental Claims pending or, to ABB’s knowledge, threatened in writing.  To ABB’s knowledge, no fact or circumstance specific to the OGP Business, the OGP Real

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Properties, the OGP Assets or the Former Properties exists which could reasonably be expected to give rise to such an Environmental Claim within the next two years.

(v)None of the OGP Real Properties or OGP Assets that are located in the United States or, to ABB’s knowledge, Former Properties that are located in the United States is listed on the National Priorities List or the Comprehensive Environmental Response, Compensation and Liability Information System under the Federal Comprehensive Environmental Response, Compensation and Liability Act or any analogous state list, and none of the OGP Real Properties or OGP Assets that are not located in the United States, or, to ABB’s knowledge, Former Properties that are not located in the United States, is listed on any non-U.S. regulatory register or list identifying such property as being actually contaminated by Hazardous Materials, including any such register or list maintained pursuant to the United Kingdom’s Environmental Protection Act 1990.

(vi)None of the OGP Subsidiaries has disposed or arranged for the disposal of any Hazardous Material (A) at any non-OGP Real Property in violation of applicable Environmental Law or (B) at any real property that is listed on the National Priorities List.

(vii)None of the OGP Real Property or OGP Assets contains any friable asbestos that requires removal under any applicable Environmental Law, and none of the OGP Real Property or OGP Assets contains any friable asbestos that requires encapsulation under any applicable Environmental Law except for such asbestos that has been encapsulated in accordance with applicable Environmental Law.

(viii)There have not been and there are not now any Releases into the Environment of any Hazardous Material (A) in violation of applicable Environmental Law, Environmental Permits or Environmental Agreements, (B) that to ABB’s knowledge require Remedial Action by any Governmental Authority under Environmental Law or (C) that are the subject of an Environmental Claim against an OGP Subsidiary or any Asset Seller from or at any OGP Real Property or the OGP Assets or, during the occupation or use of the OGP Subsidiaries thereof, any of the Former Properties except where such Releases have been remediated in accordance with applicable Environmental Law and any liability with respect to such Releases has been fully satisfied.

(ix)All material environmental audit reports, assessments, studies or tests, insurance appraisals, and health and safety reports relating to the OGP Business, that have been generated in the past three years and that are in the possession of ABB, have been supplied to the Purchaser.

(b)Purchaser acknowledges that, except for representations and warranties under Sections 3.05 (Financial Information) and 3.08 (Litigation) above, (i) the representations and warranties contained in this Section 3.15 are the only representations and warranties being made with respect to compliance with or liability under any Environmental Law, Environmental Permit or Environmental Agreement and (ii) no other representation or warranty contained in

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this Agreement shall apply to any such matters and no other representation or warranty, express or implied, is being made with respect thereto.

SECTION 3.16.Assets.  (a)  Except as set forth in Section 3.16(a) of the Disclosure Schedule, the OGP Subsidiaries and the Asset Sellers legally and beneficially own, and the IPR Assignors legally own, lease, license or otherwise have the legal and beneficial right to use, or at the Closing will own, lease, license or otherwise have the legal and beneficial right to use, all the assets primarily used or held for use in the conduct of the OGP Business, including the assets currently subject to the Capital Modernization Program and the Purchased Assets (the “OGP Assets”) free and clear of all Encumbrances other than Permitted Encumbrances.  Except as set forth in Section 3.16 of the Disclosure Schedule, (i) the OGP Subsidiaries and the Asset Sellers have good, valid and marketable title to or valid leasehold, license or other contractual interests in the OGP Assets free and clear of all Encumbrances other than Permitted Encumbrances and (ii) where capable of possession, the OGP Assets are under the control of the OGP Subsidiaries or the Asset Sellers, except for OGP Assets that, in the ordinary course of business, are placed under the control of customers, suppliers, subcontractors or other third parties having commercial relations with the OGP Business.  ABB Oleo e Gás, Manutencão e Modificação Ltda. and ABB Oleo & Gás Ltda. collectively own all of the servers, routers, switches, hubs and all ancillary cabling related thereto used exclusively by the OGP Business in Brazil, free and clear of all Encumbrances other than Permitted Encumbrances.

(b)Except for the Excluded Assets, and to the extent made available pursuant to the Related Agreements, the sale of the Shares and the Purchased Assets to Purchaser pursuant to this Agreement will convey to Purchaser (directly or indirectly) all of the tangible and intangible property primarily used by the OGP Subsidiaries and the Asset Sellers (whether owned, leased or held under license by the OGP Subsidiaries or the Asset Sellers) in connection with the operation of the OGP Business as conducted by the OGP Subsidiaries and the Asset Sellers on the date hereof including all tangible assets and properties of the OGP Subsidiaries and the Asset Sellers relating to the OGP Business reflected in the most recent balance sheet included in the Financial Statements and assets and properties acquired since December 31, 2002 in the conduct of the OGP Business by the OGP Subsidiaries and the Asset Sellers but other than assets and properties disposed of since such date without violation of the terms and provisions of this Agreement.

(c)Except as set forth in Section 3.16(c) of the Disclosure Schedule, the OGP Assets together with the rights granted to Purchaser pursuant to the Related Agreements are sufficient (taken together with the Shares) to enable Purchaser to conduct the OGP Business immediately after the Closing in a manner consistent with the conduct of the OGP Business on the date of this Agreement.

SECTION 3.17.Insurance.  True and complete copies of policy documentation relating to all insurance policies, other insurance arrangements and other contracts or arrangements for the transfer or sharing of insurance risks held by an OGP Subsidiary or an Asset Seller primarily relating to the OGP Business (including any currently effective policies which provide cover on a losses occurring basis), in each case with a sum insured or limit of liability in excess of $5 million, in force on the date hereof or, if no longer in force, under which any pending claim has been made, are included in Section 3.17 of the Disclosure Schedule.  All

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premiums due on such policies have been paid by the OGP Subsidiaries or the Asset Sellers, as the case may be, and the OGP Subsidiaries or the Asset Sellers, as the case may be, are otherwise in compliance in all material respects with the terms and provisions of such policies.  A true and complete list of all outstanding claims under such policies in excess of $5 million is set forth in Section 3.17 of the Disclosure Schedule.  Except as set forth in Section 3.17 of the Disclosure Schedule, none of the Asset Sellers relating to the OGP Business or OGP Subsidiaries maintain any self-insurance arrangement with respect to the OGP Business or the Purchased Assets in excess of $1,000,000.  To the knowledge of ABB, (i) none of the OGP Subsidiaries or the Asset Sellers (with respect to the OGP Business) has taken any action or omitted to take any action that is not consistent with past practice which could reasonably be expected to materially prejudice the ability to obtain insurance in the future on substantially the same terms as the terms of the insurance policies in place with respect to the OGP Business as of the date hereof, and (ii) all notices of claim required to be given under the terms of the existing insurance policies of the OGP Business in excess of (A) $500,000 in respect of individual claims or (B) $1,000,000 in the aggregate, as the case may be, have been given.

SECTION 3.18.Brokers.  ABB is solely responsible for the fees and expenses of all brokers, finders or investment bankers appointed by ABB and payable in connection with any brokerage, finder’s or other fees or commissions payable by it or any Affiliate of ABB in connection with the transactions contemplated by this Agreement and the Related Agreements.

SECTION 3.19.Inventory.  To ABB’s knowledge, in operating the OGP Business the Asset Sellers have not agreed to supply defective or unsafe goods or goods which fail to materially comply with their terms of sale.

SECTION 3.20.Constitution; Registers; Powers of Attorney.  (a)  Each OGP Subsidiary and Asset Seller is operating its business in all material respects in accordance with its organizational documents.  True and complete copies of the relevant organizational documents of each Material Subsidiary have been provided to Purchaser and are deemed to form part of the Disclosure Schedule.

(b)Each register, minute book and other book required by Law to be kept by the OGP Subsidiaries or Asset Sellers relating to the OGP Business has been properly kept in all material respects and contains a complete and accurate record of the matters which it is required by the relevant Law.  No notice has been received or, to the knowledge of ABB, allegation made that a register or book is incorrect or should be rectified in any material respect.

(c)No OGP Subsidiary has given any power of attorney in effect as of the date of this Agreement by which a person (other than a director, officer or employee) may enter into an agreement, arrangement or obligation on behalf of an OGP Subsidiary, except for powers of attorney granted to tax and legal advisers in the ordinary course of business.

SECTION 3.21.Related Party Transactions.  Except as set forth in Section 3.21 of the Disclosure Schedule or pursuant to any employment related agreements or arrangements, none of ABB, the Sellers or the OGP Subsidiaries have entered into any agreement, arrangement or transaction (legally enforceable or not) in excess of $100,000 with any director of any OGP Subsidiary or of any Asset Seller who is expected to be a Transferred Employee or with any

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relative or spouse of such Person, or any such agreement, arrangement or transaction in which any such director, relative or spouse has a material interest.

SECTION 3.22.Insolvency; Winding Up.  Except as set forth in Section 3.22 of the Disclosure Schedule, as of the date of this Agreement, (i) no Order has been made, petition presented or resolution passed for the winding up of any of the OGP Subsidiaries or for the appointment of a provisional liquidator to any of the OGP Subsidiaries and no administration order or procedure has been made in respect of any of the OGP Subsidiaries; (ii) no receiver or receiver and manager has been appointed of any of the OGP Subsidiaries; (iii) none of the OGP Subsidiaries is insolvent or unable to pay its debts as they mature; (iv) none of the OGP Subsidiaries has stopped paying its debts as they fall due, except with respect to disputes in the ordinary course of business; and (v) no OGP Subsidiary or any other part of the OGP Business, at any time during the relevant statute of limitations period dating back from the date of this Agreement, has entered into a transaction with Combustion Engineering, Inc., Basic Inc. or ABB Lummus Global Inc. or the subsidiaries of such entities, as of the date of this Agreement, at less than fair market value.

SECTION 3.23.Guarantees.  (a)  Except as set forth in Section 5.08(a) of the Disclosure Schedule, as of the date of this Agreement, there are no Third Party Guarantees nor OGP TPGs.

(b)Except as set forth in Section 5.08(b) of the Disclosure Schedule, as of the date of this Agreement, there are no Parent Guarantees.

(c)Except as set forth in Section 5.08(c) of the Disclosure Schedule, as of the date of this Agreement, there are no OGP Guarantees.

(d)Except as set forth in Section 1.01(a) of the Disclosure Schedule, there are no cash collateralized agreements, arrangements or obligations restricting the freedom of the OGP Business to exploit the use of its cash after the Closing (and with respect to a Provisionally Retained Business, the Subsequent Closing).

SECTION 3.24.No Other Representations.  (a)  ABB does not make, and has not made, any representations or warranties of any kind whatsoever in connection with this Agreement or the transactions contemplated by the Transaction Agreements other than those expressly set out in this Agreement, the Related Agreements or the certificate referenced in Section 2.08(v).  Without limiting the generality of the foregoing, ABB has not made, and shall not be deemed to have made, any representations or warranties in or concerning any communication or document relating to the OGP Subsidiaries, the Sellers, the OGP Business or the transactions contemplated by the Transaction Agreements, including in any information memorandum supplied to Purchaser and/or the Purchaser Representatives by or on behalf of ABB prior to the Closing or in any presentation of the OGP Subsidiaries, the Sellers, the OGP Business or the transactions contemplated by the Transaction Agreements.

(b)Other than as provided within this Agreement or the Related Agreements, no Person has been authorized by ABB to make any representation or warranty relating to ABB, the OGP Subsidiaries, the Sellers, or the OGP Business or otherwise in connection with the

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transactions contemplated by the Transaction Agreements, and, if made, such representation or warranty must not be relied upon as having been authorized by ABB.

(c)ABB acknowledges that it has not relied on any representations or warranties of Purchaser in connection with this Agreement or the transactions contemplated by the Transaction Agreements other than those expressly set out in this Agreement or the certificate referenced in Section 2.07(v).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
OF PURCHASER

As an inducement to ABB to enter into this Agreement, Purchaser hereby represents and warrants to ABB as follows:

SECTION 4.01.Organization and Authority of Purchaser and the OGP Purchasers.  (a)  Purchaser is a corporation duly organized, validly existing and in good standing under the laws of England and Wales and has all necessary corporate power and authority to enter into, execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated by the Transaction Agreements.  The execution and delivery of this Agreement by Purchaser, the performance by Purchaser of its obligations hereunder and under the Related Agreements to which it is, or will be when executed as provided in this Agreement, a party and the consummation by Purchaser of the transactions contemplated by the Transaction Agreements have been duly authorized by all requisite action on the part of Purchaser.  This Agreement has been, and upon their execution each of the Related Agreements will be, duly executed and delivered by Purchaser to the extent Purchaser is a party thereto, and, assuming due authorization, execution and delivery by ABB and the other parties thereto, if any, this Agreement is, and each of the Related Agreements to which Purchaser is a party will be, a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or similar Laws relating to or affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

(b)At the Closing, each OGP Purchaser shall be a corporation duly incorporated, validly existing and, where applicable, in good standing under the Laws of its jurisdiction of incorporation and shall have all necessary corporate power and authority to enter into, execute and deliver each Related Agreement to which it will be a party when executed as provided in this Agreement, to carry out its obligations thereunder and to consummate the transactions contemplated thereby.  The execution and delivery by each OGP Purchaser of each Related Agreement to which it is a party, the performance by such Seller of its obligations thereunder and the consummation by such OGP Purchaser of the transactions contemplated thereby will be, when executed as provided in this Agreement, duly authorized by all requisite action on the part of such OGP Purchaser.  Each Related Agreement to which each OGP Purchaser will be a party will be, when executed as provided in this Agreement, duly executed and delivered by such OGP Purchaser and, assuming due authorization, execution and delivery

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by the other parties thereto, if any, will constitute, when executed as provided in this Agreement, a legal, valid and binding obligation of such OGP Purchaser enforceable against it in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or similar Laws relating to or affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

SECTION 4.02.No Conflict.  Assuming that all consents, approvals, authorizations and other actions described in Section 4.03 have been obtained and all filings and notifications listed in Section 4.03 of the Disclosure Schedule have been made, the execution, delivery and performance of this Agreement by Purchaser and the Related Agreements to which Purchaser and each OGP Purchaser will be a party do not and will not (a) violate, conflict with or result in the breach of any provision of the charter or by-laws (or similar organizational documents) of Purchaser or any OGP Purchaser, (b) conflict with or violate any Law or Order, or (c) except as set forth in Section 4.02 of the Disclosure Schedule, conflict with, result in any breach of, constitute a default (or event which, with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance other than a Permitted Encumbrance on any of the assets or properties of Purchaser or any OGP Purchaser pursuant to any note, grant, subsidy, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which Purchaser or any OGP Purchaser is a party or by which any of such assets or properties are bound or affected, except, in the case of clause (b) or (c), as would not, individually or in the aggregate, prevent or materially delay the consummation by Purchaser and the OGP Purchasers of the transactions contemplated by the Transaction Agreements.

SECTION 4.03.Consents and Approvals.  The execution, delivery and performance of this Agreement by Purchaser and the OGP Purchasers of the Transaction Agreements to which any of them is a party do not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority except (a) for consents, appeals or authorizations or other orders of, actions by, filings with or notifications not related to merger control or competition Law set forth in Section 4.03(a) of the Disclosure Schedule, (b) the notification and waiting period requirements of the HSR Act and (c) applicable filings under non-United States antitrust and competition Laws that are required by Law to be filed prior to the Closing and which are set forth in Section 4.03(c) of the Disclosure Schedule.

SECTION 4.04.Investment Purpose.  Purchaser is acquiring the Shares solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof.

SECTION 4.05.Litigation.  No Action against Purchaser or the Purchaser Affiliates is pending or, to the knowledge of Purchaser, threatened in writing that seeks to prevent or materially delay or adversely affect the ability of Purchaser to consummate the transactions contemplated by the Transaction Agreements.  To the knowledge of Purchaser, no

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circumstances exist which could reasonably be expected to give rise to a claim which would have such effect.

SECTION 4.06.Financing.  Purchaser has legally binding agreements making available to it the funds necessary to pay the Purchase Price in accordance with this Agreement.  Purchaser has received, executed, accepted and delivered each of the Purchaser Financing Documents and has provided true and complete copies as of the date of this Agreement of the Purchaser Financing Documents to ABB.  As of the date hereof, Purchaser knows of no events or conditions existing that would reasonably be expected to delay, impair, impede or frustrate the satisfaction of any remaining condition precedent to the drawdown of funds pursuant to the Purchaser Financing Documents.

SECTION 4.07.Brokers.  Purchaser is solely responsible for the fees and expenses of all brokers, finder or investment bankers appointed by Purchaser and payable in connection with any brokerage, finder’s or other fees or commissions payable by it or any OGP Purchaser in connection with the transactions contemplated by this Agreement and the Related Agreements.

SECTION 4.08.No Other Representations.  (a)  Purchaser does not make, and has not made to ABB or any of the Affiliates of ABB (other than those Affiliates forming part of the OGP Business), any representations or warranties of any kind whatsoever in connection with this Agreement or the transactions contemplated by the Transaction Agreements other than those expressly set out in this Agreement, the Related Agreements or the certificate referenced in Section 2.07(v).

(b)Other than as provided within this Agreement or the Related Agreements, no Person has been authorized by Purchaser to make any representation or warranty relating to Purchaser or the OGP Purchasers or otherwise in connection with the transactions contemplated by the Transaction Agreements, and, if made, such representation or warranty must not be relied upon as having been authorized by Purchaser.

(c)It is understood by Purchaser that any projections or other predictions, or, except as expressly provided in this Agreement, any other financial information or data, provided by ABB relating to the OGP Subsidiaries or in connection with the transactions contemplated by the Transaction Agreements are not, and shall not be deemed to be or to include, representations or warranties of ABB.  Purchaser acknowledges that it has not relied on any representations or warranties of ABB in connection with this Agreement or the transactions contemplated by the Transaction Agreements other than those expressly set out in this Agreement or the certificate referenced in Section 2.08(v).

ARTICLE V

COVENANTS AND AGREEMENTS

SECTION 5.01.Reorganization.  Prior to the Closing, ABB shall reorganize, or shall cause the reorganization of, the OGP Business in the manner described in Section 5.01 of the Disclosure Schedule (the “Reorganization”).

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SECTION 5.02.Related Agreements.  (a)  At the Closing (or immediately thereafter with respect only to the Non-Competition Agreement), ABB and Purchaser shall enter into, cause the Affiliates of ABB and the Purchaser Affiliates respectively to enter into, or cause to be issued, as the case may be, the following agreements:

(i)A transition services agreement substantially in the form attached hereto as Exhibit D (the “Transition Services Agreement”), pursuant to which ABB shall, or shall cause its designated Affiliates to, provide certain transitional services after the Closing to Purchaser and the OGP Purchasers;

(ii)Agreements substantially in the form attached hereto as Exhibit F-1 (the “Local Share Agreements”) each between a Share Seller, on the one hand, and Purchaser or an OGP Purchaser, on the other hand, in order to memorialize by jurisdiction each sale and purchase of Shares set forth in Exhibit L;

(iii)Agreements substantially in the form attached hereto as Exhibit F-2 (the “Local Asset Agreements” and, together with the Local Share Agreements, the “Local Agreements”) each between an Asset Seller, on the one hand, and Purchaser or an OGP Purchaser, on the other hand, in order to memorialize by jurisdiction each sale and purchase of Purchased Assets and the assumption of the Assumed Liabilities set forth in Exhibit M;

(iv)A non-competition agreement between ABB Ltd. and Purchaser substantially in the form attached hereto as Exhibit G (the “Non-Competition Agreement”);

(v)An intellectual property license agreement between ABB Ltd. and Purchaser substantially in the form attached hereto as Exhibit H (the “Shared IP License Agreement”);

(vi)The Patent Assignments substantially in the form attached hereto as Exhibit O;

(vii)A bank guarantee substantially in the form of Exhibit J-1 with an aggregate principal amount equal to $40,000,000 (the “Adjustment and Indemnity Bank Guarantee”) to be issued by an Appropriate Bank;

(viii)The Deferred Transfer Agreement and a bank guarantee substantially in the form of Exhibit J-2 with an aggregate principal amount equal to an amount up to the Allocation Amount (the “Repayment Bank Guarantee”), if applicable, to be issued by an Appropriate Bank;

(ix)A bank guarantee substantially in the form of Exhibit J-3 with an aggregate principal amount equal to $7,500,000 (the “Tax Election Bank Guarantee”) to be issued by an Appropriate Bank; and

(x)The surety, substantially in the form attached hereto as Exhibit I, dated as of the Closing Date, made by ABB Ltd. in favor of Purchaser relating to the payment

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obligations of ABB or any Affiliate of ABB (other than ABB Ltd.) under the Transaction Agreements (the “Surety”).

(b)To the extent that the provisions of this Agreement are inconsistent with or additional to the provisions of any Local Agreement or Deferred Transfer Agreement, the provisions of this Agreement shall prevail and, except with respect to the representations relating to the ownership of and title to the OGP Shares contained in Exhibit F-1, ABB or an Affiliate of ABB and Purchaser shall cause the provisions of the relevant Local Agreement or Deferred Transfer Agreement to be amended to the extent necessary to give effect to the provisions of this Agreement or cause the relevant parties to such Local Agreement and Deferred Transfer Agreement to comply with the provisions of this Agreement as though they were bound by such provisions in place of the provisions of such Local Agreement or Deferred Transfer Agreement.

SECTION 5.03.Conduct of the Business Prior to the Closing.  Except as described in Section 5.03 of the Disclosure Schedule or as otherwise contemplated by any of the Transaction Agreements, unless Purchaser shall otherwise agree in writing, between the date of this Agreement and the Closing:

(a)ABB will cause each OGP Subsidiary and each Asset Seller to conduct the OGP Business in the ordinary course consistent with past practice; provided, however, that no action by any of ABB, the Sellers or the OGP Subsidiaries with respect to matters specifically addressed by any provision of Section 5.03(b) shall constitute a breach of this Section 5.03(a) unless such action would constitute a breach of any such provision of Section 5.03(b);

(b)ABB will cause (x) each of the OGP Subsidiaries not to take any of the following actions (other than for actions by and between any OGP Subsidiaries) and (y) each of the Asset Sellers not to take any of the following actions relating to the OGP Business (as a result of which it is understood that clauses (i), (ii) and (xii) below shall not apply to the Asset Sellers):

(i)amend its certificate of incorporation, by-laws or other equivalent organizational documents, or merge or consolidate, or obligate itself to do so, with or into any other entity;

(ii)issue or sell any shares of its capital stock or other securities convertible into or exchangeable for such shares or equity interests or create, allot or issue any share or loan capital or pass a shareholders’ resolution to provide for any of the above;

(iii)sell, transfer, lease, sublease, license or otherwise dispose of any OGP Subsidiary, OGP Real Property or Purchased Assets (other than the Transferred Intellectual Property) other than pursuant to transactions on arm’s length commercial terms having an aggregate value not to exceed $1,000,000;

(iv)sell, transfer or license any Business Intellectual Property, other than licenses of Business Intellectual Property ancillary to the sale of products or services in the ordinary course of business;

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(v)(A) terminate or give notice of termination of any Leased Real Property except for terminations in the ordinary course of business consistent with past practice, (B) take any steps which materially adversely affect the existing use of any OGP Real Property or its value or (C) agree to a new rental payable under any Leased Real Property;

(vi)acquire (other than with respect to contractual obligations existing as of the date of this Agreement) or enter into any agreement or option to acquire any interest in any real property for consideration or assumption of liabilities having an aggregate value in excess of $500,000;

(vii)acquire (including by merger, consolidation or acquisition of stock or assets) any corporation, partnership, limited liability company, other business organization or any division thereof other than in the ordinary course of business in connection with sales projects for consideration or assumption of liabilities having an aggregate value in excess of $1,000,000;

(viii)except with respect to transactions between an OGP Subsidiary or JV Company and an Affiliate of ABB (other than an OGP Subsidiary or JV Company) which will form part of the Intercompany Settlement Payment at Closing, assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any Person, or make any loans or advances, except (A) in the ordinary course of business consistent with past practice and (B) not having an aggregate value in excess of $500,000 in the individual case or $2,000,000 in the aggregate and provided always (C) to the extent such obligation is a loan or an advance or in the nature of a loan or an advance, the obligation is terminable on demand by the OGP Subsidiary or the JV Company;

(ix)grant to any (A) Senior Employee any increase in compensation, benefits or loans or severance benefits except as may be required under and in accordance with any existing contracts, agreements or arrangements or pursuant to applicable Law or (B) other salaried employee of an OGP Subsidiary or Asset Seller who is intended to be a Transferred Employee any increase in compensation, benefits or loans or severance benefits except as may be required under and in accordance with any existing contracts, agreements or arrangements or pursuant to applicable Law;

(x)terminate the employment of any Senior Employee;

(xi)reassign or transfer any (A) executive officer of ABB or its Affiliates (other than the OGP Subsidiaries) who is not involved in the OGP Business as of the date hereof to an OGP Subsidiary or, if such employee by virtue of such reassignment or transfer will become a Transferred Employee, to any Asset Seller or (B) Senior Employee to ABB or an Affiliate that is not an OGP Subsidiary;

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(xii)enter into any equity joint venture, partnership or any similar arrangement other than in connection with the formation of special purpose vehicles in the ordinary course of business in connection with sales projects, or make any capital contribution to any such entity except for (A) contributions required to be made pursuant to the terms of the agreements governing such entity existing on the date hereof and (B) in connection with sales projects in the ordinary course of business for consideration aggregating not more than $1,000,000;

(xiii)adopt or amend in any material respect any labor, collective bargaining or other similar agreements, contracts, conventions or arrangements of an OGP Subsidiary or an Asset Seller relating to the OGP Business, except as required by applicable Law or pursuant to the terms of any such existing labor, collective bargaining or other similar agreements, contracts, conventions or arrangements;

(xiv)(A) enter into any contract (including a contract varying any existing contract) or (B) tender an offer for a bid on any new contract or vary any existing tender or bid, as the case may be, that, if such contract (or varied contract) had been in effect on the date hereof, would have been a Material Contract or amend in any material respect or terminate any Material Contract or OGP Intellectual Property;

(xv)amend or agree to amend in any material respect, the terms of its Indebtedness or incur any additional material Indebtedness, except (A) pursuant to facilities set forth in the Disclosure Schedule where the outstanding Indebtedness pursuant to such facilities does not exceed the amount available to be drawn by the OGP Subsidiaries and the Asset Sellers relating to the OGP Business under those facilities, (B) for borrowings from ABB or any of its Affiliates in the ordinary course of business and (C) in the ordinary course pursuant to terms of sales contracts entered into after the date hereof in accordance with the terms of this Agreement; provided, however, that in each case under clause (C) of this provision, to the extent such Indebtedness is pursuant to an External Debt Contract, it shall be capable of being repaid upon demand by the OGP Subsidiary or Asset Seller;

(xvi)grant an Encumbrance on any of the OGP Assets;

(xvii)amend in any material respect any insurance contract or fail to notify any insurance claim in an amount in excess of  $500,000 in accordance with the provisions of the relevant policy or do or omit to do anything which might make any insurance contract void or voidable or entitle any of the insurers under any such contract to refuse cover in relation to a particular claim in whole or in part or settle any insurance claim in excess of $500,000 for an amount below the amount claimed;

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(xviii)make any material change to the accounting principles, policies and practices or policies for the collection of receivables or the discharge of payables of the OGP Subsidiaries or the Asset Sellers;

(xix)establish a pension plan or other employee benefit plan or increase any benefit under or otherwise amend an existing plan in which an OGP Employee or Transferred Employee participates for the benefit of an OGP Employee, OGP Former Employee or Transferred Employee, in either case except as required by Law or as may be required under and in accordance with any existing plan, or communicate to such employees a plan, proposal or an intention to establish such a plan or to grant such an increase in relation to such existing plan;

(xx)(A) pay any benefits for or make any contribution, in each case, to a pension plan or other employee benefit plan in respect of an OGP Employee, OGP Former Employee or Transferred Employee other than in accordance with the terms of the documents governing such existing plan or pursuant to applicable Law and in the ordinary course of business consistent with past practice or (B) otherwise exercise discretion in respect of such existing pension plan or scheme for and in respect of an OGP Employee, OGP Former Employee or Transferred Employee other than in accordance with the terms of the documents governing such plan or scheme and in the ordinary course of business consistent with past practice;

(xxi)commence any Action claiming money damages in excess of $500,000, or waive any material right in relation to such claims or release, discharge or compound any liability in relation to such claims, or compromise or settle any Action where the amount in controversy exceeds $500,000, or waive a material right in relation to such claims or release, discharge or compound any liability in relation to such claims, except in either case for Actions over which ABB retains liability under Article IX hereto or where reasonably necessary to preserve any rights of ABB, an OGP Subsidiary or an Asset Seller;

(xxii)issue or cause to be issued Parent Guarantees and Third Party Guarantees in each case other than in the ordinary course of business and in a manner consistent with past practice in connection with contracts with respect to the OGP Business;

(xxiii)enter into any agreement, arrangement or transaction with any director of any OGP Subsidiary or of an Asset Seller who is expected to be a Transferred Employee or with any relative or spouse of such Person;

(xxiv)fail to maintain or renew each item of registered Business Intellectual Property and other than in the ordinary course of business, fail to continue any pending application for any Business Intellectual Property in the ordinary course of business;

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(xxv)make or enter into any agreement to make capital expenditures in excess of $1,000,000 in the aggregate;

(xxvi)amend, agree to enter into or enter into a contract, agreement, commitment or arrangement between ABB and/or any of its Affiliates (other than the OGP Subsidiaries or an Asset Seller relating to the OGP Business), on the one hand, and any OGP Subsidiary or Asset Seller relating to the OGP Business, on the other hand, unless entered into on arms’ length commercial terms in the ordinary course of business;

(xxvii)amend the Variation Agreement in any way that materially affects the obligations of any party thereto; and

(xxviii)enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this Section 5.03(b).

(c)Notwithstanding anything else in this Agreement, unless Purchaser shall otherwise agree in writing, from and after the earlier of (x) the date of delivery of the Pre-Closing Notice and (y) the Effective Date, none of the OGP Subsidiaries shall, and ABB shall cause the OGP Subsidiaries not to, and, with respect to clauses (vi), and (vii) below, neither ABB nor any of its Affiliates shall:

(i)pay, declare or set aside for payment any dividend or other distribution to ABB or any of its Affiliates, except to the extent described in the Pre-Closing Notice;

(ii)incur any additional Indebtedness for money borrowed from any Person other than ABB or any of its Affiliates, except to the extent described in the Pre-Closing Notice; provided, always, that in relation to the entities subject to Secondary Transactions in which Shares are being sold to Purchaser or an OGP Purchaser, such additional Indebtedness may only be incurred in relation to funding bona fide working capital, losses or capital expenditures;

(iii)repay any money owed (including all non-trade accounts receivable by ABB and its Affiliates (other than an OGP Subsidiary)) set out within the estimated Intercompany Settlement Payment provided as part of the Pre-Closing Notice;

(iv)pay any amount to satisfy, compromise or otherwise settle (in whole or in part) (1) any Excluded Liability or (2) any liability which but for such payment would have been subject to an indemnity obligation to the Purchaser Indemnified Parties pursuant to the terms of this Agreement or any Related Agreements;

(v)pay any amount to satisfy, compromise or otherwise settle (in whole or in part) any obligation of ABB or its Affiliates under any Third Party Guarantee;

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(vi)recharge to the OGP Business any costs and expenses the responsibility for which are contemplated by a provision of the Transaction Agreements to be that of ABB or any of its Affiliates (other than the OGP Subsidiaries); and

(vii)contribute any amount into the Rabbi Trust (other than any contributions required under the terms of the Rabbi Trust).

SECTION 5.04.Access to Information; Books and Records; Monthly Review Protocol.  (a)  From the date hereof until the Closing, upon reasonable notice, ABB shall cause each of the OGP Subsidiaries, each of the Asset Sellers and each of their respective officers, directors, employees, agents and representatives to use their respective reasonable best efforts to, and ABB shall use its reasonable efforts to cause the JV Companies to:  (i) afford the Purchaser Representatives reasonable access, during normal business hours, to the offices, properties, plants, other facilities, books and records of the OGP Subsidiaries and the Asset Sellers relating to the OGP Business; (ii) furnish to the Purchaser Representatives such additional, readily available financial and operating data and other information regarding the OGP Subsidiaries and the Asset Sellers relating to the OGP Business (or legible copies thereof) as Purchaser may from time to time reasonably request; and (iii) comply with the terms of the Monthly Review Protocol; provided, however, that none of the foregoing shall unreasonably interfere with any of the businesses or operations of ABB or any of its Affiliates; provided further, however, that ABB’s Accountants or any other auditors or accountants of ABB or any of its Affiliates shall not be obligated to make any work papers available to any Person unless and until such Person has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such auditors or accountants.  ABB shall notify the Purchaser in writing at least ten Business Days in advance of any meeting to be held in accordance with the Monthly Review Protocol, stating the time, date, expected attendees and location of such meeting.  Except in the case of emergency (in which case such notice as is reasonable in the circumstances shall be given), ABB shall provide not less than five Business Days prior to such meeting date, an agenda of the business to be transacted at the meeting and all relevant papers to be discussed within it or supporting other business to be transacted at it.  As soon as reasonably practicable following such meeting, ABB shall provide the Purchaser with a copy of the minutes, if any, of such meeting.

(b)Notwithstanding Section 5.04(a), neither ABB nor any of its Affiliates shall be under any obligation to disclose to Purchaser or the Purchaser Representatives any information the disclosure of which, in ABB’s reasonable opinion, is prohibited or restricted by any applicable Law, subject to any applicable privileges (including the attorney-client privilege) or by any confidentiality obligations binding upon ABB or any of its Affiliates, except in compliance with such Laws or such confidentiality obligations.

(c)In order to facilitate the resolution of any claims made by or against ABB, for a period of six years after the Closing, Purchaser shall (i) retain the books and records of the OGP Subsidiaries and the Asset Sellers relating to the OGP Business which comprised a portion of the Purchased Assets relating to periods prior to the Closing in a manner reasonably consistent with the prior practice of ABB and the OGP Subsidiaries; (ii) upon reasonable notice, afford the ABB Representatives reasonable access (including the right to make, at ABB’s expense,

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photocopies), during normal business hours, to such books and records; provided, however, that after such six-year period, before Purchaser or any Purchaser Affiliate shall dispose of such books and records, Purchaser shall give ABB at least 90 days’ prior written notice of such intention to dispose and ABB shall be given an opportunity, at its cost and expense, to remove and retain all or any part of such books and records as ABB may elect provided that any information received shall be treated as Confidential Information; provided further, however, that if at the end of the notice period, ABB has failed to effect the pickup and delivery of such books and records, Purchaser will be entitled to destroy or dispose of such documents.  The provisions of this Section 5.04(c) shall apply mutatis mutandis to any books and records relating to the operation of the OGP Subsidiaries or the Asset Sellers with respect to the OGP Business which are retained by ABB or any of its Affiliates following the Closing.

SECTION 5.05.Confidentiality.  (a)  Effective the date hereof, the Confidentiality Agreement shall terminate in respect of that portion of the Information (as defined in the Confidentiality Agreement) relating to the OGP Business.  From and after the date hereof, each of the Parties shall, and shall cause its Representatives to:  (i) keep all Confidential Information confidential and not to disclose or reveal any Confidential Information to any person other than its Representatives who are actively and directly participating in the consummation and implementation of the transactions contemplated by the Transaction Agreements or who otherwise need to know the Confidential Information for the purpose of consummating or implementing such Transactions and (ii) use Confidential Information only for purposes in connection with the transactions contemplated by the Transaction Agreements or the consummation of such transactions and not to use Confidential Information for any other purpose.

(b)Notwithstanding anything else in Section 5.05(a) to the contrary, this Section 5.05 shall not prohibit disclosure or use of any Confidential Information by a Party or any Representative if and to the extent:

(i)as required by Law including the requirements of any Taxing Authority or the rules and regulations of any recognized stock exchange or any Self-Regulatory Organization, subject to and in accordance with Section 11.03;

(ii)the disclosure or use is required to vest the full benefit of this Agreement in ABB and its Affiliates or in Purchaser and the Purchaser Affiliates, as the case may be, including satisfaction of the conditions contained in Article VIII, or to facilitate preparation of the Final Effective Date Balance Sheet or a sale of the Shares or Assets by Purchaser or the OGP Purchasers (as appropriate);

(iii)the disclosure or use:  (A) is, subject to clause (C) below, required for the purpose of any Action before a Governmental Authority of relevant jurisdiction arising out of any of the Transaction Agreements; (B) is, subject to clause (C) below, required for the purpose of a submission to the IRS or such other taxation body in respect of any tax submissions by the Parties in respect of the transactions contemplated by this Agreement; (C) is made from and after the earlier of the date of the public announcement of discussions relating to the transaction, the date of the public announcement of the transaction, or the date of the execution of this Agreement with respect to the U.S. federal

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tax treatment and tax structure of the transaction; or (D) is in consultation with a tax advisor regarding the U.S. federal tax treatment and tax structure of the transaction;

(iv)the disclosure is made to a Representative of Purchaser or ABB whose function requires them to have such information; provided, however, that the relevant Party will procure that such Representative comply with the provisions of this clause in respect of such information as if they were bound by this Section 5.05;

(v)the disclosure is made to a potential member of the financing syndicate of Purchaser who requires such information for the purpose of making an investment decision with respect to, inter alia, lending to or investing in Purchaser; provided, however, that Purchaser shall procure that such Person comply with the provisions of this clause (v) in respect of such information as if they were bound by this Section 5.05;

(vi)the disclosure or use is made by Purchaser to an employee or executive officer of any of the OGP Subsidiaries or is a Transferred Employee; provided, however, that Purchaser shall procure that such Person comply with the provisions of this clause (vi) in respect of such information as if they were bound by this Section 5.05;

(vii)the disclosure or use is made by Purchaser or its legal counsel pertaining to the OGP Business to (i) the DOJ or the SEC in connection with or in response to DOJ or SEC inquiries or investigations arising out of the Compliance Review or (ii) the DOJ in order for the DOJ to issue the Opinion Review Release; or

(viii)agreed to in writing by the other Party.

(c)In the event that a Party or any of its Representatives is required to disclose any Confidential Information in any legal or regulatory proceeding, such Party, prior to such disclosure, shall consult with the other party/parties as to the timing, content and manner of making such disclosure or the use of such information insofar as is reasonably practicable before complying with such an obligation.

(d)Notwithstanding anything else in this Section 5.05, following the Closing, the foregoing restrictions will not apply to Purchaser’s disclosure or use of documents and information concerning the OGP Business, whether furnished by ABB or its Affiliates under this Agreement, or otherwise.

SECTION 5.06.Regulatory Authorizations; Notices and Consents.  (a)  Purchaser shall use its reasonable best efforts to promptly obtain all authorizations, consents, orders and approvals of Governmental Authorities set forth in Sections 3.04 and 4.03 of the Disclosure Schedule and of the South Korean Fair Trade Commission in pursuance of the South Korean clearance, including, where required, by responding to second requests or any other extended or second phase investigations by any Governmental Authority.  ABB will cooperate with Purchaser in promptly seeking to obtain all such authorizations, consents, orders and approvals; provided, however, that neither ABB nor any of its Affiliates shall be required to pay any fees or make any other payments to any Governmental Authority in order to obtain any such authorization, consent, order or approval (other than normal filing fees that are imposed by Law on such Persons and any advisors’ fees in connection therewith).  Neither ABB nor Purchaser

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shall take any Action that would have the effect of materially delaying, impairing or impeding the receipt of any required approvals.  For the purposes of this Section 5.06, the “South Korean clearance” shall mean the notification of this Agreement to the South Korean Fair Trade Commission pursuant to the Korean Monopoly Regulation and Fair Trade Act of December 31, 1980, as amended.

(b)ABB and Purchaser each agree to make, or to cause to be made, an appropriate filing of a notification and report form pursuant to the HSR Act in connection with the transactions contemplated by the Transaction Agreements promptly after the date of this Agreement but in no event later than ten Business Days thereafter and to supply promptly any additional information and documentary material that may be requested by any Governmental Authority pursuant to such filings.  In addition, each Party agrees to make, or to cause to be made, promptly any other filing or notice set forth in Sections 3.04(a) and 4.03(a) and (c) of the Disclosure Schedule.

(c)Sections 3.04(a) and 4.03(b) and (c) of the Disclosure Schedule set out an exhaustive list of the jurisdictions referred to in Sections 3.04(a) and 4.03(b) and (c) of this Agreement.  These are the jurisdictions in which the Parties have agreed mandatory filings are required as a result of the execution, delivery and performance by ABB and the Sellers of the Transaction Agreements.  The disclosure in Sections 3.04(a) and 4.03(b) and (c) may, however, be extended to include additional mandatory filings only insofar as additional information is disclosed by the Seller to the Purchaser or local legislation is amended, following the date of this Agreement, which in either case has the effect of making applicable a mandatory filing as a result of the execution, delivery and performance by ABB and the Sellers of the Transaction Agreements.  In such event, such additional mandatory filings will be deemed to be added to the jurisdictions referred to in Sections 3.04(a) and 4.03(b) and (c).  If any such additional mandatory filings which are suspensory in nature are identified, the parties will use their reasonable efforts to transfer the assets or shares within the relevant territory out of the entities which are the subject of a Primary Transaction provided always that such transfer will result in Purchaser reasonably determining that the Primary Test will be satisfied.  In such event, any such assets or shares transferred pursuant to this Section 5.06(c) shall be deemed a Secondary Transaction, and all consents or approvals from Governmental Authorities in respect of such additional mandatory, suspensory filings shall constitute an Additional Approval.  If such Additional Approvals have not been satisfied or waived prior to the Closing, any assets or shares transferred pursuant to this Section 5.06(c) will be subject to the Deferred Transfer Agreement.  The provisions of Sections 5.06(a), (b) and (d) shall apply to any additional mandatory filings identified and required in accordance with this Section 5.06(c).  For the purposes of this Section 5.06(c), the “Primary Test” shall be deemed to be satisfied if at Closing the aggregate gross assets, turnover and earnings before interest and tax (in each case calculated on an unconsolidated basis and excluding any items which are exclusively intra-OGP Business or investments in other OGP Subsidiaries) of the OGP Subsidiaries and the parts of the OGP Business transferred by the Asset Sellers which are capable of being and shall be transferred on the Closing Date (including, the Primary Transactions) to Purchaser and the OGP Purchasers (taken together) are equal to or exceed 85 percent of the consolidated gross assets, turnover and earnings before interest and tax of the OGP Business.  The gross assets, turnover and earnings before interest and tax in respect of each relevant OGP Subsidiary shall be calculated at the Closing Date using the accounting principles, standards and practices generally accepted in the

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country in which such OGP Subsidiary is incorporated and which are approved by the relevant regulatory body of the accounting profession in that country and consistently applied.

(d)To the extent permitted by applicable Law, each of ABB and Purchaser shall promptly notify the other of any communication it or any of its Affiliates or in the case of Purchaser, each Purchaser Affiliate and each Investor receives from any Governmental Authority relating to the matters that are the subject of this Agreement and permit the other Party to review where reasonable, subject to confidentiality obligations to third parties, in advance any proposed communication by such Party to any Governmental Authority.  No Party shall agree to participate in any meeting with any Governmental Authority in respect of any filing, investigation or other inquiry unless it consults with the other Party in advance.  Subject to the applicable confidentiality agreements, to the extent permitted by applicable Law, the Parties will coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other Party may reasonably request in connection with the foregoing.  Subject to applicable confidentiality agreements, to the extent permitted by applicable Law, the Parties will provide each other with copies of all correspondence, filings or communications between them or any of their representatives, on the one hand, and any Governmental Authority or member of the staff of any Governmental Authority, on the other hand, with respect to the Transaction Agreements and the transactions contemplated thereby.  Nothing in this Section 5.06 shall result in either Party being required to disclose business secrets or confidential information to the other Party.  Business secrets shall include turnover information, market share data, confidential fund structure information, and other confidential information in relation to the equity investors of the Purchaser and any of their investee companies and other market sensitive information.

SECTION 5.07.Retained Names and Marks.  (a)  Purchaser hereby acknowledges that all right, title and interest in and to the names and marks listed in Part A of Section 5.07(a) of the Disclosure Schedule or other corporate names of ABB or its Affiliates, together with any confusingly similar names and all Trademarks containing or incorporating any of the foregoing (the “Retained Names and Marks”) are owned exclusively by ABB, and that, except as expressly provided below, any and all right of the OGP Business to use the Retained Names and Marks shall terminate as of the Closing and shall immediately revert back to ABB and the Sellers; provided that neither Purchaser nor any of the OGP Subsidiaries shall be prevented or restricted in any way by ABB from using those names listed in Part B of Section 5.07(a) of the Disclosure Schedule with the superscript or suffix “IT” contained therein so long as such use is without the superscript or suffix “IT” (for the avoidance of any doubt, with respect to the names “Industrial IT Enabled”, “Industrial IT Certified”, and “Industrial IT Solutions”, Purchaser and the OGP Subsidiaries may use the names “Industrial Enabled”, “Industrial Certified”, and “Industrial Solutions”) (it being understood that ABB makes no warranties regarding the use by Purchaser or any of the OGP Subsidiaries of such names apart from the “IT” superscript or suffix as provided above).  Purchaser further acknowledges that it has no rights, and is not acquiring any rights, to use the Retained Names and Marks, except as expressly agreed to by ABB in writing.

(b)Purchaser shall, as soon as practicable after the Closing, but in no event later than three (3) months thereafter, cause each OGP Subsidiary, as applicable, to file with the appropriate authorities the documents required by Law to effect a change to its corporate name to

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a corporate name that does not contain any Retained Names and Marks and to supply promptly any additional information and documentary materials that may be requested by ABB with respect to such filings.

(c)Purchaser shall, for a period of three (3) months after the Closing Date, be entitled to use all of the OGP Subsidiaries’ existing stocks of signs, letterheads, advertisements and promotional materials, Internet websites and Internet domain names associated therewith, inventory and other documents and materials transferred to Purchaser or an OGP Purchaser (“Existing Stock”) containing Retained Names and Marks, after which date Purchaser shall, and shall cause each OGP Subsidiary and each OGP Purchaser to, remove or obliterate Retained Names and Marks from such Existing Stock or cease using such Existing Stock, and relinquish to ABB any rights with respect to Internet domain names incorporating any Retained Names or Marks.

(d)Except as expressly provided in this Agreement, no other right to use the Retained Names and Marks is granted by either ABB or any Seller to Purchaser, any OGP Purchaser or the OGP Subsidiaries, whether by implication or otherwise, and nothing hereunder permits Purchaser, any OGP Purchaser or any OGP Subsidiary to use the Retained Names and Marks on any documents, materials, products or services other than in connection with the Existing Stock.  Purchaser shall ensure that all use of the Retained Names and Marks by the OGP Subsidiaries as provided in this Section 5.07 shall be only with respect to goods and services of a level of quality equal to or greater than the quality of goods and services with respect to which the OGP Business used the Retained Names and Marks prior to the Closing.

(e)Purchaser agrees that neither ABB nor any of its Affiliates shall have any responsibility for claims by third parties arising out of, or relating to, the use by Purchaser, the OGP Subsidiaries, the OGP Business, the Investors and any Purchaser Affiliate thereof of any Retained Names or Marks after the Closing Date other than an allegation that the use of Retained Names or Marks is infringing the rights of a third party in any respect, and Purchaser shall indemnify and hold harmless ABB and its Affiliates from any and all claims that may arise out of the use thereof by Purchaser, the OGP Subsidiaries, the OGP Business, the Investors or any Purchaser Affiliate thereof.

SECTION 5.08.Guarantees.  (a)  As used in this Section 5.08, the following terms have the following meanings:

“Advance Payment Bonds” means Third Party Guarantees or Parent Guarantees to the extent they secure or guarantee the repayment or application of customer advances.

“Amount” means the maximum sum payable expressed in “$” pursuant to and in accordance with the terms of the relevant guarantee or other similar instrument contemplated by this Section 5.08.

“Available Balance” means at the time of determination from and after Closing the ETPG Facility Amount less the sum of the Amount payable at the date of issue under (i) each ETPG Facility Guarantee and (ii) each Substitute Third Party Guarantee issued pursuant to Section 5.08(d), and in either case whether or not any such ETPG Facility Guarantee or

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Substitute Third Party Guarantee remains outstanding or has been drawn upon in whole or in part at the time of determination.

“Eligible TPG” means all Third Party Guarantees other than Warranty Period Guarantees and Ineligible Guarantees, in every case which are outstanding as of Closing.

“ETPG Facility” means irrevocable letter(s) of credit arranged by Purchaser in favor of ABB in an amount of up to the ETPG Facility Amount to secure repayment of obligations of ABB or any of its Affiliates (other than an OGP Subsidiary) in respect of Third Party Guarantees and Parent Guarantees (other than Ineligible Guarantees), in each case which are outstanding as of the Closing, as provided in this Section 5.08.

“ETPG Facility Amount” means an aggregate amount equal to the lesser of (i) $160,000,000 minus the Amount of OGP TPGs outstanding as of Closing, and (ii) the difference between (x) the aggregate Amount of Third Party Guarantees outstanding as of Closing less (y) the sum of (A) the aggregate amount of Warranty Period Guarantees outstanding as of Closing and (B) the aggregate amount of Ineligible Guarantees to the extent they have been issued in respect of Off Balance Sheet Indebtedness.

“ETPG Facility Guarantee” means a letter of credit issued in favor of ABB pursuant to the ETPG Facility.

“Ineligible Guarantee” means any Third Party Guarantee or Parent Guarantee which is (i) an Advance Payment Bond, (ii) a tax bond (other than the Norwegian Tax Bond as defined in the Senior Credit Agreement) or in respect of an advance lease payment, and (iii) any other Third Party Guarantee or Parent Guarantee which is not related to the performance of a project-related obligation of an OGP Subsidiary or which has been issued in respect of Off Balance Sheet Indebtedness, in each case outstanding as of the Closing.

“OGP Guarantees” means any indemnities, performance, advance payment and retention bonds or guarantees, other guarantee obligations, letters of credit and other similar arrangements issued by an OGP Subsidiary with respect to an obligation of ABB or any of its Affiliates (other than another OGP Subsidiary) that does not relate to the OGP Business.

“OGP TPGs” means any indemnities, performance, advance payment and retention bonds or guarantees, other guarantee obligations, letters of credit and other similar arrangements issued by a third party in relation to the OGP Business for which an OGP Subsidiary (but none of ABB or any of its Affiliates) has a reimbursement obligation in relation to the OGP Business; provided, notwithstanding the foregoing, OGP TPGs shall not include any guarantees which are in respect of debt of an OGP Subsidiary for borrowed money.

“Parent Guarantees” means any obligations or arrangements granted or issued by ABB or any of its Affiliates (other than an OGP Subsidiary) relating to the OGP Business, in each case outstanding as of the Closing Date, other than in respect of Third Party Guarantees and excluding Parent Guarantees issued in respect of the Grayloc Note, the Houston Lease and the Aberdeen Lease.

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“Retained TPG” means all Third Party Guarantees which are either (i) outstanding as at the date of this Agreement and set forth in Section 5.08(a) of the Disclosure Schedule, (ii) identified after the date of this Agreement as outstanding as of the date of this Agreement or (iii) entered into on or after the date of this Agreement and prior to Closing and in either case is outstanding at Closing, but excluding those Third Party Guarantees in respect of which Purchaser has procured the issuance of an ETPG Facility Guarantee pursuant to Section 5.08(b) or (c).

“STPG Notice” means a written notice to Purchaser confirming (i) that one or more Third Party Guarantees or Parent Guarantees exist, (ii) that such guarantees are either Eligible TPGs, Warranty Period Guarantees or Parent Guarantees, (iii) the Amount outstanding at the date of such notice under such Eligible TPG or Warranty Period Guarantee, or in the case of a Parent Guarantee for which no amount is established in such guarantee, the amount for which an ETPG Facility Guarantee is requested in the notice, (iv) the underlying contract to which such Eligible TPG, Warranty Period Guarantee or Parent Guarantee relates (including reference number to the extent available) and attaching a copy of such guarantee, and (v) the Available Balance at the date of such notice.

“Substitute Parent Guarantees” means substitute guarantees or similar arrangements issued to replace any Parent Guarantees either (i) outstanding as of the date of this Agreement and set forth in Section 5.08(g) of the Disclosure Schedule, (ii) identified after the date of this Agreement as outstanding as of the date of this Agreement or (iii) issued on or after the date of this Agreement and prior to the Closing and in each case outstanding at Closing.

“Substitute Third Party Guarantees” means any substitute indemnity, performance, advance payment or retention bond or guarantee, other guarantee obligation, letter of credit or other similar arrangement issued to replace the Eligible TPGs, Warranty Period Guarantees or Parent Guarantees pursuant to Section 5.08(d).

“Third Party Guarantees” means any indemnities, performance, advance payment and retention bonds or guarantees, other guarantee obligations, letters of credit and other similar arrangements issued by a third party in relation to the OGP Business for which ABB or any of its Affiliates (other than an OGP Subsidiary) has a reimbursement obligation in each case, outstanding as of the Closing Date.

“Warranty Period Guarantees” means any Third Party Guarantees to the extent they secure warranty obligations with respect to services or products provided pursuant to a contract.

(b)By the Closing, Purchaser shall have arranged the ETPG Facility and it shall be available to ABB pursuant to its terms.  Subject always to the Available Balance, in order to utilize the ETPG Facility in respect of Eligible TPGs, Warranty Period Guarantees and Parent Guarantees, ABB must deliver a STPG Notice.  In the event that the Purchaser disputes that a STPG Notice has been validly provided in accordance with this Section 5.08(b) the provisions of Section 2.10(b) shall apply mutatis mutandis.  Within seven Business Days following receipt of a duly completed STPG Notice which is not disputed in accordance with this Section 5.08(b), or if disputed, upon the resolution of such dispute, Purchaser shall procure the

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issue of one or more ETPG Facility Guarantees pursuant to and in accordance with the terms of the ETPG Facility for an amount equal to the Amount of all of the relevant Eligible TPGs, Warranty Period Guarantees or Parent Guarantees which is/are the subject matter of such STPG Notice and upon such issue the Available Balance shall be permanently reduced by the amount of such ETPG Facility Guarantees.  Further, ABB shall be permitted to deliver a STPG Notice to Purchaser prior to the Closing, and so long as such delivery occurs at least seven Business Days prior to the Closing, Purchaser shall procure the issue of one or more ETPG Facility Guarantees on the Closing Date without limiting either Party’s rights under Section 5.08(n).

(c)Each ETPG Facility Guarantee shall be issued first in respect of Eligible TPGs and only when the Available Balance has been utilized in respect of all such guarantees, thereafter in respect of Warranty Period Guarantees and only when the Available Balance has been utilized in respect of all such guarantees, thereafter in respect of Parent Guarantees; provided further that any ETPG Facility Guarantee issued to ABB under the ETPG Facility in respect of a Parent Guarantee shall expire at the same time and date as the Ineligible Guarantee identified by ABB in the STPG Notice as being the Ineligible Guarantee to be used for such purposes.  Any STPG Notice delivered pursuant to Section 5.08(b) shall specify such Ineligible Guarantee and shall give the same information in respect of such Ineligible Guarantee as is required for an Eligible TPG.

(d)(i)  From and after the Closing, ABB and Purchaser shall cooperate and use their reasonable efforts to cause Purchaser in accordance with Sections 5.08(g) and 5.08(h), as soon as reasonably practicable after the Closing, to replace the Eligible TPGs and Warranty Period Guarantees (in each case, to the extent ETPG Facility Guarantees have been issued) with Substitute Third Party Guarantees.  The amount payable under any ETPG Facility Guarantee in respect of such Eligible TPG or Warranty Period Guarantees shall be reduced (and if reduced to zero such letter of credit shall be returned to Purchaser and otherwise shall be exchanged for a letter of credit for such reduced amount) by an amount equal to the Amount of such Substitute Third Party Guarantee at the time such Substitute Third Party Guarantee is issued; provided that ABB has been absolutely and unconditionally released of the obligations of ABB and each of its Affiliates in connection with the Eligible TPG or Warranty Period Guarantees in respect of which the Substitute Third Party Guarantee is issued and provided further that Purchaser shall not issue any such Substitute Third Party Guarantee unless such absolute and unconditional release shall have been obtained.

(ii)In addition to the circumstances described above in paragraph (i), a Substitute Third Party Guarantee may also be issued in accordance with Section 5.08(d)(i) for Eligible TPGs and Warranty Period Guarantees (to the extent they are not Ineligible TPGs) notwithstanding no ETPG Facility Guarantee shall have been issued in respect of the relevant Eligible TPG or Warranty Period Guarantee and if so issued the Available Balance shall be permanently reduced by the Amount of the Substitute Third Party Guarantees issued pursuant to this Section 5.08(d)(ii).

(e)Subject always to Sections 5.08(a), (b), (c) and (d), in the event that either (i) the Amount of the Eligible TPGs at the date of an STPG Notice exceeds the ETPG Facility Amount or (ii) the Amount of the Warranty Period Guarantees or Parent Guarantees at the relevant date of the STPG Notice exceeds the Available Balance, ABB shall have the right, in its

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sole discretion, to select the Eligible TPGs, Warranty Period Guarantees or Parent Guarantees (as appropriate) in respect of which the ETPG Facility is to be utilized.

(f)Purchaser shall reimburse ABB and its Affiliates for their reasonable expenses in maintaining the Retained TPGs, whether or not such guarantees are called upon to be performed, to the extent of an amount equal to 0.5% multiplied by the lesser of:

(i)$ 40,000,000; and

(ii)the aggregate principal Amount of Retained TPGs;

provided  always that ABB must notify Purchaser of the amounts, details and costs of maintaining such Retained TPGs prior to Purchaser making the payments contemplated in this Section 5.08(f) and Purchaser shall not be obligated to make a reimbursement pursuant to this Section 5.08(f) in excess of the actual cost to ABB and its Affiliates of maintaining the Retained TPGs.

(g)As soon as reasonably practicable following the Closing, Purchaser shall use its reasonable efforts to arrange Substitute Parent Guarantees.  In connection therewith, Purchaser shall use its reasonable efforts to obtain from the creditor, beneficiary or other counterparty an absolute and unconditional release of ABB and its Affiliates (other than an OGP Subsidiary) from all liability and contingent liability under or in respect of any Parent Guarantee, each release to be in form and substance reasonably satisfactory to ABB.  Notwithstanding the previous sentence, Purchaser shall not issue a Substitute Parent Guarantee to any party that has not issued an absolute and unconditional release of ABB and its Affiliates.  Purchaser shall reimburse ABB and its Affiliates for their reasonable expenses in maintaining the Parent Guarantees whether or not such Parent Guarantees are drawn upon or required to be performed.  For the purposes of Sections 5.08(g), (h) and (k) “reasonable efforts” shall be satisfied by the Party offering the assurance of such Party only and shall not require such Party to make any payment or deposit or procure that any third party bank guarantee is issued to secure such release.

(h)As soon as reasonably practicable following the Closing, ABB shall use its reasonable efforts to arrange for substitute guarantees or similar arrangements to replace any OGP Guarantees either (i) outstanding as of the date of this Agreement, all of which are set forth in Section 5.08(h) of the Disclosure Schedule or (ii) issued on or after the date of this Agreement and prior to the Closing.  In connection therewith, ABB shall use its reasonable efforts to obtain from the creditor, beneficiary or other counterparty an absolute and unconditional release of the OGP Subsidiaries from all liability and contingent liability under or in respect of any OGP Guarantee, each release to be in form and substance reasonably satisfactory to Purchaser.  To the extent that the creditor, beneficiary or other counterparty under any OGP Guarantee has not granted such release, ABB shall indemnify, defend and hold harmless Purchaser and the Purchaser Affiliates against and reimburse Purchaser and the Purchaser Affiliates for any and all amounts paid, including reasonable costs or expenses in connection with such OGP Guarantees, including Purchaser’s and the Purchaser Affiliates’ expenses in maintaining such OGP Guarantees whether or not any such OGP Guarantees are drawn upon or required to be performed, and shall in any event promptly reimburse Purchaser and the Purchaser Affiliates to

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the extent any OGP Guarantee is called upon and Purchaser or any of the Purchaser Affiliates makes any payment.

(i)From and after the Closing, to the extent that ABB receives funds under an indemnity, performance, advance payment or retention bond or guarantee, other guarantee obligation, letter of credit or other similar arrangement issued by a third party prior to the Closing for the benefit of ABB and its Affiliates (including the OGP Business), ABB shall pay Purchaser an amount equal to the portion of the proceeds received which are for the benefit of the OGP Business.  ABB shall take such reasonable steps as the Purchaser may reasonably request to enforce all such rights of the OGP Business and shall pay any proceeds for the benefit of the OGP Business recovered as soon as reasonably practicable to Purchaser’s Bank Account, and this Section 5.08(i) shall apply mutatis mutandis to the extent an OGP Subsidiary or a relevant Purchaser Affiliate being the successor of an Asset Seller relating to the Business receives such funds on behalf of ABB and its Affiliates (excluding the OGP Business).

(j)From and after the date of this Agreement:  (A) ABB shall (x) honor its obligations in connection with the Parent Guarantees which are outstanding at Closing, (y) undertake to procure that all Third Party Guarantees in respect of which an STPG Notice has been issued shall be maintained in accordance with their terms and will remain in place for the specified duration or until replaced with a Substitute Third Party Guarantee if earlier, and (z) undertake to procure that the Retained TPGs are maintained in accordance with their terms and shall remain in place for the specified duration; and (B) Purchaser shall honor its obligations in connection with the OGP Guarantees which are outstanding at Closing.

(k)If ABB or any ABB Affiliate or any third party issuer receives a demand under any Third Party Guarantee or Parent Guarantee, ABB shall procure that the Purchaser is promptly notified of such demand and shall not, and shall procure that its Affiliates shall not, and shall use its reasonable efforts to procure that any third party issuer shall not, pay any money or do or say anything to admit any liability under such Third Party Guarantee or Parent Guarantee unless legally obliged to do so, and this Section 5.08(k) shall apply mutatis mutandis to the Purchaser with respect to OGP Guarantees.

(l)Purchaser shall indemnify, defend and hold harmless ABB and its Affiliates against and reimburse ABB and its Affiliates for any and all Losses incurred with respect to any Third Party Guarantees or Parent Guarantees (other than, in each case, any Ineligible Guarantee which has been issued in respect of Off Balance Sheet Indebtedness) and, subject to the limitation in Section 5.08(f), with respect to the reimbursement of Retained TPG Expenses.  Purchaser shall in any event promptly reimburse ABB and its Affiliates to the extent any Parent Guarantee or Third Party Guarantee is called upon and ABB or any of its Affiliates makes any payment or is obligated to reimburse the party issuing such Parent Guarantee or Third Party Guarantee from and after the Closing.  Notwithstanding anything else in this Agreement to the contrary and without limiting Purchaser’s rights under Section 9.06, the OGP Subsidiary in respect of whose underlying obligations the relevant guarantee has been issued (or, in the event that the underlying obligations were obligations of an Asset Seller relating to the OGP Business, the relevant Purchaser Affiliate having assumed the obligation) shall have joint liability with Purchaser under this Section 5.08(l); provided that nothing in this Section 5.08 or Section 5.10 shall reduce or otherwise eliminate any reimbursement obligation of the OGP Subsidiaries to

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ABB or any of its other Affiliates existing as of the date of this Agreement in the event there is any default under a Third Party Guarantee or Parent Guarantee.

(m)If the ETPG Facility expires in accordance with its terms prior to the expiration of all of the guarantees which are secured by the ETPG Facility, Purchaser shall, prior to such expiration, arrange an alternative irrevocable letter of credit in favor of ABB in an Amount equal to the Amount of the such guarantees still secured (the “Remaining Guarantees”), and such alternative facility shall be reduced, from time to time, by the Amount of Remaining Guarantees that subsequently expires in accordance with such Remaining Guarantee’s respective terms.  In the event that ten Business Days prior to the date that the ETPG Facility expires in accordance with it terms ABB has not received written confirmation from Purchaser of such alternative facility, then notwithstanding anything in this Agreement or the ETPG Facility to the contrary, Purchaser shall cause ABB, or its applicable Affiliates, to be able to draw against the ETPG Facility for the Amount of the Remaining Guarantees prior to the expiration of the ETPG Facility.

(n)In the event of an error, omission or inaccuracy in any of the amounts or other assessments required to be computed by either Party pursuant to this Section 5.08, the Party discovering such error, omission or inaccuracy shall as soon as reasonably practicable notify the other Party in writing of such error, omission or inaccuracy and describe in reasonable detail the facts, circumstances and proposed remedy arising from such error, omission or inaccuracy.  Within ten Business Days of receipt of such notice, the Parties shall attempt to agree whether an error exists and, if so, the steps necessary to be taken.  Without limiting the rights of the Parties, to the extent that the Parties agree or it is finally determined that there has been such an error, omission or inaccuracy, the ETPG Facility Amount shall be increased or decreased, as the case may be, by the amount of any error.

SECTION 5.09.Third Party Consents.  (a)  ABB shall give promptly, and shall cause the OGP Subsidiaries and the Asset Sellers to give promptly, such notices to third parties, and ABB shall use its, and shall cause the OGP Subsidiaries and the Asset Sellers to use their, reasonable efforts to obtain such third party consents as are reasonably necessary to preserve to the OGP Business the benefits of their respective arrangements with third parties under the Material Contracts, Material Permits or with respect to any Purchased Assets.  Where a third party consent sought is not given, ABB and Purchaser shall cooperate with each other in any reasonable and lawful arrangements designed to provide Purchaser or an OGP Purchaser the benefits of use of any such Purchased Assets, Material Permits and Material Contracts.

(b)Where a third party consent under any Asset Seller Contract (or Lease in connection with such Asset Seller’s Leased Real Property) is not obtained prior to the Closing, ABB shall, and shall cause the Asset Sellers to, subsequent to the Closing, cooperate with Purchaser in attempting to obtain such consent as promptly thereafter as practicable.  To the extent that any such Asset Seller Contract (or Lease in connection with such Asset Seller’s Leased Real Property) is not assignable without the consent of another party thereto, this Agreement shall not constitute an assignment thereof.  If such consent cannot be obtained, ABB, Purchaser, the OGP Purchasers, OGP Subsidiaries and the Asset Sellers, as the case may be, shall each use their reasonable efforts to provide the relevant OGP Purchasers, as the case may be, with the rights and benefits of the affected Asset Seller Contract or Lease in connection with

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such Asset Seller’s Leased Real Property for the term of such contract, and, if ABB or the Asset Sellers provides such rights and benefits, Purchaser shall assume the obligations and burdens thereunder.  Until such consent is obtained or novation is achieved, ABB shall, or shall cause the Asset Seller to, do each act and thing reasonably requested of them by Purchaser or an OGP Purchaser to enable performance of the Asset Seller Contract (or Lease in connection with such Asset Seller’s Leased Real Property) and to provide for Purchaser or the OGP Purchaser the benefits of the Asset Seller Contract (or Lease in connection with such Asset Seller’s Leased Real Property) (including enforcement of a right of an Asset Seller against another party to the Asset Seller Contract or Lease in connection with such Asset Seller’s Leased Real Property) arising out of its termination by the other party or otherwise).

(c)Section 5.09(b) does not affect Purchaser’s rights and remedies against ABB in respect of an Asset Seller Contract or Lease in connection with such Asset Seller’s Leased Real Property which ABB has warranted is assignable, or may be performed by Purchaser or any OGP Purchaser instead of the Asset Seller, without a novation agreement.

(d)Where any third party consent referred to in Section 5.09(a) is required from ABB or any Affiliate of ABB, ABB hereby confirms that such consent is given.

SECTION 5.10.Termination of Certain Existing Intercompany Contracts and Arrangements.  (a)  At or prior to the Closing, ABB shall cause the contracts, agreements or arrangements between ABB and/or any of its Affiliates (other than the OGP Subsidiaries or an Asset Seller not with respect to the OGP Business), on the one hand, and any OGP Subsidiary or Asset Seller relating to the OGP Business, on the other hand, of a type described in Section 5.10 of the Disclosure Schedule to be terminated or amended to exclude such OGP Subsidiary or Asset Seller as a party thereto without any Liability thereunder of or to any of the OGP Subsidiaries.  Each other contract, agreement or arrangement between ABB and/or any of its Affiliates (other than the OGP Subsidiaries), on the one hand, and any OGP Subsidiary, on the other hand, shall remain in full force and effect after the Closing in accordance with its terms.

(b)From and after the Closing, each Party shall pay, or cause to be paid, the Intra-Group Trading Amount owed at the Closing to the other Party or any of its Affiliates or Purchaser Affiliates, as the case may be, to either such Party or its relevant Affiliate or Purchaser Affiliate, as the case may be, to whom such amount is owed:

(i)if the relevant parties have agreed in writing a period in which the amount shall be paid, on or before the end of such period; and

(ii)if the relevant parties have not made such an agreement, on normal commercial terms, but in any event within 90 days of the Closing.

For the avoidance of doubt, it is understood that no claim for payment can be made to the extent amounts are provided or written off in respect thereof in the Final Effective Date Balance Sheet.

SECTION 5.11.Discharge of Directors and Related Matters.  (a)  Prior to or at the Closing, each member of the board of each OGP Subsidiary listed in Section 5.11 of the Disclosure Schedule, as updated by written notice from ABB to Purchaser to the extent a person ceases to be a director of an OGP Subsidiary and may be replaced, shall deliver a resignation

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letter in the form attached as Exhibit N of such position to Purchaser, such resignation to become effective at the Closing.  Purchaser shall cause each OGP Subsidiary to hold such board or shareholders’ meetings as may be required in order to elect a new board of directors.  Purchaser shall cause each OGP Subsidiary to promptly thereafter make all necessary filings with the relevant Governmental Authorities and take all other necessary action to register in the applicable public registry the resignation of the retiring board members.

(b)Purchaser shall cause, at the first shareholders’ meeting or otherwise whenever the question of discharge is raised after the Closing, each member of the board of each OGP Subsidiary and, where applicable, each managing director of each OGP Subsidiary (other than any member of the board or managing director of an OGP Subsidiary who shall become an OGP Employee) to be discharged in full from any Liability resulting from such Person’s role as a member of the board of such OGP Subsidiary or as managing director of such OGP Subsidiary, as the case may be, in respect of the period prior to the Closing.

(c)If discharge of liability does not occur for any member of the board or the managing director of any OGP Subsidiary in accordance with Section 5.11(b), Purchaser shall not, and shall cause each such OGP Subsidiary not to, pursue any claim for damages against any such Person arising out of or relating to his role as a member of the board or a managing director of such OGP Subsidiary.

(d)ABB agrees with Purchaser:  (i) that the giving by any OGP Subsidiary or any of their respective directors, officers, employees, agents or advisers (past or present) or any director, officer or employee of ABB or its Affiliates who, following Closing, will be a director, officer or employee of Purchaser, an OGP Purchaser, JV Company or OGP Subsidiary or any Purchaser Affiliate to ABB or any ABB Representative (past or present) of any information or opinion in connection with the warranties contained in this Agreement, the Disclosure Schedule or otherwise in relation to the business or affairs of any OGP Subsidiary, Asset Seller (relating to the OGP Business) or JV Company in connection with the negotiation and preparation of this Agreement or the Disclosure Schedule shall not be deemed to be a representation, warranty or guarantee to ABB of the accuracy of such information or opinion; (ii) to waive any right or claim which it may have against any OGP Subsidiary or any of their respective directors, officers or employees or any director, officer or employee of ABB or its Affiliates who, following Closing, will be a director, an officer or employee of the Purchaser, an OGP Purchaser, JV Company or an OGP Subsidiary or any Purchaser Affiliate for any error, omission or misrepresentation in any such information or opinion other than any such error, omission or misrepresentation resulting from the fraudulent or willful misconduct of any such Persons; and (iii) that any such right or claim shall not constitute a defense to any claim by Purchaser under or in relation to this Agreement (including the warranties).

SECTION 5.12.Insurance.  (a)  Purchaser agrees and acknowledges that none of the insurance policies of ABB and its Affiliates (other than those of the OGP Subsidiaries) will provide insurance coverage in respect of the OGP Subsidiaries or the OGP Assets for losses or liabilities which are incurred or suffered in respect of the period on or after the Closing Date or, except as provided in Section 5.12(b), for losses or liabilities which are suffered or incurred in respect of the period prior to the Closing Date.

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(b)Purchaser and each OGP Subsidiary shall be entitled after the Closing Date to notify claims under insurance policies held by ABB and its Affiliates (other than insurance policies held by any OGP Subsidiary) written on a losses occurring basis (“ABB Occurrence Policies”) in respect of any insured loss or liability incurred or suffered by any OGP Subsidiary prior to the Closing Date (collectively, “Pre-Closing Losses”); provided that Purchaser shall pay or reimburse ABB and/or its Affiliates for any and all retrospective insurance premiums, self-insured retentions, deductibles, retentions, and related insurance program expenses; and further  provided that, only with respect to claims notified not more than five years from the Closing Date, such reimbursement shall not be in excess of an amount that would have been reimbursed to the OGP Business as of the date of this Agreement in accordance with the captive insurance arrangements of the OGP Business as of such date, including claims handling fees, taxes, residual market loadings and state surcharges incurred or suffered by ABB and its Affiliates (including ABB Insurance Limited) as a result of such claims.  For the avoidance of doubt, Purchaser shall be entitled to notify claims under ABB Occurrence Policies which are insured or reinsured by ABB Insurance Limited for a period not to exceed five years after the Closing Date; provided, however, that this shall not preclude any claims from being notified under any ABB Statutory Occurrence Policy following the expiration of such five-year period.

(c)At any time following the Closing, as soon as reasonably practicable following receipt of a written request from Purchaser or a Purchaser Affiliate, ABB shall disclose the extent to which the captive insurance retention has been eroded in respect of any years set forth in such written request.

(d)Where any asset of the OGP Business has been damaged or destroyed or liability has been incurred between the date of this Agreement and Closing, ABB shall ensure that, or shall procure that any Affiliate (other than an OGP Subsidiary) shall ensure that, to the extent any insurance proceeds have not been applied to remedy such liability, damage or destruction, all the relevant insurance proceeds received by such Affiliate and captive reimbursement of group deductible which is transferred to the OGP Business in respect of the damaged or destroyed assets are paid to Purchaser or an OGP Purchaser (as agent for the insured), as the case may be, upon the earlier of the Closing or within three Business Days of receipt, in either case to Purchaser’s Account.

(e)All monies payable in respect of any claim duly notified by Purchaser or any OGP Subsidiary, pursuant to Section 5.12(b), to the extent the relevant Losses have not been specifically provided for and any insurance proceeds receivable with respect to a relevant Loss have not been recognized in the Final Effective Date Balance Sheet, shall be payable directly to the appropriate third party claimant as directed by Purchaser or any OGP Subsidiary.

(f)ABB shall, at the cost of Purchaser, provide and procure such reasonable assistance and information as Purchaser may request to enable Purchaser or any OGP Subsidiary to collect valid claims and to exercise its rights under this Section 5.12.

SECTION 5.13.Certain Contracts.  With respect to any contract or agreement, and any sale and purchase order, bid or offer, entered into or made by, to or on behalf of any Asset Seller relating to the OGP Business (other than contracts, agreements, bids and offers constituting Purchased Assets), Purchaser shall, or shall cause the relevant OGP Purchaser or

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OGP Subsidiary to, after the Closing, duly perform the portion of such contract or agreement or sale and purchase order, or any contract or agreement or sale and purchase order resulting from such bid or offer, relating to the OGP Business in all material respects in accordance with the terms and conditions of such contract or agreement or sale and purchase order and Purchaser or the relevant OGP Purchaser shall be entitled to all benefits under such contract or agreement or sale and purchase order to the extent relating to the OGP Business.  Upon the request at any time by either Party, the Parties shall use all reasonable efforts to ensure that their respective Affiliates, or in the case of Purchaser, the Purchaser Affiliates and the Investors, enter into agreements in form and substance reasonably satisfactory to each of them formalizing the arrangements referred to in this Section 5.13.

SECTION 5.14.Transaction Financing.  (a)  Purchaser agrees to use reasonable best efforts to cause the Purchaser Financing Documents to become unconditional in accordance with their respective terms and to cause the facilities thereunder to be available to Purchaser and the OGP Purchasers on the Closing Date.

(b)Prior to the Closing, Purchaser shall not amend or waive any of the Purchaser Financing Documents in a manner adverse in any material respect to ABB without the prior written consent of ABB, which consent shall not be unreasonably withheld or delayed.

SECTION 5.15.Notification.  (a)  Subject to Section 5.06, prior to the Closing each Party shall, or shall cause its Affiliates or in the case of Purchaser, the Purchaser Affiliates and the Investors to, promptly (and in any event within three Business Days) notify the other Party in writing upon becoming aware of, and will promptly (and in any event within three Business Days) provide the other Party with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, (i) any event, circumstance, fact or occurrence arising subsequent to the date of this Agreement that would be reasonably expected to (A) result in any material breach of a representation or warranty or covenant of such Party in this Agreement or, in the case of Section 3.07(iv), any breach regardless of materiality, (B) have the effect of making any representation or warranty of such Party in this Agreement untrue or incorrect in any material respect as of the Closing or, in the case of Section 3.07(iv), any breach regardless of materiality or (C) result in a Material Adverse Effect, and (ii) any Action to which it, or any Affiliate, is a party and which seeks to prevent or materially delay the consummation of the transactions contemplated hereby, including satisfaction of the conditions contained in Article VIII.  Each notice given pursuant to this Section 5.15 shall specify the materiality of the matters contained therein and include the amount of Loss (actual or estimated), method of computation of such Loss, and the facts and circumstances surrounding such matter in reasonable detail, in each case to the extent relevant or appropriate.

(b)Subject to Section 10.01, no notice given pursuant to this Section 5.15 shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein or shall in any way limit any Party’s right to indemnity under Article IX of this Agreement.  In addition, the failure of any Party hereto to give a notice required by this Section 5.15 shall not be considered for purposes of determining the satisfaction of the conditions set out in Sections 8.02(a) and 8.03(a).

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SECTION 5.16.Other Bidders.  ABB shall procure the assignment to Purchaser of the benefit of the confidentiality provisions of all confidentiality agreements and undertakings given by any other potential purchaser of the OGP Business but only to the extent that:

(a)such assignment is not prevented by the terms of such agreements and undertakings; and

(b)such confidentiality provisions relate to the OGP Business.

ABB will send a letter as soon as reasonably practicable following the Closing (in a form to be agreed with Purchaser) to the other parties to such agreements and undertakings requesting the return of all Information (as defined in such agreements or undertakings) or requesting certification of its destruction to Purchaser in each case in accordance with the terms of such agreements and undertakings.  If such confidentiality undertakings or arrangements are not assignable, ABB shall, at the discretion, cost and expense of Purchaser, enforce the terms of such confidentiality undertakings or arrangements.

SECTION 5.17.Further Action.  Each of the Parties hereto shall use all reasonable efforts to take, or cause to be taken, all appropriate action, do or cause to be done all things necessary, proper or advisable under applicable Law, and execute and deliver such documents and other papers, as may be required to carry out the provisions of the Transaction Agreements.

SECTION 5.18.Misplaced Assets.  (a)  From and after the Closing, to the extent it is determined that any right, title or interest in or to any Purchased Asset (excluding contracts for which a third party consent has not been received) has not been transferred to, or has not vested in, Purchaser or the relevant Purchaser Affiliate (hereinafter, a “Misplaced Asset”) and Purchaser gives ABB written notice of the same:

(i)ABB shall provide such assistance (at ABB’s cost) to Purchaser or such OGP Purchaser as Purchaser reasonably requires for the purposes of Section 5.18(a)(ii) below;

(ii)ABB shall transfer, or procure the transfer of, such Misplaced Asset together with any benefit or sum (net of tax and other reasonable out-of-pocket expenses) accruing to Purchaser or an OGP Purchaser as a result of holding such Misplaced Asset, as soon as practicable, to such person as Purchaser shall direct on terms that no consideration is provided by any person for such transfer; and

(iii)ABB or the relevant Asset Seller shall hold such Misplaced Asset in trust for Purchaser or the relevant OGP Purchaser until title in such Misplaced Asset is effectively vested in Purchaser or the OGP Purchaser.

(b)From and after the Closing, to the extent it is determined that an asset which does not form part of the Purchased Assets has been transferred to, or has vested in, Purchaser or a Purchaser Affiliate and ABB gives Purchaser written notice of the same:

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(i)Purchaser shall provide such assistance to ABB (at Purchaser’s cost) or such of the Asset Sellers as ABB reasonably requires for the purposes of Section 5.18(b)(ii) below;

(ii)Purchaser shall transfer, or procure the transfer of, such asset, together with any benefit or sum (net of tax and other reasonable out-of-pocket expenses) accruing to ABB or one of the Asset Sellers as a result of holding such asset, as soon as practicable, to such person as ABB shall direct on terms that no consideration is provided by any person for such transfer; and

(iii)Purchaser or the relevant OGP Purchaser shall hold such asset in trust for ABB or the relevant Asset Seller until title in such asset is effectively vested in ABB or the Asset Seller.

SECTION 5.19.Information and Funds Received Covenants.  (a)  From and after the Closing, ABB undertakes to Purchaser to:

(i)forward and transfer to Purchaser as soon as practicable, any documents, information, communications or correspondence which ABB or any of its Affiliates may receive from time to time in relation to the OGP Business or the Purchased Assets that should properly have been sent to the OGP Business;

(ii)forward and transfer to Purchaser any payments in relation to the OGP Business or the Purchased Assets that should properly have been paid to the OGP Business within three (3) Business Days of the discovery by ABB or disclosure by Purchaser of such payments.  Payments received by ABB or any of its Affiliates in relation to the OGP Business or Purchased Assets that should properly have been paid to the OGP Business shall be held by them as trustee on trust for Purchaser, pending such transfer; and

(iii)forward and transfer to Purchaser interest on payments received by ABB or its Affiliates for the account of Purchaser and held by ABB or its Affiliates for more than three (3) Business Days, which interest shall accrue following the expiration of such three (3) Business Day period at the equivalent daily rate of 1.25% per annum;

(b)From and after the Closing, Purchaser undertakes to ABB to:

(i)forward and transfer to ABB as soon as practicable, any documents, information, communications or correspondence which Purchaser or any of the Purchaser Affiliates may receive from time to time that should properly have been sent to ABB;

(ii)forward and transfer to ABB any payments in relation to the OGP Business or Purchased Assets that should properly have been paid to ABB within three (3) Business Days of discovery by Purchaser or disclosure by ABB of such payments.  Payments so received by Purchaser after Closing in relation to the OGP Business or Purchased Assets that should properly have been paid to ABB shall be held as trustee on trust for ABB pending such transfer; and

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(iii)forward and transfer to ABB interest on payments received by Purchaser for the account of ABB or any of its Affiliates and held by Purchaser for more than three (3) Business Days, which interest shall accrue following the expiration of such three (3) Business Day period at the equivalent daily rate of 1.25% per annum.

SECTION 5.20.Perfection of Intellectual Property Assignments.  (a)  ABB shall, and shall cause any relevant Affiliate to, use its reasonable best efforts as soon as reasonably practicable after the date of this Agreement to file for recordation of the Release of Security Interest in Patent and Trademarks, dated May 2, 1991, by Citibank N.A. in favor of Vetco Gray, Inc. in the United States Patent and Trademark Office to the extent that the filing of such recordations have not been made prior to the date of this Agreement.  All reasonable fees and expenses (including, without limitation, professional charges, Taxes and registry fees) incurred in connection (whether incurred prior to or after the Closing Date) with the foregoing recordations shall be for the sole account of ABB.

(b)Purchaser acknowledges and agrees that neither ABB nor any of its Affiliates shall have any obligation or responsibility for the recordation of the assignment of the Transferred Intellectual Property by the Asset Sellers and the IPR Assignors to Purchaser or its designee(s) under the Patent Assignments; provided, however, ABB shall reimburse Purchaser for all reasonable fees and expenses (including, without limitation, professional charges and registry fees) (but excluding internal administrative costs) incurred by Purchaser or its designee(s) in connection with the foregoing recordation.

SECTION 5.21.Grayloc Note.  (a)  In the event that Chase Manhattan Bank plc (“Chase”) exercises its option to cause Purchaser to repurchase the Grayloc Note pursuant to the Note Purchase Agreement dated as of November 20, 2000 between Chase and ABB Vetco Gray Inc. (the “Chase Sale Agreement”), whether upon default or otherwise, upon the fulfillment of ABB’s indemnification obligation pursuant to Section 9.03(a)(xi), Purchaser shall transfer to ABB the Grayloc Note and all right, interest and title to any and all collateral used as security for the Grayloc Note.

(b)From and after the Closing, Purchaser shall not, and shall cause the Purchaser Affiliates not to, take any action that would result in a variation of the terms of or in any material respect would otherwise have an adverse effect on the rights of ABB in the event that the Grayloc Note is transferred to ABB.

SECTION 5.22.Shared Real Property.  (a)  The Parties acknowledge that the OGP Real Property described on Section 5.22 of the Disclosure Schedule constitutes each real property (each, a “Shared Real Property”) that (i) with respect to leased real property, is (A) leased by ABB or an Affiliate of ABB other than an OGP Subsidiary or an Asset Seller relating to the OGP Business and occupied, in whole or in part, by an OGP Subsidiary or an Asset Seller relating to the OGP Business or (B) Leased Real Property and occupied, in whole or in part, by ABB or an Affiliate of ABB other than an OGP Subsidiary or an Asset Seller relating to the OGP Business or (ii) with respect to owned real property, is (A) owned by ABB or an Affiliate of ABB other than an OGP Subsidiary or an Asset Seller relating to the OGP Business and occupied, in whole or in part, by an OGP Subsidiary or an Asset Seller relating to the OGP Business or (B) Owned Real Property and occupied, in whole or in part, by ABB or an Affiliate

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of ABB other than an OGP Subsidiary or an Asset Seller relating to the OGP Business, whether pursuant to lease, license or otherwise.  Notwithstanding anything else in this Section 5.22(a), the definition of Shared Real Property shall not include any OGP Real Property that is governed by a written lease, sublease, license, agreement or other instrument on the date of this Agreement.

(b)ABB and Purchaser agree that with respect to each Shared Real Property, prior to or as soon as practicable after the Closing Date each Party shall, or shall cause their respective Affiliates or Purchaser Affiliates, as applicable, to enter into commercially reasonable leases, subleases, licenses, agreements and other instruments in accordance with subsection (c) of this Section 5.22 necessary to allocate between Purchaser and ABB, or their respective Affiliates or Purchaser Affiliates, as applicable, real property interests consistent with the real property interests intended to be conveyed pursuant to this Agreement; provided, however, that notwithstanding anything to the contrary in this Section 5.22, each lease, sublease, license, agreement or other instrument executed in connection with this Section 5.22 shall be for a term which is the shorter of 12 months from the Closing Date or the remainder of the governing real property interest, unless the Parties mutually agree in writing to a longer term.  Notwithstanding anything in this Section 5.22(b) to the contrary, for any Shared Real Property that is subject to a Deferred Transfer Agreement, each lease, sublease, license, agreement or other instrument executed in connection with this Section 5.22 shall be for a term ending on the later of the date that is 12 months from the Closing Date or three months from the Subsequent Closing Date (as defined in the Deferred Transfer Agreement) unless the Parties mutually agree in writing to a longer term.

(c)The allocation between ABB, or its applicable Affiliate, and Purchaser, or an OGP Purchaser, of the real property interests in the Shared Real Property shall be on the following terms (unless otherwise agreed to between the Parties);

(i)such allocation shall be subject to the terms of all applicable leases, subleases, licenses, agreements and other instruments affecting such Shared Real Property (including the procurement of all required consents and approvals; except for consents or approvals of ABB or any Affiliate of ABB which shall be deemed hereby granted to the extent such consents or approvals are required);

(ii)such allocation shall be based upon a proportionate allocation of each Party’s use or occupancy of such property, as such allocation shall be reasonably estimated by ABB, based upon the historical practices and charges between Affiliates of ABB prior to the Closing Date;

(iii)before and after such allocation, ABB’s, or its applicable Affiliate’s, interest in such property shall be substantially similar to the interest of ABB or such Affiliate in such property (exclusive of the interest of the respective OGP Subsidiary or Asset Seller relating to the OGP Business) immediately prior to the transfer of the Seller’s interest in such property;

(iv)after such allocation, Purchaser’s, or the OGP Purchaser’s, interest in such property shall be substantially similar to the interest of the OGP Subsidiary or Asset

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Seller relating to the OGP Business in such property immediately prior to the transfer of the Seller’s interest in such property;

(v)before and after such allocation, the terms and conditions of ABB’s, or its applicable Affiliate’s, rights and obligations with respect to such property shall be substantially similar to the rights and obligations of ABB or such Affiliate in such property (exclusive of the rights and obligations of the respective OGP Subsidiary or Asset Seller relating to the OGP Business) immediately prior to the transfer of the Asset Seller’s interest in such property;

(vi)after such allocation, Purchaser’s, or the applicable OGP Purchaser’s, rights and obligations with respect to such property shall be substantially similar to the rights and obligations of the applicable OGP Subsidiary or Asset Seller relating to the OGP Business in such property immediately prior to the transfer of the Asset Seller’s interest in such property; and

(vii)from the Closing Date until such time as any such lease, sublease, license, agreement or other instrument has been executed and becomes effective, the Parties agree that they, or their respective Affiliates, shall each be responsible for their respective share of all costs (including rent) relating to, and shall make ordinary payments with respect to, such Party’s use and occupancy of such property in accordance with the allocation provisions of this Section 5.22(c).

(d)ABB shall use its, and shall cause the OGP Subsidiaries and the Asset Sellers to use their, reasonable efforts to obtain such third party consents as are required to permit Purchaser or the OGP Purchaser to occupy and use any Shared Real Property.

(e)In the event that the current occupant is denied the continued use of any of the leased premises as a result of the inability of ABB to procure a necessary third party consent, ABB shall indemnify and hold Purchaser and the Purchaser Affiliates harmless for Losses attributable to any increase in rent paid for a reasonably comparable substitute premises during the remaining term of such Lease; provided, however, that the maximum amount payable to Purchaser or the Purchaser Affiliates pursuant to this Section 5.22(e) shall be equal to the difference between (i) the rent expense for such party with respect to the substitute premises (or if such substitute premises are of a superior quality to the leased premises, the rent for comparable properties), less (ii) the rent expense pursuant to the applicable Lease.  For the purpose of clarity, neither ABB nor any of its Affiliates shall be responsible for any other costs or expenses of Purchaser or any of the Purchaser Affiliates including relocation expenses.

SECTION 5.23.Derivatives.  (a)  Definitions.  As used in this Section 5.23, the following terms have the following meanings:

“Derivative Contracts” means all Ordinary Course Derivative Contracts and all Non-Ordinary Course Derivative Contracts other than the Excluded Derivative Contracts.

“Derivative Valuation Bank” means Credit Suisse First Boston, Zürich or, failing its ability to provide the relevant information and in the absence of the Parties being able to agree upon a suitable replacement within ten Business Days, such other bank of international repute

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able to provide the requisite information required pursuant to this Section 5.23 appointed upon the application of either Party to the President of the Institute of Chartered Accountants of England and Wales.

“Excluded Derivative Contracts” means any Derivative Contract where a party thereto is subject to a Subsequent Closing (as defined in the Deferred Transfer Agreement and which shall be terminated in accordance with the terms of the Deferred Transfer Agreement).

“Non-Ordinary Course Derivative Contracts” means any derivative contracts which are outstanding as at Closing and which are not Ordinary Course Derivative Contracts.

“Ordinary Course Derivative Contracts” means any derivatives contracts between any OGP Subsidiary, on the one hand, and ABB or any of its Affiliates (other than an OGP Subsidiary) or another third party, on the other hand, that are outstanding at Closing and that were entered into (i) for the primary purpose of hedging currency risk, interest rate risk or raw materials pricing risk in connection with the OGP Business or (ii) in accordance with the documented hedging policies (dated on or prior to the date of entry into such relevant contract) of the OGP Business.

“Undisclosed Derivative Contracts” means those derivative contracts (other than those derivative contracts entered into by an OGP Subsidiary in the ordinary course of business after the date of this Agreement and prior to the Closing in compliance with Section 5.03) which are not set forth in Section 5.23 of the Disclosure Schedule.

(b)Notice of Derivative Contracts.  Not less than five Business Days prior to Closing, ABB shall provide to Purchaser an initial notice listing Derivative Contracts to be terminated in accordance with Section 5.23(c) and thereafter ABB may provide subsequent similar notices with respect to additional Derivative Contracts to be terminated in accordance with Section 5.23(c) (each such notice, a “Termination Notice”), specifying in each case whether such contract is an Ordinary Course Derivative Contract or a Non-Ordinary Course Derivative Contract.

(c)Termination.  ABB shall cause the early termination of all Derivative Contracts set out in each Termination Notice as soon as reasonably practicable after the Closing, but in any event within 30 days of Closing (each such date of termination, an “Early Termination Date”).  This Section 5.23(c) shall not apply to those Ordinary Course Derivative Contracts between an OGP Subsidiary and a third party not an Affiliate of ABB, which contracts Purchaser may terminate at any time after the Closing without any liability to ABB or any of its Affiliates.

(d)Valuation.  On the applicable Early Termination Date or, if the Parties agree that there is material market disruption on a proposed Early Termination Date in respect of any Derivative Contract, such other date as the Parties may agree in good faith (and all references in this Section 5.23 to the Early Termination Date in respect of those Derivative Contracts shall be deemed to refer to such other date), ABB shall calculate the fair market value in U.S. dollars of each applicable Derivative Contract to the relevant OGP Subsidiary to be terminated based on the prevailing spot market rate at 11 a.m. (Zürich time) on the Early Termination Date as determined by the Derivative Valuation Bank.  On the Business Day following an Early

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Termination Date, ABB shall deliver to Purchaser a statement setting forth the amounts so determined in accordance with this Section 5.23 (a “Settlement Statement”).

(e)(i)  Settlement of the Ordinary Course Derivatives Contracts.  The fair market values in U.S. dollars of the Ordinary Course Derivative Contracts finally determined in accordance with Section 5.23(c) shall be added and netted for each Early Termination Date, and the resulting figure shall be a “Net Early Termination Amount.”  For the purposes of this Section 5.23(e) payment to be made pursuant to any early termination (i) to the OGP Subsidiaries shall be categorized as positive and (ii) to ABB or its Affiliates (other than the OGP Subsidiaries) shall be categorized as negative.  If a Net Early Termination Amount is negative, Purchaser shall pay, or cause to be paid, to ABB by wire transfer of immediately available funds the absolute value of the Net Early Termination Amount.  If the Net Early Termination Amount is positive, ABB shall pay, or cause to be paid, to Purchaser by wire transfer of immediately available funds, the Net Early Termination Amount.  The Net Early Termination Amount shall be payable by the applicable Party on or prior to the tenth Business Day following completion of the valuation of all of the Ordinary Course Derivative Contracts terminated on such Early Termination Date in the manner contemplated by Section 5.23(d).  Subject to Section 5.23(e)(ii), payment of such amount shall be deemed to satisfy all outstanding obligations of the parties to those Ordinary Course Derivative Contracts set out in the relevant Termination Notice and no further amounts shall be payable with respect thereto.

(ii)Settlement of Non-Ordinary Course Derivative Contracts.  ABB shall reimburse Purchaser for an amount equal to (A) all amounts owing by it to a counterparty as a result of the termination by an OGP Subsidiary of Non-Ordinary Course Derivative Contracts being negative (in accordance with the finally determined Settlement Statement) plus (B) any administrative or other reasonable costs incurred by Purchaser in connection with the termination of such Non-Ordinary Course Derivative Contracts, which amount shall be netted against all amounts owed (net of any administrative costs or other reasonable costs (including Taxes) incurred by Purchaser in connection with the termination of such Non-Ordinary Course Derivative Contracts) to the OGP Subsidiaries by counterparties as a result of the termination of Non-Ordinary Course Derivative Contracts being positive (in accordance with the finally determined Settlement Statement).

(f)Undisclosed Derivative Contracts.  Promptly after the Closing but in any event within 20 days after the Closing, Purchaser shall notify ABB in writing of any Undisclosed Derivative Contracts, specifying in each case whether such contract is an Ordinary Course Derivative Contract or a Non-Ordinary Course Derivative Contract (such notice to be considered a Termination Notice for the purposes of this Section 5.23(f) only).  Such Undisclosed Derivative Contracts shall be valued and settled in the same manner as other Derivative Contracts pursuant to this Section 5.23.  ABB shall reimburse Purchaser for any administrative switching costs (but no other payments due pursuant to the terms of such Derivative Contracts) incurred by it in connection with the entering into of replacement derivative contracts for such Undisclosed Derivative Contracts if the aggregate of such costs exceeds $500,000 but only to the extent such costs exceed $500,000.

SECTION 5.24.Migration Plan.  (a)  No later than three months after the Closing Date, ABB and Purchaser shall agree to a plan (the “Migration Plan”) to implement the

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migration of certain information technology infrastructure, data and applications from ABB to a new information technology infrastructure and application structure designed for use by the OGP Business after the Closing (the “New OGP Infrastructure”).  The Migration Plan shall specify each of ABB’s and Purchaser’s responsibilities and costs in implementing the Migration Plan.  Each of ABB and Purchaser shall use commercially reasonable efforts and cooperate with each other to implement their respective responsibilities under the Migration Plan.

(b)Except as expressly agreed in the Migration Plan, ABB and Purchaser agree that the design and buildup of the New OGP Infrastructure shall be the sole responsibility and cost of Purchaser.  To the extent that specialized knowledge of ABB is required in the design of the New OGP Infrastructure, ABB shall assist Purchaser in this regard at no cost to ABB.  Purchaser may, but is not obligated to, engage ABB to provide consulting services and engineering support, at Purchaser’s cost, in connection with the buildup of the New OGP Infrastructure.

(c)ABB’s compliance with this obligation shall not be considered in determining whether Section 8.03(a) has been satisfied on the Closing Date.

SECTION 5.25.Software Matters.  (a)  Subject to the terms and conditions set forth below, effective as of the completion of the Closing, ABB, on behalf of itself and its applicable Affiliates, hereby grants to Purchaser and the OGP Subsidiaries a non-exclusive, royalty-free, paid-up, perpetual, irrevocable, worldwide, “as-is” license of the proprietary rights of ABB and its applicable Affiliates in the following to use, copy, adapt and create derivative works of the following (as the following may exist as of the Closing Date):

(i)the data shell used to hold data relevant to the OGP Subsidiaries in the database referred to as “ABACUS” (the “ABACUS Data Shell”) for the OGP Subsidiaries’ own internal use;

(ii)the customized version of the Internet website platform known as “CAWP” (the “Customized CAWP Platform”) for the OGP Subsidiaries’ own internal use;

(iii)ABB Brazil’s customizations to the BaaN enterprise resource planning system and the data dictionary used in connection therewith (the “BaaN Customizations”) for the OGP Subsidiaries’ own internal use; and

(iv)each Lotus Notes database (excluding any data or content stored therein that does not relate to the OGP Business) that, as of the Closing Date, is hosted by ABB or its Affiliates and used in the conduct of the OGP Business, which Lotus Notes databases shall be identified in the Migration Plan (the “Shared Lotus Notes Databases”), in each case, for the OGP Subsidiaries’ own internal use.

(b)The licenses granted above in clause (a) shall not include any right of the OGP Subsidiaries to use or distribute copies of the ABACUS Data Shell, the Customized CAWP Platform, the BaaN Customizations and the Shared Lotus Notes Databases outside the OGP Business.

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(c)The Parties agree that the delivery of the copies of the ABACUS Data Shell, the Customized CAWP Platform, the BaaN Customizations, the BaaN enterprise resource planning system and the Shared Lotus Notes Databases (in object code, and to the extent in the possession of ABB and its applicable Affiliates, in source code) shall be made in accordance with and subject to the Migration Plan.

(d)The licenses granted in clause (a) and the delivery of the copies under clause (c) shall be subject to the rights of applicable third party vendors in the underlying intellectual property and underlying software, and other contractual restrictions or limitations on ABB and its applicable Affiliates, including, without limitation, the applicable terms, conditions and restrictions under the Agreement, dated January 1, 2003, between ABB Corporate Management Services AG and Bekk Consulting AS.

(e)ABB shall, or shall cause its applicable Affiliate to, at the Closing Date, create a record of all financial data in the BaaN enterprise resource planning system and the MasterSAF financials system used by the OGP Business in Brazil (collectively, the “Brazilian ERP System”), which data relate to the period commencing on the first date of the applicable financial fiscal year of 2002 and ending on the Closing Date.  This record shall be recorded on an appropriate storage medium (separate from the storage medium used for routine archival purposes), and ABB or its applicable Affiliate shall, in accordance with and subject to the Migration Plan, deliver such storage medium to Purchaser or its designee as soon as practicable following the Closing Date.

(f)Purchaser and the OGP Subsidiaries acknowledge and agree that except as otherwise provided in the Transition Services Agreement, ABB and its Affiliates shall have no obligations or responsibilities regarding the performance, maintenance, support, hosting, export, migration, set-up or any other matters regarding the use of the ABACUS Data Shell, the Customized CAWP Platform, the BaaN Customizations, the Brazilian ERP System and the Shared Lotus Notes Databases.  For the avoidance of any doubt, except as specifically provided in this Agreement and in the Migration Plan, nothing herein obligates ABB to transfer or license any proprietary data or content or any third party owned applications and services used in conjunction with the ABACUS Data Shell, the Customized CAWP Platform, the BaaN Customizations, the Brazilian ERP System and the Shared Lotus Notes Databases.

(g)Purchaser and the OGP Subsidiaries may freely assign, sublicense or otherwise transfer any of the rights granted under Section 5.25(a) to any Person who acquires that portion of the OGP Business to which those rights pertain, including, without limitation, by merger, consolidation, amalgamation, reorganization or disposition of stock or sale of assets, or to any Purchaser Affiliate or the OGP Subsidiaries that conduct the OGP Business, in each case as long as such entity conducts the OGP Business.  Sections 5.25(b), (d) and (f) and any other restrictions under this Section 5.25 shall be binding on all such permitted assigns, sublicensees and transferees, and the Purchaser and the OGP Subsidiaries shall remain liable hereunder for the performance of all such permitted assigns, sublicensees and transferees.

(h)Notwithstanding anything to the contrary in this Agreement and the Related Agreements, all transfer or buyout fees associated with the transfer of the Transferred Software Licenses that are charged by applicable third party vendors to ABB or its Affiliates shall be

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borne by Purchaser.  To the extent that Purchaser does not agree to bear any such transfer or buyout fees with respect to a particular Transferred Software License, ABB and its Affiliates shall have no obligation or responsibility with respect to such particular Transferred Software License under the transactions contemplated under this Agreement.

SECTION 5.26.Waiver of Termination Rights Under Norwegian Leases.  ABB or the applicable Affiliate of ABB hereby waives any right to terminate each of the following Leases:  (i) the lease of Bergerveien 12, 1396 Billingstad, Asker, Building 4, “Lavbygget” dated December 20, 2001 made between ABB Eiendom AS and ABB Offshore Systems AS, (ii) the lease of Bergerveien 12, Building 1, 5^th floor, H-blokk, 1396 Billingstad dated September 29, 2000 made between ABB Eiendom AS and ABB Offshore Systems AS, (iii) the lease of Bergerveien 12, building 1, 4th floor, 1396 Billingstad dated March 3, 2003 made between ABB Eiendom AS and ABB Offshore AS, (iv) the lease of Bergerveien 12, Building 1, 3rd floor, 1396 Billingstad dated July 1, 2003 made between ABB Eiendom AS and ABB OS AS and (v) the lease of Bergerveien 12, Buildings 6 and 7, 1396 Billingstad dated September 7, 1999 made between ABB Eiendom AS and ABB Offshore Systems AS and certain other parties, (vi) lease of Bergerveien 12, Building 2, basement dataroom, 1396 Billingstaad dated October 1, 2003 made between ABB Eiendom AS and ABB Offshore Systems AS and (vii) lease of Bergerveien 12, Building 4, “Lavbygget” lab and storage dated February 15, 2003 between ABB Eiendom AS and ABB Offshore Systems AS, in each case as such rights may arise as a result of any change of control caused by the execution, delivery and performance of the Transaction Agreements.

SECTION 5.27.Amendments to Subleases at Briarpark, Houston, Texas.  ABB and Purchaser agree that none of the terms and conditions of any of the Leases shall be amended, except the term of the sublease at Briarpark in Houston, Texas, which shall expire 24 months following the Closing Date.

SECTION 5.28.Non-Competition Agreement Payment.  Immediately following the Closing, and notwithstanding any other provision of the Transaction Agreements, Purchaser shall (insofar as payment obligations relate to it) pay and shall (insofar as payment obligations relate to the Purchaser Affiliates) cause the applicable Purchaser Affiliates to pay to ABB an aggregate of $78,000,000 in cash for the Non-Competition Agreement in accordance with its terms.  Each of ABB and Purchaser shall cause the relevant Affiliate of ABB and Purchaser Affiliate (as appropriate) to provide counterparts of such Non-Competition Agreement duly executed by each of their Affiliates.

SECTION 5.29.Brazilian Reorganization.  ABB shall cause ABB Ltda. to carry out the steps set forth in Section 5.29 of the Disclosure Schedule to effect the transfer of the business and assets of the OGP Business located in Brazil to ABB Óleo & Gás Ltda. and ABB Óleo e Gás Ltda., Manutencão e Modificacão Ltda.  ABB’s compliance with this obligation shall not be considered in determining whether Section 8.03(a) has been satisfied on the Closing Date.

SECTION 5.30.Certain Purchaser Reimbursement Obligations.  (a)  If, at any time after the Closing, any amounts receivable from Petrobras under the Marlim contract dated March 11, 1998 are collected by Purchaser or a Purchaser Affiliate which, when aggregated with the aggregate of all amounts receivable collected after the Effective Date, are in excess of the

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amounts receivable net of provisions made in the Final Effective Date Balance Sheet as contemplated by Section 2.14 of Exhibit E, Purchaser shall promptly pay, or cause to be paid, to ABB such excess amount.

(b)If the amounts reflected in the Final Effective Date Balance Sheet with respect to the payments contemplated by Section 2.17(i) of Exhibit E exceed the actual payments required to be paid in respect thereof, Purchaser shall promptly pay, or cause to be paid, to ABB such excess amount.

SECTION 5.31.Sao Paulo Property.  (a)  In respect of the property at Avenida dos Autonomistas, No. 1496, Vila Compensina, Osaco, Sao Paulo, Brazil (the “Sao Paulo Property”), ABB shall or shall cause its applicable Affiliates to use its reasonable efforts to provide Purchaser and the applicable Purchaser Affiliates, at no cost to Purchaser, with such assistance and information as each of ABB and its applicable Affiliates is reasonably able to provide to facilitate the progress of the applicable Purchaser Affiliate’s application for the environmental permit required to enable such entity to operate its business from the Sao Paulo Property.

(b)ABB shall (i) permit Óleo e Gás Ltda to remain in occupation of the part of the Sao Paolo Property that is the subject of the sublease dated October 1, 2003 (the “Current Sublease”) until the expiry of 12 months following the Closing and (ii) use all reasonable efforts to obtain the consent of ABB’s landlord of the Sao Paolo Property to the grant of a further sublease to Óleo e Gás Ltda for a further term not to exceed two years thereafter, and provided always that such term does not exceed the term of the lease held by ABB in relation to the Sao Paolo Property.  Further, if and upon obtaining such consent, ABB shall grant Óleo e Gás Ltda a further sublease of the premises that are the subject of the Current Sublease for such term.

(c)ABB’s compliance with the obligations set forth in Sections 5.31(a) and (b) shall not be considered in determining whether Section 8.03(a) has been satisfied on the Closing Date.

SECTION 5.32.Norwegian Debt.  The Parties shall use their reasonable best efforts to cause the combined Borrowings of ABB Offshore Systems AS and its subsidiaries on the Closing Date to be equal to or greater than $145,000,000.  ABB’s compliance with this obligation shall not be considered in determining whether Section 8.03(a) has been satisfied on the Closing Date.

SECTION 5.33.Angolan Property.  ABB shall use its reasonable best efforts, or shall cause its Affiliates to use their reasonable best efforts, to obtain the registration of the property located at 5A Avenida, Cazenga, Luanda, Angola in the name of Empresa Angola Metalomecanicas SARL as soon as reasonably practicable following the date of this Agreement.  Purchaser shall not be responsible for any costs or expenses in connection with ABB’s compliance with this Section 5.33.

SECTION 5.34.Compliance Review.  The Parties shall conduct the Compliance Review with a view to the Substantial Completion of the Compliance Review and the Compliance Disposition occurring prior to the Longstop Date or, if applicable, the Extended

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Longstop Date or the Final Longstop Date, as the case may be.  Notwithstanding the foregoing, the Parties acknowledge and agree that ABB, in its sole and absolute discretion, may determine whether and to what extent it disposes of any matters arising as a result of such Compliance Review.

SECTION 5.35.No Solicitation of Transactions.  ABB, from the date of this Agreement, shall not discuss, negotiate or agree to a sale of all or any part of the OGP Business with any other party (other than Purchaser, the Purchaser Affiliates, the Investors or the Purchaser Representatives), except as otherwise permitted pursuant to the Transaction Agreements, nor will it make available any information to any such party relating to such a sale until the earlier to occur of:

(i)the Closing; or

(ii)termination of this Agreement in accordance with its terms,

and ABB shall cause its Affiliates and the ABB Representatives to do likewise.

SECTION 5.36.Kizomba B Matter.  (a) ABB shall use its reasonable efforts to cause the settlement of the Kizomba B Matter as soon as reasonably practicable after the date of this Agreement and to have the parties to such settlement agree to have any payment made thereunder categorized as a “finder’s fee payment” and under no circumstances categorized as an “Intellectual Property license fee” (or derivative thereof).  ABB’s compliance with this obligation shall not be considered in determining whether Section 8.03(a) has been satisfied on the Closing Date.

(b)To the extent the settlement described in Section 5.36(a) is consummated in whole or in part after the Closing Date, Purchaser shall cause the relevant OGP Subsidiaries and/or OGP Purchasers to honor the obligations of such OGP Subsidiaries under such settlement and comply with the terms set forth in such settlement.

SECTION 5.37.Purchaser Financing Documents.  ABB shall provide such assistance as may reasonably be requested by Purchaser in order for Purchaser to achieve satisfaction of the conditions to the availability of the facilities under the Purchaser Financing Documents, including passing or causing the passing of corporate resolutions and executing or causing the execution of other relevant documentation.

ARTICLE VI

EMPLOYEE MATTERS

SECTION 6.01.Collective Bargaining Agreements.  As of the Closing Date, Purchaser shall assume, or shall cause the OGP Subsidiaries to assume or retain, as the case may be, ABB’s and its Affiliates’ obligations under each of the labor, collective bargaining or other similar agreements or contracts (except, for the avoidance of doubt, U.S. Employee Plans or Non-U.S. Plans), relating to each OGP Employee and each Transferred Employee in accordance with the terms of such agreements or contracts.

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SECTION 6.02.Service Recognition.  To the extent that service is relevant for purposes of determining eligibility to participate, vesting and eligibility to receive benefits, including vacation, sick days, severance and similar benefits (but not for purposes of benefit accrual) under any retirement plan, employee benefit plan, program or arrangement established or maintained by Purchaser or any of the Purchaser Affiliates under which each OGP Employee or each Transferred Employee may be eligible to participate on or after the Closing Date, such plan, program or arrangement shall credit such OGP Employee and such Transferred Employee for all service earned on and prior to the Closing Date with ABB and its Affiliates, including the OGP Subsidiaries and the Asset Sellers, or any of their respective predecessors, in addition to service earned with Purchaser or any of the Purchaser Affiliates after the Closing Date.

SECTION 6.03.Purchaser Welfare Benefit Plans.  With respect to the employee benefit plans, programs and arrangements maintained, sponsored or contributed by Purchaser (“Purchaser Welfare Benefit Plans”), Purchaser shall (a) waive, or cause its insurance carrier to waive, all limitations as to participation and coverage with respect to preexisting and at-work conditions, if any, applicable to each OGP Employee and each Transferred Employee under any Purchaser Welfare Benefit Plan with respect to any conditions that exist as of the Closing Date and for which such OGP Employee or Transferred Employee is covered under the plans in which such OGP Employee or Transferred Employee was participating immediately prior to the Closing Date and (b) provide credit to each OGP Employee and each Transferred Employee for any co-payments, deductibles and out-of-pocket expenses paid by such employees under the employee benefit plans, programs and arrangements of ABB and its Affiliates, including the OGP Subsidiaries or the Asset Sellers, during the portion of the relevant plan year including the Closing Date.

SECTION 6.04.Assumed Obligations.  (a)  Effective as of the Closing Date, ABB shall assume, or shall cause its Affiliates to assume, all obligations and liabilities with respect to the ABB Vetco Gray Inc. Management Deferred Incentive Plan and shall assume the Trust for the ABB Vetco Gray Inc. Management Deferred Incentive Plan (the “Rabbi Trust”) and ABB shall ensure, or shall cause its Affiliates to ensure, that all assets under the Rabbi Trust shall be applied in accordance with the terms of the Rabbi Trust to satisfy such obligations and liabilities.

(b)ABB shall be responsible for any costs, actions, claims, obligations and liabilities (if any) whenever arising with respect to any severance benefits payable to Mr. Erik Fougner pursuant to or arising under the terms of the employment agreement between Mr. Fougner and ABB Oil, Gas and Petrochemicals Management Limited dated as of January 14, 2003.

SECTION 6.05.U.S. Employee Plans.  As of the Closing Date, each OGP Employee and Transferred Employee shall cease to accrue benefits, if any, under the ABB Cash Balance Pension Plan, the ABB Supplemental Excess Retirement Plan, the ABB Retirement Income Restoration Plan, the ABB Deferred Compensation Plan, the Personal Retirement Investment and Savings Management Plan for Employees of ABB and all other U.S. Employee Plans which are not maintained solely for the benefit of OGP Employees, OGP Former Employees and Transferred Employees (other than the Retiree Health Care Plan (under the ABB Inc. Group Benefit Plan)) (collectively, the “Retained Plans”) and the OGP Subsidiaries shall

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cease to be participating employers in such plans (as applicable).  ABB shall, or shall cause its Affiliates to, retain all assets, obligations and liabilities in respect of the Retained Plans and no assets, obligations or liabilities with respect to the Retained Plans shall be transferred to Purchaser as a result of the transactions contemplated by this Agreement.  After the Closing Date, Purchaser shall, and shall cause the Purchaser Affiliates to, provide such current information to ABB regarding each OGP Employee and each Transferred Employee on an ongoing basis as may be necessary and appropriate to facilitate determinations of eligibility for, and payments of benefits to, such OGP Employees and Transferred Employees under the Retained Plans.

SECTION 6.06.Non-U.S. Retirement Plans.  (a)  Subject to applicable Law, ABB shall consent to the continued participation of each OGP Subsidiary (and, if applicable, the participation of Purchaser or the Purchaser Affiliates and the JV Companies) which currently participates in the Split Plans or the Continued Plans for the Transitional Period.  Participation in the Split Plans and the Continued Plans will be limited to OGP Employees and Transferred Employees (and, if applicable, employees of a JV Company) who are active members of the Split Plans or the Continued Plans on the Closing Date.  Purchaser shall ensure that each entity which participates in the Split Plans or the Continued Plans complies in all respects with the Split Plans or Continued Plans rules and in particular pays contributions each month to the relevant Split Plans at the rates, in respect of the ABB UK Plan, set forth in Exhibit P to this Agreement, in respect of the Norway Split Plans, the amount payable in respect of OGP Employees, OGP Former Employees and Transferred Employees in accordance with applicable Law and the Norway Split Plans rules and, in respect of the Continued Plans, the normal monthly rates in respect of OGP Employees and Transferred Employees determined in accordance with the Continued Plans rules effective as of the Closing Date (for the avoidance of doubt no such entity shall make any contribution towards any defined benefits under the ABB Australian Superannuation Plan).  Purchaser shall ensure that the OGP Employees’ or Transferred Employees’ pensionable pay (as defined in the Split Plans) is not increased by more than 4.00% per annum (in respect of the ABB UK Plan) during or in relation to the Transitional Period except and on terms that Purchaser ensures that the participating entity pay to the appropriate Split Plans a sum equal to the value of the benefits attributable to the portion of the increase in remuneration that is in excess of the percentage increase shown above (as certified by ABB’s Actuary).  Where any participating entity exercises an employer discretion under the rules of the Split Plans which, in the reasonable opinion of ABB’s Actuary, would increase the value of the benefits under the Split Plans in respect of Transferred Employees or OGP Employees, Purchaser shall ensure that the participating entity pays to the appropriate Split Plans a sum equal to that additional cost as certified by ABB’s Actuary.  Purchaser and ABB shall ensure that each such participating entity will stop participating in the Split Plans and the Continued Plans at the end of the Transitional Period or at any earlier date specified by ABB on 30 calendar days’ written notice from ABB, if ABB reasonably considers this Section 6.06(a) has been or is about to be breached in any material respect.

(b)Purchaser shall cause each person who is a member of one of the Split Plans immediately before the Transfer Date and who in respect of the ABB UK Plan only has not attained the normal retirement age under Purchaser’s Scheme and, for the avoidance of doubt, including in respect of the Norway Split Plans any OGP Former Employee who has an entitlement or contingent entitlement to benefits under the Norway Split Plans, to be offered or admitted to membership in Purchaser’s Scheme with effect on and from the Transfer Date.

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Subject to receipt by Purchasers’ Scheme of the Transfer Amount, Purchaser shall ensure that Purchaser’s Scheme will provide benefits in respect of service before the Transfer Date for and in respect of those Transferring Members (i) who were members of the ABB UK Plan which are substantially identical to or, in the opinion of ABB’s Actuary and Purchaser’s Actuary, no less favorable than the benefits accrued by such Transferring Members in the ABB UK Plan before the Transfer Date (for the avoidance of doubt the analysis of such accrued benefits will include an allowance for future increases in pensionable pay and will be determined in accordance with the price adjustment mechanism assumptions) and (ii) who were members of the Norway Split Plans which are identical to the Norway Split Plans as determined in accordance with applicable Law.  In providing these benefits, Purchaser shall use its reasonable best efforts not to trigger any immediate cash contribution pursuant to the linear funding Laws of the applicable Law.  The form of offer of membership shall (as it relates to a transfer from the ABB UK Plan) be agreed by ABB (such agreement not to be unreasonably withheld) before it is issued to the OGP Employees and Transferred Employees who are members of the Split Plans.

(c)The Transfer Amount shall be paid in accordance with applicable Law or, in the case of the ABB UK Plan, on the Payment Date for and in respect of each Transferring Member and shall be calculated as follows:  (i) in respect of the ABB UK Plan, the value of the full unreduced cash equivalents (assuming, for the avoidance of doubt, that a member with less than two years’ qualifying service has a right to a cash equivalent) calculated as of the Closing Date in accordance with applicable Law as adjusted by the Investment Adjustment from the Closing Date to the Payment Date together with the contributions paid (if any) set forth in Exhibit P to this Agreement after deduction in respect of an allowance for death in service costs and administration expenses of 2.4% per annum of the pensionable pay/earnings (as defined in the UK ABB Plan), as adjusted by the Investment Adjustment from the date of payment of the relevant contribution to the Payment Date and (ii) in respect of the Norway Split Plans, the transfer value required to be paid by the Norway Split Plans to Purchaser’s Scheme in accordance with applicable Law.

(d)Purchaser (except in relation to the right to a cash equivalent transfer value of a Transferring Member of the ABB UK Plan determined in accordance with applicable Laws) shall not, and it shall use its commercially reasonable efforts to ensure that Purchaser’s Scheme, the OGP Subsidiaries and (if applicable) the JV Companies do not, take any action or give direct or indirect financial or other assistance to any person in taking any action which could reasonably be expected to result in an amount greater than the Transfer Amount being paid to Purchaser’s Scheme.

(e)Except as required by any applicable Laws or pursuant to matters disclosed to Purchaser as of the date of this Agreement:  (i) in addition, except with the consent of Purchaser (which shall not be unreasonably withheld), no amendment shall be made by ABB to the Split Plans which would affect the benefits or contributions payable by or in respect of any Transferring Member or which would affect the calculation of the Transfer Amount prior to the end of the Transitional Period and (ii) ABB shall do nothing to trigger the termination of any of the Split Plans prior to the end of the Transitional Period in relation to any of the Split Plans.

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(f)For the avoidance of doubt, Purchaser shall assume the assets and obligations in respect of the Acquired Plans with effect from the Closing Date in accordance with applicable Laws.

(g)On or after the Closing Date, Purchaser shall be responsible for any liability or obligation to make payments to the (i) Norway Split Plans in respect of Transferring Members and OGP Former Employees and (ii) Acquired Plans in Norway in respect of any OGP Employees or OGP Former Employees.

(h)On or after the Closing Date, ABB shall be responsible for any liability or obligation to make payments to the (i) ABB UK Plan, Norway Split Plan, ABB Brazil Pension Plan or Continued Plans (other than contributions that may be required under such plans pursuant to Sections 6.06(a) through (e) or to the extent such contributions are provided for in the Effective Date Balance Sheet) and (ii) Acquired Plans in Norway in respect of any employees who are not OGP Employees and not OGP Former Employees (except to the extent such contributions are provided for in the Effective Date Balance Sheet).

(i)ABB and Purchaser shall use their reasonable best efforts to ensure that no later than the end of the Transitional Period a gratuity fund with the Life Insurance Corporation of India is available to accept a transfer of assets and liabilities from the ABB India Employees Gratuity Fund in respect of the OGP Employees and Transferred Employees.

SECTION 6.07.Post-Retirement Health and Welfare Benefits.  Effective as of the Closing Date, each OGP Employee and each Transferred Employee shall cease to accrue benefits, if any, under the Retiree Health Care Plan (under the ABB Inc. Group Benefit Plan) (the “ABB Retiree Medical Plan”) and the OGP Subsidiaries shall cease to be participating employers in such plan.  Effective as of the Closing Date, Purchaser shall, or shall cause the OGP Subsidiaries to, assume all liabilities and obligations that ABB may have to provide benefits under the ABB Retiree Medical Plan to (a) each OGP Employee, (b) each OGP Former Employee and (c) each Transferred Employee.  ABB shall, or shall cause its Affiliates to, retain all liabilities and obligations in respect of the ABB Retiree Medical Plan other than as provided in the previous sentences.

SECTION 6.08.Vesting of Benefits Under Certain Employee Plans.  (a)  Effective as of the Closing Date, each OGP Employee and Transferred Employee shall be fully vested (to the extent not already vested) in his or her account balance under the Personal Retirement Investment and Savings Management Plan for Employees of ABB.

(b)Each OGP Employee and Transferred Employee shall receive credit for vesting purposes in accordance with the terms and conditions of the ABB Cash Balance Pension Plan, the ABB Retirement Income Restoration Plan and the ABB Supplemental Excess Retirement Plan, to the extent that such OGP Employee or Transferred Employee participated in such plans as of the Closing Date, for services performed by such OGP Employee and Transferred Employee with Purchaser and the Purchaser Affiliates on or after the Closing Date.  ABB and its Affiliates shall cease the accrual of vesting credit under such plans upon the earlier to occur of (a) the date that an OGP Employee or a Transferred Employee is fully vested in his or

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her accrued benefit under such plans and (b) the date that an OGP Employee or a Transferred Employee terminates employment with Purchaser or any of the Purchaser Affiliates.

SECTION 6.09.Continued Employment of Transferred Employees.  (a)  (i) With respect to any Transferred Employee ordinarily working in any member state of the European Union, the Parties agree that the sale of the Purchased Assets pursuant to this Agreement will constitute a “relevant transfer” for the purposes of the Transfer Regulations and, accordingly, Purchaser shall, or shall cause an OGP Purchaser to, employ each such Transferred Employee from and after the Closing Date; and (ii) with respect to any person who has been offered or promised employment with any Asset Seller in the OGP Business which offer or promise has not yet been accepted by such person, Purchaser shall, or shall cause an OGP Purchaser to, honor such offer or promise made to such person.

(b)Purchaser shall use its reasonable best efforts to ensure the making of offers of employment by an OGP Purchaser to each Transferred Employee (other than those Transferred Employees to which the provisions of Section 6.09(a) apply), such offers to be made in advance of and effective as of the Closing Date.  ABB and its Affiliates shall provide such reasonable assistance, cooperation and all information relating to the Transferred Employees as may be reasonably requested by Purchaser for the purposes of making such offers.

(c)Effective as of the Closing, ABB shall give notice of termination, or cause the termination of the employment of, all Transferred Employees (other than those Transferred Employees to which the provisions of Section 6.09(a) apply) and Purchaser shall, or shall cause the relevant OGP Purchaser to, be responsible for and shall indemnify the ABB Indemnified Parties and keep them indemnified from and against any and all Employment Costs and Liabilities (except as otherwise provided in Section 6.06(e)) arising, directly or indirectly, out of the employment of any such Transferred Employee from the Closing or from such termination of employment (for whatever reason).

(d)Purchaser shall, or shall cause the relevant OGP Purchaser to, perform and discharge for its own account all Employment Costs and Liabilities accruing for service on and after the Closing Date.  In addition, Purchaser shall, or shall cause the relevant OGP Purchaser to, perform and discharge for its own account all Employment Costs and Liabilities accrued but unpaid as of the Closing Date with respect to the OGP Employees and Transferred Employees.  Unless otherwise provided in this Agreement, the Related Agreements or the Disclosure Schedule to this Agreement, after the Closing, Purchaser shall indemnify the ABB Indemnified Parties and keep them indemnified from and against any and all Employment Costs and Liabilities relating to the OGP Employees and Transferred Employees, whether relating to the period prior to or after the Closing.  For the avoidance of doubt, Purchaser shall not be required to make an indemnity payment pursuant to this Section 6.09(d) in connection with any matter to the extent that a full provision is made in the Final Effective Date Balance Sheet pursuant to Section 2.15 of Exhibit E for such matter.

(e)The Parties agree to use their reasonable best efforts to cooperate in providing all information and assistance, and in sufficient time, to enable the Parties to fulfill their respective information and consultation obligations under the Transfer Regulations and equivalent applicable Law.  ABB shall be responsible for and shall indemnify the Purchaser

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Indemnified Parties from and against any and all Losses arising from or in respect of any breach of the informing and consulting obligations placed upon ABB and its Affiliates by the Transfer Regulations or any other applicable Law or labor, collective bargaining or other similar agreements or contracts (including, for the avoidance of doubt, any such obligations in Italy), except that Purchaser shall indemnify the ABB Indemnified Parties to the extent that such Losses arise from or are in respect of Purchaser’s failure to comply with its obligations to provide ABB with the information and assistance reasonably requested by ABB in order to enable ABB to fulfill its obligations under the Transfer Regulations and other applicable Law.

SECTION 6.10.Purchase Price Adjustment for Unfunded Benefit Liabilities.  (a)  The amount of $847 million set forth in Section 2.04(a) shall be reduced by $85 million on the Closing Date (which amount Purchaser will not and shall not be obligated to pay to ABB pursuant to Section 2.04(a) on the Closing Date or otherwise thereafter) to reflect the aggregate estimated value of the unfunded benefit liabilities under the Assumed Plans and the Non-Assumed Plans and may be further adjusted pursuant to this Section 6.10.

(b)ABB shall as soon as reasonably practicable provide to Purchaser the information necessary for the calculations required in this Section 6.10 to be completed.  Purchaser’s Actuary shall calculate the Aggregate Deficit on the basis of the assumptions set out in Exhibit Q to this Agreement and shall provide the results of such calculation to ABB’s Actuary within sixty (60) calendar days of receipt of all the required information from ABB for verification by ABB’s Actuary.  Where Purchaser’s Actuary and ABB’s Actuary cannot agree on the calculation of the Aggregate Deficit within ninety (90) days of the receipt of all necessary and appropriate information from ABB, Section 6.10(f) shall apply.

(c)Where the Aggregate Deficit is less than $100 million, then Purchaser shall pay to ABB as an adjustment to the Purchase Price the amount by which the Aggregate Deficit is less than $100 million, up to a maximum of $15 million.

(d)Where the Aggregate Deficit is greater than $126 million, then ABB shall pay to Purchaser as an adjustment to the Purchase Price the amount by which the Aggregate Deficit is greater than $126 million.

(e)For the avoidance of doubt, where the Aggregate Deficit is greater than $100 million but less than $126 million no payment shall be made by either Purchaser to ABB or ABB to Purchaser.

(f)Where ABB’s Actuary and Purchaser’s Actuary cannot agree on the calculation of the Aggregate Deficit within ninety (90) days of the receipt of all necessary and appropriate information from ABB then:  (i)  where the difference between Purchaser’s Actuary’s calculation and ABB’s Actuary’s calculation is less than $1 million, then the average of the two calculations shall apply, and (ii) where the difference between the calculation of Purchaser’s Actuary and the calculation of ABB’s Actuary is greater than $1 million, then either ABB or Purchaser may request that the calculation of such amount be determined by an independent actuary being an individual chosen by agreement between ABB and Purchaser or, failing such agreement, appointed by the President of the Institute of Actuaries (the “Independent Actuary”).  There may be only one Independent Actuary and he or she will act as an expert and

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not as an arbitrator.  The Independent Actuary will determine the disputed calculation in accordance with this Agreement and the terms set forth in Exhibit Q to this Agreement, his or her decision will be final and binding in the absence of manifest error and his or her fees and expenses will be borne equally by ABB and Purchaser or as he or she directs.

SECTION 6.11.Cooperation.  The Parties mutually agree to use their reasonable best efforts to take all actions that are necessary and appropriate to effectuate the actions contemplated by this Article VI.

ARTICLE VII

TAX MATTERS

SECTION 7.01.Indemnity.  (a)  ABB agrees to indemnify and hold harmless Purchaser against the following (as well as reasonable costs and fees for attorneys and other professional advisors incurred in connection with Taxes) (except that ABB shall not indemnify and hold harmless Purchaser for Taxes (A) to the extent of the amount reserved on the Final Effective Date Balance Sheet or (B) that have been paid under this Article VII):  (i) Taxes imposed on any OGP Subsidiary or with respect to the OGP Business with respect to any Pre-Closing Taxable Period, (ii) U.S. withholding Tax, if any, that is imposed pursuant to the Foreign Investment Real Property Act on a transfer by a Seller that is a foreign person of the assets of the OGP Business, (iii) with respect to any Straddle Period, Taxes imposed on any OGP Subsidiary or with respect to the OGP Business that are allocable, pursuant to Section 7.01(b), to the Pre-Closing Taxable Period, (iv) Taxes arising out of (A) any transactions by ABB relating to the pre-Closing acquisitions or reorganizations (other than Taxes relating to a Section 338(h)(10) Election, as defined below, which shall be governed by Section 7.08), unless such transactions are undertaken at the request of Purchaser, in which case ABB’s indemnity obligation will only apply to U.S. federal, state and local Income Taxes arising out of such transactions, provided that ABB shall indemnify and hold harmless Purchaser for Taxes payable in respect of the pre-Closing transfer of Vetco Gray Nigeria Ltd., or (B) the sale of the shares of ABB Vetco Gray U.K. Ltd. by ABB Vetco Gray Inc. to Purchaser or an OGP Purchaser, (v) Taxes of another Person claimed from the OGP Subsidiaries or Asset Sellers relating to the OGP Business as a result of any of the OGP Subsidiaries or Asset Sellers relating to the OGP Business being included prior to the Closing Date in a combined, consolidated or unitary tax group under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise and (vi) penalties for failure to file Tax Returns that are required to be filed by OGP Subsidiaries or Asset Sellers (with respect to the OGP Business) with respect to the Pre-Closing Taxable Periods.  ABB shall also indemnify Purchaser for the utilization or set-off of a Purchaser’s Relief available to any of the OGP Subsidiaries against any Tax liability or against any income, profits or gains where, but for such setting off, Purchaser would have been entitled to make a claim under this Agreement (ignoring for these purposes any financial limitations), in which case the amount of ABB’s liability shall be equal to the amount which would have been payable in the absence of that or any other Purchaser’s Relief.   Notwithstanding the foregoing, in the event of a change in law, regulation, governmental rule, directive, guideline, or a change in the generally accepted interpretation of any of the foregoing (a “Change of Law”), which takes effect after the Closing Date but which retroactively increases the amount of Taxes described in subsections (i) through (vi) above or in

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the immediately preceding sentence, ABB shall not indemnify and hold Purchaser harmless from the increased portion of Taxes attributable to such Change of Law. Purchaser shall be responsible for, and shall indemnify and hold ABB harmless against, all Taxes and associated costs and expenses with respect to the OGP Subsidiaries and the OGP Business (including the Purchased Assets) and the sale thereof for all taxable periods ending after the Closing Date (and, with respect to any Straddle Period, the portion of such taxable period that is after the Closing Date) not allocated to ABB pursuant to this Section 7.01.

(b)For purposes of this Agreement, in the case of any Taxes imposed on any OGP Subsidiary or with respect to the OGP Business and payable for a Straddle Period, the portion of such Taxes which is allocable to the Pre-Closing Taxable Period shall be (i) in the case of any Tax other than a Tax based upon or measured by gross or net income or receipts including any deemed income, the amount of such Tax for the entire taxable period (or, in the case of such Taxes determined on an arrears basis, the amount of such Tax for the immediately preceding period) multiplied by a fraction, the numerator of which is the number of days in the portion of such taxable period ending on the Closing Date and the denominator of which is the number of days in the entire taxable period and (ii) in the case of Taxes that are either based upon or measured by gross or net income or receipts including any deemed income, the amount which would be payable if the relevant taxable period ended on the Closing Date.  For purposes of this Agreement, the Texas franchise Tax, which is computed on taxable income for calendar year 2003, shall be treated as a Tax payable for a Straddle Period.

(c)Payment by ABB of any amount due under this Section 7.01 shall be made within ten days following Purchaser’s written request for the payment of such amounts.  If ABB receives an assessment or other notice of Taxes due with respect to an OGP Subsidiary or with respect to the OGP Business for any Pre-Closing Taxable Period for which ABB is not responsible, in whole or in part, pursuant to paragraph (a) of this Section 7.01, then Purchaser shall pay such Taxes, or if ABB pays such Taxes, then Purchaser shall pay to ABB the amount of such Taxes for which ABB is not responsible within ten (10) days following ABB’s written request.  In the case of a Tax that is contested in accordance with the provisions of Section 7.04, the contesting party (as between ABB and Purchaser) shall defer payment of the contested Tax to the extent permitted by Law and to the extent such deferral will not materially disadvantage the non-contesting party (as between ABB and Purchaser).

(d)Any amount otherwise payable by ABB under this Section 7.01 shall be reduced by any Post-Closing Date Tax Benefit that arose in connection with (i) any underlying adjustment resulting in the obligation of Purchaser, the OGP Purchasers, any of the OGP Subsidiaries or otherwise with respect to the OGP Business to pay Taxes for which ABB is responsible under this Section 7.01 or (ii) the payment of such Taxes.

(e)In the event that any UK Tax is due with respect to the Pre-Closing Taxable Period, ABB shall as far as possible make group relief (as defined in Section 402(1) of the Income and Corporate Taxes Act of 1988) available free of charge for the purpose of eliminating or mitigating that liability to UK Tax or the payment of such Taxes.

SECTION 7.02.Preparation of Tax Returns.  (a)  ABB shall at its cost and expense cause the OGP Subsidiaries or Asset Sellers relating to the OGP Business to timely

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prepare and file all Tax Returns relating to such OGP Subsidiaries or to the OGP Business due on or before the Closing Date and, where appropriate, shall cause to be included in the consolidated federal Income Tax Returns (and the federal, state, local, canton, provincial or national Income Tax Returns of any jurisdiction in which ABB or any of its Affiliates files consolidated, combined, group or unitary Income Tax Returns) for all periods ending on or before or which include the Closing Date, all items of income, gain, loss, deduction and credit or other items (collectively, “Tax Items”) of the OGP Subsidiaries or Asset Sellers relating to the OGP Business which are required to be included therein.  ABB shall provide, or cause to be provided, a copy of state, local and foreign Tax Returns that are required to be filed by it, the OGP Subsidiaries or the Asset Sellers with respect to the OGP Business under this paragraph, together with any attachments to the extent such Tax Returns and attachments relate solely to the OGP Subsidiaries or the OGP Business, to the Purchaser ten (10) business days prior to the due date for filing of such Tax Returns (taking into account proper extensions).  Purchaser may review such Tax Returns and provide comments.

(b)With respect to each Tax Return covering a taxable period ending on or before the Closing Date that is required to be filed after the Closing Date for, by or with respect to any of the OGP Subsidiaries or with respect to the OGP Business (other than the Tax Returns described in Section 7.02(a)), ABB shall at its cost and expense timely prepare and file such Tax Return and shall cause to be included in such Tax Return all Tax Items required to be included therein.  ABB shall provide, or cause to be provided, a copy of state, local and foreign Tax Returns that are required to be filed by it, the OGP Subsidiaries or the Asset Sellers with respect to the OGP Business under this paragraph, together with any attachments to the extent such Tax Returns and attachments relate solely to the OGP Subsidiaries or the OGP Business, to the Purchaser ten (10) business days prior to the due date for the filing of such Tax Return (taking into account proper extensions).  Purchaser may review such Tax Returns and provide comments.  An exact copy of a Tax Return relating solely to the OGP Subsidiaries and the OGP Business shall be provided to Purchaser no later than ten (10) business days after such Tax Return is filed.

(c)With respect to each Tax Return covering a Straddle Period that is required to be filed for, by or with respect to OGP Subsidiaries or Asset Sellers relating to the OGP Business (a “Straddle Period Return”), other than the Tax Returns described in Section 7.02(a), Purchaser shall cause such Straddle Period Return to be prepared and shall cause to be included in such Straddle Period Return all Tax Items required to be included therein.  Purchaser shall determine in accordance with the provisions of Section 7.01(b), subject to review and agreement by ABB, the portion, if any, of the Tax due with respect to the period covered by such Straddle Period Return that is attributable to the Pre-Closing Taxable Period.  At least 60 calendar days prior to the due date (including extensions) of such Straddle Period Return (or, if the financial statements for relevant entities are not available at such time, within 15 days after such statements become available, but in any event no later than 10 days prior to the due date (including extensions) of such Straddle Period Return), Purchaser shall deliver to ABB a copy of such Straddle Period Return along with Purchaser’s calculation (in reasonable detail) of the amount of Tax attributable to the Pre-Closing Taxable Period.  After ABB’s review and approval of such Straddle Period Return (which approval shall not be unreasonably withheld or delayed), Purchaser shall cause the OGP Subsidiaries or OGP Purchasers (with respect to the OGP

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Business) to file timely such Straddle Period Return with the appropriate Taxing Authority and to pay timely the amount of Taxes shown to be due on such Straddle Period Return.

(d)Subject to Section 7.01(a), when a Straddle Period Return is filed, Purchaser shall prepare a statement within ten calendar days of the filing of a Straddle Period Return showing (i) the aggregate amount of Taxes allocable to the Pre-Closing Taxable period as calculated by reference to such Straddle Period Return (the “Final Tax Amount”) and (ii) all Final Tax Amounts shown on previously filed Straddle Period Returns, and shall submit such statement to ABB for review and agreement thereupon by the parties hereto.  Upon agreement by the parties hereto on the amount of the Final Tax Amount, to the extent the sum of (i) the Final Tax Amount shown on such Straddle Period Return and (ii) all Final Tax Amounts shown on previously filed Straddle Period Returns exceeds the total of the aggregate amount of Taxes previously paid by ABB and Taxes reserved on the Final Effective Date Balance Sheet with respect to all Straddle Periods, ABB shall promptly pay to Purchaser such excess amount.  When all Straddle Period Returns have been filed, to the extent that the aggregate amount of Taxes paid by ABB or reserved on the Final Effective Date Balance Sheet is greater than the aggregate of all Final Tax Amounts shown on such Straddle Period Returns, Purchaser shall promptly pay ABB such excess amount.

(e)All Tax Returns to be prepared pursuant to this Section 7.02 shall be prepared in a manner consistent with practices followed in prior years except for changes required by Law.

(f)None of Purchaser or any Purchaser Affiliate shall (or shall cause or permit any OGP Subsidiary to) amend, refile or otherwise modify any Tax Return relating in whole or in part to any OGP Subsidiary with respect to a Pre-Closing Taxable Period without the prior written consent of ABB, unless required by Law to do so.  Notwithstanding anything to the contrary in this Agreement, unless required by Law to do so, ABB shall not amend, refile or otherwise modify, or permit the OGP Subsidiaries or Asset Sellers (relating to the OGP Business) to amend, refile or otherwise modify, any state, local or foreign Tax Return, which relates solely to OGP Subsidiaries or the OGP Business, with respect to taxable periods ending on or prior to the Closing Date, the amendment of which (i) would be inconsistent with prior practice and (ii) would materially adversely affect Purchaser, without the consent of Purchaser (which shall not be unreasonably withheld or delayed).

SECTION 7.03.Refunds.  Any Tax refund or credit (including any interest paid or credited with respect thereto) received or used, in the case of a credit, by Purchaser, any OGP Purchaser, or any OGP Subsidiary, (i) relating to any OGP Subsidiary or the OGP Business for any Pre-Closing Taxable Period (except for any refund included on the Final Effective Date Balance Sheet which shall be the property of Purchaser and, if paid to ABB, shall be paid over promptly to Purchaser), (ii) attributable to an amount paid by ABB under Section 7.01, or (iii) attributable to a loss, credit or a deduction arising in the Pre-Closing Taxable Period and not included on the Final Effective Date Balance Sheet, shall be the property of ABB, and if received or used by Purchaser or any of the Purchaser Affiliates shall be paid over promptly to ABB.  Purchaser shall, if ABB so requests and at ABB’s expense, cause the relevant entity to file for and use its reasonable best efforts to obtain and expedite the receipt of any refund to which ABB is entitled under this Section 7.03 to the extent such request does not otherwise materially

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disadvantage Purchaser.  Purchaser shall permit, and shall cause the relevant OGP Purchaser to permit, ABB to participate (at ABB’s expense) in the prosecution of such refund claim.

SECTION 7.04.Contests.  (a)  If a claim shall be made by any Taxing Authority that, if successful, would result in the indemnification of a party (the “Tax Indemnified Party”) under this Article VII, the Tax Indemnified Party shall promptly notify the party (the “Tax Indemnifying Party”) obligated under this Article VII to indemnify the Tax Indemnified Party in writing of such fact; otherwise, the Tax Indemnifying Party shall be released from any indemnification obligations with respect to such claim to the extent the Tax Indemnifying Party is actually prejudiced by such failure to notify or delay in notification.  Such notice shall contain factual information (to the extent known to the Tax Indemnified Party) describing the asserted Tax liability in reasonable detail and shall include copies of any notice or other document received from any Taxing Authority in respect of such asserted Tax liability.

(b)In the case of a claim or assessment with respect to Tax by a Taxing Authority or in the case of a Tax audit or administrative or judicial proceeding (a “Contest”) that relates to a Pre-Closing Taxable Period or otherwise to a matter for which ABB is primarily liable under Section 7.01 or 7.02, ABB shall have the sole right, at its expense, to control the conduct of such Contest provided ABB acknowledges its liability.  Purchaser and ABB agree to cooperate, and Purchaser agrees to cause the relevant OGP Purchasers and OGP Subsidiaries to cooperate, in the defense against or compromise of any claim in any audit or proceeding, including by executing appropriate powers of attorney empowering ABB Representatives.  Notwithstanding the foregoing, (i) ABB shall not agree to any settlement concerning Taxes with respect to Pre-Closing Taxable Periods, which would materially disadvantage Purchaser or the OGP Subsidiaries without the prior written consent of the Purchaser, which shall not be unreasonably withheld, and (ii) Purchaser shall not agree to any settlement concerning Taxes with respect to Pre-Closing Taxable Periods which would materially disadvantage ABB without the prior written consent of ABB, which shall not be unreasonably withheld.  Each of ABB and Purchaser shall have the right to be kept fully informed of any material developments and receive copies of all correspondence and shall have the right to observe the conduct of any Tax Contest (through attendance at meetings) at its own expense, including through its own counsel and other professional experts.  In a case of a Contest relating to a Straddle Period, (i) each of Purchaser and ABB may participate in such Contest at its own expense, and (ii) whichever of Purchaser and ABB would be liable for the greatest amount of Tax asserted in such Contest (determined on a present value basis) shall be entitled to control such Contest.

SECTION 7.05.Cooperation and Exchange of Information.  Notwithstanding the provisions in Section 5.04, upon the terms set forth in this Section 7.05, ABB, on the one hand, and Purchaser, the OGP Purchasers and the OGP Subsidiaries, on the other hand, will provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return (including procuring necessary signatures of relevant officers for Tax Returns), amended Tax Return or claim for refund, determining a liability for Taxes or a right to a refund of Taxes, participating in or conducting any audit or other proceeding in respect of Taxes or making representations to or furnishing information to parties subsequently desiring to purchase any of the OGP Subsidiaries or any part of the OGP Business from Purchaser or an OGP Purchaser.  Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying

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schedules, related work papers and documents relating to rulings or other determinations by Taxing Authorities.  ABB, on the one hand, and Purchaser, the OGP Purchasers and the OGP Subsidiaries, on the other hand, shall make their respective employees and the employees of their respective Affiliates or Purchaser Affiliates, as applicable, available on a basis mutually convenient to the parties to provide explanations of any documents or information provided hereunder.  Each of ABB, Purchaser, the OGP Purchasers and the OGP Subsidiaries shall retain all Tax Returns, schedules and work papers, records and other documents in their possession relating to Tax matters of the OGP Subsidiaries and the OGP Business for each taxable period first ending after the Closing Date and for all prior taxable periods until the later of (i) the expiration of the period of limitations for the assessment of Taxes applicable to the relevant taxable periods to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified by the other party in writing of such extensions for the respective Tax periods, or (ii) eight years following the due date (without extension) for such Tax Returns; provided, however, that a party shall not dispose of any such materials if, at least 90 Business Days before the later of the end of either of the periods described in clause (i) or (ii), the other party has notified the disposing party of its desire to review such material, in which case such other party shall be given an opportunity, at its expense, to remove and retain all or any part of such materials.  Any information obtained under this Section 7.05 shall be kept confidential, except as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or in conducting an audit or other proceeding or participating in any Contest.

SECTION 7.06.Conveyance Taxes.  Each of ABB and Purchaser shall be liable for 50 per cent of any real property transfer or gains, sales, use, transfer, value added, stock transfer, and stamp taxes, any transfer, recording, registration, and other fees, and any similar Taxes which become payable in connection with the transactions contemplated by the Transaction Agreements, except that, with respect to the pre-Closing transfer of Vetco Gray Nigeria Ltd. and the sale of the shares of ABB Vetco Gray U.K. Ltd. by ABB Vetco Gray Inc. to Purchaser or an OGP Purchaser, ABB shall indemnify and hold harmless Purchaser for all such aforementioned Taxes.  ABB and Purchaser agree to cooperate in the execution and delivery of all instruments and certificates necessary to enable ABB and/or Purchaser to comply with any pre-Closing filing requirements.  The parties shall prepare and file all necessary Tax Returns and other documentation with respect to such Taxes and shall take such reasonable steps as appropriate and as permitted by Law to reduce such Taxes.  Notwithstanding anything in this Section 7.06 to the contrary, ABB shall not be responsible for any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer recording, registration and other fees, and any similar Taxes which become payable in connection with the acquisitions or reorganizations undertaken prior to Closing at the request of the Purchaser other than the pre-Closing transfer of Vetco Gray Nigeria Ltd.

SECTION 7.07.Tax Covenants.  (a)  Notwithstanding any other provision of this Agreement, neither Purchaser nor any Purchaser Affiliate shall carry back, or cause or permit any OGP Subsidiary to carry back, for U.S. federal, state or local or non-U.S. Tax purposes to any taxable year or period, or portion thereof, ending on or before the Closing Date any operating losses, net operating losses, capital losses, Tax credits or similar items without a prior written consent of ABB.

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(b)(i)  Nothing contained in this Agreement shall prohibit ABB solely with respect to the Pre-Closing Taxable Period, prior to the Closing Date, from making, or causing to be made, an election under Treasury Regulation Section 301.7701-3 with respect to any OGP Subsidiary or any Affiliate thereof, subject to the consent of  Purchaser (which consent shall not be unreasonably withheld).

(ii)Nothing contained in this Agreement shall prohibit Purchaser, solely with respect to the Post-Closing Taxable Period, from making, or causing to be made, an election under Treasury Regulation Section 301.7701-3 with respect to the OGP Subsidiaries, provided that such election does not become effective during a Pre-Closing Taxable Period or portion thereof, unless Purchaser has obtained prior written consent of the Seller (which consent shall not be unreasonably withheld).

SECTION 7.08.Elections.  (a)  ABB and Purchaser shall join to make a timely and irrevocable election under Section 338(h)(10) of the Code and similar elections under any applicable state or local Tax laws (a “Section 338(h)(10) Election”) for the OGP Subsidiaries organized in the United States other than ABB Offshore Systems, Inc. (the “338(h)(10) Subsidiaries”).  Each of ABB, Purchaser, and the 338(h)(10) Subsidiaries shall report the purchase of the Shares consistent with the Section 338(h)(10) Elections made with respect to those companies and shall take no position contrary thereto.

(b)Each of ABB, Purchaser and the 338(h)(10) Subsidiaries shall execute any and all documents, statements, and other forms (including IRS Forms 8023 and 8883) that are required to be submitted to any Taxing Authority in connection with a Section 338(h)(10) Election (the “Section 338 Forms”) no later than 15 days prior to the date such Section 338 Forms are required to be filed except for IRS Form 8023, which shall be signed and executed on the Closing Date.  Each of ABB, Purchaser, and the 338(h)(10) Subsidiaries shall cause the Section 338 Forms to be duly executed by an authorized person for ABB, Purchaser, and the 338(h)(10) Subsidiaries, and shall duly and timely file the Section 338 Forms in accordance with applicable Tax laws and the terms of this Agreement.

(c)Solely for purposes of the Section 338(h)(10) Election, each of ABB and Purchaser shall use its best efforts, as soon as practicable after the Closing Date, to enter into an agreement, as may be amended from time to time (the “Allocation Agreement”), to allocate the Purchase Price (with subsequent adjustment for any amounts that are treated as adjustments to the Purchase Price for all purposes) allocable to the Shares for all applicable Tax purposes, including the computation of the Modified Aggregate Deemed Sale Price (as defined under applicable Treasury Regulations and similar state, local or foreign tax provisions) (“MADSP”) for the assets of the 338(h)(10) Subsidiaries.  Purchaser shall initially prepare a statement setting forth a proposed computation and allocation of MADSP (the “Computation”).  Purchaser shall submit the Computation to ABB along with copies of all workpapers, reports, opinions and other similar documents used to prepare the Computation (“Workpapers”), no later than ninety (90) days after the Closing Date.  If, within sixty (60) days of ABB’s receipt of the Computation and the Workpapers, ABB shall not have objected in writing to such Computation, the Computation shall become the Allocation Agreement.  If ABB objects in writing to the Computation within such sixty (60) days, Purchaser and ABB shall negotiate in good faith to resolve the Computation.  If Purchaser and ABB shall not have agreed to the Computation and adopted an

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Allocation Agreement within thirty (30) days after ABB’s objection, any disputed aspects of the Allocation Agreement shall be resolved by an accounting or law firm mutually acceptable to Purchaser and ABB (the “338 Auditors”) as soon as practicable but in no event later than thirty (30) days prior to the earlier of (i) the last date on which the Section 338 Forms may be filed or (ii) the last date on which either Purchaser or ABB (whichever is earlier) must file a Tax Return relating to the transactions contemplated hereby.  The decision of the 338 Auditors shall be final, and the costs, expenses and fees of the 338 Auditors shall be borne equally by Purchaser and ABB.  Purchaser and ABB shall not take a position before any Taxing Authority or otherwise (including in any Tax Return) inconsistent with the Allocation Agreement.  For purposes of this Section 7.08(c), references to ABB shall include ABB and any of its designated Affiliates.

(d)ABB shall be responsible for all U.S. federal Income Taxes attributable to the OGP Subsidiaries or Asset Sellers relating to the OGP Business for periods ending on or before the Closing Date (including any Tax resulting from the Section 338(h)(10) Election).  In addition, ABB shall be liable for any state or local Tax attributable to the Section 338(h)(10) Election or an election under the state or local law similar to the election available under Section 338(h)(10) of the Code, which shall include the Texas franchise tax imposed on the 338(h)(10) gain, and also for all U.S. state and local Income Taxes arising out of any pre-Closing acquisitions or reorganizations undertaken at the request of Purchaser and for all Taxes arising out of the sale of the shares of ABB Vetco Gray U.K. Ltd. by ABB Vetco Gray Inc. to Purchaser or an OGP Purchaser.

(e)At Purchaser’s option, Purchaser may make an election under Section 338(g) with respect to acquisitions of any of the OGP Subsidiaries organized outside the United States, provided, however, that Purchaser indemnifies ABB and any of its Affiliates for all state and local Tax costs that would be incurred by ABB or any of its Affiliates as a result of the election contemplated by this Section 7.08(e).  Provided that Purchaser acknowledges its liability under this Section 7.08(e) in writing, ABB shall cooperate with, and take all necessary actions requested by Purchaser, regarding any such election including reporting the transactions for tax purposes in a manner consistent with such elections.

(f)Notwithstanding any other provision in this Agreement, in each of the Applicable Taxing Jurisdictions, ABB shall control (i) the reporting of the income or gain resulting from the Section 338(h)(10) Election (or similar election under state or local law), or arising out of any pre-Closing acquisitions or reorganizations undertaken at the request of Purchaser or arising out of the sale of the shares of ABB Vetco Gray U.K. Ltd. by ABB Vetco Gray Inc. to Purchaser or an OGP Purchaser, on the associated Tax Returns (including filings with respect to estimated Tax) reflecting such income or gain (the “Designated Returns”) and (ii) the determination of the amount of any associated Tax (determined taking into account any available Relief) resulting from the Section 338(h)(10) Election (or similar election under state or local law), or arising out of any pre-Closing acquisitions or reorganizations undertaken at the request of Purchaser or arising out of the sale of the shares of ABB Vetco Gray U.K. Ltd. by ABB Vetco Gray Inc. to Purchaser or an OGP Purchaser, that is to be paid with such return (in each Applicable Taxing Jurisdiction, the “Designated Tax Amount”); provided that any such return shall be filed by the Party having filing responsibility for such return under Section 7.02.  At least 25 calendar days before the filing of any Designated Return, ABB will provide Purchaser with a schedule showing the Designated Tax Amount, along with supporting materials

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showing in reasonable detail how the Designated Tax Amount was computed.  Purchaser may review such schedule and supporting materials and provide comments.  Unless Purchaser notifies ABB of any comments or disagreements with respect to ABB’s schedule within 15 calendar days before the due date for a Designated Return, such schedule shall be final, and the applicable Designated Return shall be filed in a manner that is in accordance with such schedule.  If Purchaser timely notifies ABB of any comments or disagreements with respect to such schedule, then ABB shall consult with the Purchaser in good faith with respect to such comments or disagreements, the schedule and supporting materials, and, in general, with respect to the reporting of the income or gain resulting from the Section 338(h)(10) Election (or similar election under state or local law) or arising out of any pre-Closing acquisitions or reorganizations undertaken at the request of Purchaser or arising out of the sale of the shares of ABB Vetco Gray U.K. Ltd. by ABB Vetco Gray Inc. to Purchaser or an OGP Purchaser.  In the event that, notwithstanding such consultation, there remain any outstanding issues with respect to any of the matters described in the preceding sentence, then at least 12 calendar days before the due date for the Designated Return:  (i) Purchaser shall submit to ABB a schedule showing the Tax resulting from the Section 338(h)(10) Election (or similar election under state or local law) or arising out of any pre-Closing acquisitions or reorganizations undertaken at the request of Purchaser or arising out of the sale of the shares of ABB Vetco Gray U.K. Ltd. by ABB Vetco Gray Inc. to Purchaser or an OGP Purchaser as determined by Purchaser (after taking into account any available Relief), along with supporting materials showing in reasonable detail Purchaser’s computations (in each Applicable Taxing Jurisdiction, the “Alternative Designated Tax Amount”); (ii) ABB shall acknowledge in writing to Purchaser its liability under Section 7.08(d) (including liability in the event of a determination by a Taxing Authority that the applicable amount of Tax exceeds the Designated Tax Amount shown in ABB’s schedule) and its intention to timely remit the Designated Tax Amount, as shown in ABB’s schedule to the applicable Taxing Authority (or to Purchaser by check, so long as such check is made out to the applicable Taxing Authority and not to Purchaser and the amount of the check includes the amount of any penalty for payment by check rather than by wire transfer); and (iii) in the case of any Designated Return as to which there is an outstanding issue and which under applicable Law must be executed by Purchaser or a Purchaser Affiliate, except to the extent ABB establishes to Purchaser’s reasonable satisfaction that ABB’s position is substantially the same as positions reasonably taken by ABB in its past practice, Purchaser may request that ABB provides an opinion of counsel or an accountant or accountants generally recognized as expert in such matters that there is substantial authority for the position being advocated by ABB and, if such opinion is not provided at least eight days before such due date, ABB shall be deemed to have agreed to the Alternative Designated Tax Amount for the Applicable Taxing Jurisdiction and such amount shall become the Designated Tax Amount.  ABB (or, in the case of a Designated Return for which Purchaser has filing responsibility, Purchaser) shall timely file each Designated Return (the due date for such filing (determined taking into account any duly obtained extensions), the “Filing Date”).  For the avoidance of doubt, no determination or statement made, schedule or other document provided, or other action taken by ABB, Purchaser or any of their Affiliates pursuant to this Section 7.08(f) or Section 9.08(b) shall be treated as modifying, qualifying or limiting in any respect ABB’s obligations under Section 7.08(d).

(g)For purposes of Sections 7.08(a) through (f), each of ABB and Purchaser shall cause their respective Affiliates or Purchaser Affiliates, as the case may be, to take any

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action required in those paragraphs or refrain from taking any action prohibited under those paragraphs.

SECTION 7.09.Miscellaneous.  (a)  Each of ABB, on the one hand, and Purchaser, the OGP Purchasers and the OGP Subsidiaries, on the other hand, agrees to treat all payments made by it (or caused to be made by it) to or for the benefit of the other parties (including any payments to any OGP Subsidiary or Asset Seller) under this Article VII, under other indemnity provisions of this Agreement and for any misrepresentations or breaches of warranties or covenants as adjustments to the Purchase Price for all purposes and that such treatment shall govern for purposes hereof except to the extent that the Laws of a particular jurisdiction provide otherwise.  All payments made by the parties under this Agreement shall be made gross, free of right of counterclaim or set off and without deduction or withholding of any kind other than any deductions or withholding required by Law.  If any party makes a deduction or withholding required by Law from a payment under this Agreement, the sum due from the payor party shall be increased to the extent necessary to ensure that, after the making of any deduction or withholding, the payee party receives a sum equal to the sum it would have received had no deduction or withholding been made, net of any associated credit or other Tax benefit.  If an indemnity payment made pursuant to Section 7.01 will be or has been subject to Tax, the payor party shall pay to the payee the amount (after taking into account Tax payable in respect of the amount) that will ensure that the payee party receives and retains a net sum equal to the sum it would have received had the payment not been subject to Tax; provided that if the Tax paid by the payee party has resulted in a Relief which is available to it or an Affiliate of it or Purchaser Affiliate, as appropriate, then the payee party shall pay or procure the payment to the payor party of an amount equal to the lesser of (a) the amount by which the payee party’s, or the relevant Affiliate’s or Purchaser Affiliates’, Tax liability has been reduced as a result of use of the relevant Relief; and (b) the additional amount paid by the payor party under this Section 7.09(a).

(b)Notwithstanding any provision in this Agreement to the contrary, the provisions of Article VII, and the representations and warranties contained in Section 3.12, shall terminate at the close of business on the 60th calendar day following the expiration of the period of limitations including any extensions for the assessment of Taxes applicable to the Tax liabilities in question.

(c)For purposes of this Article VII and Section 3.12, all references to Purchaser, the OGP Purchasers, ABB, the OGP Subsidiaries and Asset Sellers shall include their respective successors, if any.

(d)Notwithstanding anything to the contrary in this Article VII, to the extent Tax is attributable to an action, omission or delay by Purchaser or any of the Purchaser Affiliates not otherwise contemplated by this Agreement, including in the filing of any Tax Returns, responding to Tax audits or other inquiries or making payments, such Tax shall not be indemnifiable hereunder and shall be the sole responsibility of Purchaser.

(e)In the event that a dispute arises between ABB and Purchaser as to the amount of Taxes or indemnification or any matter relating to Taxes attributable to the OGP Subsidiaries or Asset Sellers relating to the OGP Business, the Parties shall attempt in good faith

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to resolve such dispute, and any agreed upon amount shall be paid to the appropriate Party.  If such dispute is not resolved thirty (30) calendar days thereafter, the Parties shall submit the dispute to an independent accounting firm mutually chosen by Purchaser and ABB for resolution, which resolution shall be final, conclusive and binding on the Parties.  Notwithstanding anything in the Agreement to the contrary, the fees and expenses of the independent accounting firm in resolving this dispute shall be borne equally by ABB and Purchaser.

(f)The indemnification provided in this Article VII and recourse to the Tax Election Bank Guarantee (solely for Taxes attributable to the Section 338(h)(10) Elections) shall be the sole remedy for any claim in respect of Taxes, including for any claim arising out of or relating to a breach of Section 3.12.  In the event of a conflict between the provisions of this Article VII and any other provisions of this Agreement, the provisions of this Article VII shall control.

(g)If any Party is to make a payment under this Agreement, such Party shall pay or cause the relevant Affiliate or Purchaser Affiliate, as the case may be, to make all such payments.

(h)All tax-sharing agreements or similar arrangements with respect to or involving the OGP Subsidiaries shall be terminated with respect to the OGP Subsidiaries prior to the Closing Date, and, after the Closing Date, neither ABB and its Affiliates, on the one hand, nor the OGP Subsidiaries, on the other, shall be bound thereby or have any liability thereunder to the other party for any amounts purported to be due with respect to any period under such agreements and arrangements.

(i)ABB shall furnish Purchaser with an affidavit, stating, under penalty of perjury, the United States taxpayer identification number of the transferor of Shares of a company organized in the United States or Purchased Assets that are U.S. real property interests as defined in Section 897(c)(1) of the Code, and that such transferor is not a foreign person, pursuant to Section 1445(b)(2) of the Code.

(j)Purchaser hereby waives compliance for the Asset Sellers and their Affiliates with the provisions of the bulk sales laws applicable to the transfers described in this Agreement.  ABB shall indemnify and hold harmless Purchaser against any and all liabilities with respect to the Pre-Closing Taxable Period as a result of such non-compliance.

(k)ABB shall use its reasonable efforts to deliver to Purchaser by the Closing Date a certificate of exemption under section 116 of the Canadian Income Tax Act in respect of the sale of ABB Vetco Gray Canada, Inc. by ABB Oil & Gas USA Inc. to Purchaser or to an OGP Purchaser and in respect of any transfer of ABB Vetco Gray Canada Inc. occurring between the date of this Agreement and the Closing.  In the event that such certificate has not been obtained by ABB at least ten Business Days before the Closing Date, ABB will cooperate in good faith with the Purchaser to implement an alternative strategy to transfer ABB Vetco Gray Canada, Inc. or its assets or business to Purchaser or an OGP Purchaser (in lieu of the transfer of such company contemplated by Section 2.01 and Exhibit B-1 hereof), to the extent that such alternative strategy does not create any additional Tax or other Liabilities to be borne by ABB.

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ABB’s compliance with this obligation shall not be considered in determining whether Section 8.03(a) has been satisfied on the Closing Date.

ARTICLE VIII

CONDITIONS TO CLOSING

SECTION 8.01.Conditions to the Parties’ Obligations.  The obligations of ABB and Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver, at or prior to the Closing, of each of the following conditions:

(a)Antitrust/Competition Law Approvals.  (i) Any applicable waiting period (and any extension thereof) under the HSR Act relating to the transactions contemplated by the Transaction Agreements shall have expired or shall have been terminated without any Action having been commenced by the Federal Trade Commission or the Antitrust Division of the United States Department of Justice for the purpose of preventing the transactions contemplated by the Agreement; (ii) The European Commission shall have issued a decision that the transactions contemplated by this Agreement (the “Merger”) fall within either Article 6.1(a) or Article 6.1(b) or Article 8(2) of Council Regulation (EEC) No. 4064/89 (the “Merger Regulation”) or shall have been deemed to have done so under Article 10(6) of the Merger Regulation declaring the Merger compatible with the Common Market without attaching to its decision any conditions or obligations; (iii) The Office for Competition and Consumer Protection in Poland shall have granted or be deemed to have granted such clearance as is necessary for the transactions contemplated by this Agreement to proceed without attaching to its decision any conditions or obligations; and (iv) the Swiss Competition Commission shall have cleared or otherwise be deemed to have granted a clearance without attaching to any such clearance any conditions or obligations.

(b)No Order.  No court of competent jurisdiction shall have issued or entered any Order that is then in effect and has the effect of making the purchase and sale of the Shares or Purchased Assets on assumption of the Assumed Liabilities contemplated by this Agreement illegal or otherwise prohibiting its consummation.

SECTION 8.02.Additional Conditions to Obligations of ABB.  The obligations of ABB to consummate the transactions contemplated by this Agreement shall also be subject to the fulfillment or waiver, by written notice to Purchaser, by ABB at its sole discretion, at or prior to the Closing, of each of the following additional conditions:

(a)Representations, Warranties and Covenants.  Each of the representations and warranties of Purchaser contained in this Agreement shall be true and correct as of the Closing Date, with the same force and effect as if made as of the Closing Date, other than such representations and warranties which are made as of another date, which shall be true and correct as of such date, except where any failures of such representations and warranties to be true and correct, individually or in the aggregate, have not and would not reasonably be expected to materially delay or prevent the consummation of the transactions contemplated hereby, and the covenants and agreements contained in this

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Agreement to be complied with by Purchaser on or before the Closing (except for those covenants and agreements which, pursuant to the terms of any Deferred Transfer Agreement, are to be performed by Purchaser after the Closing) shall have been complied with in all material respects.

(b)Related Agreements.  ABB shall have received counterparts of each of the Related Agreements, except for the Non-Competition Agreement, duly executed by each of the parties thereto.

(c)Compliance Review.  ABB shall not have failed to be satisfied with the results of the Compliance Review and the related consequences of such results in the context of both the objectives contemplated by the Compliance Review and the transactions contemplated by the Transaction Agreements and the Compliance Disposition shall have occurred.

(d)ETPG Facility.  ABB shall have received evidence of the creation of the ETPG Facility, as contemplated by Section 5.08(b), to its reasonable satisfaction.

SECTION 8.03.Additional Conditions to the Obligations of Purchaser.  The obligations of Purchaser to consummate the transactions contemplated by this Agreement shall also be subject to the fulfillment or waiver, by written notice to ABB, by Purchaser at its sole discretion, at or prior to the Closing, of each of the following additional conditions:

(a)Representations, Warranties and Covenants.  Each of the representations and warranties of ABB contained in this Agreement shall be true and correct as of the Closing Date, with the same force and effect as if made as of the Closing Date, other than such representations and warranties which are made as of another date, which shall be true and correct as of such date, except where any failures of such representations and warranties to be true and correct, individually or in the aggregate, have not and would not reasonably be expected to have a Material Adverse Effect, and the covenants and agreements contained in this Agreement to be complied with by ABB on or before the Closing (except for those covenants and agreements which, pursuant to the terms of any Deferred Transfer Agreement, are to be performed by ABB after the Closing) shall have been complied with in all material respects.  The failure of the representation and warranty set forth in Section 3.02(b)(i) (with respect only to the beneficial and record ownership by ABB Oil & Gas USA Inc. of the Shares of ABB Vetco Gray Canada, Inc. and ABB Vetco Gray Pte. Ltd.) to be true and correct as of the Closing Date shall be deemed to constitute a Material Adverse Effect for the purposes of this Section 8.03(a).  For the avoidance of doubt, by virtue of the omission in the previous sentence of any reference to the other representations and warranties contained in Section 3.02(b) it shall not be inferred that a failure of such representations and warranties, individually or in the aggregate, to be true and correct would not constitute a Material Adverse Effect for purposes of this Section 8.03(a).

(b)Title to Shares.  Each Seller and each Seller Subsidiary shall be the beneficial and record owner of the OGP Shares of the Material Subsidiaries opposite such party’s name in column 3 of Exhibit B-1 or Section 3.02(b) of the Disclosure Schedule,

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as applicable, and all of such shares shall be duly authorized, validly issued, fully paid and nonassessable, and all legal and beneficial right, title and interest in or to such OGP Shares shall be transferred free and clear of Encumbrances to Purchaser or the OGP Purchasers and certificates evidencing all such OGP Shares (to the extent such shares are evidenced by certificates) shall be delivered to Purchaser or the OGP Purchasers.

(c)Financing Condition.  The Purchaser Financing Documents shall have become unconditional in accordance with their terms and the facilities thereunder shall have become available to Purchaser and the OGP Purchasers.

(d)Asbestos Order.  (i)  An Order confirming the Plan of Reorganization of Combustion Engineering, Inc. filed in the United States Bankruptcy Court for the District of Delaware (Case No. 03-10495(JFK)), as modified through the day of such Order, shall have been entered; (ii) such Order shall contain the Asbestos PI Channeling Injunction as set forth in Section 3.2.5.3 of the Plan, which injunction shall apply to the OGP Protected Parties (as defined in the Plan); and (iii) said confirmation Order and channeling injunction shall not have been stayed, amended, reversed or vacated nor be subject to a pending application to stay pending appeal.

(e)Absence of Material Adverse Change.  During the 12 months preceding the Closing Date, there shall not have been any event or series of events that result in an adverse change in the OGP Business taken as a whole which has caused the OGP EBITDA to equal an amount less than $134,000,000.

(f)Securitization Programs.  ABB shall have obtained the full release and unconditional discharge of each of the OGP Subsidiaries participating in, party to or having obligations under the multi-jurisdictional trade receivables securitization program extended by Eureka Securitization plc (the “Eureka Program”).

(g)Capital Modernization Program.  ABB shall have obtained the full release and unconditional discharge of each of the OGP Subsidiaries or Asset Sellers relating to the OGP Business participating in, party to or having obligations under the Capital Modernization Program, and the OGP Assets shall be free of all Encumbrances granted as a result of such program.  Purchaser acknowledges and agrees that this condition shall be deemed satisfied (in respect of such part of the Capital Modernization Program provided by J.P. Morgan Leasing Inc. only) upon the execution by J.P. Morgan Leasing Inc. of the payoff letter in substantially the same form as Exhibit U and the payment on or prior to the Closing Date by ABB to J.P. Morgan Leasing Inc. of the amounts set forth in such letter.

(h)Aberdeen and Houston Properties.  Each of the Aberdeen Lease and the Houston Lease shall have been terminated without liability to or from any OGP Subsidiary or Asset Seller relating to the OGP Business and all real property rights, titles and interests which were the subject of each such lease shall have been conveyed to the OGP Subsidiary which was the lessee under such lease free from any Encumbrances created by the Aberdeen Lease and the Houston Lease, respectively.

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(i)Related Agreements.  Purchaser shall have received counterparts of each of the Related Agreements, except for the Non-Competition Agreement, duly executed by each of the parties thereto.

(j)Compliance Review.  Purchaser shall not have failed to be satisfied with the results of the Compliance Review and the related consequences of such results in the context of both the objectives contemplated by the Compliance Review and the transactions contemplated by the Transaction Agreements and the Compliance Disposition shall have occurred.

(k)Deliverables.  Purchaser shall have received: (i) certificates or other instruments evidencing the Shares (if applicable) duly endorsed in blank, or accompanied by stock powers duly executed in blank, in form sufficient to convey title to Purchaser; (ii)  certificates or other instruments evidencing title to the shares of capital stock of the Material Subsidiaries; (iii) evidence that none of the OGP Subsidiaries, Purchased Assets or the OGP Assets is subject to the liens created to secure the $1.5 billion multi-currency revolving credit facility agreement between, inter alia, ABB Oil and Gas Inc. and Credit Suisse First Boston, in a form reasonably satisfactory to Purchaser; (iv) a legal opinion from Homburger Rechtsanwälte of Weibergstrasse 56, Zürich, Switzerland, substantially in the form of Exhibit R; and (v) evidence of the termination and related payoff of the Norway Securitization Program with Den norske Bank ASA, substantially in the form of Exhibit V.

SECTION 8.04.Additional Conditions to the Consummation of Certain Transactions.  The obligations of ABB and Purchaser to consummate each Secondary Transaction shall also be subject to the satisfaction or waiver, prior to, at or after the Closing, of the Additional Approvals applicable to such Secondary Transaction set forth on Exhibit M.

ARTICLE IX

INDEMNIFICATION

SECTION 9.01.Survival of Representations and Warranties.  Subject to the limitations and other provisions of this Agreement:  (a) the representations and warranties of the Parties contained in this Agreement and the certificates required by Sections 2.07(v) and 2.08(v) and (b) the covenants and agreements of the Parties contained in this Agreement which by their terms are required to be performed on or before the Closing (the “Pre-Closing Covenants”) shall survive the Closing and shall remain in full force and effect until September 30, 2005; provided, however, that (i) this Article IX shall not apply to the representations and warranties contained in Section 3.12 (Tax); (ii) the representation and warranties contained in Sections 3.01 (Organization and Authority of ABB and the Sellers), 3.02 (Organization of the OGP Subsidiaries; Capital Stock of the OGP Subsidiaries; Ownership of the Shares), Section 3.13 (Employee Benefit Matters), 3.16(a) (Assets), 3.18 (Brokers) and 4.01 (Organization and Authority of Purchaser and the OGP Purchasers) shall survive the Closing and remain in full force and effect for a period of six (6) years from the Closing Date; and (iii) the representations and warranties contained in Section 3.15 (Environmental Matters) shall survive the Closing and remain in full force and effect for a period of seven (7) years from the Closing Date; and (c) each covenant and agreement of the Parties contained in this Agreement which by its terms requires

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performance in whole or in part after the Closing Date (a “Post-Closing Covenant”) shall survive the Closing and shall remain in full force and effect until such covenant or agreement is fully performed.

SECTION 9.02.Indemnification by Purchaser.  Purchaser agrees from and after the Closing Date to indemnify ABB and its Affiliates, and their respective officers, directors, employees, agents, successors and assigns (each, an “ABB Indemnified Party”), against and hold them harmless from all Liabilities, losses, damages, claims, costs, and expenses (including reasonable attorney’s fees) (collectively, “Losses”) actually suffered or incurred by them arising out of:  (i) the breach of any representation or warranty of Purchaser contained in this Agreement or the certificate required by Section 2.07(v), (ii) the breach of any Pre-Closing Covenant by Purchaser, (iii) the breach of any Post-Closing Covenant by Purchaser, (iv) any Assumed Liability, and (v) any claim or cause of action arising before, on or after the Closing Date against any ABB Indemnified Party with respect to the OGP Business or any of the OGP Assets or operations of the OGP Subsidiaries, whether relating to the operation of the OGP Business prior to or after the Closing, except for any claim (other than a claim for a breach of Section 3.23) with respect to which ABB is specifically obligated to indemnify the Purchaser Indemnified Parties under Section 9.03.  No claim may be asserted nor may any action be commenced against Purchaser pursuant to clause (i) or (ii) of this Section 9.02 for breach of any representation or warranty or Pre-Closing Covenant, unless written notice of such claim or action is received by Purchaser describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or action on or prior to the date on which the representation or warranty or Pre-Closing Covenant on which such claim or action is based ceases to survive as set forth in Section 9.01; provided, however, that in respect of any Loss which is contingent, Purchaser shall not be required to make any payment hereunder until the time that such contingent Loss ceases to be contingent, but this provision shall not operate to allow Purchaser to avoid a claim made in respect of a contingent Loss if such claim was made within the applicable time limit and containing such details as are required by this sentence.

SECTION 9.03.Indemnification by ABB.  (a)  ABB agrees from and after the Closing Date to indemnify Purchaser and the Purchaser Affiliates, and their respective officers, directors, employees, agents, successors and assigns (each, a “Purchaser Indemnified Party”) against and hold them harmless from all Losses actually suffered or incurred by them arising out of:  (i) the breach of any representation or warranty of ABB contained in this Agreement or the certificate required by Section 2.08(v) (other than any representation or warranty contained in Section 3.12 of this Agreement), (a “Warranty Claim”), (ii) the breach of any Pre-Closing Covenant by ABB, (iii) the breach of any Post-Closing Covenant by ABB, (iv) the Excluded Liabilities, (v) the Reorganization, (vi) the matters described in Section 3.07 of the Disclosure Schedule, (vii) any Asbestos Claims, (viii) the Environmental Liabilities, (ix) the Action described in Item 7 of Section 3.08(a) of the Scope I Operations Disclosure Schedule, but only to the extent such Losses exceed $100,000, (x) the failure of Lummus FPS Houston to perform its obligations to Purchaser or the Purchaser Affiliates pursuant to the Kizomba contract described in Item 3 of Section 3.09(a)(iv) of the Scope I Operations Disclosure Schedule, (xi) the Chase Sale Agreement, (xii) any Title IV Plans, (xiii) the Non-Business Liabilities, (xiv) Off Balance Sheet Indebtedness,  (xv) the termination of the Securitization Programs, (xvi) the breach of any representation or warranty contained in Section 3.07(iv), (xvii) the claim asserted in the demand letter described in Item 20 of Section 3.08(a) of the Scope I Operations Disclosure Schedule,

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(xviii) the Excess Transocean Payment, (xvix) the Excess Finder’s Fee and (xx) the agreements governing the part of the Capital Modernization Program provided by J.P. Morgan Leasing Inc.  No claim may be asserted nor may any action be commenced against ABB pursuant to clause (i) or (ii) of this Section 9.03(a) for breach of any representation or warranty or Pre-Closing Covenant, unless written notice of such claim or action is received by ABB describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or action on or prior to the date on which the representation or warranty or Pre-Closing Covenant on which such claim or action is based ceases to survive as set forth in Section 9.01; provided, however, that in respect of any Liability which is contingent, ABB shall not be required to make any payment hereunder until the time that such contingent liability becomes fixed but this proviso shall not operate to allow ABB to avoid a claim made in respect of a contingent liability if such claim was made within the applicable time limit and containing such details as are required by this sentence.

(b)No claim may be made against ABB for indemnification pursuant to a Warranty Claim:  (i) with respect to any individual claim of Loss unless such claim exceeds $100,000 (nor shall any such item be applied to or considered for purposes of calculating the aggregate amount of the Purchaser Indemnified Parties’ Losses or any deductible amount pursuant to Section 9.03(a)(iv) or the next sentence of this Section 9.03(b) other than as set out in this Section 9.03(b)) and (ii) unless the aggregate amount of all Losses of the Purchaser Indemnified Parties with respect to Warranty Claims and subject always to Section 9.03(c) and (d) below, shall exceed $10,000,000 (the “Purchaser Threshold”), and ABB shall then be liable for all such Losses and not just the amount in excess of the Purchaser Threshold.  Notwithstanding clause (ii) above but subject always to Section 9.03(d) below, the maximum amount that ABB shall be required to pay pursuant to Section 9.03(a) in respect of all Losses by all Purchaser Indemnified Parties is $400,000,000 (the “Cap”).  For the purposes of this Section 9.03(b), where there are Warranty Claims arising from the same set or similar facts or events all such claims shall be deemed to give rise to one claim in respect of the total Loss suffered by Purchaser.  No claim may be made against ABB for indemnification pursuant to Section 9.03(a)(vii) with respect to any Losses of a JV Company in excess of the book value of the shares in such JV Company as of the Closing Date.  Losses not in excess of $100,000 in the aggregate shall not be deemed to be a Loss for purposes of Section 9.03(a)(ix).  Losses in excess of the amount of the Excess Transocean Payment shall not be deemed to be a Loss for purposes of Section 9.03(a)(xviii).  Losses in excess of the amount of the Excess Finder’s Fee shall not be deemed to be a Loss for purposes of Section 9.03(a)(xix).

(c)Notwithstanding anything contained in Section 9.03(b)(ii) to the contrary, claims for indemnification pursuant to Section 9.03(a)(i) based upon any breach of the representations and warranties contained in Section 3.15 (Environmental Matters) shall not be subject to the Purchaser Threshold, but no such claim for indemnification may be made against ABB relating to any particular property unless and until the aggregate amount of all Purchaser Indemnified Parties’ Losses relating to such property exceeds $250,000, and ABB shall then be liable only for the amount of such Losses in excess of such amount.  Any amounts subject to the foregoing sentence shall be ignored for purposes of determining whether the Purchaser Threshold has been satisfied.

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(d)Notwithstanding any other provision of this Agreement, Section 9.03(b) does not apply in respect of (i) a Warranty Claim arising from any fact, matter or circumstance relating to Sections 3.01 (Organization and Authority of ABB and the Sellers), 3.02 (Organization of the OGP Subsidiaries; Capital Stock of the OGP Subsidiaries; Ownership of the Shares), 3.08(b) (Litigation) 3.16(a) (Assets) and 3.18 (Brokers) or (ii) claims for indemnification made pursuant to Section 9.03(a)(iii), (vi), (vii), (xii) or (xvi).

SECTION 9.04.Indemnification Procedures.  (a)  A Purchaser Indemnified Party or an ABB Indemnified Party, as the case may be (for purposes of this Section 9.04, an “Indemnified Party”), shall give the indemnifying party under Section 9.02 or 9.03, as applicable (for purposes of this Section 9.04, an “Indemnifying Party”), written notice of any matter which it has determined has given or could give rise to a right of indemnification under this Agreement, as soon as reasonably practicable following such determination, stating the amount of the Loss, if known, and method of computation thereof, containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises; provided, however, that the failure to timely provide such notice shall not release the Indemnifying Party from any of its obligations under this Article IX except to the extent the Indemnifying Party is materially prejudiced by such failure, it further being understood that notices for Warranty Claims or breach of Pre-Closing Covenants must be delivered prior to the expiration of the applicable survival period specified in Section 9.01.

(b)An Indemnified Party shall give written notice of any pending or threatened investigation, claim or demand by a third party (which for the avoidance of doubt shall include any Governmental Authority) that the Indemnified Party has determined has given or could give rise to a right of indemnification hereunder (a “Third Party Claim”), as soon as reasonably practicable following receipt of such claim or demand describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or demand; provided, however, that the failure to timely provide such notice shall not release the Indemnifying Party from any of its obligations under this Article IX except to the extent the Indemnifying Party is materially prejudiced by such failure, it being understood that notices for Warranty Claims or breach of Pre-Closing Covenants must be delivered prior to the expiration of the applicable survival period specified in Section 9.01.

(c)Other than in respect of a Retained Conduct Matter, the Indemnifying Party shall have the right, but not the obligation, to direct, through counsel of its own choosing, which counsel shall be reasonably satisfactory to the Indemnified Party, the defense or settlement of any Third Party Claim the subject of indemnification hereunder at its own expense.  If the Indemnifying Party elects to assume the defense of any such Third Party Claim, the Indemnified Party may participate in such defense, but in such case the expenses of the Indemnified Party shall be paid by the Indemnified Party.  The Indemnified Party shall provide the Indemnifying Party with reasonable access to its records and personnel relating to any such claim, assertion, event or proceeding during normal business hours and upon reasonable notice and shall otherwise cooperate with the Indemnifying Party in the defense or settlement thereof, and the Indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.  Notwithstanding the foregoing, (i) at any time prior to the Indemnifying Party’s delivery to each relevant Indemnified Party of notice of such Indemnifying Party’s election to assume the defense of a Third Party Claim, any Indemnified Party may, at the

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sole cost and expense of such Indemnified Party, file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate to protect its interests so long as such action preserves and does not waive or otherwise prejudice the Indemnifying Party’s ability to assert any relevant defense, counter claim, cross claim or other response to such claim, (ii) the Indemnified Party may take over the control of the defense or settlement of a Third Party Claim at any time if it irrevocably waives in writing its right to indemnification under this Article IX with respect to such claim and (iii) the Indemnifying Party may not, without the consent of the Indemnified Party (such consent not to be unreasonably withheld or delayed), settle or compromise any action or consent to the entry of any judgment if such settlement, compromise or judgment would obligate the Indemnified Party to take any action or refrain from taking any action or otherwise alter the manner in which it conducts the OGP Business.  The failure of the Indemnified Party to participate in, conduct or control such defense shall not relieve the Indemnifying Party of any obligation it may have hereunder.

(d)If an Indemnifying Party shall fail to undertake any such defense, an Indemnified Party shall have the right to undertake the defense or settlement thereof, at the Indemnifying Party’s expense.  Whether or not an Indemnifying Party shall have assumed the defense of a Third Party Claim, an Indemnified Party shall not admit any Liability with respect thereto, or settle, compromise or discharge such Third Party Claim without such Indemnifying Party’s prior written consent, such consent not to be unreasonably withheld or delayed.  If an Indemnified Party assumes the defense of any such Third Party Claim pursuant to this Section 9.04 and proposes to settle such claim or proceeding prior to a final judgment thereon or to forgo any appeal with respect thereto, then such Indemnified Party shall give an Indemnifying Party written notice thereof as soon as is reasonably practicable and such Indemnifying Party shall have the right to participate in the settlement or assume or reassume the defense of such claim or proceeding at any time by written notice to such Indemnified Party.

(e)Purchaser shall have the right to direct the defense of any Third Party Claim arising out of a Retained Conduct Matter.  Unless Purchaser allows ABB to direct the defense or settlement, Purchaser shall consult with ABB and consider all of ABB’s reasonable requests, and make reasonable efforts to mitigate any Losses arising out of any such Claim.  ABB has the right to be present during any settlement conferences and shall be notified of and have the right to attend any meetings with Governmental Authorities and shall be provided with copies of all relevant correspondence, results, reports and other documents.  Neither ABB nor Purchaser shall agree, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed to a settlement of any Retained Conduct Matter unless such settlement does not require an admission of guilt or liability by such Party and effectively releases the other Party from any liability with respect to such matters without imposing any obligation or restraint on such other Party.  ABB shall be released from its indemnification obligations with respect to a Retained Conduct Matter (if otherwise valid under this Agreement) only to the extent that associated Losses (i) are identified as a result of any investigation after the Closing Date; or (ii) result from (A) any negligent act or omission by Purchaser, the OGP Subsidiaries or any Purchaser Affiliates or (B) any act or omission that would result in a violation of Section 3.07(iv) by Purchaser, the OGP Subsidiaries or any of their respective Affiliates after the Closing Date that increases the amount of such Losses.  Notwithstanding the foregoing, ABB shall not be released from its indemnification obligations with respect to a

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Retained Conduct Matter pursuant to clause (i) above if associated Losses are identified as a result of investigations after the Closing Date and the results of such investigations are required to be disclosed (A) by an Order or Governmental Authority or (B) in response to (1) an Action against Purchaser, the OGP Subsidiaries or any of the Purchaser Affiliates by a Governmental Authority or any other Person, (2) a requirement of a Governmental Authority or Law which if not responded to will give rise to an Action or (3) any circumstance which if known by a Governmental Authority would give rise to an Action.

SECTION 9.05.Environmental Remediation.  (a)  Purchaser shall as soon as is reasonably practicable provide to ABB written notice in accordance with Section 11.02 of any conditions or circumstances that are reasonably likely to require or give rise to Remedial Actions and that are reasonably likely to result in Purchaser making a claim for indemnification pursuant to either Section 9.03(a)(viii) or Section 9.03(a)(i), in the latter case based upon any breach of the representations and warranties contained in Section 3.15; provided, however, that any failure to provide such notice shall not affect Purchaser’s indemnification rights hereunder except to the extent ABB’s interests are prejudiced.  Except in an emergency, in the event ABB receives notice under Section 9.04 (which relates only to Remedial Actions) or 9.05, ABB shall have the right, but not the obligation, to conduct any and all Remedial Actions necessary to satisfy its indemnification obligations, unless ABB is not permitted to conduct such Remedial Actions by a Governmental Authority.  Purchaser shall cooperate with ABB in connection therewith (including providing ABB reasonable access to any OGP Real Property upon which, or from which, Remedial Actions are to be conducted).  ABB shall ensure at its own expense that all reasonable action is taken to keep or restore so far as reasonably possible any OGP Real Property or OGP Asset as appropriate, at which or from which ABB conducts Remedial Actions, in or to no worse condition than that prior to the commencement of the Remedial Actions and shall indemnify Purchaser or at Purchaser’s election any OGP Subsidiary for any Losses actually suffered by Purchaser or any of the OGP Subsidiaries as a result of any damage caused to the OGP Real Property or OGP Assets by ABB’s Remedial Actions.  In satisfying its indemnification obligations in respect of Remedial Actions, ABB shall have the right to implement the most cost-effective measures that are consistent with Environmental Laws then applicable to the use and operation of the relevant facilities to the extent that they are not more onerous than those applicable to the use and operation of the relevant facilities while under the ownership of ABB, and that are consistent with any explicit requirement of a Governmental Authority that is issued pursuant to such Environmental Laws, provided that they reasonably ensure that no further Remedial Action, which would qualify for indemnification under this Agreement, could reasonably be expected to be required in the foreseeable future.  In implementing such measures, ABB shall consult with Purchaser and consider all Purchaser’s reasonable suggestions, and make reasonable efforts to mitigate any interruption to the OGP Business.  Purchaser shall be afforded the reasonable opportunity to be present during any Remedial Action and shall be notified of and shall be afforded the reasonable opportunity to attend any meetings with Governmental Authorities and shall be provided with copies of all relevant correspondence, results, reports and other documents.

(b)With respect to any claim by a Purchaser Indemnified Party for indemnification pursuant to either Section 9.03(a)(viii) or under Section 9.03(a)(i), in the latter case based upon any breach of the representations and warranties contained in Section 3.15, ABB shall be released from its indemnification obligations for such claims (if otherwise valid

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under this Agreement) to the extent that associated Losses (A) are increased by a change in primary use or zoning classification of the OGP Real Property from industrial use to commercial or residential use or from commercial use to residential use after the Closing Date by Purchaser, the OGP Subsidiaries or their respective Affiliates, or any other Person; (B) are identified as a result of any sampling or testing of the Environment after the Closing Date except that which is (i) required by an Order or Environmental Law, Environmental Permit or Environmental Agreement; (ii) in response to (a) an Action against Purchaser, the OGP Subsidiaries or any of their respective Affiliates by a Governmental Authority or any other Person, (b) a requirement of a Governmental Authority or Law which if not responded to could reasonably be expected to give rise to an Action, or (c) any circumstance which if known by a Governmental Authority would give rise to an Action; (iii) conducted with respect to the state of repair of any buildings or plant on the premises including any foundation and underground tank and structures, with respect to which such sampling and testing is required pursuant to relevant Law or is undertaken in accordance with standards commonly accepted and practiced within the same or similar industry; (iv) conducted in relation to the closure or decommissioning of, or the expansion, improvement or development of any OGP Real Property, with respect to which such sampling and testing is required pursuant to relevant Law or is undertaken in accordance with standards commonly accepted and practiced within the same or similar industry; (v) conducted in connection with routine or emergency utility work or the routine or emergency assessment of the structural integrity of fountains, foundations, drains, sewers, sumps or storage tanks, with respect to which such sampling and testing is required pursuant to relevant Law or is undertaken in accordance with standards commonly accepted and practiced within the same or similar industry; (vi) required by the terms of any Leased Real Property lease in effect as of the date hereof; and/or (vii) undertaken by Purchaser in respect of a matter which is the subject of a valid indemnity claim made pursuant to Section 9.03(a)(viii) or, for indemnification pursuant to Section 9.03(a)(i) based upon any breach of the representations and warranties contained in Section 3.15; or (C) result from any negligent act or omission of Purchaser, the OGP Subsidiaries or any of the Purchaser Affiliates after the Closing Date that increases the amount of such Losses.

SECTION 9.06.Certain Projects Relating to the Business.  (a)  Section 9.06(a) of the Disclosure Schedule sets forth the projects of the OGP Business to which this Section 9.06 applies (the “Indemnified Projects”).

(b)From and after the Closing and so long as ABB has unfulfilled obligations under this Section 9.06, Purchaser shall, and shall cause the OGP Subsidiaries and the OGP Purchasers to:

(i)afford ABB and the ABB Representatives reasonable access, during normal business hours and upon reasonable notice, to the records and personnel of the OGP Subsidiaries and the OGP Purchasers in order to allow ABB to fulfill its obligations and pursue any available remedies under this Section 9.06 with respect to the Indemnified Projects;

(ii)cooperate with ABB and the ABB Representatives in order to assist ABB in connection with any reasonable requests it may have with respect to its obligations under this Section 9.06 concerning the Indemnified Projects;

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(iii)afford the ABB Representatives the opportunity, at least once each calendar month after giving at least seven Business Days written notice, to meet with the applicable project manager for each Indemnified Project and direct such project manager to discuss with the ABB Representatives the extent of the efforts taken by Purchaser and the Purchaser Affiliates to comply with clause (v) below;

(iv)deliver to ABB monthly statements no later than ten days after the end of each month, setting out in reasonable detail the status of each Indemnified Project, including all material developments since the previous statement;

(v)perform in all material respects the obligations of each OGP Subsidiary under all contracts and agreements governing the Indemnified Projects, and act in accordance with the contractual terms and conditions of such contracts and agreements in each case in a manner consistent with past practice and in compliance with applicable Law; and

(vi)allow ABB to nominate one Person to be an observer on the steering committee of each Indemnified Project (and such steering committee shall monitor the progress of each of the Indemnified Projects in a manner consistent with past practice in relation to such Indemnified Projects, but in any case such steering committee shall meet no less than once every two months), which costs and expenses of such steering committee observer shall be paid by ABB.  Purchaser shall take all necessary steps to ensure that such observer is given all proper notice and invited to participate in all meetings of each such steering committee in his capacity as an observer.

(c)The Effective Date Balance Sheet shall contain separate identified provisions with respect to each of the Indemnified Projects (in the aggregate, the “Estimated Indemnified Project Loss Provisions”), established in accordance with the Closing Accounting Principles.

(d)(i)  Purchaser shall deliver to ABB a final statement in respect of each Indemnified Project prepared in accordance with the Closing Accounting Principles (each, a “Final Indemnified Project Statement”), to be delivered promptly after full performance and completion of the relevant Indemnified Project by Purchaser and/or the Purchaser Affiliates as evidenced by the applicable customer’s final acceptance thereunder (or appropriate evidence of termination thereof) and expiry of the relevant warranty or other limitation period applicable to the Indemnified Project.  The Final Indemnified Project Statement shall set out in reasonable detail (with reasonably appropriate supporting documentation, data and backup information) the amount of the Indemnified Project Losses actually incurred by Purchaser or the Purchaser Affiliates with respect to such Indemnified Project, and subject to Section 9.06(d)(iv) shall be deemed to be final, binding and conclusive on the Parties.  For the purposes of this Section 9.06, “Indemnified Project Loss” shall mean the excess (which may be a negative number and therefore a gain), if any, of the full costs actually incurred by Purchaser in the performance of an Indemnified Project (including liquidated and other damages payable to a customer in accordance with the terms thereof and any cost actually incurred in complying with any contractual obligations during the applicable warranty period under the contract governing such Indemnified Project) over the revenues (including the net sales price actually received from

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customers plus interest on customer advances), all calculated in accordance with the Closing Accounting Principles.

(ii)Subject always to Section 9.06(h), after completion of the Final Indemnified Project as described in clause (i) above and the corresponding Final Indemnified Project Statement, the Parties shall determine the “Net Position” which shall equal ([A] + [B]) — ([C] + [D]), as described below, and thereafter the settlement of the Parties’ obligations under this Section 9.06 shall be made as set out below provided, however, that if [A] is greater than [C] then the Net Position shall equal [B] — [D]:

(1)           To the extent the Net Position is negative, ABB shall pay to Purchaser such negative amount, or

(2)To the extent the Net Position equals zero, neither Party shall be under any obligation to make a payment to the other Party, or

(3)To the extent the Net Position is positive, Purchaser shall pay to ABB an amount equal to such positive amount.

For purposes of this Section 9.06(d)(ii):

[A] = the amount of the Estimated Indemnified Project Loss Provisions.

[B] = the aggregate amount of the ABB Stage Payments (as defined below).

[C] = the net aggregate amount of the Indemnified Project Losses as reflected on the Final Indemnified  Projects Statements.

[D] = the aggregate amount of Purchaser Stage Payments (as defined below).

(iii)Subject always to Section 9.06(h), on the date that is six months after the Effective Date, and every six months thereafter until the final settlement pursuant to clause (i) above (each, a “Stage Period”), Purchaser shall provide to ABB a written notice containing a good faith estimate, with reasonably detailed supporting data and backup information, of the net aggregate amount of Indemnified Project Losses of all of the Indemnified Projects determined in accordance with the Closing Accounting Principles (insofar as they relate to the Indemnified Projects) but as of such date rather than as of the Effective Date (each, a “Stage Estimate”), and the parties shall thereupon determine the applicable “Net Stage Position” which shall equal ([A] + [B]) — ([C] + [D]), (unless [A] is greater than [C], in which case the applicable Net Stage Position shall equal [B] - [D]);

and thereafter the settlement of the applicable Net Stage Position shall be made as follows:

(1)To the extent the Net Stage Position is negative, ABB shall pay to Purchaser such negative amount (each such payment, an “ABB Stage Payment”), or

(2)To the extent the Net Stage Position equals zero, neither Party shall be under any obligation to make a payment to the other Party, or

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(3)To the extent the Net Stage Position is positive, Purchaser shall pay to ABB an amount equal to such positive amount (each such payment, a “Purchaser Stage Payment”).

For purposes of this Section 9.06(d)(iii):

[A] = the amount of the Estimated Indemnified Project Loss Provisions.

[B] = the aggregate amount of all ABB Stage Payments prior to the applicable Stage Period.

[C] = the amount of the applicable Stage Estimate.

[D] = the aggregate amount of all Purchaser Stage Payments prior to the applicable Stage Period.

(iv)ABB shall have the right to dispute any amount reflected on a Final Indemnified Project Statement and any Stage Estimate pursuant to the dispute mechanism set forth in Section 2.10(b), applied mutatis mutandis.

(e)(i)  Any Third Party Claims (other than claims by customers or subcontractors asserting a breach of warranty or breach of contract) shall be subject to the indemnification procedures set forth in Section 9.04.

(ii)Subject to Section 9.06(e)(iii), Purchaser shall have the right to direct the defense of any Third Party Claim by customers or subcontractors asserting a breach of warranty or breach of contract.  Unless Purchaser allows ABB to direct the defense or settlement, Purchaser shall consult with ABB and consider all of ABB’s reasonable requests, and make reasonable efforts to mitigate any Losses arising out of any such Claim.

(iii)In the event any Third Party Claim by a customer or subcontractor asserting a breach of warranty or breach of contract gives rise to an Action, at such time such Third Party Claim shall become subject to the indemnification procedures set forth in Sections 9.04(b), (c) and (d).

(f)Notwithstanding anything in Sections 9.02 and 9.03 to the contrary, the rights and obligations of the Parties in respect of the indemnification and other payments for any and all matters pertaining to the Indemnified Projects shall be governed by this Section 9.06.  Purchaser and ABB acknowledge and agree that, following the Closing, the indemnification provisions of this Section 9.06 shall be the sole and exclusive remedies of Purchaser, the Purchaser Affiliates, ABB and its Affiliates for any and all Losses relating to, or arising under, the Indemnified Projects.  For avoidance of doubt, Purchaser acknowledges and agrees that it shall have no right to seek indemnity from ABB for any Loss arising from or related to an Indemnified Project pursuant to an indemnity claim under Section 9.03(a) for a breach of a representation or warranty of ABB, and no amounts paid by ABB pursuant to this Section 9.06(f) shall be used in the calculation of the Purchaser Threshold or the Cap.

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(g)Payments to be made by either Party pursuant to this Section 9.06 shall be made within five Business Days following the date which is the earlier of (i) the date when the relevant amount has been agreed between the Parties and (ii) the date when the amount has been finally determined pursuant to the dispute mechanism set forth in Section 9.06(d)(iv), applied mutatis mutandis.

(h)For the avoidance of doubt, Purchaser shall not be required to repay any of the Estimated Indemnified Project Loss Provisions pursuant to this Section 9.06.

SECTION 9.07.Additional Indemnification Provisions; Exclusive Remedies.  (a)  ABB and Purchaser agree for themselves and on behalf of their respective Affiliates or Purchaser Affiliates, as applicable, that, with respect to each indemnification obligation contained in this Agreement, (i) all Losses shall be net of any third party insurance paid to or for the benefit of the Indemnified Party from its own or its Affiliates’ or Purchaser Affiliates’ insurance policies in connection with the facts giving rise to the right of indemnification, after deduction of any Taxes and any out-of-pocket cash and expenses reasonably incurred in connection with securing such insurance payment (including retrospective insurance premiums directly attributable to such claim), (ii) all of ABB’s obligations to indemnify a Purchaser Indemnified Party for Losses under this Agreement shall be reduced to the extent of the amount of any specific provision, specific reserve or general reserve in respect of a specific contract, lease or project in respect of the relevant Losses reflected in the Final Effective Date Balance Sheet and (iii) ABB shall have no Liability for Losses under a Warranty Claim to the extent that (A) such Warranty Claim would not have arisen or been aggravated but for any alteration, repeal or enactment of any applicable Law after the Closing Date, (B) such Warranty Claim would not have arisen but for any change in the accounting policies, practices or procedures adopted by Purchaser, an OGP Purchaser or the OGP Subsidiaries (other than changes required to ensure compliance with Law in effect as of the Closing Date), or (C) such Warranty Claim would not have arisen but for a failure by Purchaser, an OGP Purchaser or the OGP Subsidiaries after the Closing to take reasonable steps to mitigate the effect of the circumstances giving rise to such Warranty Claim.

(b)An Indemnified Party shall use its reasonable efforts to pursue any and all rights to reimbursement, recovery or indemnification with respect to all Losses for which it is entitled to indemnification under this Agreement pursuant to any contract, agreement, insurance policy or arrangement with any Person (other than Affiliates or Purchaser Affiliates of such Indemnified Party).  For the purposes of this Section 9.07(b), “reasonable efforts” shall be satisfied without the Indemnified Party being required to bring any claim or other proceeding against any such person.  If an Indemnified Party, for any reason, does not bring a claim or other proceeding against any such person, the Indemnifying Party shall be entitled to bring such claim or other proceeding against such party, and the Indemnified Party shall, upon reasonable request, provide the Indemnifying Party and its agents and representatives with reasonable access to (i) any applicable books and records and (ii) any applicable officers, directors or employees in each case of Purchaser, the OGP Purchasers and/or the Indemnified Party, as the case may be, to such claim or other proceeding.  The Indemnifying Party shall, at the request of the Indemnified Party, refrain from bringing such claim or other proceeding against such party; provided, however, that such a request by the Indemnified Party shall be deemed a waiver of indemnification from the

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Indemnifying Party up to the amount of the reimbursement, recovery or indemnification reasonably expected to be reimbursed, recovered or indemnified from such person.

(c)If an Indemnifying Party pays an amount in discharge of any claim under this Agreement and an Indemnified Party, its Affiliates or Purchaser Affiliates or any of their respective officers, directors, employees, agents and representatives subsequently recovers from a third party a sum which is attributable to the subject matter of the claim, such Indemnified Party shall promptly pay to such Indemnifying Party an amount equal to all amounts recovered up to the aggregate amount thus paid by such Indemnifying Party hereunder.  If the Indemnifying Party has not already paid such an amount in satisfaction of such a claim, the amount of the claim the Indemnifying Party would be liable for shall be reduced by an amount equal to such recovery.

(d)None of the Sellers shall provide any representation, warranty or indemnity under any Local Agreement, unless a representation, warranty or indemnity provided in this Agreement is required to be restated in a Local Agreement in order to make the Local Agreement enforceable under applicable Law, and all such representations, warranties and indemnities shall be expressly excluded thereunder.  To the extent any such exclusion would be prohibited by applicable Law and Purchaser or an OGP Purchaser would have a cause of action by virtue of any representation, warranty or indemnity implied by applicable Law, Purchaser shall ensure that no claim is made in respect thereof by Purchaser or the relevant OGP Purchaser against ABB or any of its Affiliates; it being understood and agreed by the Parties that the remedies expressly afforded to Purchaser and the Purchaser Affiliates under this Agreement shall be the sole recourse of Purchaser and the Purchaser Affiliates, on the one hand, against ABB and its Affiliates, on the other hand, relating to the transactions contemplated by the Transaction Agreements.

(e)Except as provided in Article VII relating to Tax matters, following the Closing, the indemnification provisions of Sections 9.02 and 9.03 shall be the sole and exclusive remedies of Purchaser, ABB and their respective Affiliates or Purchaser Affiliates, as applicable, for any breach by the other Party of the representations and warranties in this Agreement and for any failure by the other Party to perform and comply with any Pre-Closing Covenants; provided, however, that neither ABB nor Purchaser shall be precluded from pursuing any claim or the amount of any claim arising from the fraudulent conduct of the other in connection with the negotiation, execution and delivery of this Agreement.  No breach of any representation, warranty, covenant or agreement contained herein shall give rise to any right on the part of Purchaser, on the one hand, or ABB, on the other hand, after the consummation of the purchase and sale of the Shares and the Purchased Assets and the assumption of the Assumed Liabilities contemplated by this Agreement, to rescind this Agreement or any of the transactions contemplated by the Transaction Agreements.

(f)Neither Party shall have any liability under any provision of the Transaction Agreements for any punitive, special, incidental, consequential or indirect damages, regardless of the legal theory on which the claim is based (it being the understanding of the Parties that punitive or special damages that are paid by an Indemnified Party to a third party with respect to a Third Party Claim are direct damages of the Indemnified Party).

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SECTION 9.08.Certain Procedures Governing the Bank Guarantees.  (a)  The Adjustment and Indemnity Bank Guarantee guarantees the payment obligations of ABB or its Affiliates, as applicable, (i) with respect to the adjustments, if any, contemplated by Section 2.10 (the “Adjustment Obligations”) and (ii) the obligations of ABB or its Affiliates under this Agreement (other than the Adjustment Obligations) (the “Indemnity Obligations”) and (iii) the obligations of ABB or its Affiliates under the Related Agreements.  With respect to the Adjustment Obligations, in the event that ABB has failed to make the Net Payment to Purchaser, if any, in accordance with Section 2.10(h) within 10 Business Days of the due date for such payment, Purchaser shall, in accordance with the terms of the Adjustment and Indemnity Bank Guarantee, be entitled but not obligated to serve a notice upon the Appropriate Bank for payment of an amount equal to the lesser of (x) the Net Payment and (y) the Net Outstanding A/I Guarantee Amount.  If the Net Payment exceeds $10,000,000 and Purchaser receives an amount equal to the Net Payment from the Appropriate Bank, ABB shall cause the Appropriate Bank to reissue the Adjustment and Indemnity Bank Guarantee in the amount equal to the Net Outstanding A/I Guarantee Amount at such date prior to the payment of any amounts to Purchaser representing the Net Payment at such date less $10,000,000, provided always that if such calculation results in a negative figure or zero, the Adjustment and Indemnity Bank Guarantee shall be deemed to be extinguished and shall not be required to be reissued pursuant to this Section 9.08(a).  If the Net Payment is less than or equal to $10,000,000, upon payment by ABB or the Appropriate Bank of the Net Payment, the Net Outstanding A/I Guarantee Amount shall be reduced by the amount of the Net Payment, notwithstanding any Indemnity Obligations of ABB under the Adjustment and Indemnity Bank Guarantee.  With respect to the Indemnity Obligations, in the event that Purchaser delivers to ABB or ABB Ltd., as the case may be (for purposes of this Section 9.08(a) only, together, “ABB”), a notice of a claim pursuant to and in accordance with the relevant provisions of any Transaction Agreement, and either (A) ABB mutually agrees with Purchaser in writing that it is obligated to indemnify Purchaser for the amount set forth in such notice, or (B) ABB fails to dispute in writing to Purchaser within ten Business Days that it is obligated to indemnify Purchaser as set forth in such notice and Purchaser has obtained a judgment in its favor in respect of a Default Judgment Claim, or (C) a final non-appealable judgment or determination shall have been rendered pursuant to and in accordance with Section 11.12 (or such comparable provision in a Related Agreement) relating to such claim by Purchaser deeming an amount to be due and owing by ABB to Purchaser (each, a “Payment Event”), and within ten Business Days of a Payment Event, ABB has failed to satisfy its payment obligations in connection therewith, Purchaser shall be entitled but not obligated to serve a notice upon the Appropriate Bank for payment of an amount equal to the lesser of (x) the applicable amount arising out of such Payment Event and (y) the Net Outstanding A/I Guarantee Amount.  Upon payment by ABB of an amount arising out of a Payment Event or by the Appropriate Bank of such amount in connection with such Payment Event, the Net Outstanding A/I Guarantee Amount shall be reduced by such amount.  The Adjustment and Indemnity Bank Guarantee shall terminate on the earlier of (x) the date when the Net Outstanding A/I Guarantee Amount equals zero and (y) September 30, 2005 unless one or more claims have been made prior to such date and any one of those claims has not been resolved, then, the date of termination shall be such which is 28 days from the final determination or receipt by Purchaser of a non-appealable judgment or determination in respect of such claim(s) in accordance with the provisions of Section 11.12 of this Agreement (or such comparable provision in a Related Agreement), in which case the Net Outstanding A/I Guarantee

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Amount shall be reduced to an amount equal to the aggregate amount of such claim(s) only to the extent that the aggregate amount of such claims is less than the Net Outstanding A/I Guarantee Amount.

(b)The Tax Election Bank Guarantee guarantees the payment obligations of ABB pursuant to Section 7.08(d).  If, by five calendar days before the Filing Date, ABB has failed to pay to the relevant Taxing Authority by check or electronic or wire transfer the Designated Tax Amount and to provide documentary evidence of such payment to Purchaser, then Purchaser shall be entitled but not obligated to serve a notice upon the Appropriate Bank for either (i) payment to the Taxing Authority in the Applicable Taxing Jurisdiction where Purchaser has not previously paid such Tax or (ii) payment to Purchaser where Purchaser has previously paid such Tax to the applicable Taxing Authority (in which case documentary evidence of such previous payment shall be provided to ABB by Purchaser) of an amount equal to the lesser of (x) the applicable Designated Tax Amount and (y) the Net Outstanding Tax Guarantee Amount.  Upon payment by ABB of an amount under Section 7.08(d) or by the Appropriate Bank of such amount (whether to the Applicable Taxing Jurisdiction or to Purchaser under the circumstances described above), the Net Outstanding Tax Guarantee Amount shall be reduced by such amount.  Upon payment to the relevant Taxing Authority (or to Purchaser under the circumstances described above) with respect to the final Filing Date in the final Applicable Taxing Jurisdiction for which a Section 338(h)(10) Election (or similar election under state or local law) is being made, or in which income or gain arising out of any pre-Closing acquisitions or reorganizations undertaken at the request of Purchaser or arising out of the sale of the shares of ABB Vetco Gray U.K. Ltd. by ABB Vetco Gray Inc. to Purchaser or an OGP Purchaser is being reported, the Net Outstanding Tax Guarantee Amount will be reduced to an amount equal to the sum of the differences, for each Applicable Taxing Jurisdiction where there is a difference, between (x) the Designated Tax Amount and (y) the Alternative Designated Tax Amount.  In the case where ABB has provided an opinion of counsel or an accountant or accountants of a type contemplated by Section 7.08(f), the Net Outstanding Tax Guarantee Amount will be further reduced by 25% of the difference between the Designated Tax Amount and the Alternative Designated Tax Amount with respect to each of the specific Applicable Taxing Jurisdictions.  The Tax Election Bank Guarantee shall terminate on the earlier of (x) the date when the Net Outstanding Tax Guarantee Amount equals zero and (y) the second anniversary of the final Filing Date.  For purposes of this Section 9.08(b) and Section 7.08(f), the term “Applicable Taxing Jurisdictions” shall mean:  Alaska, California, Colorado, Louisiana, Michigan, Mississippi, Montana, New Jersey, New Mexico, Oklahoma, Utah, and Texas and any other jurisdiction in which a Tax Return reflecting income or gain from the Section 338(h)(10) Election (or similar election under state or local law), or reflecting income or gain arising out of any pre-Closing acquisitions or reorganizations undertaken at the request of Purchaser or arising out of the sale of the shares of ABB Vetco Gray U.K. Ltd. by ABB Vetco Gray Inc. to Purchaser or an OGP Purchaser, must be filed; provided, that in the event that ABB provides to Purchaser a certification in a form reasonably satisfactory to Purchaser from the auditors of its financial statements that ABB’s federal consolidated group has sufficient net operating loss carryforwards and capital loss carryforwards so that such consolidated group will not have any federal income tax liability for the taxable year of such group that includes the Closing Date, the United States of America will not be an Applicable Tax Jurisdiction, but if ABB has failed to provide such certification within 90 days after the Closing Date, then the United States of America will from that time forward be deemed to be an Applicable Taxing Jurisdiction for the purposes of this Agreement.

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(c)The Repayment Bank Guarantee guarantees the repayment obligations of ABB of a portion of the Purchase Price should a Subsequent Closing with respect to a Provisionally Retained Business fail to occur in accordance with the terms and conditions of the Deferred Transfer Agreement (each a “Repayment Event”).  Within 10 Business Days of a Repayment Event, if ABB has failed to pay to Purchaser an amount equal to the Allocation Amount set forth with respect only to the relevant Provisionally Retained Business (or a lesser amount determined pursuant to Section 4.02 of the Deferred Transfer Agreement), Purchaser is entitled to but not obligated to serve notice upon the Appropriate Bank for payment of such amount.  Upon payment by ABB or the Appropriate Bank of such amount, the aggregate principal amount of the Repayment Bank Guarantee shall be reduced by the Allocation Amount with respect to the relevant Provisionally Retained Business.  Within two Business Days of a Subsequent Closing of a Provisionally Retained Business, the aggregate principal amount of the Repayment Bank Guarantee shall be reduced by the Allocation Amount attributable to such Provisionally Retained Business.  The Repayment Bank Guarantee shall terminate upon the expiry of 25 Business Days following the earlier of (i) the Subsequent Closing of the last Provisionally Retained Business or (ii) the termination of the Deferred Transfer Agreement, in each case in accordance with the terms and conditions of the Deferred Transfer Agreement.

(d)(i)  To the extent that a payment by ABB or ABB Ltd. to Purchaser in accordance with this Section 9.08 and the terms of the relevant Guarantee is made in partial satisfaction of an amount properly claimed thereunder, such payment shall not relieve ABB, or ABB Ltd. or the relevant Affiliate of ABB, as the case may be, of liability with respect to any remaining outstanding amounts due and owing to Purchaser.

(ii)Each time a reduction is contemplated in any of the Adjustment and Indemnity Bank Guarantee, the Tax Election Bank Guarantee or the Repayment Bank Guarantee, each Party shall jointly execute a written notice to the relevant Appropriate Bank instructing it to effect such reduction.

(e)Purchaser shall only draw down funds under the Adjustment and Indemnity Bank Guarantee, the Tax Election Bank Guarantee and the Repayment Bank Guarantee in accordance with the terms and conditions of this Section 9.08.

SECTION 9.09.Interest.  Except with respect to the Deferred Consideration, if an Indemnifying Party defaults in the payment when due of any sum payable under this Article IX (whether determined by agreement or pursuant to an order of an arbitrator or otherwise) the liability of such Indemnifying Party shall be increased to include interest on such sum from the date when such payment is due until the date of actual payment (whether before or after judgment) at a rate per annum of the three-month U.S. treasury bill rate (as reported by The Wall Street Journal or, if not reported thereby, by another authoritative source) in effect on or about 11:00 a.m. (New York City time) on such due date plus one hundred (100) basis points calculated on the basis of the actual number of days elapsed over 365, from date of payment by the Indemnified Party to the date of payment by the Indemnifying Party, compounded annually.  Such interest shall accrue from day to day.

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ARTICLE X

TERMINATION AND WAIVER

SECTION 10.01.Termination.  This Agreement may be terminated:

(a)by ABB or Purchaser if the Closing shall not have occurred by May 10, 2004(the “Longstop Date”); provided, however, that the Longstop Date may be extended under the following circumstances:

(i)if, by the Longstop Date, the Substantial Completion of the Compliance Review shall have occurred and the Compliance Disposition shall not have occurred (“Event One”), and (A) Purchaser (1) has provided evidence reasonably satisfactory to ABB that the Purchaser Financing Documents will remain in full force and effect until the Extended Longstop Date and (2) certifies in writing to ABB (the “Extension Notice”) that based on the facts and circumstances and materiality of all matters, individually or collectively, set forth in the notices provided to Purchaser by ABB pursuant to Section 5.15, Purchaser either deems to be satisfied or waives the conditions to the Closing contained in Sections 8.03(a) and (d) as of the Longstop Date; provided, however, that if, individually or collectively, the facts or circumstances or materiality of any matter or the consequences arising from any matter set forth in any such notice change from those set forth in the latest notice received by Purchaser prior to its delivery of the Extension Notice with respect to any matter, or any notice is inaccurate with respect to any matter after the Longstop Date or new facts or circumstances with respect to any matter arise after the Longstop Date, Purchaser shall be able to rely on the conditions to the Closing that it deemed satisfied or waived in its certification, as applicable; provided, further, that effective upon such extension the conditions to the Closing contained in Sections 8.02(c) and 8.03(j) shall be replaced in their entirety by the following:  “The Compliance Disposition shall have occurred.”, and such conditions shall not be deemed to be satisfied or waived by Purchaser or ABB as of the Longstop Date; and (B) if no later than one Business Day prior to the Longstop Date, ABB has not stated in writing to Purchaser that it believes that the occurrence of the Compliance Disposition likely will not occur prior to the Final Longstop Date in a manner acceptable to ABB (a “Stop Notification”); or

(ii)if by the Longstop Date, the Substantial Completion of the Compliance Review shall not have occurred (“Event Two”) and Purchaser has provided evidence reasonably satisfactory to ABB that the Purchaser Financing Documents will remain in full force and effect until the Extended Longstop Date,

then, in each such case, Purchaser may, in its sole discretion and upon three Business Days’ written notice to ABB expiring on or before the Longstop Date, extend the Longstop Date until June 7, 2004 (the “Extended Longstop Date”); provided further, that with respect to Event Two, if by the Extended Longstop Date, the Substantial Completion of the Compliance Review shall have occurred but the Compliance Disposition shall not

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have occurred, Purchaser may, in its sole discretion and upon three Business Days’ written notice to ABB expiring on or before the Extended Longstop Date, extend the Extended Longstop Date until July 12, 2004 (the “Final Longstop Date”) if and only if (A) Purchaser (1) has provided evidence reasonably satisfactory to ABB that the Purchaser Financing Documents will remain in full force and effect until the Final Longstop Date and (2) provides the Extension Notice to ABB that based on the facts and circumstances and materiality of all matters, individually or collectively, set forth in the notices provided to Purchaser by ABB pursuant to Section 5.15, Purchaser either deems to be satisfied or waives the conditions to the Closing contained in Sections 8.03(a) and (d) as of the Extended Longstop Date; provided, however, that if, individually or collectively, the facts or circumstances or materiality of any matter or the consequences arising from any matter set forth in any such notice change from those set forth in the latest notice received by Purchaser prior to its delivery of the Extension Notice with respect to any matter, or any notice is inaccurate with respect to any matter after the Extended Longstop Date or new facts or circumstances with respect to any matter arise after the Extended Longstop Date, Purchaser shall be able to rely on the conditions to the Closing that it deemed satisfied or waived in its certification, as applicable; provided, further, that effective upon such extension the conditions to the Closing contained in Sections 8.02(c) and 8.03(j) shall be replaced in their entirety by the following:  “The Compliance Disposition shall have occurred.”, and such conditions shall not be deemed to be satisfied or waived by Purchaser or ABB as of the Extended Longstop Date; and (B) if no later than one Business Day prior to the Extended Longstop Date, ABB has not delivered to Purchaser a Stop Notification;

provided  always that the right to terminate this Agreement under this Section 10.01(a) shall not be available to any Party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur prior to such date.

If applicable, the Extended Longstop Date or the Final Longstop Date, as the case may be, shall be deemed to be the Closing Date for purposes of this Agreement unless Purchaser prior to such date shall provide to ABB written notice of its intention to consummate the transactions contemplated by this Agreement and its proposed date of such consummation, in which case after the expiry of ten Business Days from receipt by Purchaser of the Pre-Closing Notice as contemplated by Section 2.09(a), such date shall be deemed to be the Closing Date for purposes of this Agreement;

(b)at any time prior to the close of business on the Longstop Date:

(i)by ABB or Purchaser in the event that (A) any Order restraining, enjoining or otherwise prohibiting the transactions contemplated by the Transaction Agreements shall have become final and nonappealable, any Governmental Authority with respect to any merger filing listed in Section 8.01(a) or any additional mandatory, suspensory filings identified pursuant to Section 5.06(c) which relates to an entity the subject of a Primary Transaction, as the case may be, has issued a decision withholding approval or attached any conditions, undertaking or remedies of any of the transactions contemplated by the

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Transaction Agreements; or (B) the conditions set forth in Section 8.01(a) shall not be capable of being satisfied; provided, however, that the right to terminate this Agreement under this Section 10.01(b) shall not be available to any Party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, or substantially contributed to, such Order, decision or failure to satisfy;

(ii)by Purchaser in the event that any of the conditions set forth in Section 8.01 or 8.03 (other than 8.03(c)) is not capable of being satisfied by the Longstop Date; or

(iii)by ABB in the event that any of the conditions set forth in Section 8.01 or 8.02 is not capable of being satisfied by the Longstop Date;

provided, however, that the right to terminate this Agreement under this Section 10.01(b) shall not be available to any Party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, or contributed to, such Order, decision or failure to satisfy; or

(c)by the mutual written consent of ABB and Purchaser.

SECTION 10.02.Effect of Termination.  In the event of termination of this Agreement pursuant to Section 10.01, this Agreement shall forthwith become void and there shall be no liability on the part of either Party hereto except (a) that the provisions of Section 5.05, this Section 10.02 and Article XI shall survive termination of the Agreement and (b) that nothing herein shall relieve either Party from liability for any willful breach of this Agreement.

SECTION 10.03.Waiver.  Either ABB or Purchaser may (a) extend the time for the performance of any of the obligations or other acts of Purchaser or ABB, respectively, (b) waive any inaccuracies in the representations and warranties of Purchaser or ABB, respectively, contained herein or in any document delivered by ABB or Purchaser, respectively, pursuant hereto or (c) waive compliance with any of the agreements or conditions of Purchaser or ABB, respectively, contained herein.  Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Parties.  Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement.  The failure of any Party to assert any of its rights hereunder shall not constitute a waiver of any of such rights, nor in any way affect the validity of such agreements or any part thereof or the right of a Party to enforce any such provision.

ARTICLE XI

GENERAL PROVISIONS

SECTION 11.01.Expenses.  (a)  Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred relating to this Agreement and the transactions contemplated

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hereby shall be paid by the Party incurring such costs and expenses, whether or not the Closing shall have occurred.

(b)ABB shall, upon termination of this Agreement in accordance with and pursuant to Section 10.01 of this Agreement, promptly pay to Purchaser an amount equal to $9,000,000 as reimbursement for certain of the transaction costs and expenses incurred by Purchaser; provided, however, that if the cause for such termination of this Agreement is the material breach of the terms and conditions of this Agreement by Purchaser, ABB shall not be required to make any such payment to Purchaser.

(c)On the date that is two Business Days prior to the commencement of each calendar month after the date of this Agreement until Substantial Completion of the Compliance Review, Purchaser shall provide to ABB its best estimate of the Purchaser Compliance Costs for the next calendar month and ABB shall provide to Purchaser its best estimate of the ABB Compliance Costs for such month.  If the estimated Purchaser Compliance Costs are ninety percent or less of the estimated ABB Compliance Costs then no further discussions shall occur between the Parties and such estimated Purchaser Compliance Costs shall be deemed to be the “Approved Purchaser Compliance Costs”.  If such estimated Purchaser Compliance Costs are in excess of ninety percent of the estimated ABB Compliance Costs, the Parties shall discuss such estimates in good faith with a view to arriving at agreed estimates of both the Purchaser Compliance Costs and the ABB Compliance Costs.  If after such discussions, the estimated Purchaser Compliance Costs remain in excess of 90% of the ABB Compliance Costs, and ABB, in its sole discretion, shall not have agreed such estimated Purchaser Compliance Costs for such month, then Purchaser may modify its planned use of resources for the forthcoming month in light of the provisions of this Section 11.01.  Purchaser may decide to modify its planned use of resources for the forthcoming month in order it to enable an Excess Amount to be paid under Section 11.01(d)(ii).  If ABB accepts such estimated Purchaser Compliance Costs, such estimated Purchaser Compliance Costs shall be deemed to be the Approved Purchaser Compliance Costs.

(d)(i)  ABB shall reimburse on a monthly basis in arrears the aggregate fees and expenses (including value added tax and other similar taxes) of Deloitte Touche Tohmatsu, Cadwalader, Wickersham & Taft LLP and Clifford Chance LLP (and such other professional advisors appointed by Purchaser with the prior written consent of ABB (such consent not to be unreasonably withheld or delayed)) actually incurred by or on behalf of Parties from January 1, 2004 through the earlier of (x) termination of this Agreement and (y) the completion of the Compliance Review, in relation to the development and implementation of the Compliance Review (the “Purchaser Compliance Costs”).  Subject to Section 11.01(d)(ii), (A) no such monthly reimbursement for the months of January, February and March 2004 shall exceed the greater of (x) 90% of the aggregate fees and expenses (including value added tax and other similar taxes) of PricewaterhouseCoopers LLP and Shearman & Sterling LLP (and such other professional advisers appointed by ABB with the prior written consent of Purchaser (such consent not to be unreasonably withheld or delayed)), actually incurred by or on behalf of ABB during the same month in relation to the development and implementation of the Compliance Review (the “ABB Compliance Costs”), (y) $1,000,000, and (z) if applicable under Section 11.01(c), the Approved Purchaser Compliance Costs; and (B) during the months commencing with April 2004 through the Substantial Completion of the Compliance Review, clause (A)

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above shall apply mutatis mutandis except that each reference to “90%” therein shall be replaced with “60%” for purposes of this clause (B) (each month during which Purchaser Compliance Costs are to be reimbursed is referred to in this Section 11.01(d) as a “Review Period” and, for a particular Review Period, the greater of the amounts referred to in clauses (x), (y) and (z) above, is referred to in this Section 11.01(d) as the “Maximum Payment Limit”).

(ii)The reimbursement obligation under this Section 11.01(d) shall be cumulative such that if:

(A)the Purchaser Compliance Costs in a given Review Period are less than the Maximum Payment Limit in such Review Period (such difference being, a “Shortfall Amount”), then:

(1)to the extent there are existing Excess Amounts, the Shortfall Amount shall be used by ABB to reimburse Purchaser in respect of any such Excess Amounts but only to the extent of such Shortfall Amount; and

(2)any remaining Shortfall Amounts shall be carried forward to subsequent Review Periods until extinguished by the reimbursement of any Excess Amounts; and

(B)the Purchaser Compliance Costs in a given Review Period are greater than the Maximum Payment Limit in such Review Period (such difference being, an “Excess Amount”), then:

(1)to the extent there are any Shortfall Amounts which have been carried forward pursuant to Section 11.01(d)(ii)(A)(2), such Shortfall Amounts shall be used by ABB to reimburse Purchaser in respect of such Excess Amount but only to the extent of such Shortfall Amounts; and

(2)any remaining Excess Amount shall be carried forward to subsequent Review Periods.

(iii)Notwithstanding anything to the contrary in this Section 11.01(d), ABB shall never be obligated to reimburse Purchaser under this Section 11.01(d) for an amount in excess of the aggregate of the Maximum Payment Limits for the Review Periods during which the Compliance Review has been carried out.

(iv)ABB shall, within 10 Business Days after the end of each calendar month, provide to Purchaser (A) written confirmation of the total amount of the ABB Compliance Costs for that Review Period together with a breakdown of such costs and expenses by adviser, (B) a statement from each of its advisers referenced above (showing the total amount of fees and expenses together with the number of people carrying out the services to which the fees relate, with a split of such fees between partners and non-partners) in respect of all of the ABB Compliance Costs for such Review Period and (C) a letter from each such adviser to Purchaser confirming that such statement reflects all of the fees and costs incurred by that adviser comprising ABB Compliance Costs for that Review Period.  ABB shall only be obligated under this paragraph to reimburse Purchaser Compliance Costs which are evidenced by an invoice

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addressed to Purchaser but expressed to be payable by ABB.  Invoices claiming reimbursement under this Section 11.01(d) must be presented on a monthly basis within 10 Business Days after the end of each calendar month.  ABB shall pay the requisite amount within 30 days of presentation of the invoice, and if not paid within such time amounts owed shall accrue interest on a daily basis commencing on the due date and ending on the actual date of payment at a per annum rate equal to 5%.  Purchaser shall deliver (i) written confirmation of the total amount of the Purchaser Compliance Costs for each Review Period together with a breakdown of such costs and expenses by adviser; (ii) a statement from each adviser referenced above (showing the total amount of fees and expenses together with the number of people carrying out the services to which the fees relate, with a split of such fees between partners and non-partners) in respect of all of the Purchaser Compliance Costs for such Review Period and (iii) a letter from each adviser confirming that the statement only contains fees and expenses which are Purchaser Compliance Costs.

(v)The Parties acknowledge and agree that the Shortfall Amount and the Excess Amount as of December 31, 2003 equal $942,000 and $0, respectively.

SECTION 11.02.Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing in the English language and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person or by registered or certified mail (postage prepaid, return receipt requested) or by electronic mail (confirmed by certified mail, and such electronic mail shall be deemed to have been duly given upon receipt of such certified mail) to the respective parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 11.02):

(a)if to ABB:

ABB Handels- und Verwaltungs AG

Affolternstrasse 54

PO Box 8131

CH-8050 Zurich

Switzerland

E-mail:   john.scriven@ch.abb.com
hans.enhoerning@ch.abb.com

Attention:  John Scriven
Hans Enhoerning

and with a copy to:

Shearman & Sterling LLP

599 Lexington Avenue

New York, New York  10022

E-mail:  jmarzulli@shearman.com

Attention:  John A. Marzulli Jr., Esq.

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(b)if to Purchaser:

Laradew Limited
c/o Candover Partners Limited

20 Old Bailey

London, England EC4M 7LN

E-mail:  m.gumienny@candover.com
john.arney@candover.com

Attention:  Marek Gumienny
John Arney

with a copy to:

Clifford Chance LLP

10 Upper Bank Street

London, England  E14 5JJ

E-mail:  adam.signy@cliffordchance.com
ian.bagshaw@cliffordchance.com

Attention:  Adam Signy
Ian Bagshaw

SECTION 11.03.Public Announcements.  No Party to this Agreement shall make, or cause to be made, any press release or public statement with respect to this Agreement or the transactions contemplated hereby or otherwise communicate with any news media relating thereto without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that nothing shall restrict any Party (even in the absence of agreement by the other parties) from making any statement which (i) may be required by Law or the rules of any stock exchange or national trading system on which such Party’s common stock is listed or Self-Regulatory Organization, provided that such Party shall consult (as is reasonably practical prior to complying with such obligation) with the other Party as to the timing content and manner of such statement, (ii) is the agreed terms of any such statement or any repetition thereof or (iii) is made or sent by Purchaser or an OGP Purchaser after the Closing to the customers, clients or suppliers of the OGP Business informing such party of the purchase of the OGP Business; provided, however that such statement shall not contain any reference to the Purchase Price other than as stated pursuant to a disclosure pursuant to subsection (i) or (ii) of this Section 11.03.

SECTION 11.04.Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

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SECTION 11.05.Entire Agreement.  The Transaction Agreements constitute the entire agreement of the Parties hereto with respect to the subject matter hereof and supersede any prior agreements and undertakings, both written and oral, between the Parties hereto with respect to the subject matter hereof including the Confidentiality Agreement.  The Purchaser and the Sellers agree that neither Party shall bring any action against the other or against any Affiliate or Purchaser Affiliate or adviser of the other or provider of finance to Purchaser and/or the OGP Purchasers relating to any previous agreement(s) between them relating to the subject matter of this Agreement.

SECTION 11.06.Assignment.  Neither this Agreement nor any of the rights hereunder may be assigned by any Party by operation of Law or otherwise without the express written consent of the other Party hereto; provided, however, that any Party may assign all or any of its rights and obligations under this Agreement to any Affiliate or Purchaser Affiliate, as the case may be; provided that no such assignment shall relieve the assigning Party of its obligations hereunder if such assignee does not perform such obligations; provided  further that, notwithstanding the foregoing provisions of this Section 11.06, Purchaser and any of the Purchaser Affiliates may assign and/or charge, by way of security only, any or all of their rights, title or interest under this Agreement (including all present and future claims, causes of action, payments and proceeds in respect thereof) to any secured lender(s) (or to any security agent acting on their behalf) lending money or making other banking facilities available to Purchaser in connection with the acquisition of the Shares or Purchased Assets and/or any banking guarantees or other working capital facilities and/or any refinancing of the existing debt of the OGP Subsidiaries or to any secured lender(s) (or to any security agent acting on their behalf) who provide funds or make other banking facilities available in connection with any subsequent refinancing of such funding; provided  further that, without limitation to the foregoing, any secured lender(s) (or any security agent acting on their behalf) may assign such rights on any enforcement of the security under such finance arrangements.  ABB agrees that it will acknowledge any such assignment of which it is notified.  The Purchaser shall be entitled to charge and assign absolutely all or any part of its right, title and interest, present and future in and under this Agreement, including all present and future claims, causes of action, payments and proceeds in respect thereof (the “Assigned Property”) to the Bank who shall be entitled to take possession of the Assigned Property or otherwise exercise in relation to it all of the rights of an absolute owner.  Notwithstanding any such assignment, the Sellers may, unless they receive written notice from the Bank to the contrary, deal with Purchaser in connection with all matters arising under this Agreement including determination and control of (i) whether or not any claim shall be brought against the Sellers and (ii) the conduct of any such claim, including the settlement, compromise or withdrawal of any claim provided only that all payments under this Agreement otherwise due to Purchaser or a Purchaser Affiliate by the Sellers shall be made to the Bank.  The liability of any of the Sellers for breach of this obligation under this Agreement shall not in any way be increased or adversely affected by any assignment contemplated by this Section 11.06.  Any purported assignment in violation of this Section 11.06 shall be null and void.  For the avoidance of doubt, an assignment for security pursuant to this Section 11.06 shall not constitute an assumption of the obligations hereunder.

SECTION 11.07.No Third Party Beneficiaries.  Except for the provisions contained in Section 5.11(a) and (d)(ii), the provisions of Article VII with respect to Tax Indemnified Parties, the provisions of Article IX with respect to Indemnified Parties, Section 

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11.06 with respect to assignment to the Bank, and for the purposes of Section 11.05, with respect to an Affiliate or adviser to any of ABB, the Sellers, Purchaser or the OGP Purchasers or a provider of finance to Purchaser or the OGP Purchasers, this Agreement shall be binding upon and inure solely to the benefit of the Parties hereto and their permitted assigns and nothing else herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

SECTION 11.08.Amendment.  This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, each of ABB and Purchaser or (b) by a waiver in accordance with Section 10.03.

SECTION 11.09.Specific Performance.  The Parties hereto agree that if any of the provisions of any of the Transaction Agreements are not performed in accordance with their specific terms or are otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the Parties shall be entitled to specific performance of the terms thereof, in addition to any other remedy at Law or equity.

SECTION 11.10.Currency.  (a)  To the fullest extent permitted by Law, the obligation of any Party in respect of any amount due under this Agreement will, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in United States dollars that the Party entitled to receive such payment may, in accordance with its normal procedures, purchase with the sum paid in such other currency (after any premium and costs of exchange) on the Business Day immediately following the day on which such Party receives such payment.  If the amount in United States dollars that may be so purchased for any reason falls short of the amount originally due, the applicable Party will pay such additional amounts, in United States dollars, as may be necessary to compensate for the shortfall.  Any obligation of a Party not discharged by such payment will, to the fullest extent permitted by applicable Law, be due as a separate and independent obligation and, until discharged as provided herein, will continue in full force and effect.

(b)When, pursuant to the terms of any Transaction Agreement, any conversion of currencies is required, the applicable exchange rate to be used shall be the free market exchange rate or cross rate as determined by Citibank N.A. in New York, New York, in force as of the Business Day immediately preceding (i) in the case of a Loss under Article IX, the day on which the Loss was actually incurred; and (ii) in all other situations, the date that the relevant determination is to be made; provided, however, that for all financial accounting purposes, including the preparation of the Effective Date Balance Sheet, such conversion shall be made in accordance with the Closing Accounting Principles.

SECTION 11.11.Governing Law.  This Agreement, and any arbitration conducted in accordance with Section 11.12 of this Agreement, shall be governed by, and construed in accordance with, the substantive laws of the State of New York, without reference to its conflict of law rules; provided, however, that the conflict of law rules of the State of New York shall be applicable with respect to any conflict that may arise between the laws of the State

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of New York and the laws of the relevant jurisdiction applicable for the transfer of a Purchased Asset.

SECTION 11.12.Arbitration.  (a)  Except as otherwise provided in Sections 2.10, 6.10, 7.08, 9.06 and 11.09 and 11.13, any dispute, controversy or claim arising out of, relating to or in connection with any Transaction Agreement (other than the Surety) including any dispute regarding its existence, validity, breach, termination or enforceability (a “Dispute”) shall be addressed by the Parties or their respective Affiliates or Purchaser Affiliates, as appropriate, and resolved pursuant to this Section 11.12.

(b)Any Party or its Affiliate or Purchaser Affiliate, as the case may be, may give written notice of a Dispute to all other Parties and their respective Affiliates or Purchaser Affiliate, as the case may be.  The Parties or their respective Affiliates or Purchaser Affiliate, as the case may be, will then make good faith efforts to amicably resolve the Dispute.  Such efforts to reach an amicable resolution of the Dispute shall continue for a period of 30 days from the notice unless the Parties agree in writing to discontinue such efforts, or to continue them for a stated period.

(c)Following completion of the efforts set forth in subparagraph (b), any Party or its Affiliate or Purchaser Affiliate, as the case may be, may submit such a Dispute for final and binding resolution pursuant to the Rules of Arbitration of the International Chamber of Commerce in effect as of the date of the filing of the initial request for arbitration, as supplemented by the provisions set forth in this Agreement (the “Rules”).

(d)The seat, or legal place, of arbitration shall be London, England.  All proceedings in the arbitration shall be conducted in English.

(e)The arbitral tribunal shall consist of three persons, each of whom shall be fluent in English.  One arbitrator shall be nominated by the Party requesting arbitration at the time of the filing of its request for arbitration, the second arbitrator shall be nominated by the opposing Party not later than fifteen (15) days after receiving the claimant’s request, and the third arbitrator shall be jointly nominated by the first two nominated arbitrators, and shall act as Chair.  If the first two appointed arbitrators are unable to agree upon a third within fifteen (15) days of the nomination of the second, or if any Party fails to appoint an arbitrator as set forth herein, an arbitrator shall be appointed by the International Court of Arbitration of the International Chamber of Commerce (the “Appointing Authority”) pursuant to the Rules.

(f)The Parties intend that any arbitral proceedings instituted pursuant to this Agreement shall be conducted as expeditiously as possible.  Accordingly, the Parties agree that the arbitral tribunal and the Appointing Authority shall be guided by this intention in deciding upon any procedural time limit or any request by either Party affecting the progress of the proceedings, including any request for the expedited formation of the arbitral tribunal.

(g)Nothing contained herein shall limit the right of a Party hereto to seek from any court of competent jurisdiction, pending appointment of an arbitral tribunal, interim relief in aid of arbitration or to protect or enforce its rights hereunder.

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(h)The award of the arbitrators shall be final and binding upon the parties, and shall not be subject to any appeal or review.  Judgment upon the award rendered by the arbitral tribunal may be enforced in any court of competent jurisdiction.

SECTION 11.13.Default Judgment Claim.  All Default Judgment Claims shall be subject to the exclusive jurisdiction of the courts of England and that ABB and its Affiliates agree notwithstanding any other provisions of the Transaction Agreements that they will not argue to the contrary.  This Section 11.13 is for the benefit of Purchaser only and does not prevent Purchaser from initiating Actions in respect of a Default Judgment Claim in any other competent court with jurisdiction.

SECTION 11.14.Waivers.  (a)  Waiver of Jury Trial.  ABB AND PURCHASER HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS OR THE ACTIONS OF ABB OR PURCHASER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS OR SHAREHOLDERS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.

(b)Waiver of Right to Defend Judgment Claim.  ABB HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO DEFEND ANY DEFAULT JUDGMENT CLAIM, EXCEPT IN SO FAR AS ABB’S DEFENSE OF ANY SUCH CLAIM CONTENDS THAT EITHER (I) PURCHASER HAS FAILED TO SERVE THE NOTICE WHICH FORMS THE BASIS OF THE DEFAULT JUDGMENT CLAIM IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF THE TRANSACTION AGREEMENTS, (II) ABB HAS NOT DEFAULTED IN RESPONDING TO A NOTICE OF CLAIM SERVED UPON IT BY PURCHASER IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF THE TRANSACTION AGREEMENTS OR (III) THE AMOUNTS CLAIMED BY PURCHASER IN SUCH NOTICE HAVE BEEN PAID BY ABB TO PURCHASER OR A PURCHASER AFFILIATE.

SECTION 11.15.Counterparts.  This Agreement may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

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IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed as of the date first written above by its respective officers thereunto duly authorized.

ABB HANDELS- UND VERWALTUNGS AG
By	ERIC ELZVIK
	Name:	Eric Elzvik
	Title:	SVP
By	HANS ENHOERNING
	Name:	Hans Enhoerning
	Title:	VP
LARADEW LIMITED
By	JOHN KENNEDY
	Name:	John Kennedy
	Title:	Director

EXHIBIT A

DEFINED TERMS

“338 Auditors” shall have the meaning set forth in Section 7.08(c).

“338(h)(10) Election” shall have the meaning set forth in Section 3.12(o).

“338(h)(10) Subsidiaries” shall have the meaning set forth in Section 7.08(a).

“ABACUS Data Shell” shall have the meaning set forth in Section 5.25(a)(i).

“ABB” shall have the meaning set forth in the Preamble.

“ABB Compliance Costs” shall have the meaning set forth in Section 11.01(d)(i).

“ABB Indemnified Party” shall have the meaning set forth in Section 9.02.

“ABB Occurrence Policies” shall have the meaning set forth in Section 5.12(b).

“ABB Representatives” shall have the meaning set forth in Section 2.10(a).

“ABB Retiree Medical Plan” shall have the meaning set forth in Section 6.07.

“ABB Stage Payment” shall have the meaning set forth in Section 9.06(d)(iii).

“ABB Statutory Occurrence Policy” means any ABB Occurrence Policy which is required to be held pursuant to compulsory insurance requirements imposed by Law in any territory.

“ABB’s Accountants” means Ernst & Young AG, which is a member of Ernst & Young International, independent accountants of ABB, or such other internationally recognized independent accounting firm as ABB may nominate with written notice to Purchaser.

“ABB’s Actuary” means an actuary nominated by ABB and as notified to Purchaser in accordance with the terms of this Agreement.

“ABB’s Bank Account” means a bank account to be designated by ABB in a written notice to Purchaser at least five Business Days before the Closing or such other bank account as ABB may thereafter notify Purchaser pursuant to Section 11.02.

“Aberdeen Lease” means the Sale and Leaseback Agreement between ABB Vetco Gray, Inc. and Citibank International plc dated as of November 6, 2000 with respect to the property at Broadfold Road, Bridge of Don Industrial Estate, Aberdeen, Scotland as amended from time to time.

“Acquired Plans” means the 1987 Vetco Gray Hughes Pension Plan, the Norwegian former UMOE insured plan 11443, ABB Gas Technology AS (former UMOE Process technology) insured plan 11448, other former UMOE insured plans 11438, 11439, 11441, 11442, Nordea

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insurance contract 11449, former UMOE insured plans 11437, Avtalefestet Pension liabilities in Norway, Unfunded pension promises in Norway, ABB Vetco Gray Canada Inc. Group Registered Pension Plan for Alberta Employees hired on or after July 10, 1996, ABB Vetco Gray Canada Inc. Group Registered Pension Plan for Alberta Employees hired prior to July 10, 1996 and ABB Vetco Gray Denmark defined contribution pension plan.

“Acquisition Newcos” means Newco1, Newco2, Purchaser and any OGP Purchaser (to the extent different) (and accordingly “Acquisition Newco” shall mean any one of them).

“Action” means any claim, action, suit, arbitration or other proceeding by or before any Governmental Authority.

“Additional Approvals” means the approvals set forth on Exhibit M.

“Adjustment and Indemnity Bank Guarantee” shall have the meaning set forth in Section 5.02(a)(vii).

“Adjustment Obligations” shall have the meaning set forth in Section 9.08(a).

“Advance Payment Bonds” shall have the meaning set forth in Section 5.08(a).

“Affiliate” means, with respect to any specified Person (other than Purchaser or any OGP Purchaser) at the time of determination, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.  For purposes of this Agreement, “control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.

“Affiliated Group” means any affiliated group within the meaning of Section 1504 of the Code (or any similar group defined under a similar provision of state, local or foreign law).

“Aggregate Deficit” means the Assumed Plans Deficit plus the Non-Assumed Plans Deficit.

“Agreement” or “this Agreement” means this Stock and Asset Purchase Agreement, dated as of January 16, 2004, between ABB and Purchaser (including the Exhibits hereto and the Disclosure Schedule) and all amendments hereto made in accordance with the provisions of Section 11.08.

“Allocation Agreement” shall have the meaning set forth in Section 7.08(c).

“Allocation Amount” shall have the meaning set forth in Section 2.06.

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“Alternative Designated Tax Amount” shall have the meaning set forth in Section 7.08(f).

“Amount” shall have the meaning set forth in Section 5.08(a).

“Applicable Taxing Jurisdiction” shall have the meaning set forth in Section 9.08(b).

“Appointing Authority” shall have the meaning set forth in Section 11.12(e).

“Appropriate Bank” means Credit Suisse First Boston or such other bank or financial institution which has a rating for its long-term unsecured and non credit-enhanced debt obligations of A+ or higher by Standard & Poor’s Rating Services or an equivalent or higher rating by Moody’s Investor Services Limited or such other comparable rating from another internationally recognized credit rating agency, which bank shall underwrite the Adjustment and Indemnity Bank Guarantee, the Tax Election Bank Guarantee or the Repayment Bank Guarantee.

“Approved Purchaser Compliance Costs” shall have the meaning set forth in Section 11.01(c).

“Argentinean Debt” shall have the meaning set forth in Section 2.09(e).

“Asbestos Claims” means any claim, demand, debt, liability, or obligation (including any cross-claim, contribution claim, subrogation claim, indemnity claim, successor liability claim or any other similar derivative claim or demand), whether now existing or hereafter arising, asserted against Purchaser, any OGP Purchaser, any of the OGP Subsidiaries or any of their subsidiaries or Affiliates, or any Purchased Assets, whether in the nature of or sounding in tort, or under contract, warranty, or any other theory of law, equity, or admiralty for, arising out of, resulting from, or relating to directly or indirectly, death, bodily injury, sickness, disease, or other personal injuries, physical, emotional or otherwise, to persons, caused, or allegedly caused, directly or indirectly, by the presence of, or exposure to, asbestos, including any asbestos-containing products, boiler systems, equipment, components, parts, improvements to real property, or materials engineered, designed, marketed, manufactured, fabricated, constructed, sold, supplied, produced, installed, maintained, serviced, specified, selected, repaired, removed, replaced, released, distributed or any way used prior to the Closing Date by ABB or any of its Subsidiaries or any other entity for whose products or operations ABB or its Subsidiaries has liability or is alleged to have liability (including any acts or omissions that constituted or may have constituted ordinary or gross negligence or reckless, willful, intentional, or wanton misconduct of ABB or any of its Subsidiaries or any other entity for whose products or operations ABB or any of its Subsidiaries has liability or is alleged to have liability or any conduct for which ABB or any of its Subsidiaries has strict liability or is alleged to have strict liability under any applicable law) including all claims, debts, obligations, or liabilities for compensatory damages (such as loss of consortium, medical monitoring, personal or bodily injury, wrongful death, survivorship, proximate, consequential, general and special damages) and punitive or exemplary damages and any fines, penalties, assessments and any other liability whatsoever which is in any way related to or based upon asbestos or asbestos-containing products, or the presence of, or exposure to asbestos in any form.

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“Asset Seller Contracts” means all the licenses, sub-licenses, contracts of insurance and other contracts and agreements entered into by an Asset Seller that in each case is primarily related to the OGP Business and comprises a part of the Purchased Assets.

“Asset Sellers” shall have the meaning set forth in the Preliminary Statements.

“Assigned Property” shall have the meaning set forth in Section 11.06.

“Assumed Liabilities” means all Liabilities (except Excluded Liabilities) of each Asset Seller to the extent relating to the OGP Business or the Purchased Assets, whether arising prior to, on or after the Closing.

“Assumed Plans” means the Vetco Gray Hughes Inc. Post-Retirement Medical Plan, the 1987 Vetco Gray Hughes Pension Plan, the Norwegian former UMOE insured plan 11443, ABB Gas Technology AS (former UMOE Process technology) insured plan 11448, other former UMOE insured plans 11438, 11439, 11441, 11442, 11444, Nordea insurance contract 11449, former UMOE insured plans 11437, Avtalefestet Pension liabilities in Norway, Unfunded pension promises in Norway.

“Assumed Plans Deficit” means the value as of the Closing of the liabilities of each Assumed Plan calculated in accordance with the assumptions set out in Exhibit Q less the fair market value as of the Closing of the Assumed Plans assets.

“Available Balance” shall have the meaning set forth in Section 5.08(a).

“BaaN Customizations” shall have the meaning set forth in Section 5.25(a)(iii).

“Bank” means the party or parties providing the Senior Credit Agreement and the Mezzanine Loan Agreement to Purchaser.

“Bank CP Letter” means the letter dated on or about the date hereof provided by the Facility Agent (as defined in the Senior Credit Agreement) and the Mezzanine Facility Agreement (as defined in the Mezzanine Loan Agreement) confirming which, if any of the documents and other evidence listed in part 1 of Schedule 3 to the Senior Credit Agreement and in part 1 of Schedule 3 to the Mezzanine Loan Agreement have been unconditionally and irrevocably delivered in a form and substance satisfactory to it and which conditions to Funding remain to be satisfied.

“Borrowings” shall have the meaning set forth in Section 2.20 of Exhibit E.

“Brazilian ERP System” shall have the meaning set forth in Section 5.25(e).

“Business” means the business of supplying products, systems and services for O&G Installations, including (i) engineering, procurement, construction and servicing, (ii) design, manufacture, sale and servicing of products and systems and (iii) operations services, engineering, procurement and construction project management services for modification and maintenance of existing O&G Installations.  For purposes of this Agreement, “O&G

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Installations” shall mean any facility or installation designed to explore, extract, produce, transport or process oil and/or gas.

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in The City of New York, Zurich, Switzerland, London, England or Frankfurt am Main, Germany.

“Business Intellectual Property” means, collectively, (i) the OGP Intellectual Property and (ii) the Transferred Intellectual Property.

“Business IP Licenses” means, collectively, the OGP IP Licenses and the Transferred IP Licenses.

“Cap” shall have the meaning set forth in Section 9.03(b).

“Capital Modernization Program” or “CMP” means the (a) Master Hire Agreement between Royal Scot Leasing Limited and ABB Vetco Gray UK Limited dated May 29, 2001, (b) Master Hire Agreement between Royal Scot Leasing Limited and ABB Vetco Gray UK Limited dated October 30, 2000 and (c) Master Lease Agreement between JP Morgan Leasing, Inc. and ABB Vetco Gray Inc. dated May 21, 2001 pursuant to which the functionality of existing machinery of ABB Vetco Gray UK Ltd. and ABB Vetco Gray Inc. is replaced.

“Change of Law” shall have the meaning set forth in Section 7.01(a).

“Chase” shall have the meaning set forth in Section 5.21(a).

“Chase Sale Agreement” shall have the meaning set forth in Section 5.21(a).

“Closing” shall have the meaning set forth in Section 2.05(a).

“Closing Accounting Principles” means the accounting principles described in Exhibit E.

“Closing Date” shall have the meaning set forth in Section 2.05(a).

“Closing Date Acknowledgement” shall have the meaning set forth in Section 2.07(x).

“Code” means the Internal Revenue Code of 1986, as amended.

“Compliance Disposition” means (i) the completion of any proceeding by the U.S. Department of Justice, Criminal Division arising from disclosures made by ABB Ltd. to such agency concerning the OGP Business and (ii) the issuance by the U.S. Department of Justice, Criminal Division of the Opinion Review Release.

“Compliance Review” means the review conducted by the Parties of issues related to any violations by or on behalf of the OGP Business of the U.S. Foreign Corrupt Practices Act as contemplated by the terms set forth in Exhibit T.

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“Computation” shall have the meaning set forth in Section 7.08(c).

“Confidential Information” means, (a) with respect to Purchaser, all information used in or otherwise relating to (i) the Business furnished by ABB or any of its Affiliates or Representatives, whether furnished before or after the date hereof, whether oral or written, and regardless of the manner or form in which it is furnished, including all analyses, reports or other information with respect to the customers or financial or other affairs of the Business including information relating to (A) the marketing of goods or services including customer names and lists and other details of customers, sales targets, sales statistics, market share statistics, prices, market research reports and surveys, and advertising or other promotional materials; or (B) future projects, business development or planning, commercial relationships and negotiations and (ii) the transactions contemplated in the Transaction Agreements, or the terms or conditions or any other facts relating thereto, including the negotiations relating to the Transaction Agreements and the fact that Confidential Information has been made available to such Party or its Representatives, and, (b) with respect to ABB, (i) the Purchaser’s business, financial or other affairs (including future plans or other potential investments) and (ii) the transactions contemplated in the Transaction Agreements, or the terms or conditions or any other facts relating thereto, including the negotiations relating to the Transaction Agreements and the fact that Confidential Information has been made available to such Party or its Representatives; provided, however, that the following shall be not be deemed to be Confidential Information:  (A) information which is or becomes generally available to the public other than as a result of a disclosure by such Party or any of their respective Affiliates or Purchaser Affiliates, as the case may be, in violation of this Agreement or other obligation of confidentiality, (B) information which was available to such Party or any of its Affiliates or Purchaser Affiliates, as the case may be, on a nonconfidential basis prior to its disclosure by the other Party or its Affiliates, or (C) information which becomes available to a Party on a nonconfidential basis from a person (other than the other Party or its Affiliates or Purchaser Affiliates, as the case may be) who is not prohibited from disclosing such information by a legal, contractual or fiduciary obligation to the owner of such otherwise Confidential Information.

“Confidentiality Agreement” means the confidentiality agreement dated as of November 20, 2002 between ABB and Purchaser.

“Contest” shall have the meaning set forth in Section 7.04(b).

“Continued Plans” means the ABB Australia Superannuation Plan, the ABB Canada Money Purchase Plan and ABB India Employees Gratuity Fund.

“Current Sublease” shall have the meaning set forth in Section 5.31(b).

“Customized CAWP Platform” shall have the meaning set forth in Section 5.25(a)(ii).

“Default Judgment Claim” means any Action commenced by Purchaser in a competent court strictly and solely in pursuance of a judgment that ABB is liable pursuant to the terms of the relevant Transaction Agreements to pay an amount to Purchaser by virtue of the

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default by ABB in responding to the notice of claim served upon it in accordance with the terms of such Transaction Agreements.

“Deferred Consideration” shall be an amount up to $50,000,000 payable by Purchaser to ABB pursuant to Section 2.04(a) and determined in accordance with the provisions set forth in Exhibit S-1.

“Deferred Transfer Agreement” shall have the meaning set forth in Section 2.06.

“Delayed Amount” shall have the meaning set forth in Section 2.09(e).

“Derivative Contracts” shall have the meaning set forth in Section 5.23(a).

“Derivative Valuation Bank” shall have the meaning set forth in Section 5.23(a).

“Designated Returns” shall have the meaning set forth in Section 7.08(f).

“Designated Tax Amount” shall have the meaning set forth in Section 7.08(f).

“Disclosure Schedule” means the set of Disclosure Schedules including all documents attached thereto and delivered therewith, dated as of the date hereof, and forming a part of this Agreement pertaining to the Scope 1 Operations and the Scope 2 Operations.

“Dispute” shall have the meaning set forth in Section 11.12.

“Dispute Notice” shall have the meaning set forth in Section 2.10(b)(ii).

“DOJ” means the United States Department of Justice.

“Early Termination Date” shall have the meaning set forth in Section 5.23(c).

“Effective Date” shall have the meaning set forth in Section 2.10(a).

“Effective Date Balance Sheet” shall have the meaning set forth in Section 2.10(a).

“Eligible TPG” shall have the meaning set forth in Section 5.08(a).

“Employment Costs and Liabilities” means, relating to any OGP Employee and Transferred Employee, any Losses arising out of or in connection with (i) amounts payable or paid in respect of the employment of him or her, including salary, wages, tax and social security contributions, bonus, insurance premium, payments or allowances or any other consideration for employment, (ii) costs of providing any non-cash benefits, which the employer is required to provide, by law or contract in connection with such employment, and (iii) his or her employment or the employment relationship, or termination of his or her employment, or of the employment relationship, including all Losses arising out of or in connection with any claim for redundancy pay, or damages or compensation for unfair or wrongful dismissal or breach of contract and payment in lieu of any notice period, but excluding, solely in respect of clauses (i), (ii) and (iii) above and not for any other purpose under this Agreement, any Losses arising out of or in

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connection with the Retained Plans, Title IV Plans, Continued Plans, Split Plans, the ABB Vetco Gray Inc. Management Deferred Incentive Plan, the ABB Post-Retirement Medical Plan, the ABB Brazil Pension Plan and any severance benefits payable to Erik Fougner pursuant to Section 6.04(b).

“Encumbrance” means any security interest, pledge, mortgage, lien (including environmental and tax liens), charge, encumbrance, adverse claim, preferential arrangement or restriction of any kind, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

“Environment” means surface water, groundwater, sediment, soil, subsurface strata, ambient air and any other environmental medium and living organisms or ecosystems supported by those media, including humans.

“Environmental Agreement” means (i) any agreement, covenant, warranty, representation, guarantee or indemnity, to which an OGP Subsidiary is a party as of the date hereof, that allocates, assigns or imposes responsibility or liability on an OGP Subsidiary for a Release of Hazardous Materials into the Environment, and (ii) any agreement, covenant, warranty, representation, guarantee or indemnity, which relates to an OGP Asset and to which an Asset Seller is a party as of the date hereof, and which is to be transferred by an Asset Seller to Purchaser pursuant to this Agreement or the transactions contemplated herein, that allocates, assigns or imposes responsibility or liability on an Asset Seller for a Release of Hazardous Materials into the Environment.

“Environmental Claims” means any and all Actions, demands, demand letters, liens, notices of noncompliance or violation, notices of liability, investigations, Orders, consent orders or consent agreements relating in any way to any Environmental Law or any Environmental Permit or any Environmental Agreement.

“Environmental Law” means any federal, state, local or foreign statute, Law, ordinance, regulation, rule, code, order or common law, and any enforceable judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, in each case as in effect on the date hereof, relating to pollution or protection of the Environment or natural resources, including those relating to the use, handling, transportation, treatment, storage or Release of Hazardous Materials, the exposure of humans to any Hazardous Materials and/or the creation of any noise, vibration, radiation, common law or statutory nuisance.

“Environmental Liabilities” means any and all Losses, to the extent such Losses exceed the provisions included in the Final Effective Date Balance Sheet, suffered or incurred by Purchaser and or any OGP Subsidiary in relation to Items 1 through 7 of Section 3.15(a) of the Scope 1 Operations Disclosure Schedule.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under or issued pursuant to any Environmental Law.

“Equity CP Letter” means the letter dated as of the date of this Agreement issued by the institutional investors to Newco1, and Newco2 and for the reliance of ABB confirming

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which, if any, of the conditions to the Shareholders Agreement have been unconditionally and irrevocably completed by all the parties thereto.

“ERISA” shall have the meaning set forth in Section 3.13(a).

“Estimated Effective Date Net Assets” shall have the meaning set forth in Section 2.09(a).

“Estimated Indemnified Project Loss Provisions” shall have the meaning set forth in Section 9.06(c).

“ETPG Facility” shall have the meaning set forth in Section 5.08(a).

“ETPG Facility Amount” shall have the meaning set forth in Section 5.08(a).

“ETPG Facility Guarantee” shall have the meaning set forth in Section 5.08(a).

“Eureka Program” shall have the meaning set forth in 8.03(f).

“Event Two” shall have the meaning set forth in Section 10.01(a)(ii).

“Excess Amount” shall have the meaning set forth in Section 11.01(d)(ii)(B).

“Excess Finder’s Fee” means an amount equal to the aggregate of all payments associated with the Kizomba B Matter which ABB Vetco Gray Inc. has been required to pay to ABB Lummus Global Inc. in excess of $2,000,000 in respect of any number of systems delivered by ABB Vetco Gray Inc. under the relevant contract.

“Excess Transocean Payment” means an amount derived in accordance with the following formula:

$5,000,000 + (0.8 times [B]);

provided, however, that (i) the Excess Transocean Payment shall under no circumstances exceed [A] and (ii) if [A] is $5,000,000 or less, then the Excess Transocean Payment shall equal [A].

For the purpose of this definition:

“[A]” means the claim (if any) expressed in U.S. dollars which ABB Vetco Gray Inc. or any other part of the OGP Business becomes liable to pay pursuant to the circumstances described in item 4 of Section 3.08(a) of the Scope I Operations Disclosure Schedule; and

“[B]” means the greater of 0 and ([A] - $10,000,000).

“Excluded Assets” means the right, title and interest of any Asset Seller in any of the following assets, as the same shall exist on the Closing Date (except as otherwise provided below):

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(i)all cash and cash equivalents as they existed on the Effective Date;

(ii)all bank accounts;

(iii)any rights to Tax refunds, deductions, credits or similar benefits relating to the OGP Business or the Purchased Assets attributable to taxable periods ending, or an event occurring, on or prior to the Closing Date;

(iv)the organization documents, company seal, minute books, tax records (other than tax records required by applicable Law to be transferred), charter documents, stock or equity record books and such other books and records as pertain to the organization, existence or capitalization of the Asset Sellers, as well as any other records or materials relating to the Asset Sellers generally and not related to the Purchased Assets or the operation of the OGP Business;

(v)the Retained Names and Marks and all Intellectual Property rights other than the Transferred Intellectual Property;

(vi)the Transferred Software Licenses to the extent any right, title or interest is not transferred to Purchaser hereunder;

(vii)any right, property or asset that is listed or described in Section 2.02(b) of the Disclosure Schedule;

(viii)all records prepared in connection with the transactions contemplated by the Transaction Agreements, except to the extent they are required for the operation of the OGP Business; and

(ix)all rights of the Asset Sellers under any Related Agreements to which any Asset Seller is a party.

“Excluded Derivative Contracts” shall have the meaning set forth in Section 5.23(a).

“Excluded Liabilities” means any of the following Liabilities of any of the Asset Sellers as the same shall exist on the Closing Date (except as otherwise provided below):

(i)all obligations relating to Indebtedness (including all non-trade accounts receivable by ABB or its Affiliates (other than the OGP Subsidiaries)) for borrowed money as they existed on the Effective Date;

(ii)all Taxes relating to any taxable period, or any portion thereof, ending on or prior to the Closing Date;

(iii)all Liabilities relating to or arising out of the Excluded Assets (which includes, for the avoidance of doubt, derivative contracts); and

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(iv)all other Liabilities incurred by such Asset Seller other than from conduct of the OGP Business.

“Existing Stock” shall have the meaning set forth in Section 5.07(c).

“Extended Longstop Date” shall have the meaning set forth in Section 10.01(a)(ii).

“Extension Notice” shall have the meaning set forth in Section 10.01(a)(i).

“External Debt Contract” means, for any OGP Subsidiary, each contract with a third party (other than an Affiliate of ABB) with respect to Indebtedness for borrowed money.

“Filing Date” shall have the meaning set forth in Section 7.08(f).

“Final Effective Date Balance Sheet” shall have the meaning set forth in Section 2.10(c).

“Final Intercompany Settlement Payment” shall have the meaning set forth in Section 2.10(c).

“Final Longstop Date” shall have the meaning set forth in Section 10.01(a)(ii).

“Final Net Intercompany Balance” shall have the meaning set forth in Section 2.10(c).

“Final Stub Payment” shall have the meaning set forth in Section 2.10(c).

“Final Indemnified Project Statement” shall have the meaning set forth in Section 9.06(d)(i).

“Final Tax Amount” shall have the meaning set forth in Section 7.02(d).

“Financial Statements” shall have the meaning set forth in Section 3.05(a).

“Former Properties” means any real property formerly owned or leased or occupied by an OGP Subsidiary.

“GAAP” means generally accepted accounting principles in the United States including, to the extent that such principles permit the application of alternative accounting principles, the accounting principles elected by ABB or its Affiliates consistent with one of such alternatives.

“Governmental Authority” means any United States federal, state or local or any supra-national or non-United States government, governmental, regulatory or administrative authority, agency or commission (including any patent or trademark registry) or any court, tribunal, or judicial or arbitral body or expert determination.

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“Grayloc Note” means the Promissory Note issued by Grayloc Products LLP to ABB Vetco Gray, Inc. dated November 20, 2000 in connection with the disposal by ABB Vetco Gray, Inc. of Grayloc Products LLP, and which was subsequently sold to Chase Manhattan Bank plc.

“Hazardous Material” means (a) any petroleum, petroleum products, petroleum by-products or breakdown products, radioactive materials, asbestos-containing materials or polychlorinated biphenyls or (b) any chemical, material, waste or substance defined or regulated under any Environmental Law or Environmental Permit or by any Governmental Authority pursuant to any Environmental Law or Environmental Permit as being capable (alone or in combination with other substances) of causing the pollution or contamination of, or harm or damage to, the Environment.

“Houston Lease” means the Sale and Leaseback Agreement between ABB Vetco Gray, Inc. and Citicorp Del-Lease Inc. dated as of May 30, 2000 (as amended from time to time) with respect to the property at 12221 N. Houston Rosslyn Rd., Houston, Texas.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Income Taxes” means any and all Taxes based upon, measured by or calculated with respect to net income or receipts (including, but not limited to, any capital gains and alternative minimum taxes).

“Income Tax Returns” means any and all Tax Returns relating to Income Taxes.

“Indebtedness” means, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money, (b) all obligations of such Person evidenced by notes, bonds or debentures, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (d) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (e) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, and (f) all Indebtedness of others referred to in clauses (a) through (e) above guaranteed directly or indirectly in any manner by such Person or in effect guaranteed directly or indirectly by such Person.

“Indemnity Obligations” shall have the meaning set forth in Section 9.08(a).

“Indemnified Party” shall have the meaning set forth in Section 9.04(a).

“Indemnified Project Loss” shall have the meaning set forth in Section 9.06(d)(i).

“Indemnified Projects” shall have the meaning set forth in Section 9.06(a).

“Indemnifying Party” shall have the meaning set forth in Section 9.04(a).

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“Independent Accounting Firm” shall have the meaning set forth in Section 2.10(b)(iii).

“Independent Actuary” shall have the meaning set forth in Section 6.10(f).

“Ineligible Guarantee” shall have the meaning set forth in Section 5.08(a).

“Initial Purchase Price” shall have the meaning set forth in Section 2.04(a).

“Intellectual Property” means (i) patents, patent applications and statutory invention registrations, utility models, petty patents, provisional patent applications and any and all divisions, continuations, continuations-in-part, reissues, reexaminations and extensions thereof, and all other invention registrations and invention disclosures, (ii) Trademarks, (iii) copyrights, including (without limitation), copyrights in computer software and databases, (iv) designs, design rights and industrial models, (v) rights in inventions, trade secrets and technical know-how, (vi) database rights, (vii) semiconductor topography rights and mask works and (viii) registrations and applications for registration (and right to make applications) of any of the foregoing in all cases, wherever subsisting in the world, and all rights of the same or a similar nature in any jurisdiction.

“Intercompany Settlement Payment” shall have the meaning set forth in Section 2.09(d).

“Intra-Group Trading Amount” means the purchase price of goods delivered and services performed (i) by ABB or its Affiliates (other than OGP Subsidiaries and the JV Companies) to the OGP Subsidiaries and the JV Companies or (ii) by the OGP Subsidiaries and the JV Companies to ABB or its Affiliates (other than the OGP Subsidiaries and the JV Companies), as the case may be, in the ordinary course of business.

“Investment Adjustment” means during the period specified sixty percent (60%) of the percentage change in the FTSE All-Share Total Return Index plus forty percent (40%) of the percentage change in the FTSE Over 15 Year Gilt Total Return Index between close of business on the first date and close of business on the day before the second date.

“Investors” shall have the meaning set forth in Exhibit S-1 hereto.

“IPR Assignors” means ABB Research Ltd. (Switzerland), ABB GmbH (Germany), ABB Sp. z.o.o (Poland) and ABB AS (Norway).

“IRS” means the United States Internal Revenue Service.

“JV Company” means any partnership, joint venture, consortium or other association or undertaking engaged in the OGP Business in which ABB is the beneficial owner of fifty percent (50%) or less of the outstanding shares of corporate capital or other equity interests.

“Key Contract” means the documents listed under the heading of “Key Contracts” on Section 3.09(c) of the Disclosure Schedule.

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“Kizomba B Matter” means the claims referred to in item 13 of Section 3.08(a) of the Scope I Operations Disclosure Schedule.

“knowledge of ABB” or “ABB’s knowledge” means the actual knowledge of any of the Persons specifically identified in Section 12.01(a) of the Disclosure Schedule.

“Law” means any United States federal, state, local or non-United States statute, law, ordinance, regulation, rule, code, order, other requirement or rule of law.

“Leased Real Property” means the real property leased by an OGP Subsidiary or leased by an Asset Seller as set forth in Section 3.11 of the Disclosure Schedule.

“Leases” shall have the meaning set forth in Section 3.11(b)(iii).

“Liabilities” means any and all liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including Taxes and those arising under any Law (including any Environmental Law), Action or Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

“Local Agreements”, “Local Asset Agreements” and “Local Share Agreements” shall each have the meanings set forth in Sections 5.02(a)(ii) and (iii).

“Longstop Date” shall have the meaning set forth in Section 10.01(a).

“Loss” or “Losses” shall have the meaning set forth in Section 9.02 (a).

“MADSP” shall have the meaning set forth in Section 7.08(c).

“Material Adverse Effect” means, when referred to in the Warranties for the purposes of determining a Warranty Claim pursuant to Article IX, any fact, matter or circumstance relating to a Scope that has had or would reasonably be expected to have a materially adverse effect on the business, results of operations or financial condition of such Scope (and not, for the avoidance of doubt, on the OGP Business taken as a whole) or in the case of any fact, matter or circumstance not specific to a particular Scope, the OGP Business taken as a whole; provided, however, that “Material Adverse Effect” shall not include any fact, matter or circumstance arising after the date hereof out of or attributable to (i) changes or effects that generally affect the industries in which the OGP Business operates, (ii) changes in general economic, regulatory or political conditions, (iii) changes arising out of, or attributable to, the announcement of the execution of this Agreement or the consummation of the transactions contemplated by the Transaction Agreements, or (iv) changes directly attributed to Purchaser’s consent or refusal to consent to the taking of actions set forth in Section 5.03.  Notwithstanding the foregoing, when referred to in the Warranties for the purpose of determining the satisfaction of the conditions to Closing specified in Section 8.03(a), Material Adverse Effect shall be determined by reference to the OGP Business taken as a whole, and not to any particular Scope.

“Material Contracts” shall have the meaning set forth in Section 3.09(a).

“Material Permits” shall have the meaning set forth in Section 3.07.

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“Material Subsidiary” means each of (i) ABB Offshore Systems Inc., (ii) ABB Vetco Gray Inc., (iii) ABB Offshore Systems Ltd., (iv) ABB Vetco Gray Pte. Ltd., (v) ABB Vetco Gray UK Ltd., (vi) ABB Offshore Systems AS and (vii) ABB Vetco Gray Canada, Inc.; and “Material Subsidiaries” means all of the above entities.

“Maximum Payment Limit” shall have the meaning set forth in Section 11.01(c)(i).

“Merger” shall have the meaning set forth in Section 8.01(a).

“Merger Regulation” shall have the meaning set forth in Section 8.01(a).

“Mezzanine Loan Agreement” means the US$180,000,000 mezzanine loan agreement dated on or about the date hereof between Laradew Limited as borrower, certain Group Companies (as defined therein) as guarantors, J.P. Morgan plc, Bank of Scotland and Credit Suisse First Boston as mandated lead arrangers, the Mezzanine Lenders named in that agreement, Credit Suisse First Boston as mezzanine facility agent and J.P. Morgan Europe Limited as security agent, as supplemented, novated and amended from time to time.

“Migration Plan” shall have the meaning set forth in Section 5.24(a).

“Misplaced Asset” shall have the meaning set forth in Section 5.18(a).

“Monthly Management Report” shall have the meaning set forth in Section 3.05(a).

“Monthly Review Protocol” means the principles and agendas for the monthly review meetings contemplated to be held by the Parties set forth in Exhibit W.

“Net Assets” means, with respect to the OGP Business determined on a combined basis, total net assets minus total net liabilities, as reflected on the Effective Date Balance Sheet or the Pre-Closing Notice, as the case may be; provided, for the avoidance of doubt, that “Net Assets” shall not take into account the Intercompany Settlement Payment, the Excluded Assets or the Excluded Liabilities, and shall include the Net Intercompany Balance as at the Effective Date (only for the purpose of the Effective Date Balance Sheet).

“Net Early Termination Amount” shall have the meaning set forth in Section 5.23(e).

“Net Intercompany Balance” shall have the meaning set forth in Section 2.09(d).

“Net Outstanding A/I Guarantee Amount” means at any time $40,000,000 less any net reductions in accordance with Section 9.08(a) at the time of determination.

“Net Outstanding Tax Guarantee Amount” means at any time $7,500,000 less any net reductions in accordance with Section 9.08(b) at the time of determination.

“Net Payment” shall have the meaning set forth in Section 2.10(h)(ii).

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“Net Position” shall have the meaning set forth in Section 9.06(d)(ii).

“Net Stage Position” shall have the meaning set forth in Section 9.06(d)(iii).

“Newco1” means Pixiegrove Limited, a company incorporated in England & Wales (registered number 4825478) whose registered office is 10 Upper Bank Street, London, EC14 5JJ.

“Newco2” means Packgrange Limited, a company incorporated in England & Wales (registered number 4825399) whose registered office is 10 Upper Bank Street, London, EC14 5JJ.

“New OGP Infrastructure” shall have the meaning set forth in Section 5.24(a).

“Non-Assumed Plans” means the ABB Post-Retirement Medical Plan, the ABB UK Plan and the Norway Split Plans.

“Non-Assumed Plans Deficit” means in respect of each Non-Assumed Plan the value at the Closing Date of such plan’s liabilities (as calculated in accordance with Exhibit Q) in respect of the OGP Employees, Transferring Employees or in relation to the ABB UK Plan only the Transferring Members and (in respect of the Norway Split Plans and the ABB Post-Retirement Medical Plan, OGP Former Employees) minus:  (i) in respect of the Norway Split Plans, the transfer value required to be paid by the Norway Split Plans to Purchaser’s Scheme in accordance with applicable Laws, but excluding any allowance for any post-Closing obligation on ABB under the linear funding requirement of applicable Law by virtue of the fact that the OGP Subsidiaries (and, if applicable, the Purchaser or the Purchaser Affiliates and the JV Companies) shall cease to participate in the Norway Split Plans at the end of the Transitional Period, (ii) the cash equivalent transfer value calculated in accordance with applicable Laws in respect of the ABB UK Plan, and (iii) in respect of the ABB Post-Retirement Medical Plan, zero (the Non-Assumed Plans in the U.S. are unfunded).

“Non-Business Liabilities” shall mean:

(i)any liability of any dormant subsidiary which (a) relates to a period prior to Closing and (b) does not relate directly to the OGP Business or any liability for any other entity which has been liquidated or otherwise wound up;

(ii)any liability in connection with the disposal or acquisition pursuant to an agreement entered into prior to Closing of any company, entity or business which does not relate directly to the OGP Business and any liabilities which relate in whole or in part to such company, entity or business; and

(iii)any other liability incurred by or on behalf of the OGP Business prior to Closing which is unrelated to the OGP Business.

“Non-Competition Agreement” shall have the meaning set forth in Section 5.02(iv).

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“Non-Ordinary Course Derivative Contracts” shall have the meaning set forth in Section 5.23(a).

“Non-U.S. Plan” means a material employee benefit plan or a bonus, stock option, stock purchase, incentive, profit sharing, deferred compensation, retiree medical or life insurance, retirement, severance or other benefit plan, program, agreement or arrangement, or any employment, retention or change of control agreement or arrangement, to which ABB, any of the OGP Subsidiaries or any of the Asset Sellers maintains, contributes to or sponsors for the benefit of any OGP Employee, OGP Former Employee, Transferred Employee, or current or former director of the OGP Subsidiaries or in respect of which any OGP Subsidiary has or may have material liability, and which is subject to or governed by the Law of any jurisdiction other than the United States or any state or commonwealth of the United States.

“Norway Securitization Program” means the agreement relating to the discounting of receivables dated November 28, 2002 between ABB Offshore Systems AS and Den norske Bank ASA.

“Norway Split Plans” means ABB Pensjonkasse and ABB Pensjonkasse Executive Plan.

“Off Balance Sheet Indebtedness” means the aggregate amount represented by an amount raised under any transaction or arrangement (including forward sale or sale and leaseback agreements) having the commercial effect of a borrowing and which is not included within Borrowings (as defined in Exhibit E).

“OGP Assets” shall have the meaning set forth in Section 3.16(a).

“OGP Business” means the Business as conducted by ABB through the Scope 1 Operations, the Scope 2 Operations (including the non-Angolan assets of Sociedade de Montagens Metalomecanicas S.A.) and the control valve business in India.

“OGP EBITDA” means the earnings before interest, taxes, depreciation and amortization of the OGP Business for the 12-month period ended on the Closing Date and shall comprise the aggregate of (x) the earnings before interest, taxes, depreciation and amortization for the period commencing on January 1, 2004 and ending on the Closing Date, calculated in accordance with the principles contained in the definition of “2004 EBITDA” set forth in Exhibit S-1 hereto (provided that all references therein to the Purchaser Group shall be replaced for purposes of this definition with references to the OGP Business and provided that all references therein to the 2004 Accounts Period shall mean, for the purposes of this definition only, from January 1, 2004 to the Closing), and (y) the earnings before interest, taxes, depreciation and amortization for the period commencing on the date 364 days prior to the Closing Date (excluding the Closing Date itself) (the “LTM Start Date”) and ending on December 31, 2003, calculated in accordance with the principles set forth in Exhibit S-3 hereto.  For the avoidance of doubt, if the LTM Start Date is not a monthly management account date, then the earnings before interest, taxes, depreciation and amortization for the period from the LTM Start Date to the next monthly management account date shall be calculated as a pro rata portion of such period.

“OGP Employees” shall have the meaning set forth in Section 3.13(a).

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“OGP Former Employees” shall have the meaning set forth in Section 3.13(a).

“OGP Intellectual Property” means all Intellectual Property owned by the OGP Subsidiaries.

“OGP IP Licenses” means all licenses of Intellectual Property between (i) an OGP Subsidiary and (ii) a third party that is not an Affiliate of either an Asset Seller or an OGP Subsidiary, which licenses are material to the OGP Business as currently conducted or, which in any single case, involve consideration in excess of $500,000 during the remainder of its natural term (excluding any renewal terms), but excluding any licenses ancillary to the sale of products or services in the ordinary course of business.

“OGP Guarantees” shall have the meaning set forth in Section 5.08(a).

“OGP Purchasers” means each wholly owned subsidiary of Purchaser assigned by Purchaser pursuant to Section 11.06 the right to acquire Shares or the right to acquire the Purchased Assets and to assume the Assumed Liabilities, as the case may be, pursuant to this Agreement.

“OGP Real Property” means the Leased Real Property and the Owned Real Property.

“OGP Shares” shall have the meaning set forth in Section 3.02(b).

“OGP Subsidiaries” shall have the meaning set forth in the Preliminary Statements to this Agreement.

“OGP TPGs” shall have the meaning set forth in Section 5.08(a).

“Opinion Review Release” means the opinion issued by the U.S. Department of Justice, Criminal Division pursuant to the procedures set forth at 28 C.F.R. § 80 substantially to the effect that the U.S. Department of Justice does not intend to take enforcement action against the Investors, Purchaser or any Purchaser Affiliate or any of their respective directors and senior officers for any pre-acquisition conduct concerning the OGP Business.

“Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“Ordinary Course Derivative Contracts”  shall have the meaning set forth in Section 5.23(a).

“Owned Real Property” means the right, title and interest in and to the real property owned by an OGP Subsidiary or an Asset Seller that is set forth in Section 3.11 of the Disclosure Schedule, together with all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing.

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“Parent Guarantees” shall have the meaning set forth in Section 5.08(a).

“Party” or “Parties” means ABB and/or Purchaser, as applicable.

“Patent Assignments” means the assignment from the applicable Asset Seller or IPR Assignor to Purchaser or its designees of the Transferred Intellectual Property.

“Payment Date” means the date on which ABB and Purchaser agree in writing or, in default of agreement, the date which ABB chooses and which is within sixty (60) calendar days of the date on which ABB has received written evidence that the Transfer Terms have been and remain complied with.

“Payment Event” shall have the meaning set forth in Section 9.08(a).

“Permitted Encumbrances” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced:  (a) liens for Taxes, assessments and governmental charges or levies not yet due and payable or which are being contested in good faith in proper proceedings; (b) Encumbrances imposed by Law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (d) minor survey exceptions, reciprocal easement agreements and other customary Encumbrances on title to real property that (i) were not incurred in connection with any Indebtedness, (ii) do not render title to the property encumbered thereby unmarketable and (iii) do not, individually or in the aggregate, materially adversely affect the value or use of such property for its current and anticipated purposes; (e) Encumbrances described in Section 1.01(a) of the Disclosure Schedule; (f) the Leases and all matters to which the Leases are subject and (g) non-exclusive licenses of Intellectual Property.

“Person” means any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

“Post-Closing Covenant” shall have the meaning set forth in Section 9.01.

“Post-Closing Date Tax Benefit” means any present or future Tax benefit actually realized by Purchaser, any of the OGP Purchasers, or any of the OGP Subsidiaries for a taxable period or portion thereof beginning after the Closing Date.

“Post-Closing Taxable Period”  means (i) any taxable period ending after the Closing Date and (ii) with respect to any Straddle Period, the portion of such taxable period that ends after the Closing Date.

“Pre-Closing Adjustment” shall have the meaning set forth in Section 2.09(b).

“Pre-Closing Covenants” shall have the meaning set forth in Section 9.01.

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“Pre-Closing Losses” shall have the meaning set forth in Section 5.12(b).

“Pre-Closing Notice” shall have the meaning set forth in Section 2.09(a).

“Pre-Closing Taxable Period” means (i) any taxable period ending on or before the Closing Date and (ii) with respect to any Straddle Period, the portion of such taxable period that ends on or before the Closing Date.

“Primary Transaction” means each of the transactions listed as Primary Transactions on Exhibit L.

“Primary Test” shall have the meaning set forth in Section 5.06(c).

“Provisionally Retained Business” means any portion of the OGP Business that is not sold, conveyed, assigned, transferred or delivered to Purchaser as of the Closing Date and is the subject of a Deferred Transfer Agreement.

“Purchase Price” shall have the meaning set forth in Section 2.04(a).

“Purchase Price Documentation” shall have the meaning set forth in Section 2.10(a).

“Purchased Assets” means the right, title and interest of any Asset Seller in the following assets, as the same shall (a) exist on the Closing Date less any such assets that shall have been terminated, repaid or disposed of in the ordinary course of business between the Effective Date and the Closing Date and (b) exist on the Effective Date plus any assets that shall have been acquired by the relevant Asset Seller in the ordinary course of business between the Effective Date and the Closing Date:

(i)the Owned Real Property and Leased Real Property identified on Section 3.11 of the Disclosure Schedule as being owned or leased by an Asset Seller, the Transferred Intellectual Property (together with registration and renewal certificates of the foregoing, to the extent applicable), the Transferred IP Licenses, and, subject to Section 2.02(b), the Tangible Personal Property and the Asset Seller Contracts;

(ii)the Transferred Software Licenses;

(iii)all inventories owned by the Asset Sellers and used primarily relating to the OGP Business;

(iv)the goodwill of the Asset Sellers relating to the OGP Business, together with the exclusive right (so far as the Asset Sellers can grant the same) for Purchaser or the relevant OGP Purchaser to use the names and marks used in the OGP Business (other than the Retained Names and Marks except as provided under Section 5.07) to represent itself as carrying on the OGP Business in continuation of and in succession to the Asset Sellers;

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(v)all accounts receivable and notes receivable owing to the Asset Sellers from third parties to the extent arising from the conduct of the OGP Business;

(vi)the sales and promotional literature, customer lists and other sales-related materials used by the Asset Sellers primarily relating to the OGP Business;

(vii)cash received in respect of the OGP Business by such Asset Seller after the Effective Date and held by such Asset Seller on the Closing Date;

(viii)the Intra-Group Trading Amount owing to the Asset Sellers to the extent arising from the conduct of the OGP Business;

(ix)the benefit (so far as the same can be lawfully assigned or transferred) of all claims, causes of action and similar rights of the Asset Sellers arising at any time (whether before or after the Closing) out of or relating to the OGP Business, which relate primarily to any of the Purchased Assets or any of the Assumed Liabilities;

(x)fixed plant, equipment, machinery and motor vehicles primarily related to the OGP Business;

(xi)all books of account, general, financial and personnel records, invoices, shipping records, supplier lists, tax records that are required by applicable Law to be transferred, correspondence and other documents, records and files relating exclusively to the OGP Business (and copies of any such documents relating primarily to the OGP Business), original registration and renewal certificates for the OGP Intellectual Property and the Transferred Intellectual Property to the extent in the possession of the Asset Sellers and any rights thereto owned by the Asset Sellers; provided, however, that each of the Asset Sellers may retain electronic or paper copies of all such books of account and records referenced above; and

(xii)all other assets (including equity interests in the JV Companies) primarily related to or under development primarily for the benefit of the OGP Business.

“Purchaser” shall have the meaning set forth in the Preamble.

“Purchaser Affiliate” means the Acquisition Newcos and, with respect to any Person at the time of determination, any Person that is controlled directly, or indirectly through one or more intermediaries, by an Acquisition Newco.  For the avoidance of doubt, “control” shall bear the meaning ascribed to it in the definition of “Affiliate” above.

“Purchaser Compliance Costs” shall have the meaning set forth in Section 11.01(d)(i).

“Purchaser Financing Documents” means the Senior Credit Agreement, the Mezzanine Loan Agreement and the Shareholders Agreement, the Bank CP Letter and the Equity CP Letter.

“Purchaser Indemnified Party” shall have the meaning set forth in Section 9.03(a).

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“Purchaser Representatives” shall have the meaning set forth in Section 2.10(a).

“Purchaser Stage Payments” shall have the meaning set forth in 9.06(d)(iii).

“Purchaser Threshold” shall have the meaning set forth in Section 9.03(b).

“Purchaser Welfare Benefit Plans” shall have the meaning set forth in Section 6.03.

“Purchaser’s Accountants” means Deloitte & Touche Tohmatsu, independent accountants of Purchaser, or such other internationally recognized independent accounting firm as Purchaser may nominate with written notice to ABB.

“Purchaser’s Actuary” means an actuary nominated by the Purchaser.

“Purchaser’s Bank Account” means a bank account to be designated by Purchaser in a written notice to ABB at least five Business Days before the Closing or such other bank account as Purchaser may thereafter notify ABB pursuant to Section 11.02.

“Purchaser’s Relief” means a Final Effective Date Balance Sheet Relief and/or any Relief to the extent that the same arises in respect of periods (or any part of any period) after the Closing Date or in respect of any event, act, omission, default, occurrence, circumstance or transaction of any kind whatsoever occurring after the Closing Date, but only to the extent that such Relief is not otherwise prohibited by Section 7.03 of this Agreement.

“Purchaser’s Scheme” means the retirement benefit plans nominated or established by Purchaser which are capable of receiving the Transfer Amount and which have or are capable of having any necessary regulatory or tax approval required by any applicable Law.

“Rabbi Trust” shall have the meaning set forth in Section 6.04.

“Redundancy Laws” means any Law or Order providing for any payment, compensation or other benefit to be provided to employees in respect of the termination of their employment on grounds which are without fault on the part of the employee or imposing such obligations on an employer proposing to terminate any contract of employment on grounds which are without fault on the part of the employee.

“Related Agreements” means the Purchase Price Bank Guarantee, the Deferred Closing Bank Guarantee, the Tax Election Bank Guarantee, the Surety, the Transition Services Agreement, the Local Agreements, the Non-Competition Agreement, the Shared IP License Agreement, the Patent Assignments, the Deferred Transfer Agreements (if any) and such other documents or instruments required to be entered into and delivered under this Agreement and the Related Agreements to effectuate the transactions contemplated by the Transaction Agreements.

“Release” means disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying, seeping or placing Hazardous Materials into the Environment.

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“Relief” means any allowance, credit, exemption, deduction or relief from, in computing against or in respect of Tax or any right to repayment of Tax.

“Remaining Guarantees” shall have the meaning set forth in Section 5.08(m).

“Remedial Action” means any monitoring, treatment, excavation, removal, investigation, remediation or cleanup of Hazardous Materials in the Environment.

“Reorganization” shall have the meaning set forth in Section 5.01.

“Repayment Event” shall have the meaning set forth in Section 9.08(c).

“Repayment Bank Guarantee” shall have the meaning set forth in Section 5.02(a)(viii).

“Representative” means, as to any Party, such Party’s Affiliates, and their respective directors, officers, employees, agents, financing sources, syndicatees and potential syndicatees of such financing sources and advisors and any and all advisors to such persons.

“Retained Conduct Matter” means, unless Purchaser confirms to ABB in writing that it shall not be so treated, any Third Party Claim whose subject matter relates to a disclosure pursuant to Section 3.07(iv) of the Disclosure Schedule or a breach of Section 3.07(iv).

“Retained Names and Marks” shall have the meaning set forth in Section 5.07(a).

“Retained Plans” shall have the meaning set forth in Section 6.05.

“Retained TPG” shall have the meaning set forth in Section 5.08(a).

“Revenue Procedure” means Revenue Procedure issued from time to time by the United States Internal Revenue Service.

“Review Period” shall have the meaning set forth in Section 11.01(c)(i).

“Rules” shall have the meaning set forth in Section 11.12(c).

“Sao Paulo Property” shall have the meaning set forth in Section 5.31.

“Scope” means each of Scope 1 Operations and Scope 2 Operations.

“Scope 1 Operations” means the business activities conducted from time to time by the Drilling Production Equipment and Subsea Systems business units.

“Scope 2 Operations” means the business activities conducted from time to time by the Maintenance and Modification and the Floating Production Systems-Norway business units.

“Secondary Transaction” means each of the transactions listed as Secondary Transactions in Exhibit L or designated as a Secondary Transaction pursuant to Section 5.06(c).

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“Section 338 Forms” shall have the meaning set forth in Section 7.08(b).

“Section 338(h)(10) Election” shall have the meaning set forth in Section 7.08(a).

“Securitization Programs” means (i) the Eureka Program and (ii) the Norway Securitization Program.

“Self-Regulatory Organization” means any authority or body with relevant powers to which a Party or any of its Representatives is subject or by which a Party or any of its Representatives is governed, administered or has agreed to be bound, whether or not the relevant powers of such authority or body have the force of Law.

“Seller” and “Sellers” shall have the meanings set forth in the Preliminary Statements.

“Seller Subsidiaries” shall have the meaning set forth in the Preliminary Statements.

“Senior Credit Agreement” means the US$873,000,000 senior credit agreement dated on or about the date of this Agreement between, inter alia, Pixiegrove Limited (as parent), certain Group Companies (as defined therein) as borrowers and guarantors, J.P. Morgan plc, Bank of Scotland and Credit Suisse First Boston as mandated lead arrangers, the senior lenders named in that agreement, and J.P. Morgan Europe Limited as facility agent and security agent, as supplemented, novated and amended from time to time.

“Senior Employee” means an employee of an OGP Subsidiary or of an Asset Seller who is expected to be a Transferred Employee, as the case may be, who has an annual salary in excess of $100,000 or otherwise who is set out in Schedule 2 to the Non-Competition Agreement.

“Settlement Statement” shall have the meaning set forth in Section 5.23(d).

“Share Sellers” shall have the meaning set forth in the Preliminary Statements.

“Shared IP License Agreement” shall have the meaning set forth in Section 5.02(a)(v).

“Shared Lotus Notes Databases” shall have the meaning set forth in Section 5.25(a)(iv).

“Shared Real Property” shall have the meaning set forth in Section 5.22(a).

“Shareholders Agreement” means the agreement dated on or about the date of this Agreement between (1) Newco1, Newco2 and Purchaser, (2) John Kennedy and others and (3) Candover, 3i, JP Morgan Partners (each term as defined therein) and others, as amended from time to time.

“Shares” shall have the meaning set forth in the Preliminary Statements.

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“Shortfall Amount” shall have the meaning set forth in Section 11.01(d)(ii)(A).

“South Korean clearance” shall have the meaning set forth in Section 5.06(a).

“Split Plans” means ABB UK Plan and the Norway Split Plans.

“Stage Estimate” shall have the meaning set forth in Section 9.06(d)(iii).

“Stage Period” shall have the meaning set forth in Section 9.06(d)(iii).

“Straddle Period” means any taxable period beginning before and ending after the Closing Date.

“Straddle Period Return” shall have the meaning set forth in Section 7.02(c).

“Stop Notification” shall have the meaning set forth in Section 10.01(a)(i).

“STPG Notice” shall have the meaning set forth in Section 5.08(a).

“Stub Payment” shall have the meaning set forth in Section 2.09(c).

“Substantial Completion of the Compliance Review” means the mutual agreement in writing of the compliance counsels of each Party that the Compliance Review has been substantially completed.

“Substitute Parent Guarantees” shall have the meaning set forth in Section 5.08(a).

“Substitute Third Party Guarantees” shall have the meaning set forth in Section 5.08(a).

“Surety” shall have the meaning set forth in Section 5.02(a)(x).

“Tangible Personal Property” means all of the tangible personal property, including equipment, machinery, vehicles and rolling stock, office equipment and furnishings used or held for use by the Asset Sellers primarily relating to the OGP Business.

“Tax” or “Taxes” means all income, gross receipts, gains, sales, use, employment, franchise, profits, excise, property, value added and other taxes, fees, stamp taxes and duties, assessments or charges of any kind, together with any interest and penalties, additions to tax or additional amounts imposed by any Taxing Authority with respect thereto, as well as payments for group relief.

“Tax Election Bank Guarantee” shall have the meaning set forth in Section 5.02(a)(ix).

“Tax Indemnified Party” shall have the meaning set forth in Section 7.04(a).

“Tax Indemnifying Party” shall have the meaning set forth in Section 7.04(a).

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“Tax Items” shall have the meaning set forth in Section 7.02(a).

“Tax Returns” means any and all returns and reports required to be filed with a Taxing Authority.

“Taxing Authority” means the United States Internal Revenue Service and any other U.S. or non-U.S. federal, state, canton, provincial, local, national or other Governmental Authority having the power to impose a Tax or Taxes.

“Third Party Claim” shall have the meaning set forth in Section 9.04(b).

“Third Party Guarantees” shall have the meaning set forth in Section 5.08(a).

“Title IV Plans” means any “employee pension benefit plan” as defined in Section 3(2) of ERISA that is or has been sponsored, maintained or contributed to by ABB or its Affiliates at any time with respect to which the OGP Subsidiaries would incur liability under Title IV of ERISA or Section 412 of the Code.

“Trademarks” means trademarks, service marks, trade names, trade dress, corporate names, logos, domain names and other identifiers of source, together with the goodwill associated therewith, together with all registrations and applications for registration thereof.

“Transaction Agreements” means this Agreement and the Related Agreements.

“Transfer Amount” means the amount as calculated in accordance with Section 6.06(c).

“Transfer Date” means the first day of the month following the date six months after the Closing Date or such other date as ABB and Purchaser may agree in writing.

“Transfer Regulations”means any applicable Law implementing the provisions of the Council Directive 2001/23/EEC dated March 12, 2001, or any other similar provisions provided for by applicable Law in non-European Union countries, applicable to any of the Transferred Employees or their terms and conditions of employment.

“Transfer Terms” means all of the requirements in respect of Purchaser’s Scheme set out in Section 6.06 have been and remain complied with in all material respects, any regulatory consents have been obtained and the Split Plans have received all of the written consents of Transferring Members (where appropriate) to the making of a transfer payment to Purchaser’s Scheme.

“Transferred Employees” means such employees of each Asset Seller who are (a) primarily engaged in the OGP Business (wherever located) (including all such employees who have rights of employment on return from any vacation, leave or other absence), or (b) listed in Exhibit A to a Local Asset Agreement.

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“Transferred Intellectual Property” means the registered Intellectual Property owned by the Asset Sellers and used in the OGP Business and set forth on Section 1.01(c) of the Disclosure Schedule.

“Transferred IP Licenses” means the licenses of Intellectual Property between (i) an Asset Seller and (ii) a third party that is neither an ABB Affiliate of an Asset Seller or an OGP Subsidiary set forth in Section 1.01(c) of the Disclosure Schedule.

“Transferred Software Licenses” means the number of licenses for software applications obtained by ABB and its Affiliates and used in the conduct of the OGP Business immediately prior to the Closing, as such software applications and number of licenses are listed in Section 1.01(b) of the Disclosure Schedule.

“Transferring Member” means an OGP Employee or Transferred Employee who is a member of one of the Split Plans immediately before the Closing Date who becomes a member of Purchaser’s Scheme with effect from the Transfer Date and, who (in respect of an ABB UK Plan member only), in a written form, within sixty (60) calendar days prior to the Transfer Date requests or consents to a transfer of assets being made from the Split Plans to Purchaser’s Scheme in discharge of all liabilities which the Split Plans may have to pay benefits to or in respect of him and who has not withdrawn that request before the Payment Date, together with, in respect of the Norway Split Plans, any OGP Former Employee who has an entitlement or contingent entitlement to benefits under the Norway Split Plans.

“Transition Services Agreement” shall have the meaning set forth in Section 5.02(a)(i).

“Transitional Period” means the period beginning on the Closing Date and ending on the Transfer Date.

“Treasury Regulations” means the Treasury Regulations (including Temporary Regulations) promulgated by the U.S. Department of Treasury with respect to the Code or other federal tax statutes.

“Undisclosed Derivative Contracts” shall have the meaning set forth in Section 5.23(a).

“U.S. Antiboycott Laws and Regulations” means the antiboycott laws and regulations administered by the U.S. Department of Commerce and the U.S. Department of Treasury, including the reporting and filing requirements set forth in Section 8 of the Export Administration Act of 1979, as amended (50 USC.A app. Section 2407), Section 999 of the Code and Part 760 of the Export Administration Regulations (15 C.F.R. Part 760) and the Export Administration Act of 1979.

“U.S. Employee Plans” shall have the meaning set forth in Section 3.13(a).

“Variation Agreement” means the Agreement of Variation among ABB Service Pty Ltd., ABB Australia Pty Ltd. and Worley Pty Ltd. dated December 19, 2003.

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“Warranty Claim” shall have the meaning set forth in Section 9.03(a)(i).

“Warranty Period Guarantees” shall have the meaning set forth in Section 5.08(a).

“Workpapers” shall have the meaning set forth in Section 7.08(c).

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EX-4.7

Exhibit 4.7

EXECUTION COPY

PURCHASE AGREEMENT

Between

ABB HOLDING AG, ZURICH,

as Seller

and

LAGRUMMET DECEMBER NR 919 AB
(under change of name to “FUND AMERICAN HOLDINGS AB”),

as Purchaser

Dated as of December 8, 2003

7-11 Moorgate

London EC2R 6HH

TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION AND RELATED MATTERS
1.1.	Definitions
1.2.	Other Terms
1.3.	Interpretation
ARTICLE 2 SALE AND PURCHASE OF U.S. SHARES AND INTERNATIONAL SHARES
2.1.	Sale and Purchase
2.2.	Title
ARTICLE 3 PURCHASE PRICE AND ADJUSTMENT
3.1.	Purchase Price
3.2.	Payment of U.S. Purchase Price
3.3.	Payment of International Purchase Price
3.4.	Closing Financial Statements; Disputes
3.5.	Adjustments
ARTICLE 4 CLOSING
4.1.	Date and Place
4.2.	Deliveries at the U.S. Closing
4.3.	Deliveries at the Closing
4.4.	Escrow
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ABB
5.1.	Organization
5.2.	Authority
5.3.	Capital Stock
5.4.	Subsidiaries and Branch Offices
5.5.	Financial Information
5.6.	Compliance with Law
5.7.	Personal Property
5.8.	Real Property
5.9.	Intellectual Property
5.10.	Contracts
5.11.	Employees
5.12.	Employee Benefit Plans
5.13.	Taxes
5.14.	Litigation
5.15.	Environmental Matters
5.16.	Insurance
5.17.	Agents
5.18.	Accounts with Financial Institutions
5.19.	Continuing Business Relationships
5.20.	Brokers
5.21.	Solvency
5.22.	Alstom Instruments

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5.23.	ABB Instruments
5.24	Sirius America Contracts
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER
6.1.	Organization
6.2.	Authority
6.3.	Financing
6.4.	Employees
ARTICLE 7 COVENANTS
7.1.	General
7.2.	Conduct of Business
7.3.	Access to Information
7.4.	Reasonable Efforts
7.5.	Employee Benefit Plans
7.6.	Taxes
7.7.	Replacement of Directors and Auditors
7.8.	No Solicitation/No Hire of Employees
7.9.	No Solicitation of Offers
7.10.	Notice of Certain Matters
7.11.	Intercompany Accounts
7.12.	Investment Portfolio
7.13.	Assignment of Confidentiality Agreements
7.14.	Amendment of Leases
7.15.	Sirius Belgium
7.16.	Access to Purchaser Auditors
7.17.	Facility Agreement
7.18.	Purchaser Disclosure Procedures
7.19.	Dividends
7.20.	ABB Intellectual Property
7.21.	Amendments to Certain Contracts
7.22.	Employees
ARTICLE 8 CONDITIONS TO CLOSING
8.1.	Conditions of Both Parties
8.2.	Additional Conditions of Purchaser
8.3.	Additional Conditions of ABB
8.4.	Frustration of Closing Conditions
ARTICLE 9 LIABILITY AND RELATED MATTERS
9.1.	Indemnification by ABB
9.2.	Indemnification by Purchaser
9.3.	Termination of Indemnification
9.4.	Procedures Relating to Third Party and Direct Indemnification Claims
9.5.	Assignment of Rights
9.6.	Tax Indemnification and Related Matters
9.7.	Indemnity Payments

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9.8.	Scandinavian Re Indemnity
9.9.	Special Indemnity in Respect of Alstom Instruments
9.10.	Special Indemnity in Respect of ABB Instruments
9.11.	Other Limitations; Indemnity Provisions
9.12.	Survival of Representations and Warranties and Covenants
9.13.	Reliance on Representations and Warranties
9.14.	ABB’s Disclosure
ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER
10.1.	Termination
10.2.	Amendments and Waivers
ARTICLE 11 GENERAL PROVISIONS
11.1.	No Announcement; Confidentiality
11.2.	Cooperation
11.3.	Entire Agreement
11.4.	Severability
11.5.	No Third Party Beneficiaries
11.6.	Assignment
11.7.	Notices
11.8.	Governing Law
11.9.	Pre-Closing Dispute Resolution
11.10.	Post-Closing Dispute Resolution
11.11.	Enforcement
11.12.	Costs, Expenses, Transfer Taxes and Fees
11.13.	No Set-Off
11.14.	Further Assurances
11.15.	Certain Insurance

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SCHEDULES AND ANNEXES

Schedules
1.1(1)	Financial Statements
1.1(2)	Investment Guidelines
1.1(3)	Permitted Encumbrances
1.3.4	ABB’s Knowledge
3.4.1(1)	Net Equity Statement — Adjustments
3.4.1(2)	Form of Closing Financial Statements
3.4.2	Form of Business Auditors’ Opinions
7.2.1	Conduct of Business
7.5(1)	Transferred Plans
7.5(2)	Retained Plans
7.21	Amendments to Certain Contracts
8.1	Governmental Approvals
11.6	Merger Schedule
Disclosure Schedule
Annexes
1	ABB Bank Guaranty
2	Escrow Agreement
3	ABB and ABB Ltd Legal Opinion
4	Purchaser Legal Opinion
5	Transitional Services Agreement
6	White Mountains Insurance Group, Ltd. Opinion

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PURCHASE AGREEMENT

This Purchase Agreement (the “Agreement”) is entered into as of this 8^th day of December 2003 between the following parties:

ABB HOLDING AG, ZURICH, a company organized and existing under the laws of Switzerland with its principal office at Affolternstrasse 44, 8050 Zurich, Switzerland (“ABB”); and

LAGRUMMET DECEMBER NR 919 AB (under change of name to “FUND AMERICAN HOLDINGS AB”), a company organized and existing under the laws of Sweden (Reg. No. 556651-1084 with its principal office at Bohusgatan 14, SE 106 60 Stockholm, Sweden (“Purchaser”).

WITNESSETH:

WHEREAS, ABB owns 100% of the issued and outstanding shares (the “International Shares”) of ABB Insurance Holding Sweden AB, a company organized and existing under the laws of Sweden (“Sirius Holding”);

WHEREAS, Sirius Holding owns: (i) 100% of the issued and outstanding shares of Sirius International Insurance Corporation, a company organized and existing under the laws of Sweden (“Sirius International”); and (ii) 100% of the issued and outstanding shares of Sirius Rückversicherungs Service GmbH, a company organized and existing under the laws of Germany (“Sirius Rück”);

WHEREAS, Sirius International owns: (i) 100% of the issued and outstanding shares (the “U.S. Shares”) of Sirius America Insurance Company, a company organized and existing under the laws of the State of Delaware (“Sirius America”); (ii) 100% of the issued and outstanding shares of Sirius Belgium Reassurances S.A., a Company organized and existing under the laws of Belgium (“Sirius Belgium”); and (iii) 100% of the issued and outstanding shares of Scandinavian Reinsurance Company Ltd (Bermuda), a company organized and existing under the laws of Bermuda (“Scandinavian Re”), and together with Sirius Holding, Sirius International, Sirius Rück, Sirius Belgium and Sirius America, (the “Acquired Group”, and each of which, an “Acquired Company”);

WHEREAS, ABB desires to sell, and Purchaser desires to purchase, the International Shares, in each case on the terms and conditions herein set forth; and

WHEREAS, Purchaser desires to cause Folksamerica Reinsurance Company, a company organized and existing under the laws of New York with its principal office at One Liberty Plaza, New York, New York 10006, U.S.A. (“U.S. Purchaser”) to purchase the U.S. Shares from Sirius International, and ABB desires to cause Sirius International to sell the U.S. Shares to U.S. Purchaser, in each case at the U.S. Closing and on the terms and conditions herein set forth (the “U.S. Transaction”);

NOW, THEREFORE, in consideration of the mutual covenants, representations and warranties herein contained, and subject to and on the terms and conditions herein set forth, the parties hereto agree as follows:

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ARTICLE 1
INTERPRETATION AND RELATED MATTERS

1.1.Definitions

Unless the context of this Agreement provides otherwise, the following terms shall have the meanings set out below:

“ABACUS Financial Statements” shall have the meaning set out in Section 7.19(a).

“ABACUS Net Equity” shall have the meaning set out in Section 7.19(a).

“ABACUS Net Equity Statement” shall have the meaning set out in Section 7.19(a).

“ABB” shall have the meaning set out in the preamble to this Agreement.

“ABB Distribution” shall have the meaning set out in Section 7.19(b).

“ABB Distribution Amount” shall have the meaning set out in Section 7.19(b).

“ABB Group” means ABB Ltd, being an Affiliate of ABB and a company organized and existing under the laws of Switzerland with its principal office at Affolternstrasse 44, PO Box 8131, CH-8050 Zurich, Switzerland, and each of its Affiliates.

“ABB Instruments” shall have the meaning set out in Section 5.23.

“ABB Specified Claims” shall have the meaning set out in Section 9.1.

“Acquired Company” shall have the meaning set out in the recitals to this Agreement.

“Acquired Group” shall have the meaning set out in the recitals to this Agreement.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with such Person.

“Affiliate Contracts” shall have the meaning set out in Section 5.5.5.

“Alstom Group” shall have the meaning set out in Section 5.22.

“Alstom Indemnified Parties” shall have the meaning set out in Section 9.9(a).

“Alstom Instruments” shall have the meaning set out in Section 5.22.

“Alstom Losses” shall have the meaning set out in Section 9.9(a).

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“Assumed Reinsurance Agreements” means all Contracts pursuant to which any Acquired Company has provided reinsurance or retrocessional coverage to another Person (other than another Acquired Company).

“Audited Closing Financial Statements” shall have the meaning set out in Section 3.4.2(a)(i).

“Audited Closing Net Equity Statement” shall have the meaning set out in Section 3.4.2(a)(ii).

“Audited Deficiency Amount” means the amount, if any, by which the Audited Net Equity is less than the Guaranteed Net Equity.

“Audited Excess Amount” means the amount, if any, by which Audited Net Equity exceeds the Guaranteed Net Equity.

“Audited Net Equity” means the amount of Net Equity, determined on the basis of the Audited Closing Financial Statements.

“Belgian Tax Reassessments” shall have the meaning set out in Section 9.6.4(b).

“Branded Assets” shall have the meaning set out in Section 7.20.1.

“Business” means the insurance and reinsurance business operations conducted by the Acquired Group.

“Business Auditors” means Ernst & Young, auditors to the Acquired Group.

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by applicable Law to be closed in Stockholm, Sweden or New York, New York.

“Ceded Reinsurance Agreements” means all Contracts pursuant to which any Acquired Company has ceded or transferred to any Person (other than another Acquired Company) any of its obligations or liabilities under any assumed insurance or assumed reinsurance agreement.

“Closing” means the completion of the matters set forth in Section 4.3 after the satisfaction or waiver of the conditions set forth in Article 8.

“Closing Date” means the date on which the Closing occurs in accordance with this Agreement.

“Closing Financial Statements” means the Unaudited Closing Financial Statements, the Audited Closing Financial Statements and the Final Closing Financial Statements.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Confidential Information” shall have the meaning set out in the Confidentiality Agreement.

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“Confidentiality Agreement” shall have the meaning set out in Section 11.3.

“Contract” means a loan or credit agreement, bond, debenture, note, mortgage, indenture, guarantee, lease or other contract, commitment, agreement, arrangement, understanding, obligation, undertaking, instrument, permit, concession, franchise or license (other than any permit or license granted by any governmental authority), whether oral or written, in each case that is legally binding or intended to be legally binding (including all amendments thereto).

“Direct Claim” shall have the meaning set out in Section 9.4.2.

“Direct Insurance Agreement” means all Contracts pursuant to which an Acquired Company has provided insurance to another Person (other than another Acquired Company).

“Disclosed Insurance Agreements” shall have the meaning set out in Section 5.10.1(g).

“Disclosure Schedule” means the disclosure schedule delivered by ABB to Purchaser concurrently with the execution and delivery of this Agreement.

“Disputed Net Equity” means the difference between the Audited Net Equity and the Net Equity proposed by Purchaser in the Objection Notice (or, if Purchaser does not propose a Net Equity in the Objection Notice, the lowest Net Equity that may be reasonably derived from the objections raised by Purchaser in the Objection Notice).

“Disputes Auditors” shall have the meaning set out in Section 3.4.6.

“Employee” means each employee actively employed by an Acquired Company as of the Closing, including any employee of an Acquired Company on leave of absence or short-term disability (but not long-term disability) (or whenever the term “Employee” is used herein with respect to any date prior to the Closing Date, each individual who would be an Employee were the Closing to occur on such date).

“Employee Benefit Plan” shall have the meaning set out in Section 5.12.1.

“Encumbrance” means a lien, pledge, mortgage, security interest, assessment, claim, lease, charge, option, right of first refusal, imperfection of title, easement, transfer restriction under any shareholder or similar agreement or other encumbrance of any kind whatsoever.

“Environmental Claims” shall have the meaning set out in Section 5.15.

“Environmental Laws” shall have the meaning set out in Section 5.15.

“ERISA” shall have the meaning set out in Section 5.12.1.

“Escrow Agent” shall have the meaning set out in Section 4.4.

“Escrow Agreement” shall have the meaning set out in Section 4.4.

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“Facility Agreement” means the Facility Agreement dated as of June 26, 2003, among Sirius Holding, Skandinaviska Enskilda Banken AB (publ) and FöreningsSparbanken AB (publ).

“Final Closing Financial Statements” shall have the meaning set out in Section 3.4.10(b).

“Final Deficiency Amount” means the amount, if any, by which the Final Net Equity is less than the Guaranteed Net Equity.

“Final Excess Amount” means the amount, if any, by which Final Net Equity exceeds the Guaranteed Net Equity.

“Final Net Equity” means the amount of Net Equity, determined on the basis of the Final Closing Financial Statements.

“Financial Risks Business” means the issuance by the Acquired Group of project bonds, performance bonds and financial products relating to trade credit risks, political risks, credit derivative risks, and export finance risks.

“Financial Statements” means the audited consolidated financial statements of the Acquired Group (excluding Sirius Holding and Sirius Rück) as of December 31, 2002, including the balance sheet of the Acquired Group (excluding Sirius Holding and Sirius Rück) as of December 31, 2002, and the notes thereto, and the related income statements and statements of cash flow for the twelve month period then ended, in each case prepared in accordance with U.S. GAAP, copies of which are attached as Schedule 1.1(1).

“Former Employee” means each employee who was formerly employed by an Acquired Company with respect to whom any Acquired Company or any Employee Benefit Plan transferred to Purchaser or its Affiliates in connection with the transactions contemplated hereby (including any Employee Benefit Plan sponsored by any Acquired Company) has any liability.

“Gain” shall have the meaning set out in Section 9.8.2(b).

“Guaranteed Net Equity” means SEK 3.566 billion.

“Hazardous Material” means (i) any petroleum or petroleum products, radioactive materials or wastes, asbestos in any form, urea formaldehyde foam insulation and polychlorinated biphenyls; and (ii) any other chemical, material, substance or waste that is prohibited, limited or regulated under any Environmental Law.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.

“IMG” means International Medical Group, Inc.

“Indemnified Party” shall have the meaning set out in Section 9.4.1.

“Indemnifying Party” shall have the meaning set out in Section 9.4.1.

5

“Insurance Agreement Claims” shall have the meaning set out in Section 9.1.

“Insurance Policy” means each policy and binder currently-in-effect held by ABB and its Affiliates (including the Acquired Group) under which any Acquired Company or any assets of the Business are insured (excluding, for the avoidance of doubt, insurance coverage relating to areas such as life, medical and disability which are contained in any Employee Benefit Plan).

“Intellectual Property” means trade names, service marks, trademarks, logos, patents, copyrights, rights in Know-How and other similar proprietary rights which may subsist in any part of the world, whether registered or not.

“International Purchase Price” shall have the meaning set out in Section 3.1(a).

“International Shares” shall have the meaning set out in the recitals to this Agreement.

“Investment Guidelines” means the investment guidelines of the Acquired Group as of the date of this Agreement set out in Schedule 1.1(2).

“Investment Portfolio” means all investments, including stocks, bonds, cash and limited partnership interests, owned, directly or indirectly, by the Acquired Group, other than shares in an Acquired Company, IMG or the LUC.

“Know-How” means any technical, industrial and commercial information and techniques in any tangible form.

“KPMG Report” shall have the meaning set out in Section 3.4.4.

“Law” means any statute, law, code, ordinance, regulation, directive or other national or supra-national legally binding requirement or rule as in effect (i) wherever such term is used in Article 5 or 6, as at the date(s) the relevant warranty is made pursuant to this Agreement and, in any event, no later than the Closing Date, (ii) wherever such term is used in Article 7, as at the date any permitted, required or prohibited action is taken, and in any event (other than with respect to Sections 7.4.2 and 7.7.1) no later than the Closing Date and (iii) wherever such term is otherwise used in this Agreement, from time to time in force.

“Leased Real Property” shall have the meaning set out in Section 5.8.3.

“Lenders” means Skandinaviska Enskilda Banken AB (publ) and FöreningsSparbanken AB (publ) and any other Persons that have agreed to make available to Sirius Holding a term loan facility under the Facility Agreement.

“Lenders’ Payment” shall have the meaning set out in Section 8.2(d).

“Licensed Intellectual Property” shall have the meaning set out in Section 5.9.4.

“Loss” means any actual loss, claim, damage, liability, cost, expense, obligations, judgments, Encumbrances, injunctions, charges, orders, decrees, rulings,

6

dues, assessments, Taxes, fines, penalties, fees and amounts paid in settlement (including reasonable fees and expenses of counsel), but excluding special, indirect, incidental, consequential and punitive damages.

“Losses In Excess Of Reserves” shall have the meaning set out in Section 9.8.1(b).

“LUC” means the real property located at the London Underwriting Centre, Minster Court, London EC3.

“Material Adverse Effect” means any change in, or effect on, the Acquired Group or the Business which, individually or in the aggregate is, or which is reasonably likely to be, materially adverse to the properties, assets, liabilities, results of operations or financial condition of the Acquired Group, taken as a whole or, in relation to references to “Material Adverse Effect” in Sections 5.2.2, 5.2.3, 5.3, 5.6.1 and 5.14(ii)(z) only, will or is reasonably likely to prevent the material transactions contemplated hereby, including the acquisition of the International Shares.

“Material Contract” shall have the meaning set out in Section 5.10.2.

“Measurement Date” means December 31, 2003.

“Measurement Date Representations and Warranties” means the representations and warranties in: Section 5.5.3, Section 5.5.4, Section 5.6.2, Section 5.7, the second sentence of Section 5.8.1, Section 5.8.2, Section 5.8.3, Section 5.9.2(b), Section 5.9.2(d)(ii), Section 5.9.2(e), Section 5.9.3(a), Section 5.9.3(b)(ii), Section 5.11.2, Section 5.12.2 (except (i) thereof), Section 5.14 and Section 5.15.

“Net Equity” means, as of the Measurement Date, the total shareholders’ equity value in Swedish kronor of the Acquired Group from the Closing Financial Statements, calculated in accordance with U.S. GAAP consistently applied to the Financial Statements (so long as the Financial Statements were in accordance with U.S. GAAP) and the adjustments set out in Schedule 3.4.1(1).  In calculating Net Equity, there will be no accrual, provision or reserve in respect of any costs, liabilities, charges or events to be incurred after the Measurement Date in respect of the disposal, closure, reorganization or restructuring of any operations initiated by Purchaser or any of its Affiliates, other than those duly authorized by ABB and/or its Affiliates prior to the Measurement Date and recognizable in accordance with U.S. GAAP.

“Objection Notice” shall have the meaning set out in Section 3.4.5.

“Order” shall have the meaning set out in Section 5.2.2.

“Other Intellectual Property” shall have the meaning set out in Section 5.9.3.

“Outstanding Retained Amount” shall have the meaning set out in Section 3.5.3.

“Owned Real Property” shall have the meaning set out in Section 5.8.2.

“Permits” shall have the meaning set out in Section 5.6.2.

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“Permitted ABB Distribution Amount “ shall have the meaning set out in Section 7.19(b).

“Permitted Encumbrances” means: (i) rights of first refusal and similar rights of governmental authorities under applicable Law; (ii) mechanics’, carriers’, workmen’s, repairmen’s and other like Encumbrances arising or incurred in the ordinary course of business; (iii) Encumbrances for Taxes, assessments and other governmental charges not yet due and payable or that may thereafter be paid without penalty (with the applicable Encumbrance thereby released) or that are being contested in good faith by appropriate proceedings; and (iv) Encumbrances related to deposits to secure policyholders’ obligations as required by the insurance regulators of various jurisdictions to the extent that such deposits and the corresponding Encumbrances are listed on Schedule 1.1(3).

“Person” means any individual, company, partnership or other entity of any kind or governmental authority.

“Pledge Agent” means Skandinaviska Enskilda Banken AB (publ) or any other Person serving as the agent for the financing parties under the Pledge Agreement.

“Pledge Agreement” means the Pledge Agreement dated as of June 26, 2003, between Sirius Holding and Skandinaviska Enskilda Banken AB (publ).

“Pre-Measurement Tax Period” shall have the meaning set out in Section 9.6.1(a).

“Prior ABB Payments” shall have the meaning set out in Section 9.11.5.

“Property” means real, personal or mixed property, tangible or intangible, including any leased real property.

“Property Taxes” shall have the meaning set out in Section 9.6.1(b).

“Purchaser” shall have the meaning set out in the preamble to this Agreement.

“Purchaser Specified Claims” shall have the meaning set out in Section 9.2.

“Reinsurance Pools” shall have the meaning set out in Section 5.10.1(d).

“Registered Intellectual Property” shall have the meaning set out in Section 5.9.2(a).

“Release” means any actual or threatened release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment or within any building, structure, facility or fixture.

“Reserves” means: (i) all loss reserves for losses relating to the Business, consisting of case reserves and reserves for incurred but not reported losses, including unallocated and allocated reserves for loss adjustment expenses; and (ii) all reserves for unearned premiums relating to the Business.

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“Retained Amount” means an amount in Swedish kronor equal to $30,000,000 based on the closing mid-point rate calculated on the basis of the exchange rates between U.S. Dollars and Swedish kronor published in The Financial Times five (5) Business Days prior to the Closing.

“Retained Plans” shall have the meaning set out in Section 7.5(b).

“Retirement Benefits” shall have the meaning set out in Section 7.5(a).

“Rules” shall have the meaning set out in Section 11.10.1.

“Scandinavian Re” shall have the meaning set out in the recitals to this Agreement.

“Scandinavian Re Affiliate Commitment” means any capital, property, asset or right, or commitment to provide capital, properties, assets or rights that is legally binding or intended to be legally binding, provided by an Acquired Company (other than Scandinavian Re) to another Person to support the obligations of Scandinavian Re under any Contract.

“Scan Re Agreements” shall have the meaning set out in Section 5.10.1(e).

“Scan Re Disputes” shall have the meaning set out in Section 9.8.1(a).

“Scan Re Memo” shall have the meaning set out in Section 9.8.1(a).

“Senior Executive” means a managing director of an Acquired Company and all managers of such Acquired Company who report directly to him or her.

“Sirius America” shall have the meaning set out in the recitals to this Agreement.

“Sirius Belgium” shall have the meaning set out in the recitals to this Agreement.

“Sirius Holding” shall have the meaning set out in the recitals to this Agreement.

“Sirius Holding Dividend” means the dividend to be declared and paid by Sirius Holding prior to the Measurement Date in the amount of Three Hundred and Forty-Five Million Swedish kronor (SEK 345,000,000).

“Sirius International” shall have the meaning set out in the recitals to this Agreement.

“Sirius Rück” shall have the meaning set out in the recitals to this Agreement.

“Straddle Period” shall have the meaning set out in Section 7.6(b).

“Subsidiary” means, as to any Person, any other Person 50% or more of whose voting shares are owned or controlled, directly or indirectly, through one or more intermediaries, by such first Person.

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“Swedish kronor” and “SEK” means the lawful currency of the Kingdom of Sweden.

“Tax Claim” shall have the meaning set out in Section 9.6.3.

“Tax Return” means any return, declaration of estimated tax payments, report, estimate, information return or statement, including any related or supporting information with respect to any of the foregoing, filed or to be filed with any taxing authority in connection with the determination, assessment, collection or administration of any Taxes.

“Taxes” means all taxes, fees, duties and other assessments imposed by any government or political subdivision or taxing authority thereof or therein, including any income, estimated, premium, profits, windfall profits, environmental, alternative, minimum, license, import, transfer, registration, stamp, franchise, sales, use, value added, gross receipts, excise, utility, property (real or personal), severance, ad valorem, net proceeds, deed, lease, service, capital, customs, occupation, payroll wage, workman’s compensation, employment, withholding and social security taxes, including all interest, fines, assessments, penalties or additions to taxes imposed in connection therewith or with respect thereto.

“Third Party Claim” shall have the meaning set out in Section 9.4.1.

“Tillinghast Report” shall have the meaning set out in Section 3.4.4.

“Transfer Taxes” means all transfer, documentary, registration, stamp and similar Taxes (including all applicable real estate transfer Taxes and stock transfer Taxes) and related fees (including any penalties, interest or additions to Tax) arising out of, in connection with or attributable to this Agreement and the transactions contemplated hereby.  For the avoidance of doubt, Transfer Taxes shall not include any income Taxes arising out of, in connection with or attributable to this Agreement or the transactions contemplated hereby, such as any capital gains Taxes.

“Transferred Plan” shall have the meaning set out in Section 7.5(a).

“U.S. Closing” means the completion of the matters set forth in Section 4.2.

“U.S. GAAP” means generally accepted accounting principles in the United States of America.

“U.S. Dollars” or “$” means the lawful currency of the United States of America.

“U.S. Purchase Price” shall have the meaning set out in Section 3.2.

“U.S. Purchaser” shall have the meaning set out in the recitals to this Agreement.

“U.S. Shares” shall have the meaning set out in the recitals to this Agreement.

“U.S. Transaction” shall have the meaning set out in the recitals to this Agreement.

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“Unaudited Closing Financial Statements” shall have the meaning set out in Section 3.4.1(a).

“Unaudited Closing Net Equity Statement” shall have the meaning set out in Section 3.4.1(a).

“Unaudited Net Equity” means the amount of Net Equity, determined on the basis of the Unaudited Closing Financial Statements.

1.2.Other Terms

Other terms may be defined elsewhere in this Agreement (including in any Annex or Schedule hereto) and, unless otherwise indicated, shall have the respective meanings there ascribed to such terms.

1.3.Interpretation

The following provisions shall apply in connection with the interpretation of this Agreement:

1.3.1        Any reference to Articles, Sections, clauses, Annexes and Schedules are, unless otherwise stated, references to Articles, Sections, clauses, Annexes and Schedules of or to this Agreement. The headings in this Agreement have been inserted for convenience only and shall not be taken into account in its interpretation.

1.3.2        All Annexes and Schedules form an integral part of this Agreement and are equally binding therewith. Any reference to “this Agreement” shall include such Annexes and Schedules.

1.3.3        If any period is referred to in this Agreement by way of reference to a number of days, the days shall be reckoned exclusively of the first and inclusively of the last day unless the last day falls on a day that is not a Business Day, in which case the last day shall be the next succeeding Business Day.

1.3.4        Whenever any reference is made in this Agreement to ABB’s knowledge, information, belief or awareness, it shall be deemed to mean the knowledge of the individuals identified in Schedule 1.3.4 in relation to the subject matter in question.

1.3.5        Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.

1.3.6        Any reference to the “stock”, “capital stock”, “shares” or “share capital” of a Person shall refer to all voting and non-voting equity securities and other ownership and voting interests with respect to such Person.

1.3.7        Whenever the term “or its foreign currency equivalent” is used in this Agreement, it shall be deemed to refer to such foreign currency equivalent (i) as calculated as of the date of delivery of notice of a Direct Claim or Third Party Claim under Article 9 or (ii) otherwise as calculated as at the date of this Agreement.

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ARTICLE 2
SALE AND PURCHASE OF U.S. SHARES AND INTERNATIONAL SHARES

2.1.Sale and Purchase

2.1.1U.S. Shares

Upon the terms and subject to the conditions of this Agreement, ABB shall cause Sirius International to transfer and deliver to U.S. Purchaser, and Purchaser shall cause U.S. Purchaser to purchase and take delivery of, the U.S. Shares at the U.S. Closing, free and clear of all Encumbrances and with all rights attached and accruing to such U.S. Shares, in exchange for the U.S. Purchase Price (paid in accordance with Section 4.2.2).  For purposes of the making of the representations and warranties set forth in Articles 5 and 6 below at Closing, the U.S. Transaction shall be deemed not to have occurred, and for purposes of the covenants set forth in Section 7.2.4 below, Purchaser shall be deemed to have provided prior written consent with respect to the U.S. Transaction.

2.1.2International Shares

Upon the terms and subject to the conditions of this Agreement, ABB shall transfer and deliver to Purchaser, and Purchaser shall purchase and take delivery of, the International Shares at the Closing, free and clear of all Encumbrances and with all rights attached and accruing to such International Shares, in exchange for the International Purchase Price (paid in accordance with Section 4.3.2(a)).

2.2.Title

2.2.1U.S. Shares

Subject to Purchaser having caused U.S. Purchaser to pay the U.S. Purchase Price in accordance with Section 4.2.2, title of ownership to the U.S. Shares shall transfer to U.S. Purchaser at the U.S. Closing.

2.2.2International Shares

Subject to Purchaser having paid, or caused to be paid, to the extent applicable, the amounts set forth in Section 4.3.2(a), title of ownership to the International Shares shall transfer to Purchaser at the Closing.

ARTICLE 3
PURCHASE PRICE AND ADJUSTMENT

3.1.Purchase Price

(a)The purchase price for the International Shares (the “International Purchase Price”) shall equal (i) the sum of (a) Three Billion Two Hundred and Twenty Million Swedish kronor (SEK 3,220,000,000), (b) the Final Excess Amount, if any, and (c) the interest amounts payable by Purchaser to ABB pursuant to Section 3.5.5 less (ii) the sum of (x) the amount of the ABB Distribution, if any, (y) the Final Deficiency Amount, if any, and (z) the interest amounts payable by ABB to Purchaser pursuant to Section 3.5.5, if any.

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(b)The International Purchase Price and the U.S. Purchase Price are each exclusive of any Transfer Taxes, 75% of which shall be borne by ABB and 25% of which shall be borne by Purchaser.

3.2.Payment of U.S. Purchase Price

The purchase price for the U.S. Shares (the “U.S. Purchase Price”) shall be the U.S. GAAP book value of Sirius America as of the Measurement Date (in U.S. Dollars).  Purchaser shall cause U.S. Purchaser to pay the U.S. Purchase Price in full at the U.S. Closing in accordance with Section 4.2.2.

3.3.Payment of International Purchase Price

Purchaser shall pay, or shall cause to be paid, to the extent applicable, the amounts set forth in Section 4.3.2(a) at the Closing.

3.4.Closing Financial Statements; Disputes

3.4.1Unaudited Closing Financial Statements

(a)As soon as reasonably practicable after the Measurement Date: (i) ABB, assisted by the Business Auditors, shall prepare in good faith: (x) in accordance with U.S. GAAP consistently applied to the Financial Statements (so long as the Financial Statements were in accordance with U.S. GAAP), in Swedish kronor and in the form of Schedule 3.4.1(2), a consolidated balance sheet of the Acquired Group as of December 31, 2003, together with related consolidated income statements and statements of cash flow for the twelve month period then ended (collectively, the “Unaudited Closing Financial Statements”); and (y) a statement showing the calculation of Net Equity, determined on the basis of the Unaudited Closing Financial Statements and taking into account the adjustments set out in Schedule 3.4.1(1) (the “Unaudited Closing Net Equity Statement”); and (ii) ABB shall prepare consolidating financial statements with respect to each Acquired Company related to the Unaudited Closing Financial Statements in each case in the form of Schedule 3.4.1(2).  ABB shall deliver the Unaudited Closing Financial Statements, the Unaudited Closing Net Equity Statement and the consolidating financial statements described in sub-clause (ii) above to Purchaser within five (5) days of such statements being finalized by the Acquired Group and ABB.

(b)ABB shall:

(i)cause the Acquired Group to retain Reserves as of the Measurement Date relating to (x) the EPIX/Hartford dispute identified as Treaty 260, all underwriting years, in the Scan Re Memo, (y) the Reliance Re dispute identified as Treaty 189, all underwriting years, in the Scan Re Memo and (z) each Scan Re Dispute, in each case at a minimum value equal to the highest value of such Reserves as of December 31, 2002, March 31, 2003, June 30, 2003 and September 30, 2003, provided that the value of such Reserves with respect to the disputes identified in clauses (x), (y) and (z) of this Section 3.4.1(b)(i) as of the Measurement Date may be (A) lowered to nil if any amount is paid in a full and final settlement of such Scan Re Dispute, on or prior to the Measurement Date, (B) lowered to the amount proposed by the third party in writing to such dispute to be paid in full and final settlement

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thereof if such settlement remains outstanding for acceptance as at the Measurement Date or to the amount adjudicated, on or prior to the Measurement Date, by a court or arbitrator to be due to the third party to such dispute in full and final adjudication of all claims under such dispute or (C) lowered by the amount of any payments made, on or prior to the Measurement Date, in partial settlement of such Scan Re Dispute; and

(ii)set forth the value of each Reserve described in sub-clause (i) above in an appendix to the balance sheet included in the Unaudited Closing Financial Statements.

Purchaser and ABB hereby agree that establishing the value of each Reserve described in sub-clause (i) above in accordance with such sub-clause is in accordance with U.S. GAAP.

3.4.2Audit of Closing Financial Statements

(a)The Unaudited Closing Financial Statements shall be audited by the Business Auditors in accordance with generally accepted auditing standards in the United States and the Unaudited Closing Net Equity Statement shall be reviewed by the Business Auditors.  Upon completion of the audit, the Business Auditors shall deliver to ABB and Purchaser:

(i)(x) a copy of the Unaudited Closing Financial Statements, including the requisite footnotes thereto, all as adjusted to reflect any changes resulting from the Business Auditors’ audit of such statements and (y) the Business Auditors’ executed opinion thereon in the form set out in Schedule 3.4.2(1) stating that the Unaudited Closing Financial Statements were prepared in accordance with U.S. GAAP consistently applied to the Financial Statements (so long as the Financial Statements were in accordance with U.S. GAAP) and the audit was conducted in accordance with generally accepted auditing standards in the United States, which opinion shall be unqualified if delivered and dated on or after the Closing Date or, if delivered prior to the Closing and qualified, such qualified opinion shall be reissued as unqualified at the Closing (collectively, the “Audited Closing Financial Statements”); and

(ii)a copy of the Unaudited Closing Net Equity Statement, as adjusted to reflect any changes resulting from the Business Auditors’ review of such statement, and the Business Auditors’ unqualified and executed opinion in the form set out in Schedule 3.4.2(2) (collectively, the “Audited Closing Net Equity Statement”).

(b)ABB shall cause the Business Auditors, as part of their audit, to perform audit procedures as to the adequacy of the values and allowances for the Reserves relating to (i) the EPIX/Hartford dispute identified as Treaty 260, all underwriting years, in the Scan Re Memo, (ii) the Reliance Re dispute identified as Treaty 189, all underwriting years, in the Scan Re Memo, (iii) the receiveables/recoverables of the Acquired Group, (iv) each Scan Re Dispute and (v) the deferred tax assets of the Acquired Group, in each case as set forth in the Unaudited Closing Financial Statements.

(c)Provided that Purchaser has complied with its obligation to provide access pursuant to Section 3.4.3(a) as is reasonably required by ABB or the Business

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Auditors to perform their obligations under this Section 3.4.2, ABB shall procure that the Business Auditors deliver the Audited Closing Financial Statements and the Audited Closing Net Equity Statement to ABB and Purchaser no later than ninety (90) days after the Measurement Date.  The fees and expenses of the Business Auditors in connection with the Audited Closing Financial Statements and the Audited Closing Net Equity Statement shall be borne by ABB.

(d)Simultaneously with the delivery of the Audited Closing Financial Statements and the Audited Closing Net Equity Statement by the Business Auditors pursuant to Section 3.4.2(c), ABB shall deliver to Purchaser consolidating financial statements with respect to each Acquired Company related to the Audited Closing Financial Statements, all as adjusted to reflect any changes resulting from the Business Auditors’ audit of the Unaudited Closing Financial Statements, and in the form of Schedule 3.4.1(2).

3.4.3Access

(a)Following the Closing, until the Audited Closing Financial Statements and the Audited Closing Net Equity Statement become the Final Closing Financial Statements, Purchaser shall, and shall cause its Affiliates to, provide reasonable access on reasonable notice during normal business hours to ABB’s employees and representatives to the Acquired Group’s and each member of the Acquired Group’s respective offices, employees agents, accountants (including the Business Auditors) and actuaries and to premises, properties, books, accounting records and other documents (including supporting contractual documentation) of the Acquired Group or available to the Acquired Group reasonably required for the purpose of agreeing or settling any dispute in relation to the Audited Closing Financial Statements or the Audited Closing Net Equity Statement and allow ABB to take copies of such documents.  Neither Purchaser nor any of its Affiliates shall be under any obligation to disclose to ABB’s employees or representatives any information the disclosure of which, according to the advice of Purchaser’s legal counsel, is restricted by confidentiality obligations or applicable Law or would jeopardize the legal privilege, if any, accorded to any documents produced or prepared by the legal representatives of Purchaser or its Affiliates.

(b)Prior to the Closing, and following delivery of the Audited Closing Financial Statements and the Audited Closing Net Equity Statement pursuant to Section 3.4.2, ABB shall, and shall cause its Affiliates to provide reasonable access on reasonable notice during normal business hours to Purchaser’s auditors, employees and representatives to the Acquired Group’s and each member of the Acquired Group’s respective officers, employees, agents, accountants (including the Business Auditors) and actuaries and to the premises, properties, books, accounting records and other documents (including supporting contractual documentation and the work papers of the Business Auditors relating to the audit of the Financial Statements and the Audited Closing Financial Statements, provided that Purchaser’s auditors, employees and representatives have signed any release letter reasonably required by the Business Auditors in connection therewith) of the Acquired Group or available to the Acquired Group reasonably required for the purpose of reviewing the Audited Closing Financial Statements and the Audited Closing Net Equity Statement and/or the purpose of agreeing or settling any dispute in relation to the Audited Closing Financial Statements or the Audited Closing Net Equity Statement and allow Purchaser and its auditors to take copies of such documents.  Neither ABB or any of its Affiliates shall be under any obligation to disclose to Purchaser’s auditors, employees and representatives any information the disclosure of which, according to the advice of ABB’s legal counsel, is restricted by

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confidentiality obligations or applicable Law or would jeopardize the legal privilege, if any, accorded to any documents produced or prepared by the legal representatives of ABB or its Affiliates.

3.4.4Actuarial Review of Reserves

As soon as reasonably practicable after the Measurement Date, ABB shall cause:

(a)Tillinghast (i) to perform a loss and loss adjustment expense reserve review of each Acquired Company (other than Scandinavian Re and Sirius America) as of the Measurement Date, with the same scope as Tillinghast’s loss and loss adjustment expense reserve review of each Acquired Company as of December 31, 2002 and (ii) to deliver to ABB a report on such Reserves in the form of the report issued to Eric Elzvik on 8 April 2003 (the “Tillinghast Report”); and

(b)KPMG LLP (i) to perform a loss and loss adjustment expense reserve review of Sirius America as of the Measurement Date, with the same scope as KPMG LLP’s loss and loss adjustment expense reserve review of Sirius America as of December 31, 2002, and (ii) deliver to ABB a report on such Reserves in the form of the report issued to the board of directors of Sirius America on March 14, 2003 (the “KPMG Report”).

Prior to or concurrently with the delivery of the Audited Closing Financial Statements and the Audited Closing Net Equity Statement, ABB shall deliver to Purchaser the Tillinghast Report and the KPMG Report.  ABB shall cause the Business Auditors, as part of their audit, to perform audit procedures as to the adequacy of the Reserves of Scandinavian Re.

3.4.5Objection Notice

The Audited Closing Financial Statements and the Audited Closing Net Equity Statement shall be binding and conclusive upon ABB and Purchaser unless Purchaser shall have notified ABB in writing within forty-five (45) days after receipt of the Audited Closing Financial Statements and Audited Closing Net Equity Statement of any objections thereto (an “Objection Notice”); provided, however, that no objections may be made with respect to amounts in the income statements and statements of cash flow contained in the Audited Closing Financial Statements other than to the extent that such amounts affect amounts included in the Audited Closing Net Equity Statement.  A notice under this Section 3.4.5 shall be given in accordance with Section 11.7 and shall: (i) specify in reasonable detail the items or issues relating to the Audited Closing Financial Statements or the Audited Closing Net Equity Statement which are the subject of a dispute and provide a description in reasonable detail of the reasons for such dispute; and (ii) expressly state that such objections have been made by Purchaser in good faith and taking into account the adjustments set forth in Schedule 3.4.1(1).

3.4.6Disputes Auditors

If any dispute between ABB and Purchaser relating to objections validly made pursuant to Section 3.4.5 to the Audited Closing Financial Statements or the Audited Closing Net Equity Statement is not resolved by them within thirty (30) days after ABB’s receipt of

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an Objection Notice, Purchaser and ABB shall submit such dispute to the Washington, D.C. office of Deloitte & Touche LLP or, in the event Deloitte & Touche LLP is unable or unwilling to act, to the Washington, D.C. office of such other international accounting firm agreed between ABB and Purchaser (or, failing such agreement within seven (7) days of written notice by ABB or Purchaser to the other party, such other international accounting firm nominated by Deloitte & Touche LLP (or its designee)) (the “Disputes Auditors”).

3.4.7Procedures

(a)Before referring a matter to the Disputes Auditors, ABB and Purchaser shall agree on procedures to be followed by the Disputes Auditors (including procedures for presentation of evidence).  If ABB and Purchaser are unable to agree upon procedures within seven (7) days of notice to the other party that procedures need to be agreed pursuant to this Section 3.4.7(a), the Disputes Auditors shall establish the procedures giving due regard to the provisions of this Article 3 and the intention of ABB and Purchaser to resolve disputes as quickly, efficiently and inexpensively as reasonably possible.

(b)ABB and Purchaser shall, as promptly as practicable, submit evidence in accordance with the procedures agreed upon or established by the Disputes Auditors, and the Disputes Auditors shall decide the dispute in accordance therewith as promptly as practicable.  At all times pending resolution of any matter submitted to the Disputes Auditors pursuant to this Section 3.4, ABB and Purchaser shall, and shall cause their respective Affiliates to afford to, the Disputes Auditors reasonable access on reasonable notice during normal business hours, subject to the Disputes Auditors undertaking to preserve the confidentiality thereof, to all personnel, properties, books, contracts, records, electronically stored material, schedules, analyses and working papers of or relating to the Business for the purposes of deciding the dispute.

3.4.8Disputes Auditors’ Decision

The Disputes Auditors shall act as experts and not as arbitrators, shall review only the objections to the Audited Closing Financial Statements or Audited Closing Net Equity Statement as to which ABB and Purchaser are in dispute as set out in the Objection Notice and shall make their determination based upon the terms and conditions set forth in this Article 3 and within the range of (i) the Net Equity stated in the Audited Net Equity Statement; and (ii) the Net Equity proposed by Purchaser in the Objection Notice (or, if Purchaser does not propose a Net Equity in the Objection Notice, the lowest Net Equity that may be reasonably derived from the objections raised by Purchaser in the Objection Notice).  ABB and Purchaser agree that they will require the Disputes Auditors to render a draft of their decision within twenty-eight (28) days after referral of the dispute to the Disputes Auditors for a decision pursuant hereto and their final decision two (2) days later.  ABB or Purchaser may query manifest arithmetic errors in the draft decision of the Disputes Auditor; provided, however, that the Disputes Auditors shall respond to any such queries in their sole discretion.  The final decision of the Disputes Auditors shall be final and binding on ABB and Purchaser.

3.4.9Fees and Expenses

All fees and expenses of the Disputes Auditors shall be borne by ABB and Purchaser equally.

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3.4.10Final Closing Financial Statements

(a)The Audited Closing Financial Statements and the Audited Closing Net Equity Statement shall become final and binding in total on ABB and Purchaser upon the earliest to occur of:

(i)if no Objection Notice has been given, the expiration of the period within which Purchaser may notify ABB of any objections thereto pursuant to Section 3.4.5;

(ii)the written agreement by ABB and Purchaser that such Audited Closing Financial Statements and Audited Closing Net Equity Statement, together with any modifications thereto agreed by them, are final and binding; and

(iii)if a dispute has been submitted to the Disputes Auditors in accordance with Section 3.4.6, the date on which the Disputes Auditors have issued their final decision with respect to such dispute.

(b)The Audited Closing Financial Statements and Audited Closing Net Equity Statement, as adjusted, where applicable, pursuant to any agreement between the parties or pursuant to the decision of the Disputes Auditors, when final and binding on the parties in accordance with clause (a) above, are herein referred to as the “Final Closing Financial Statements”.  Notwithstanding any other provision of this Agreement to the contrary, the parties’ agreement on or determination of the Final Closing Financial Statements shall not affect (i) each party’s rights under Article 9, including rights relating to any breach of any of the representations and warranties set forth in Articles 5 and 6 or (ii) the content of such representations and warranties.

3.4.11Exclusive Remedy

Notwithstanding any other provision of this Agreement to the contrary, the procedures set out in this Section 3.4 shall be each party’s exclusive remedy against the other party to this Agreement with respect to any disputes relating to an adjustment to the International Purchase Price under this Article 3.

3.5.Adjustments

3.5.1Closing Adjustments for Audited Amounts

If the U.S. Closing and the Closing occur prior to the date when the Audited Closing Financial Statements and the Audited Closing Net Equity Statement become the Final Closing Financial Statements pursuant to Section 3.4.10, then:

(a)if there has been an ABB Distribution:

(i)in excess of the Audited Excess Amount, the aggregate amount payable by Purchaser at the Closing shall be decreased by the total of (x) the amount by which the ABB Distribution Amount exceeds the Audited Excess Amount and (y) the Retained Amount; or

(ii)of less than the Audited Excess Amount, the aggregate amount payable by Purchaser at the Closing shall be (x) increased by the difference

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between the Audited Excess Amount and the ABB Distribution Amount and (y) decreased by the Retained Amount; or

(iii)equal to the Audited Excess Amount, the aggregate amount payable by Purchaser at the Closing shall be decreased by the Retained Amount; or

(iv)and there is an Audited Deficiency Amount, the aggregate amount payable at the Closing shall be decreased by the total of (x) the Audited Deficiency Amount, (y) the ABB Distribution Amount and (z) the Retained Amount; or

(v)and there is neither an Audited Excess Amount nor an Audited Deficiency Amount, the aggregate amount payable by Purchaser at the Closing shall be decreased by the total of (x) the ABB Distribution Amount and (y) the Retained Amount; or

(b)if there has not been an ABB Distribution:

(i)and there is an Audited Excess Amount, the aggregate amount payable by Purchaser at the Closing shall be (x) increased by the Audited Excess Amount and (y) decreased by the Retained Amount; or

(ii)and there is an Audited Deficiency Amount, the aggregate amount payable by Purchaser at the Closing shall be decreased by the total of (x) the Audited Deficiency Amount and (y) the Retained Amount; or

(iii)and there is neither an Audited Excess Amount nor an Audited Deficiency Amount, the aggregate amount payable by Purchaser at the Closing shall be decreased by the Retained Amount.

3.5.2Closing Adjustments for Final Amounts

If the U.S. Closing and the Closing occur on or after the date when the Audited Closing Financial Statements and the Audited Closing Net Equity Statement become the Final Closing Financial Statements pursuant to Section 3.4.10, then at the Closing:

(a)if there is a Final Excess Amount, the aggregate amount payable by Purchaser at the Closing shall be (i) increased by an amount equal to the Final Excess Amount and (ii) decreased by the ABB Distribution Amount, if any; or

(b)if there is a Final Deficiency Amount, the aggregate amount payable by Purchaser at the Closing shall be decreased by an amount equal to the total of the Final Deficiency Amount and the ABB Distribution Amount, if any; or

(c)if there is neither a Final Excess Amount nor a Final Deficiency Amount, the aggregate amount payable by Purchaser at the Closing shall be decreased by the ABB Distribution Amount, if any.

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3.5.3Retained Amount Adjustment

If Section 3.5.1 applies to the Closing, then within three (3) Business Days after delivery of an Objection Notice, if any, Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, any amount by which the Retained Amount exceeds the Disputed Net Equity (the amount of the Retained Amount outstanding after such payment, if any, being referred to hereinafter as the “Outstanding Retained Amount”).

3.5.4Post-Closing Adjustments for Final Amounts

If Section 3.5.1 applies to the Closing, then within three (3) Business Days after the Audited Closing Financial Statements and the Audited Closing Net Equity Statement have become the Final Closing Financial Statements pursuant to Section 3.4.10:

(a)if there is a Final Excess Amount which is:

(i)less than the Audited Excess Amount, (x) ABB shall pay to Purchaser, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by Purchaser in writing, an amount equal to the amount, if any, by which the difference between the Audited Excess Amount and the Final Excess Amount is greater than the Outstanding Retained Amount or (y) Purchaser shall pay to ABB in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, an amount equal to the amount, if any, by which the Outstanding Retained Amount exceeds the difference between the Audited Excess Amount and the Final Excess Amount; or

(ii)greater than the Audited Excess Amount, Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, an amount equal to the total of (x) the difference between the Final Excess Amount and the Audited Excess Amount and (y) the Outstanding Retained Amount; or

(iii)equal to the Audited Excess Amount, Purchaser shall pay to ABB the Outstanding Retained Amount in Swedish kronor in immediately available funds to the account designated by ABB in writing; or

(b)if there is a Final Excess Amount and there was an Audited Deficiency Amount, Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, an amount equal to the total of the Audited Deficiency Amount, the Final Excess Amount and the Outstanding Retained Amount; or

(c)if there is a Final Excess Amount and there was neither an Audited Excess Amount nor an Audited Deficiency Amount, then Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, an amount equal to the total of (i) the Final Excess Amount and (ii) the Outstanding Retained Amount; or

(d)if there is a Final Deficiency Amount which is:

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(i)greater than the Audited Deficiency Amount, (x) ABB shall pay to Purchaser, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by Purchaser in writing, an amount equal to the amount, if any, by which the difference between the Final Deficiency Amount and the Audited Deficiency Amount is greater than the Outstanding Retained Amount or (y) Purchaser shall pay to ABB in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, an amount equal to the amount, if any, by which the Outstanding Retained Amount exceeds the difference between the Audited Deficiency Amount and the Final Deficiency Amount; or

(ii)less than the Audited Deficiency Amount, Purchaser shall pay to ABB in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by Purchaser in writing, an amount equal to the total of (x) the difference between the Final Deficiency Amount and the Audited Deficiency Amount and (y) the Outstanding Retained Amount; or

(iii)equal to Audited Deficiency Amount, Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, the Outstanding Retained Amount; or

(e)if there is a Final Deficiency Amount and there was an Audited Excess Amount, then:

(i)ABB shall pay to Purchaser, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by Purchaser in writing, the amount, if any, by which (i) the total of the Final Deficiency Amount and the Audited Excess Amount is greater than (ii) the Outstanding Retained Amount; or

(ii)Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, the amount, if any, by which (i) the Outstanding Retained Amount is greater than (ii) the total of the Final Deficiency Amount and the Audited Excess Amount; or

(f)if there is a Final Deficiency Amount and there was neither an Audited Excess Amount nor an Audited Deficiency Amount, then:

(i)Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, an amount equal to the amount, if any, by which the Outstanding Retained Amount exceeds the Final Deficiency Amount; or

(ii)ABB shall pay to Purchaser, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by Purchaser in writing, the amount, if any, by which the Final Deficiency Amount exceeds the Outstanding Retained Amount; or

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(g)if there is neither a Final Excess Amount nor a Final Deficiency Amount and there was an Audited Excess Amount:

(i)less than the Outstanding Retained Amount, Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, an amount equal to the difference between the Outstanding Retained Amount and the Audited Excess Amount; or

(ii)greater than the Outstanding Retained Amount, ABB shall pay to Purchaser, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by Purchaser in writing, an amount equal to the difference between the Outstanding Retained Amount and the Audited Excess Amount; or

(h)if there is neither a Final Excess Amount nor a Final Deficiency Amount and there was an Audited Deficiency Amount, then Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, an amount equal to the total of the Outstanding Retained Amount and the Audited Deficiency Amount; or

(i)if there is neither a Final Excess Amount nor a Final Deficiency Amount and there was neither an Audited Excess Amount nor an Audited Deficiency Amount, Purchaser shall pay to ABB, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB in writing, the Outstanding Retained Amount.

3.5.5Interest

(a)The aggregate amount payable by Purchaser at the Closing shall be increased by the amount of simple interest accrued on Three Billion Two Hundred and Twenty Million Swedish kronor (SEK 3,220,000,000) at an annual rate of three percent (3%), calculated on the basis of the actual number of days elapsed over 365, from January 1, 2004 to the Closing Date, compounded annually.

(b)Any amount payable by Purchaser pursuant to Section 3.5.3 or 3.5.4 shall be paid with simple interest thereon at an annual rate of three percent (3%), calculated on the basis of the actual number of days elapsed over 365, from the Closing Date to the date of actual payment, compounded annually.  Any amount payable by ABB pursuant to Section 3.5.4 shall be paid with simple interest thereon at an annual rate of three percent (3%), calculated on the basis of the actual number of days elapsed over 365, from the Closing Date to the date of actual payment, compounded annually.

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ARTICLE 4
CLOSING

4.1.Date and Place

4.1.1U.S. Closing

The U.S. Closing shall take place at the offices of White Mountains Insurance Group, Ltd. at Crawford House, 23 Church Street, Hamilton HM 11, Bermuda on the Closing Date immediately prior to the Closing.

4.1.2Closing

The Closing shall take place at the offices of White Mountains Insurance Group, Ltd. at Crawford House, 23 Church Street, Hamilton HM 11, Bermuda, at 10:00 a.m. on a date agreed by ABB and Purchaser that is not earlier than two (2) Business Days and not later than ten (10) Business Days following the satisfaction or waiver of the conditions set forth in Article 8 (other than those conditions that by their terms are to be satisfied or waived at or immediately prior to the Closing); provided, however, that if all the conditions set forth in Article 8 shall not have been satisfied or waived on such a date, then the Closing shall take place on the first Business Day on which all such conditions shall have been satisfied or waived.

4.2.Deliveries at the U.S. Closing

4.2.1Deliveries by ABB

At the U.S. Closing, ABB shall cause Sirius International to deliver to U.S. Purchaser (duly executed where appropriate) all certificates or other instruments representing the U.S. Shares, in each case duly signed and/or endorsed and/or accompanied by other documents required under applicable Law in order to transfer title to such U.S. Shares to U.S. Purchaser free and clear of all Encumbrances.

4.2.2Deliveries by Purchaser

At the U.S. Closing, Purchaser shall cause U.S. Purchaser to deliver to Sirius International, an amount equal to the U.S. Purchase Price, in U.S. Dollars, by electronic transfer in immediately available funds and to the account of Sirius International designated by ABB in writing at least three (3) Business Days prior to the U.S. Closing (such payment to be evidenced by confirmation to Sirius International from the relevant bank that such funds have been credited to such account).

4.3.Deliveries at the Closing

4.3.1Deliveries by ABB

At the Closing, ABB shall (or shall cause its Affiliates to) deliver to Purchaser (duly executed where appropriate):

(a)all certificates or other instruments representing the International Shares, in each case duly signed and/or endorsed and/or accompanied by other

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documents required under applicable Law in order to transfer title to such International Shares to Purchaser free and clear of all Encumbrances;

(b)unless otherwise requested by Purchaser at least seven (7) Business Days prior to the Closing, resignations, effective as of the Closing, of (i) each member and deputy member of the board of directors (or other comparable managing body) of each Acquired Company (other than any employee representative and any representative appointed by the Swedish Financial Supervisory Authority or any insurance or regulatory authority in any other jurisdiction) and (ii) the auditors of each Acquired Company;

(c)a certificate signed by an authorized officer of ABB, dated as of the Closing Date, to the effect that the conditions set out in Sections 8.2(a), (b) and (f) are satisfied, provided that any certifications therein with respect to Measurement Date Representations and Warranties shall only be made for the purpose of Section 8.2(a) and not Article 9;

(d)a good standing certificate for Sirius America and certified commercial register extracts for Sirius Holding, Sirius International and Sirius Rück, in each case from the appropriate government official and dated as of a date not earlier than ten (10) Business Days prior to the Closing Date;

(e)a clean, irrevocable letter of credit or bank guaranty, issued in favor of Purchaser by a bank or financial institution reasonably satisfactory to Purchaser in the amount of $40,000,000, substantially in the form set out in Annex 1; and

(f)a transitional services agreement duly executed by ABB, substantially in the form attached as Annex 5.

4.3.2Deliveries by Purchaser

At the Closing, Purchaser shall (or shall cause its Affiliates to) deliver to ABB (duly executed where appropriate):

(a)Three Billion Two Hundred and Twenty Million Swedish kronor, (SEK 3,220,000,000), subject to adjustment pursuant to Section 3.5, plus interest pursuant to Section 3.5.5(a), by electronic transfer in immediately available funds and to the account designated by ABB in writing at least three (3) Business Days prior to the Closing (such payment to be evidenced by confirmation to ABB from the relevant bank that such funds have been credited to such account);

(b)a certificate signed by an authorized officer of Purchaser, dated as of the Closing Date, to the effect that the conditions set out in Sections 8.3(a) and (b) are satisfied; and

(c) a transitional services agreement duly executed by Purchaser substantially in the form set out in Annex 5.

4.4.Escrow

If Section 3.5.1 applies to the Closing, on the Closing Date, Purchaser and ABB shall enter into an escrow agreement with Citibank N.A., or such other nationally

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recognized financial institution mutually acceptable to Purchaser and ABB (the “Escrow Agent”), in substantially the form attached as Annex 2 (the “Escrow Agreement”), and, upon consummation of the Closing, Purchaser shall deposit, or cause to be deposited, with the Escrow Agent pursuant to the Escrow Agreement an amount equal to the Retained Amount.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ABB

ABB represents and warrants to Purchaser, as of the date of this Agreement and as of the Closing Date, as follows; provided, however, that, solely with respect to Purchaser’s indemnification rights under Article 9, the Measurement Date Representations and Warranties instead shall be deemed to be made only as of the date of this Agreement and as of the Measurement Date.

5.1.Organization

Each of ABB and each Acquired Company is a company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization (except, in the case of good standing, for entities organized under the laws of any jurisdiction that does not recognize such concept) and has all requisite corporate or company power and authority to own its properties and assets and to carry on its business as presently being conducted.  ABB has delivered to Purchaser complete and correct copies of (i) the organizational documents of each Acquired Company, in each case as amended through the date of this Agreement and (ii) the share transfer books and minute books from January 1, 1999 to June 30, 2003, and if applicable, certificates of good standing for each Acquired Company.

5.2.Authority

5.2.1Corporate Power and Authority

ABB has all requisite corporate power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby.  The execution and delivery by ABB of this Agreement, the consummation by ABB of the transactions contemplated hereby and the performance by ABB of the provisions of this Agreement have been duly authorized by all necessary corporate action (including actions of the board of directors and, if required, the shareholders) on the part of ABB.  This Agreement has been duly executed and delivered by ABB and, assuming the due authorization, execution and delivery of this Agreement by Purchaser, this Agreement constitutes a legal, valid and binding obligation of ABB enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors rights generally from time to time in effect and, where applicable, to general principles of equity.

5.2.2No Conflicts

The execution and delivery by ABB of this Agreement, the consummation by ABB of the transactions contemplated hereby and the performance by ABB of the provisions of this Agreement do not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of, or result in,

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termination, cancellation or acceleration of any obligation or to a loss of a material benefit under, or result in the creation of any Encumbrance on any of the properties or assets of the Acquired Group under, or give rise to any increased, additional or accelerated rights or entitlements under, any provision of: (i) the organizational documents of ABB or any Acquired Company; or (ii) subject to the governmental filings and other matters referred to in Section 5.2.3 below, any (x) Law or (y) order, writ, injunction, decree, or judgment by or legally binding agreement or stipulation with any governmental authority (an “Order”), in each case, applicable to ABB or any Acquired Company or any of their respective properties or assets, except, in the case of clause (ii), for any such conflict, violation, breach or default, which, individually or in the aggregate, has not had and is not reasonably likely to result in a Material Adverse Effect.

5.2.3Governmental Authorization

No consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any governmental authority is required to be obtained or made by or with respect to ABB or any of its Affiliates in connection with the execution and delivery by ABB of this Agreement, the consummation by ABB of the transactions contemplated hereby or the performance by ABB of the provisions of this Agreement, except for: (i) approvals under applicable competition Law, including the HSR Act, the German “Gesetz gegen Wettbewerbsbeschränkungen” (act against restraints of competition) and Law No. 8884/1994 and Resolution No. 15/98 (of August 1998) of the Federative Republic of Brazil; (ii) the approval of the Swedish Financial Supervisory Authority, the Malaysian insurance regulator, the Bermuda insurance regulator, the Delaware Insurance Department, the New York Insurance Department and the insurance department of any State in the United States where any Acquired Company is deemed commercially domiciled under such State’s Law; and (iii) those the failure of which to obtain or make, individually or in the aggregate, have not had and are not reasonably likely to result in a Material Adverse Effect.

5.3.Capital Stock

5.3.1Capital Stock

The registered share capital of Sirius Holding amounts to SEK 100,000 and consists of 1,000 shares issued at a par value per share of SEK 100. The maximum share capital permitted by the current articles of association of Sirius Holding is SEK 400,000.  The registered share capital of Sirius International amounts to SEK 800,000,000 and consists of 8,000,000 shares issued at a par value per share of SEK 100.  The maximum share capital permitted by the current articles of association of Sirius International is SEK 1,000,000,000.  The issued and outstanding capital stock of Sirius Rück consists of 2 common shares.  The authorized capital stock of Sirius America consists of 50,000 ordinary shares, of which 42,000 are issued and outstanding.  The issued and outstanding capital stock of Sirius Belgium consists of 700,000 common shares.  The authorized, issued and outstanding capital stock of Scandinavian Re consists of 50,000,000 common shares and 1,000 preference shares.  All outstanding shares of capital stock of each Acquired Company have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights.  There are no bonds, debentures, notes or other indebtedness of ABB, any Acquired Company or any of their Affiliates having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of the capital stock of any Acquired Company may vote.  Except as set forth above, there are no securities, options, warrants, calls, rights or other Contracts of any kind obligating any Acquired Company, or

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obligating ABB or any of its Affiliates to cause any Acquired Company, to issue, deliver or sell, or cause to be issued, delivered or sold, shares of capital stock or other securities of any Acquired Company or obligating any Acquired Company, or obligating ABB or any of its Affiliates to cause any Acquired Company, to issue, grant, extend or enter into any such security, option, warrant, call, right or other Contract.  There are no outstanding contractual or other legally binding obligations, or obligations intended to be legally binding, of any Acquired Company to repurchase, redeem or otherwise acquire any shares of capital stock or other securities of any Acquired Company.  Except as set forth in Section 5.3.1 of the Disclosure Schedule, ABB owns the International Shares free and clear of any and all Encumbrances and Sirius Holding owns 100% of the issued and outstanding shares of Sirius International and Sirius Rück, in each case free and clear of any and all Encumbrances.  All of the issued and outstanding shares of capital stock of Sirius America, Sirius Belgium (in liquidation) and Scandinavian Re are owned by Sirius International, in each case free and clear of any and all Encumbrances.  For the avoidance of doubt, any right over such capital stock created in favor of Purchaser or its Affiliates by the agreement to sell the International Shares and the U.S. Shares pursuant to terms of this Agreement shall not be deemed an Encumbrance.

5.3.2Capital Maintenance

The capital contributions for all of the capital stock of Sirius Rück have not been repaid, in part or in full, in violation of any applicable capital maintenance Laws and other similar Laws.

5.4.Subsidiaries and Branch Offices

Section 5.4 of the Disclosure Schedule sets forth: (i) the Subsidiaries (other than Sirius International, Sirius Rück, Sirius America, Sirius Belgium and Scandinavian Re) of each Acquired Company as of December 31, 2002 and the date of this Agreement; and (ii) the location of each branch office of each Acquired Company as of the date of this Agreement.

5.5.Financial Information

5.5.1Financial Statements

The Financial Statements have been prepared from the books and records of the Acquired Group (other than Sirius Holding and Sirius Rück) and have been prepared in accordance with U.S. GAAP.  The Financial Statements fairly present in all material respects the consolidated financial condition of the Acquired Group (excluding Sirius Holding and Sirius Rück) as of the date thereof and the results of operations of the Acquired Group (excluding Sirius Holding and Sirius Rück) for the period then ended, in each case in accordance with U.S. GAAP.  Subject to Section 9.13, nothing in this representation and warranty shall be deemed to constitute a warranty as to the adequacy of any Reserves.

5.5.2Sirius Holding and Sirius Rück

Sirius Holding was duly registered on November 26, 2002 and, since that date, has not engaged in any business or activity other than the ownership of shares of capital stock of Sirius International and Sirius Rück, activities incidental thereto and entry into the Facility Agreement and the Pledge Agreement.  Sirius Holding has no properties or assets other than

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the capital stock of Sirius International and Sirius Rück.  As of the date of this Agreement, except as set forth in Section 5.5.2 of the Disclosure Schedule or in this Section 5.5.2, Sirius Holding has no debts, liabilities, obligations or commitments of any kind whatsoever, whether accrued, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, contingent, absolute, known or unknown, determined, determinable or otherwise.  Except as set forth in Section 5.5.2 of the Disclosure Schedule, Sirius Rück has no debts, liabilities, obligations or commitments of any kind whatsoever, whether accrued, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, contingent, absolute, known or unknown, determined, determinable or otherwise, as of December 31, 2002 that would be required to be reflected on a balance sheet (or in the notes thereto) prepared in accordance with generally accepted accounting principles in Germany.

5.5.3Undisclosed Liabilities

There are no debts, liabilities, obligations or commitments of the Acquired Group of any kind whatsoever, whether accrued, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, contingent, absolute, known or unknown, determined, determinable or otherwise, that would be required, as of the date(s) this warranty is made, to be reflected on a consolidated balance sheet (or in the notes thereto) prepared in accordance with U.S. GAAP, other than liabilities or obligations:

(a)reflected or reserved against on the audited balance sheet (or in the notes thereto) included in the Financial Statements or the unaudited balance sheet (or in the notes thereto) included in Section 5.5.2(2) of the Disclosure Schedule;

(b)incurred since December 31, 2002 in the ordinary course of business and not otherwise in violation of this Agreement;

(c)for Taxes for periods in respect of which ABB is obliged to indemnify Purchaser under Section 9.6; or

(d)reasonably evident from any documents or matters disclosed in the Disclosure Schedule, or which are otherwise liabilities or obligations to the extent arising from items specifically addressed by any other warranties in this Article 5 but are not required to be disclosed pursuant to such warranties (whether because they do not rise to the materiality threshold in such warranties or fall outside any date limitations in such warranties or are not required to be disclosed due to knowledge limitations in such warranties or otherwise).

Subject to Section 9.13, nothing in this representation and warranty shall be deemed to constitute a guarantee of the adequacy of the Reserves.

5.5.4Investments

Except as set forth in Section 5.5.4(1) of the Disclosure Schedule, the Acquired Group has good and marketable title to all of the investments constituting the Investment Portfolio, free and clear of all Encumbrances other than Permitted Encumbrances.  The execution and delivery by ABB of this Agreement, the consummation by ABB of the transactions contemplated hereby and the performance by ABB of the provisions of this Agreement do not, and will not, result in the creation of any Encumbrance, other than a Permitted Encumbrance, on any of the investments constituting the Investment Portfolio.

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Section 5.5.4(2) of the Disclosure Schedule sets forth a true and correct list of all investments constituting the Investment Portfolio as of October 31, 2003, the issuer of such investments, the nominal amount owned of such investments and the market value with respect to public investments (or estimated market value with respect to private investments, determined on a basis consistent with the past practice of the Acquired Group since January 1, 2002 of the Acquired Group) of such investments as of such date.  Except as set forth in Section 5.5.4(3) of the Disclosure Schedule, as of the date of this Agreement, none of the investments constituting the Investment Portfolio which are directly held by an Acquired Company is in default in the payment of principal or interest or dividends.  As of the date of this Agreement, all such investments comply with the Investment Guidelines.

5.5.5Affiliate Contracts

Section 5.5.5 of the Disclosure Schedule sets forth a true and correct list, as of the date of this Agreement, of all Contracts representing future liabilities or receivables in excess of SEK 500,000 (or its foreign currency equivalent) (other than: (i) Assumed Reinsurance Agreements or Ceded Reinsurance Agreements with an effective date commencing prior to January 1, 2001 or Direct Insurance Agreements with an effective date commencing prior to January 1, 2002 (but not any such Contracts between members of the Acquired Group, which shall be disclosed); (ii) Disclosed Insurance Agreements (but not any such Disclosed Insurance Agreements between members of the Acquired Group, which shall be disclosed); (iii) Insurance Policies; and (iv) the ABB Instruments), between any Acquired Company, on the one hand, and ABB or any of its Affiliates, on the other hand (collectively, the “Affiliate Contracts”).  All of the Affiliate Contracts are valid, binding and enforceable against each member of the ABB Group party thereto in accordance with their terms and conditions, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors rights generally from time to time in effect and, where applicable, to general principles of equity.

5.5.6Affiliate Instruments

There are no commercial paper, notes, debentures, securities, options, warrants, calls, puts, rights and other similar financial instruments, issued by ABB or any of its Affiliates (“Affiliate Instruments”) and held or owned by an Acquired Company as of the date of this Agreement.

5.5.7Subsequent Events

Except as set forth in Section 5.5.7 of the Disclosure Schedule, from December 31, 2002 to the date of this Agreement, the Acquired Group has conducted the Business in all material respects in the ordinary course of the Acquired Group (other than as a result of ABB’s agreement in Section 7.2.4(dd) not to enter into any Contracts in respect of the Financial Risks Business or the reaction of third parties, whether prior to or after the date of this Agreement, to the Acquired Group’s decision not to enter into any such Contracts).  Except as set forth in Section 5.5.7 of the Disclosure Schedule, from December 31, 2002 to the date of this Agreement, there has not occurred any circumstance, change in, or effect on the Acquired Group, taken as a whole, that, individually or the aggregate, has had or is reasonably likely to result in a Material Adverse Effect, other than changes or effects resulting from (i) changes in general economic conditions or financial market conditions (including currency rate fluctuations and interest rate changes), (ii) any decline in the value of the Investment Portfolio, or (iii) catastrophe events with an impact in the ordinary course of

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the Business.  Without limiting the generality of the first sentence, Section 5.5.7 of the Disclosure Schedule sets forth a description of each action taken by any Acquired Company on or after January 1, 2003 and on or prior to the date of this Agreement that would have been restricted pursuant to Section 7.2.4(d), (f), (g), (i), (j)(iii), (w) or (z) if this Agreement were in effect during such period.

5.5.8Insurance Reserves

(a)None of the Reserves reflected on the audited balance sheet included in the Financial Statements have been discounted.  Subject to Section 9.13, nothing in this representation and warranty shall be deemed to constitute a warranty as to the adequacy of any Reserves.

(b)ABB has delivered to Purchaser true and complete copies of any and all actuarial reports, actuarial certificates, loss and loss adjustment expense reserve reports and other reports prepared by any third party actuarial consultant prior to the date of this Agreement on behalf of or made available to ABB or any of its Affiliates, including any Acquired Company, in each case relating to the adequacy or determination of the Reserves as of any date after January 1, 2002.

5.5.9Scandinavian Re Affiliate Commitments

Section 5.5.9 of the Disclosure Schedule sets forth (i) a true and correct list of each Scandinavian Re Affiliate Commitment, (ii) details of the liability as of November 30, 2003, of each Acquired Company under each Scandinavian Re Affiliate Commitment, (iii) the amount of the maximum potential liability of each Acquired Company under each Scandinavian Re Affiliate Commitment and (iv) details of any Encumbrances on the properties or assets of any Acquired Company relating to each Scandinavian Re Affiliate Commitment.

5.6.Compliance with Law

5.6.1Applicable Law

Each Acquired Company and its respective properties, assets, operations and businesses have been and are in compliance with: (i) the terms of such Acquired Company’s organizational documents; (ii) in all material respects, all Laws applicable to such Acquired Company or its operations or business, or by which any of its properties or assets are bound; (iii) all applicable orders and finally binding writs, judgments, injunctions, awards and decrees of any court or other governmental authority or any arbitrator; and (iv) such Acquired Company’s Permits, except, in the case of clauses (iii) and (iv), where the failure to comply, individually or in the aggregate, has not had, and is not reasonably likely to result in, a Material Adverse Effect.

5.6.2Permits

Section 5.6.2(1) of the Disclosure Schedule sets forth all governmental licenses, permits, approvals, determinations of eligibility and authorizations (“Permits”) held by the Acquired Group as of the date of this Agreement, which are all the Permits required in connection with the conduct of the Business as currently conducted by the Acquired Group and are, in all material respects, valid and in full force and effect.  For each Acquired

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Company, Section 5.6.2(2) of the Disclosure Schedule lists all jurisdictions in which such Acquired Company is licensed and authorized to write, and writes, insurance or reinsurance as of the date of this Agreement.  Between January 1, 2001 and the date of this Agreement, no insurance regulator in any jurisdiction (other than the jurisdiction in which it is incorporated) has notified any Acquired Company, in writing, that such Acquired Company is commercially domiciled in such jurisdiction.  Neither ABB nor any of its Affiliates has received, between January 1, 2001 and the date of this Agreement, any written notice from any governmental authority that it has engaged in any activity which will cause non-renewal, revocation or suspension of any Permit of the Acquired Group.  All material registrations and filings between January 1, 2001 and the date of this Agreement to insurance regulatory authorities in relation to Permits by or on behalf of each Acquired Company have complied in all material respects with applicable Law in effect when filed, and no material deficiencies have been asserted in writing between January 1, 2001 and the date of this Agreement by any such regulatory authority with respect to such registrations or filings that have not been satisfied.

5.6.3Notice of Violations

Except as set forth in Section 5.6.3 of the Disclosure Schedule, between January 1, 2001 and the date of this Agreement, neither ABB nor any of its Affiliates has received any written notice from any governmental authority alleging any violation in any material respect of any applicable Law by any Acquired Company which remains unresolved.

5.6.4Judgments, Decrees and Orders

None of the Acquired Companies nor, to the knowledge of ABB, any of the directors of the Acquired Companies or Senior Executives (in their capacity as such) is a party to or subject to any judgment, decree, order, award, or injunction of any governmental authority or arbitrator that would restrict in any material respect the future conduct of the Business.

5.6.5Areas Covered by Other Provisions

This Section 5.6 does not relate to labor and employment matters (to which Section 5.11 is applicable), employee benefits matters (to which Section 5.12 is applicable), Tax matters (to which Section 5.13 is applicable), litigation matters (to which Section 5.14 is applicable), or environmental matters (to which Section 5.15 is applicable).

5.7.Personal Property

Each Acquired Company has valid title to, or subsisting leasehold interests in or licenses to, all material tangible personal property used or held for use by it.  Except as set forth in Section 5.7(1) of the Disclosure Schedule, all such material personal property which is owned by such Acquired Company is held by it free and clear of any and all Encumbrances other than Permitted Encumbrances.  With respect to all leases for material personal property to which an Acquired Company is a party: (i) all such leases are valid and subsisting and in full force and effect, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors rights generally from time to time in effect and, where applicable, to general principles of equity; and (ii) neither ABB nor any of its Affiliates has received between January 1, 2001 and the date of this Agreement any written notice that it is, nor, to the knowledge of ABB, is any other party, in material breach of or in

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material default under any such lease.  Except as set forth in Section 5.7(2) of the Disclosure Schedule, there is no tangible personal property which is owned, leased or licensed by ABB or any of its Affiliates (other than an Acquired Company) and used by the Acquired Group and is necessary for the operation of the Business as operated by the Acquired Group as at the date of this Agreement that will no longer be permitted to be used by the Acquired Group following the consummation of the transactions contemplated hereby on substantially the same terms as applicable to the Acquired Group immediately prior to the Closing.

5.8.Real Property

5.8.1List of Real Property

Section 5.8.1 of the Disclosure Schedule sets forth a description of all real property owned, leased or used by each Acquired Company as of the date of this Agreement, describing: (i) any Acquired Company holding interests in such real property; (ii) the street address of such real property; (iii) whether such real property is owned or leased; (iv) any interests of ABB or any of its Affiliates (other than the Acquired Group) in such real property; and (v) any Encumbrances (other than Permitted Encumbrances and the Encumbrances set forth in clauses (ii) and (iii) of Section 5.8.2) on such Acquired Company’s interest in such real property.  Except as set forth in Section 5.8.1 of the Disclosure Schedule, no portion of any real property owned, leased or used by the Acquired Group is leased by the relevant member of the Acquired Group to any third party.

5.8.2Owned Real Property

The Acquired Group has valid title to all real property owned by it (“Owned Real Property”), in each case free and clear of any and all Encumbrances other than: (i) Permitted Encumbrances; (ii) easements, covenants, rights-of-way and similar restrictions that do not materially affect the (x) use or (y) book value of such Owned Real Property if such restrictions existed at the time it was acquired or the market value of such Owned Real Property if such restrictions arose after it was acquired by the Acquired Group; and (iii) zoning and building restrictions.

5.8.3Leased Real Property

With respect to all real property leased by the Acquired Group and all real property owned or leased by ABB or any of its Affiliates and used by the Acquired Group (collectively, “Leased Real Property”), ABB has delivered to Purchaser true and complete copies of all related leases, including all amendments and modifications thereto.  With respect to each Leased Real Property: (i) each lease is valid and subsisting and in full force and effect, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors rights generally from time to time in effect and where applicable to general principles of equity; and (ii) neither ABB nor any of its Affiliates has received between January 1, 2001 and the date of this Agreement any written notice that it is, nor, to the knowledge of ABB is any other party thereto, in material breach of or in material default under any lease relating to such Leased Real Property.

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5.9.Intellectual Property

5.9.1Jointly Used Intellectual Property

Except as set forth in Section 5.9.1 of the Disclosure Schedule, there is no Intellectual Property owned or licensed by ABB or any of its Affiliates (other than an Acquired Company) which is used by the Acquired Group and is necessary for the operation of the Business as operated by the Acquired Group as at the date of this Agreement that will no longer be permitted to be used by the Acquired Group following the consummation of the transactions contemplated hereby on substantially the same terms as applicable to the Acquired Group immediately prior to the Closing.  There is no other material Intellectual Property (other than shrink-wrap, off-the-shelf or other software readily available commercially) which is used by the Acquired Group and is necessary for the operation of the Business as operated by the Acquired Group as at the date of this Agreement that will no longer be permitted to be used by the Acquired Group following the consummation of the transactions contemplated hereby on substantially the same terms as applicable to the Acquired Group immediately prior to the Closing.

5.9.2Registered Intellectual Property

(a)Section 5.9.2(1) of the Disclosure Schedule contains a true and correct list of all patents, patent applications, registered trademarks, trademark applications, registered designs and applications for registered designs and Internet domain names of each Acquired Company as of the date of this Agreement (collectively, “Registered Intellectual Property”).

(b)The Registered Intellectual Property is owned by the Acquired Group, free and clear of any and all Encumbrances other than Permitted Encumbrances.

(c)All registration, renewal and other maintenance fees in respect of the Registered Intellectual Property due and payable have been paid in full.

(d)Except as set forth in Section 5.9.2(2) of the Disclosure Schedule: (i) none of ABB and its Affiliates has received written notice of any legal proceedings instituted or threatened in writing against an Acquired Company in relation to any Registered Intellectual Property which is pending as of the date of this Agreement; and (ii) to the knowledge of ABB, the use by any Acquired Company of the Registered Intellectual Property does not infringe the Intellectual Property of any third Person.

(e)To the knowledge of ABB, all Registered Intellectual Property is valid and enforceable, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors rights generally from time to time in effect and, where applicable, to general principles of equity and is not being infringed or opposed by any Person.

(f)No Acquired Company has granted to any Person, including ABB or any of its Affiliates (other than an Acquired Company), any license to use any Registered Intellectual Property.

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5.9.3Other Intellectual Property

(a)All Intellectual Property used in the Business other than the Registered Intellectual Property (“Other Intellectual Property”) is owned by, or licensed to or, to the knowledge of ABB, used under the authority of the owner by, an Acquired Company.

(b)(i) Neither ABB nor any of its Affiliates has received written notice of any legal proceedings instituted against an Acquired Company in relation to any Other Intellectual Property which is pending as of the date of this Agreement; and (ii) to the knowledge of ABB, the use by any Acquired Company of any Other Intellectual Property does not infringe in any material respect the Intellectual Property of any third Person.

(c)No Acquired Company has granted to any Person, including ABB or any of its Affiliates (other than an Acquired Company), any express written license to use any Other Intellectual Property.

5.9.4Licensed Intellectual Property

(a)Section 5.9.4 of the Disclosure Schedule contains a true and correct list as of the date of this Agreement of all material express licenses from any Person under which Other Intellectual Property is used in the Business by any Acquired Company as of the date of this Agreement (other than shrink wrap or off-the-shelf software freely available commercially) (the “Licensed Intellectual Property”) and, except to the extent indicated in such Section 5.9.4 of the Disclosure Schedule, ABB has delivered to Purchaser true and complete copies of all related licenses, including all amendments and modifications thereto.

(b)No notice of a material default has been sent or received, between January 1, 2001 and the date of this Agreement, by ABB or any of its Affiliates under any such license which remains uncured as of the date of this Agreement.

5.10.Contracts

5.10.1Direct Insurance and Reinsurance Agreements

(a)Set forth in Section 5.10.1(1) of the Disclosure Schedule is a list, true and correct in all material respects, as of November 30, 2003, of each Direct Insurance Agreement with an effective date commencing on or after January 1, 2002 pursuant to which any Acquired Company (other than Scandinavian Re) has continuing obligations or rights as of the date of this Agreement, including a description of the name of either the insured (if such information is available), or the agent, the name of the broker, type of contract, inception date, estimated premium and limits.

(b)Set forth in Section 5.10.1(2) of the Disclosure Schedule is a true and correct list, as of November 30, 2003, of each Assumed Reinsurance Agreement with an effective date commencing on or after January 1, 2001 pursuant to which any Acquired Company (other than Scandinavian Re) has continuing obligations or rights as of the date of this Agreement, including a description of the name of the ceding company, the name of the broker, type of contract, inception date, estimated premium and limits.

(c)Set forth in Section 5.10.1(3) of the Disclosure Schedule is a true and correct list, as of November 30, 2003, of each Ceded Reinsurance Agreement with an effective date commencing on or after January 1, 2001 pursuant to which any Acquired

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Company (other than Scandinavian Re) has continuing obligations or rights as of the date of this Agreement, including a description of the name of the reinsurers and retrocessionaires, type of contract, inception date, estimated premium and limits.

(d)Set forth in Section 5.10.1(4) of the Disclosure Schedule is a true and correct list, as of November 30, 2003, of (i) each reinsurance pool to which an Acquired Company has assumed reinsurance risks currently in force and (ii) all assigned pools in which an Acquired Company is participating arising from the requirements of insurance Laws (collectively, “Reinsurance Pools”).

(e)Set forth in Section 5.10.1(5) of the Disclosure Schedule is a true and correct list of (i) each Direct Insurance Agreement and each Assumed Reinsurance Agreement to which Scandinavian Re is or has ever been a party and (ii) as of November 30, 2003, each Ceded Reinsurance Agreement to which Scandinavian Re is a party, including, in the case of sub-clauses (i) and (ii) above, a description of the cedant or broker, the type of contract, inception date, estimated premium, limits and whether any Acquired Company has any continuing rights or obligations thereunder (in which case, such contract has been described as “In force” in Section 5.10.1(5) of the Disclosure Schedule) (collectively, the “Scan Re Agreements”).

(f)Except as set forth in Section 5.10.1(6) of the Disclosure Schedule, as of the date of this Agreement, (i) to the knowledge of ABB or any Acquired Company, no reinsurer or retrocessionaire of an Acquired Company is the subject of a rehabilitation, liquidation, conservatorship, receivership or bankruptcy proceeding, and (ii) no written notice of intended cancellation has been received by ABB or any of its Affiliates from any reinsurer or retrocessionaire of an Acquired Company with respect to any Ceded Reinsurance Agreement.

(g)The Direct Insurance Agreements, the Assumed Reinsurance Agreements, the Ceded Reinsurance Agreements, Reinsurance Pools and the Scan Re Agreements required to be listed in Sections 5.10.1(1), 5.10.1(2), 5.10.1(3), 5.10.1.(4) and 5.10.1(5) respectively, of the Disclosure Schedule are collectively referred to hereinafter as the “Disclosed Insurance Agreements”.

(h)All of the Disclosed Insurance Agreements are valid, binding and enforceable against the applicable Acquired Company and, to the knowledge of ABB or any Acquired Company, against the other parties thereto in accordance with their respective terms, subject in each case to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors rights generally from time to time in effect and, where applicable, to general principles of equity.  Except as set forth in Section 5.10.1(7) of the Disclosure Schedule, neither ABB nor any of its Affiliates has received (x) between January 1, 2002 and the date of this Agreement with respect to Direct Insurance Agreements or (y) between January 1, 2001 and the date of this Agreement with respect to Assumed Reinsurance Agreements, Ceded Reinsurance Agreements, Reinsurance Pool and Scan Re Agreements, any written notice that it is, nor to the knowledge of ABB or any Acquired Company, is any other party thereto, in default or breach (save in relation to the timely payment of premiums or a liquidation, conservatorship, receivership or bankruptcy proceeding to which a reinsurer or retrocessionaire is subject and otherwise disclosed in Section 5.10.1(6) of the Disclosure Schedule), under:

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(i)any Direct Insurance Agreement required to be listed in Section 5.10.1(1) of the Disclosure Schedule, except for defaults or breaches which are not material, in the aggregate, with respect to the total amount of annual premiums derived by the Acquired Group from the particular agent to which such Direct Insurance Agreement relates;

(ii)any Assumed Reinsurance Agreement required to be listed in Section 5.10.1(2) of the Disclosure Schedule, except for defaults or breaches which are not material with respect to such Assumed Reinsurance Agreement; or

(iii)any Ceded Reinsurance Agreement, Reinsurance Pool or Scan Re Agreement required to be listed in Section 5.10.1(3), Section 5.10.1(4) or Section 5.10.1(5), respectively, of the Disclosure Schedule, except for defaults or breaches which are not material with respect to such Ceded Reinsurance Agreement; provided that, for the avoidance of doubt, defaults or breaches that affect the collectibility of such Ceded Reinsurance Agreement (other than arising from the liquidation, conservatorship, receivership or bankruptcy proceeding to which a reinsurer or retrocessionaire is subject and otherwise disclosed in Section 5.10.1(6) of the Disclosure Schedule) shall be deemed material.

5.10.2Material Contracts

(a)Set forth in Section 5.10.2(1) of the Disclosure Schedule is a true and correct list, as of the date of this Agreement, of Contracts of the following types under which, as of the date of this Agreement, any obligation or liability exists (but excluding any Assumed Reinsurance Agreements, Ceded Reinsurance Agreements, Direct Insurance Agreements or Reinsurance Pools) and to which, at the date of this Agreement, any Acquired Company is a party (each, a “Material Contract”):

(i)a Contract with any managing general agent, agent, reinsurance intermediary, claims adjuster or claims administrator or broker of an Acquired Company pursuant to which such party received compensation or commissions of (x) SEK 8,000,000 (or its foreign currency equivalent) or more in the fiscal year ended December 31, 2002 or (y) SEK 4,000,000 (or its foreign currency equivalent) in the period from January 1, 2003 to June 30, 2003 or (z) to whom any underwriting or claims settlement authority is delegated;

(ii)a Contract: (x) containing a provision limiting the ability of any Acquired Company to engage in any line of insurance or reinsurance business in any geographical area or to compete with any Person; or (y) providing for “exclusivity” as a result of which any Acquired Company is restricted with respect to distribution and marketing;

(iii)a Contract which is otherwise required to be disclosed under this Section 5.10.2 and pursuant to which the consummation of any of the transactions contemplated hereby or the execution and delivery, performance or effectiveness of this Agreement will conflict with, result in a violation or breach of, or constitute a default under (with or without notice or lapse of time

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or both), or give rise under such Contract to any right of, or result in, a termination, right of first refusal, amendment, revocation, cancellation or acceleration, or loss of material benefit, or to increased, additional or accelerated rights or entitlements of any Person;

(iv)a Contract preventing the solicitation for employment of third parties by the applicable Acquired Company;

(v)a “standstill” Contract prohibiting an Acquired Company from acquiring the assets or securities of any person;

(vi)a partnership, joint venture, shareholders or other similar Contract with any Person;

(vii)all Contracts relating to the borrowing of money or the deferred purchase price of Property in an amount in excess of SEK 4,000,000 (or its foreign currency equivalent) (other than repurchase agreements and reverse repurchase agreements entered into in the ordinary course of managing an Acquired Company’s investments and consistent with past practice), or the direct guarantee of any obligation for, or Contracts to service the repayment of, borrowed money or any other liability in respect of indebtedness for borrowed money in an amount in excess of SEK 4,000,000 (or its foreign currency equivalent) of any other Person;

(viii)a lease, sublease, license (excluding computer software or Contracts disclosed in Section 5.9 of the Disclosure Schedule) or rental or use Contract to which an Acquired Company is a party with respect to personal property used by an Acquired Company in the conduct of its Business, operations or affairs and providing for annual rental or license payments to be paid by or on behalf of an Acquired Company in excess of SEK 4,000,000 (or its foreign currency equivalent);

(ix)a Contract relating to the future disposition or acquisition, after the date of this Agreement, of any investment in any Person or of any interest in any business enterprise (other than the disposition or acquisition of investments in the ordinary course of the business of the applicable Acquired Company, including the acquisition of investments to form part of the Investment Portfolio), or requiring an Acquired Company to purchase in the future, after the date of this Agreement, any security (other than the disposition or acquisition of investments in the ordinary course of business of the applicable Acquired Company, including the acquisition of investments to form part of the Investment Portfolio);

(x)a Contract with a Person other than an Acquired Company relating to computer software licenses (other than licences disclosed in Sections 5.9.3 or 5.9.4 of the Disclosure Schedule), data processing, information technology or other corporate administrative services or computer hardware leases representing non-terminable future liabilities in excess of SEK 4,000,000 (or its foreign currency equivalent);

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(xi)a power of attorney given to a Person other than a director, officer or Employee of an Acquired Company which is currently effective and outstanding, other than powers of attorney which are required by Law or which have been granted pursuant to requirements of applicable insurance or securities rules and regulations;

(xii)a Contract under which an Acquired Company has continuing obligations entered into in connection with the settlement or other resolution of any claim, action, suit, investigation, arbitration or legal, administrative or other proceeding (other than settlements or resolutions relating to a Direct Insurance Agreement, Assumed Reinsurance Agreement, Ceded Reinsurance Agreement, Reinsurance Pool or Scan Re Agreement); and

(xiii)a Contract (other than Contracts cancelable at will or with no more than 90 days’ notice, in each case without penalty) not listed in clauses (i) to (xii) above, representing future liabilities or receivables of more than SEK 8,000,000 (or its foreign currency equivalent).

(b)All of the Material Contracts are valid, binding and enforceable against the applicable Acquired Company and, to the knowledge of ABB or any Acquired Company, against the other parties thereto in accordance with their respective terms subject, in each case, to applicable bankruptcy, reorganization, moratorium and other laws affecting creditors rights generally from time to time in effect and, where applicable, to general principles of equity.  Neither ABB nor any of its Affiliates has received between January 1, 2001 and the date of this Agreement any written notice which remains outstanding that it is, nor, to the knowledge of ABB or any Acquired Company, is any other party thereto, in material breach or material default under any Material Contract.

5.11.Employees

5.11.1Agreements

Section 5.11.1 of the Disclosure Schedule lists, as of the date of this Agreement: (i) each and every employment agreement relating to a current or former Senior Executive under which any Acquired Company has any outstanding future or contingent obligations or liabilities; and (ii) each and every labor and collective bargaining agreement (other than national or industry wide standard collective bargaining agreements or collective bargaining agreements imposed by applicable Law) applicable to any Employee or Former Employee under which any Acquired Company has any outstanding future or contingent obligations or liabilities.  ABB has delivered true and complete copies of each agreement listed in Section 5.11.1 of the Disclosure Schedule to Purchaser.

5.11.2Labor Relations

There is no pending or, to the knowledge of ABB, threatened in writing and since January 1, 2002, there has been no: (i) labor strike, work stoppage or lockout against any Acquired Company; (ii) unfair labor practice charge or complaint against any Acquired Company before any governmental authority; (iii) material union grievance against any Acquired Company; (iv) representation or certification proceeding or petition seeking a representation or certification proceeding involving any Acquired Company; (v) material employment discrimination charge (including as to pay or other employment conditions)

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against any Acquired Company; or (vi) other material claim or proceeding against any Acquired Company by an Employee or Former Employee, in each case that has not been fully and finally resolved as of the date of this Agreement.  Each Acquired Company is in material compliance with all Laws related to labor, employment, employment standards, discrimination (including as to pay or other employment conditions) and health and safety.

5.11.3Employees

Section 5.11.3 of the Disclosure Schedule sets out (i) the following information, as of October 31, 2003 with respect to each Employee: name, title, principal place of employment, base salary or wage rate and target bonus amount and (ii) the aggregate annual base salary payroll as of October 31, 2003 for each Acquired Company.

5.11.4No Changes in Compensation

Except as set forth in Section 5.11.4 of the Disclosure Schedule or as required by applicable Law or currently effective collective bargaining agreements, since December 31, 2002, no Acquired Company has (i) except as permitted by Section 7.2.4(d), increased the salary or wage rate of any Employee, other than increases in the ordinary course of the business of the applicable Acquired Company, (ii) granted any increase in the basis of calculation of any bonus entitlement for any Employee, or (iii) agreed or committed to take any of the actions described in this Section 5.11.4.

5.12.Employee Benefit Plans

5.12.1List of Employee Benefit Plans

Section 5.12.1(1) of the Disclosure Schedule contains a true and correct list as of the date of this Agreement of all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), whether or not such plans are covered by ERISA) and all other material pension, retirement, termination indemnity, early retirement, savings, deferred compensation, profit sharing, severance, change in control, retention, bonus, incentive, stock option, restricted stock, stock appreciation right, stock purchase, phantom equity, welfare benefit, retiree medical and supplemental retirement, plans, programs or arrangements that currently apply to (i) any group of Employees, (ii) any Senior Executive listed in Section 5.12.1(2) of the Disclosure Schedule or (iii) with respect to any such plan in Switzerland relating to Sirius International, a single Employee, in each case in respect of any Employee’s employment by any Acquired Company or with respect to which any Acquired Company has any actual or contingent liability, excluding any plan, program or arrangement sponsored by any government, or governmental entity, union or employee organization or any other Person other than a member of the ABB Group, such as social security or similar programs or government-mandated programs (each, an “Employee Benefit Plan”).  There are no plans, programs or arrangements providing Retirement Benefits for the Employees which will transfer to Purchaser or its Affiliates after Closing by operation of laws or otherwise other than the Transferred Plans.  No Employee Benefit Plan shall partially transfer to Purchaser after the Closing by operation of Law or otherwise.  Each Employee Benefit Plan that is not maintained or sponsored by ABB or any of its Affiliates is indicated as such in Section 5.12.1 of the Disclosure Schedule.  ABB has delivered to Purchaser with data, records or information reasonably sufficient to identify those Employee Benefit Plans that (i) provide defined benefit pension benefits, or (ii) are intended to qualify for favorable Tax status

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conferred by the taxing authorities under the Laws of any jurisdiction that are similar to Section 401(a) of the Code.  ABB has delivered to Purchaser copies of, to the extent applicable: (v) the currently effective plan document (including all amendments thereto) and the most recent summary plan description for each Employee Benefit Plan (or the most recent employee handbook containing a description thereof), (w) a written description of each unwritten Employee Benefit Plan, (x) any trust, insurance, group annuity contract or other agreement related to the funding or financing of each Employee Benefit Plan, (y) all filings required to be made with any governmental authority during the three calendar years preceding the date of this Agreement with respect to each Employee Benefit Plan, and (z) the three most recent financial or actuarial valuations or funding reports prepared with respect to each Employee Benefit Plan.

5.12.2Compliance and Claims

Except as set forth in Section 5.12.2 of the Disclosure Schedule: (i) each Employee Benefit Plan has been administered in all material respects in accordance with its terms and complies in all material respects with all applicable Laws; (ii) there are no pending, or to the knowledge of ABB, claims or proceedings threatened in writing related to any Employee Benefit Plan (other than claims for benefits in the ordinary course); (iii) there are no pending, or to the knowledge of ABB, investigations by any governmental authority threatened in writing in respect of any Employee Benefit Plan; (iv) no event or condition has occurred or is reasonably likely to occur that has or is reasonably likely to result in material liability under any Employee Benefit Plan, other than for contributions or benefit payments in the ordinary course of the applicable Acquired Company; (v) to the knowledge of ABB, each Employee Benefit Plan that is intended to qualify for favorable Tax benefits under the Laws of any jurisdiction is so qualified and, to the knowledge of ABB, no event or condition exists that is reasonably likely to result in the loss or revocation of such status; (vi) neither ABB nor any of its Affiliates nor, to the knowledge of ABB, any other Person, has engaged in a transaction with respect to any Employee Benefit Plan that is reasonably likely to give rise to any material Tax or penalty under Chapter 43 of the Code or ERISA; and (vii) all required consents and releases in connection with the amendment, modification or termination of any Employee Benefit Plan have been validly obtained and are effective.  To the extent that this Section 5.12.2 relates to any Employee Benefit Plan that is not maintained or sponsored by ABB or its Affiliates, the representations contained herein are made to the knowledge of ABB.

5.12.3Contributions and Funding

All benefits, contributions and premiums relating to each Employee Benefit Plan have been timely paid or made or accrued in accordance with the terms of such Employee Benefit Plan and the terms of all applicable Laws and no request has been made to waive or defer payment of any benefits, contributions or premiums that would otherwise be required to be made to any Employee Benefit Plan.  Section 5.12.3 of the Disclosure Schedule identifies each Transferred Plan that is not required to be funded under applicable Law.

5.12.4Post-Retirement Welfare Arrangements

Except as set forth in Section 5.12.4 of the Disclosure Schedule or as required by applicable Law, no Employee Benefit Plan maintained or sponsored by an Acquired Company provides life or medical insurance benefits after the termination of employment.

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No provision of any Employee Benefit Plan required to be included in Section 5.12.4 of the Disclosure Schedule under the preceding sentence or communication by ABB or its Affiliates to Employees with respect to any such Employee Benefit Plan would prevent the amendment, modification or termination after the Closing Date of any such Employee Benefit Plan without material liability to any Acquired Company.

5.12.5Severance and Change in Control Arrangements

(a)There are no payments, benefits or rights or increased and/or accelerated payments, benefits or rights, to which any Employee or Former Employee may be entitled as a result of any adjustment to the Purchase Price pursuant to any provision of this Agreement.

(b)Except as set forth in Section 5.12.5 of the Disclosure Schedule, (i) no Employee or Former Employee will be entitled to any payment, benefit or right from an Acquired Company, or any increased and/or accelerated payment, benefit or right, as a result of (x) such Employee’s or Former Employee’s exercise of his/her right to terminate employment with any Acquired Company or its respective Affiliates at any time before or after the Closing Date (other than pension or retirement benefits under an Employee Benefit Plan) arising as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby or (y) the execution of this Agreement or the consummation of the transactions contemplated hereby and (ii) the execution of this Agreement or the consummation of the transactions contemplated hereby will not require accelerated funding of any Employee Benefit Plan or give rise to any material liability in connection with any Employee Benefit Plan, other than, in the case of (i) and (ii), pursuant to applicable Law.  No Employee or Former Employee is or will be entitled to receive after the Closing any payment or benefit from Purchaser, any Acquired Company or any of their Affiliates pursuant to any Contract or Employee Benefit Plan in effect on the date of this Agreement that would not be deductible to such entity for U.S. Federal income tax purposes as a result of such payment or benefit constituting an “excess parachute payment” within the meaning of Section 280G of the Code in connection with a change in the ownership or effective control, of a corporation, or a substantial portion of the assets or a corporation (within the meaning of Sections 280G of the Code, in each case arising out of or resulting from the consummation of the transactions contemplated by this Agreement.

(c)Any amounts due as set forth in Section 5.12.5 of the Disclosure Schedule shall be paid as required by Section 7.5.

(d)No Employee or Former Employee will be entitled to any payment, benefit or right from ABB or any Affiliate of ABB (other than an Acquired Company) in connection with the execution of this Agreement or the consummation of the transactions contemplated hereby, provided that any amounts described in Section 7.5 which are required to be paid by the Acquired Group are duly paid.

5.13.Taxes

5.13.1Tax Returns

Except as set forth in Section 5.13.1 of the Disclosure Schedule, all material Tax Returns that are required to be filed on or prior to the date of this Agreement with respect to the assets, income or operations of any Acquired Company have been filed when due,

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including any period of extension, and have been true, correct and complete in all material respects.

5.13.2Payment of Taxes

All material Taxes with respect to taxable periods covered by the Tax Returns referred to in Section 5.13.1 have been paid when due and payable, after giving effect to any applicable extensions.

5.13.3Tax Controversies

Except as set forth in Section 5.13.3 of the Disclosure Schedule: (i) since January 1, 2001 and until the date of this Agreement, there have been no audits that resulted in a material adjustment to Taxes of the Acquired Group; (ii) no audits or administrative proceedings or court proceedings are pending as of the date of this Agreement with regard to Taxes or Tax Returns of any Acquired Company; (iii) since January 1, 2001 and until the date of this Agreement, no written notice of such audit, administrative proceeding or court proceeding has been received by ABB or any of its Affiliates that relates to any Acquired Company.

5.13.4Tax Withholdings

Each Acquired Company has, within the time and manner prescribed by Law, withheld and paid over to the proper governmental authorities all amounts required to be so withheld and paid over by such Acquired Company under applicable Laws.

5.13.5Extensions

No Acquired Company has entered into an agreement or waiver extending any statute of limitations relating to the payment or collection of Taxes of any Acquired Company that has not expired.

5.13.6Tax Sharing Agreements

No Acquired Company is party to or bound by any written Tax sharing agreement, Tax indemnity obligation or other similar Contract with respect to Taxes, pursuant to which Purchaser or any Acquired Company could have Tax liability after the Measurement Date.  Except as set forth in Section 5.13.6 of the Disclosure Schedule, no Acquired Company has been included in any “consolidated,” “unitary” or “combined” Tax Return provided for under the law of the United States, any foreign jurisdiction or any state or locality with respect to Taxes for any taxable period for which the statute of limitations has not expired (other than a group of which the members of the Acquired Group are the only members).

5.13.7Inclusions Attributable to Prior Periods

Sirius America will not be required to include in a taxable period ending after the Measurement Date taxable income attributable to income that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 481 of the Code or comparable provisions of applicable Law, or for any other reason.

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5.13.8Jurisdictions

Since January 1, 2001 and until the date of this Agreement, no written claim has been made by any taxing authority in a jurisdiction in which an Acquired Company does not file Tax Returns that it is or may be subject to material Taxes in that jurisdiction.

5.13.9Distributions

Since January 1, 2001, Sirius America has not constituted either a “distributing corporation” or a “controlled corporation” as such terms are defined in Section 355(a)(1)(A) of the Code in a distribution of stock or securities intended to qualify for Tax-free treatment (in whole or in part) under Section 355 of the Code.

5.14.Litigation

Except as set forth in Section 5.14 of the Disclosure Schedule, there are no claims, actions, suits, investigations of which ABB has knowledge, arbitrations or legal, administrative or other proceedings pending and, to the knowledge of ABB, none are presently threatened in writing against any Acquired Company before or by any court, governmental authority or arbitrator, except for any action, suit, proceeding or investigation (i) with respect to claims under Direct Insurance Agreements to which Sirius America is a party arising in the ordinary course of the business of Sirius America; or (ii) which if adversely determined, individually, is not reasonably likely to (x) require monetary payments by the Acquired Group, in the aggregate, of more than SEK 5,000,000 (or its foreign currency equivalent); (y) result in an order, injunction or other equitable relief or relief for non-monetary damages against an Acquired Company which is reasonably likely to impede to any material extent the operation of the Business as operated by such Acquired Company at the date of this Agreement; or (z) result in a Material Adverse Effect.  Since January 1, 2003, except with respect to payments made in the ordinary course in connection with Assumed Reinsurance Agreements, Ceded Reinsurance Agreements, Direct Insurance Agreements or Reinsurance Pools, there have been no payments in excess of the sum of SEK 5,000,000 (or its foreign currency equivalent) with respect to any threatened or previously outstanding individual action, suit, arbitration or other legal proceeding made by or on behalf of any Acquired Company.

5.15.Environmental Matters

Other than pursuant to its obligations under Direct Insurance Agreements, Assumed Reinsurance Agreements, Ceded Reinsurance Agreements or Reinsurance Pools: (i) each Acquired Company is in compliance with, and since January 1, 2001 has been in compliance with, all applicable Laws and Orders relating to human health or the environment (“Environmental Laws”), and none of the Acquired Companies has received (x) any written communication from a governmental authority that alleges that the Acquired Company is in violation of, or has liability under, any Environmental Law or (y) any written request for information under any Environmental Law; (ii) each Acquired Company has obtained, and is in compliance with, all Permits required under such Environmental Laws; (iii) there are no proceedings, actions, claims, demands, investigations of which ABB has knowledge or written notices of noncompliance or violation arising out of or relating to Environmental Law (“Environmental Claims”) by any governmental authority or by any other Person pending or, to the knowledge of ABB, threatened in writing against any Acquired Company; and (iv) there has been no Release of any Hazardous Material that would reasonably be expected to

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form the basis of an Environmental Claim against any of the Acquired Companies, or against any Person whose liabilities for such Environmental Claims an Acquired Company has, or may have, retained or assumed, either contractually or by operation of Law.

5.16.Insurance

(a)Section 5.16 of the Disclosure Schedule contains a true and correct list, as of the date of this Agreement, of all Insurance Policies (excluding, for the avoidance of doubt, any Assumed Reinsurance Agreements, Ceded Reinsurance Agreements, Direct Insurance Agreements or Reinsurance Pools) in force as of the date of this Agreement.  All such Insurance Policies are, in all material respects, in full force and effect, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors rights generally from time to time in effect and, where applicable, to general principles of equity.

(b)Since January 1, 2003, no Acquired Company, or any Person acting on its behalf, has failed to give any material notice or to present any material claim under any Insurance Policy or surety bond in due and timely fashion, except where such failure has not, and is not reasonably likely to, materially adversely affect the right to recover under such Insurance Policy.  ABB has delivered to Purchaser the reports, if any, prepared since December 31, 2002 for the Acquired Group on: (i) accidents, casualties or damages occurring on or to the properties or assets of the Acquired Group; and (ii) claims by the Acquired Group for damages, reimbursement of losses, contribution or indemnification under any Insurance Policy and settlements or negotiations of settlements relating thereto.

5.17.Agents

Section 5.17(1) of the Disclosure Schedule sets forth each agent, broker, intermediary or producer who produced business for an Acquired Company during either of the years ended December 31, 2001 and 2002 (other than those brokers recorded in the Quantel system, which brokers generated aggregate premia of less than SEK 10 million, in the two year period to December 31, 2002).  Except as otherwise set forth in Section 5.17(2) of the Disclosure Schedule, between January 1, 2002 and the date of this Agreement, no Person listed in Section 5.17(1) of the Disclosure Schedule has given written notice of termination to, or been given written notice of termination by, ABB or any Acquired Company and neither ABB nor any of its Affiliates has received written notice that any of the foregoing is not duly licensed.

5.18.Accounts with Financial Institutions

Section 5.18 of the Disclosure Schedule sets forth a true and correct list, as of the date of this Agreement, of all safe deposit boxes, active bank accounts and other time or demand deposits of the Acquired Group, together with the names and addresses of the applicable financial institution or other depository, the account number, the contact person at the applicable financial institution and the names of all persons who are authorized to draw thereon by any Acquired Company.

5.19.Continuing Business Relationships

Except as set forth in Section 5.19 of the Disclosure Schedule, neither ABB nor any of its Affiliates has received, as at the date of this Agreement, any written notice

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from any insured, reinsured, retrocedent or retrocessionaire of the Acquired Group accounting for, or relating to, more than five percent (5%) of the gross written premiums for the Acquired Group in 2002 that such entity will cease to do business or materially adversely change its volume of business with any Acquired Company as a result of this Agreement or the consummation of the transactions contemplated hereby.

5.20.Brokers

Except for Deutsche Bank AG, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of ABB or any of its Affiliates.  ABB and its Affiliates (other than the Acquired Group) are solely responsible for the fees and expenses of Deutsche Bank AG.

5.21.Solvency

Neither ABB nor any of its parent companies has ceased payment of its debts when they fall due and none of them are insolvent or unable to pay its debts according to the Federal Act of Switzerland of 11 April 1889 on Debt Enforcement and Bankruptcy.  No order has been notified and no resolution has been passed for the winding up of ABB or any of its parent companies or for a provisional liquidator to be appointed in respect of ABB or any of its parent companies and no petition has been presented and no meeting has been convened for the purpose of winding up ABB or any of its parent companies.  No receiver, including an administrative receiver, has been appointed in respect of ABB, any of its parent companies or all or any of their respective assets.  Neither ABB nor any of its parent companies is subject to a composition plan or a moratorium and no commissioner has been appointed in this respect.

5.22.Alstom Instruments

Section 5.22 of the Disclosure Schedule sets forth (i) a true and correct list of each bond, note, debenture, security, right or other financial instrument or financial guarantee that has been issued by any member of the Acquired Group in connection with the Financial Risks Business and provides insurance, reinsurance, indemnification or any other obligation (other than a Direct Insurance Agreement providing first-party insurance coverage of the property or assets of Alstom Schweiz AG, Alstom Sweden AB or their Affiliates, successors and assigns (the “Alstom Group”)) for the financial obligations, losses or commitments of any Person who was a member of the Alstom Group at the time such financial instrument or financial guarantee was issued (collectively, the “Alstom Instruments”) and (ii) the face value or policy limit of each Alstom Instrument.

5.23.ABB Instruments

Section 5.23 of the Disclosure Schedule sets forth (i) a true and correct list of each bond, note, debenture, security, right or other financial instrument or financial guarantee that has been issued by any member of the Acquired Group and provides insurance, reinsurance, indemnification or any other obligation (other than a Direct Insurance Agreement providing first-party insurance coverage of the property or assets of any member of the ABB Group) for the financial obligations, losses or commitments of any Person who was a member of the ABB Group at the time such financial instrument or financial guarantee

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was issued (other than an Acquired Company) (collectively, the “ABB Instruments”) and (ii) the face value or policy limit of each ABB Instrument.

5.24.Sirius America Contracts

Except as set forth in Section 5.24 of the Disclosure Schedule, Sirius America is not a party to any Contract: (i) containing a provision limiting the ability of Sirius America or any Affiliate of Sirius America to engage in any line of insurance or reinsurance business in any geographical area or to compete with any Person; or (ii) providing for “exclusivity” as a result of which Sirius America or any Affiliate of Sirius America is restricted with respect to distribution and marketing.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to ABB, as of the date of this Agreement and as of the Closing Date, as follows:

6.1.Organization

Purchaser is a company duly organized, validly existing and in good standing under the laws of Sweden and has all requisite corporate power and authority to own its properties and assets and to carry on its business as presently being conducted.

6.2.Authority

6.2.1Company Power and Authority

Purchaser has all requisite company power and authority to execute, deliver and perform this Agreement, and to consummate the transactions contemplated hereby.  The execution and delivery by Purchaser of this Agreement, the consummation by Purchaser of the transactions contemplated hereby and the performance by Purchaser of the provisions of this Agreement have been duly authorized by all necessary company action (including action of the board of directors and, if required, the shareholders) on the part of Purchaser.  This Agreement has been duly executed and delivered by Purchaser and, assuming the due authorization, execution and delivery of this Agreement by ABB, this Agreement constitutes a legal, valid and binding obligation of Purchaser enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors rights generally from time to time in effect and, where applicable, to general principles of equity.

6.2.2No Conflicts

The execution and delivery by Purchaser of this Agreement, the consummation by Purchaser and U.S. Purchaser of the transactions contemplated hereby and the performance by Purchaser and U.S. Purchaser of the provisions of this Agreement do not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to a loss of a material benefit under, or result in the creation of any Encumbrance on any of the properties or assets of Purchaser under, or give rise to any

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increased, additional or accelerated rights or entitlements under, any provision of: (i) the organizational documents of Purchaser or U.S. Purchaser; or (ii) subject to the governmental filings and other matters referred to in Section 6.2.3 below, any Law or Order, in each case, applicable to Purchaser or U.S. Purchaser or any of their respective properties or assets, except, in the case of clause (ii) for any such conflict, violation, breach or default which, individually or in the aggregate, does not and is not reasonably expected to materially adversely affect the ability of Purchaser or U.S. Purchaser to complete the transactions contemplated hereby.

6.2.3Governmental Authorization

No consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any governmental authority is required to be obtained or made by or with respect to Purchaser or any of its Affiliates in connection with the execution and delivery by Purchaser of this Agreement, the consummation by Purchaser of the transactions contemplated hereby or the performance by Purchaser of the provisions of this Agreement, except for: (i) approvals under applicable competition Law, including the HSR Act, the German “Gesetz gegen Wettbewerbsbeschränkungen” (act against restraints of competition) and Law No. 8884/1994 and Resolution No. 15/98 (of August 1998) of the Federative Republic of Brazil; (ii) the approval of the Swedish Financial Supervisory Authority, the Malaysian insurance regulator, the Bermuda insurance regulator, the Delaware Insurance Department, the New York Insurance Department and the insurance department of any State in the United States where any Acquired Company is deemed commercially domiciled under such State’s Law; and (iii) those the failure of which to obtain or make, individually or in the aggregate, do not and are not reasonably expected to materially impair the ability of Purchaser or any of its Affiliates to perform its obligations under this Agreement.

6.3.Financing

Purchaser has sufficient funds for the financing of the payment in full of the International Purchase Price and the U.S. Purchase Price and all other amounts payable by U.S. Purchaser and Purchaser hereunder at the U.S. Closing and the Closing.

6.4.Employees

As of the date of this Agreement, neither Purchaser nor any of its Affiliates has entered into any Contract with any Employee.

ARTICLE 7
COVENANTS

7.1.General

Without limiting the generality of any other provision of this Agreement, each of the parties will use all reasonable efforts to take all action and to do all things necessary, proper or advisable (including executing and delivering documents and papers) in order to consummate and make effective the transactions contemplated hereby and to cause the Closing to occur as promptly as practicable (including satisfaction, but not waiver, of the closing conditions set forth in Article 8).

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7.2.Conduct of Business

7.2.1Ordinary Course

From the date hereof until the Measurement Date, except as described in Schedule 7.2.1 or except as otherwise specifically provided in or specifically contemplated by this Agreement or to the extent that Purchaser shall have otherwise given its prior written consent (which consent shall not be unreasonably withheld or delayed), ABB shall cause each Acquired Company to carry on the Business in the ordinary course of its business.  From the Measurement Date until the Closing, except as described in Schedule 7.2.1 or except as otherwise specifically provided in or specifically contemplated by this Agreement or to the extent that Purchaser shall have otherwise given its prior written consent (which consent may be granted or withheld at Purchaser’s sole discretion), ABB shall cause each Acquired Company to carry on the Business in the ordinary course of its business.

7.2.2Preserve Business

Except as otherwise specifically provided in this Agreement, from the date hereof until the Closing, ABB will cause each Acquired Company: (i) to use all reasonable efforts to preserve its business organization, goodwill and Permits; (ii) to take all reasonable steps to retain the services of its Employees who comply with their employment contracts; (iii) to comply in all material respects with all Laws applicable to such Acquired Company; (iv) to take all reasonable steps to preserve the current relationships of such Acquired Company with its brokers, reinsurance intermediaries, ceding companies, reinsurers, agents, managing general agents or underwriters, service providers, suppliers and other Persons with whom such Acquired Company has significant business relationships; and (v) to use its reasonable efforts to perform its obligations under all Contracts to which it is a party or by or to which its Properties or assets are bound or subject; provided, however, that nothing in clause (iv) above shall require an Acquired Company to take any action, or desist from any action, which is contrary to the commercial interests of the Acquired Company.

7.2.3Maintain Books, Records and Properties

Prior to the Closing, ABB will cause each Acquired Company to: (i) maintain its books and records in the usual, regular and ordinary manner consistent with past practice; (ii) continue in full force and effect the Insurance Policies listed in Section 5.16 of the Disclosure Schedule, or comparable substitute Insurance Policies, and will promptly notify Purchaser of any cancellation or non-renewal of such Insurance Policies; and (iii) use reasonable efforts to maintain all of its properties and assets in such repair, working order and operating condition as is consistent with past practice of the Business (subject only to ordinary wear and tear).

7.2.4Certain Restrictions

Without limiting the generality of Section 7.2.1, except as otherwise specifically provided in or specifically contemplated by this Agreement or as described in Schedule 7.2.1, ABB shall ensure that the Acquired Group will not do any of the following from the date hereof until the Measurement Date without the prior written consent of Purchaser (which consent shall not be unreasonably withheld or delayed):

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(a)merge or consolidate any Acquired Company with or into any Person or sell, lease or otherwise dispose of any properties or assets with a value, in the aggregate, in excess of SEK 5,000,000 (or its foreign currency equivalent) (other than ordinary course trading of the Investment Portfolio);

(b)acquire any properties or assets with a value in the aggregate in excess of SEK 5,000,000 (or its foreign currency equivalent), except (i) in the ordinary course of business for fair value and (ii) in ordinary course trading of the Investment Portfolio consistent with the Investment Guidelines;

(c)amend the certificate of incorporation or by-laws or similar organizational documents of any Acquired Company;

(d)make any wage or salary increase for, or otherwise amend or terminate the employment agreement of, any Senior Executive, other than (i) wage or salary increases in the ordinary course of the business of the applicable Acquired Company and not in excess of five percent (5%) per annum in the aggregate or (ii) pursuant to a Contract in existence on the date hereof or entered into after the date of this Agreement and not in violation of this Agreement;

(e)make, change or revoke any material Tax election or enter into any Contract or settlement regarding material Taxes with any Tax authority or amend any material Tax Returns;

(f)change the fiscal year or accounting methods, principles or practices of any Acquired Company, except as required by generally accepted accounting principles applicable in the jurisdiction of such Acquired Company (provided that such revised principles or practices shall not affect the preparation of the Closing Financial Statements) or, to the extent inconsistent therewith, the statutory accounting rules applicable to Sirius America;

(g)change in any material respect its underwriting, reinsurance, marketing, establishment or release of Reserves, establishment or release of safety reserves, investment or claims adjustment policies or practices or the Investment Guidelines, except, in each case, as required by Law or by any applicable insurance or other regulatory authority;

(h)declare, set aside or pay any dividend or other distribution (whether in cash, stock, property or any combination thereof) in respect of any securities of any Acquired Company (except (i) dividends paid or distributions made only to another Acquired Company, (ii) the ABB Distribution and (iii) the Sirius Holding Dividend) or redeem, repurchase or otherwise acquire any equity securities of any Acquired Company;

(i)revalue any of its properties or assets, including writing off notes or accounts receivable, other than in the ordinary course of the business of the applicable Acquired Company, or as required by applicable Law or generally accepted accounting principles applicable in the jurisdiction of the applicable Acquired Company (provided that such revaluations shall not affect the preparation of the Closing Financial Statements);

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(j)except as required by applicable Law or collective bargaining agreement or other Contract: (i) enter into any new employment, bonus, incentive or deferred compensation, severance or termination agreement with any Senior Executive or director of such Acquired Company; (ii) establish, adopt or enter into any collective bargaining agreement, or adopt or amend in any material respect any Employee Benefit Plan; or (iii) accelerate the vesting of any benefit provided under, or the funding of, any Employee Benefit Plan;

(k)create, incur, assume or permit to come into existence any Encumbrances on any property or asset of the Acquired Group other than Permitted Encumbrances and, with respect to real property, Encumbrances described in Sections 5.8.2(ii) and (iii);

(l)create, incur or assume any liabilities or obligations in relation to indebtedness for borrowed money in excess of an aggregate of SEK 1,000,000 (or its foreign currency equivalent);

(m)(excluding any obligation under Contracts entered into in accordance with clause (q) below) guarantee to a third party the liabilities or obligations of another Person, enter into any “keep well” or other agreement to maintain the financial condition of another Person or enter into any Contract having the economic effect of any of the foregoing;

(n)except as permitted by Section 7.2.4(bb), pay or discharge any material claim, liability or Encumbrance (whether absolute, accrued, contingent or otherwise), or waive any material right, in each case other than in the ordinary course of the business of the applicable Acquired Company or pursuant to binding contractual obligations of an Acquired Company in existence on the date hereof or otherwise permitted to be entered into after the date of this Agreement;

(o)hire any new employees or consultants, except for (i) ten such employees or consultants each earning less than SEK 800,000 (or its foreign currency equivalent) per annum who are hired in the ordinary course of business, (ii) employees earning less than SEK 800,000 (or its foreign currency equivalent) per annum hired to replace departed employees or (iii) any new employees hired to replace a departed Senior Executive whose replacement is reasonably necessary for the operation of the Business;

(p)make capital expenditures in fixed assets in excess of an aggregate of SEK 1,000,000 (or its foreign currency equivalent);

(q)enter into any Contract (other than (i) Assumed Reinsurance Agreements, Ceded Reinsurance Agreements, Direct Insurance Agreements or Reinsurance Pools entered into in the ordinary course of the business of the applicable Acquired Company and consistent with the underwriting guidelines of the Acquired Group as of the date of this Agreement, or (ii) Contracts with managing general agents, agents or brokers entered into in the ordinary course of the business of the applicable Acquired Company and not otherwise prohibited by clause (dd) below) which, if it existed on the date hereof, would be required to be listed in Section 5.10.2 of the Disclosure Schedule;

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(r)other than in the ordinary course of the business of the applicable Acquired Company and, if applicable, consistent with the underwriting guidelines of the Acquired Group as of the date of this Agreement, amend in any material respect or terminate any existing Direct Insurance Agreement, Assumed Reinsurance Agreement, Ceded Reinsurance Agreement, Reinsurance Pool or any Material Contract;

(s)commute any Direct Insurance Agreement, Assumed Reinsurance Agreement or Ceded Reinsurance Agreement, other than in connection with the cessation of the Financial Risks Business, resulting in a gain or loss to such Acquired Company in excess of SEK 2,000,000 (or its foreign currency equivalent), other than as required by Law or by any applicable insurance or other regulatory authority;

(t)make any investment in any Affiliate Instrument;

(u)make any investment in non-investment grade securities;

(v)abandon, waive, terminate or otherwise change any of the Permits of the Acquired Group, except as may be required by Law or by any applicable insurance or other regulatory authority;

(w)make any loan, advance or capital contribution to any Person (other than an Acquired Company);

(x)enter into or modify any Contract with ABB, any of its Affiliates or any officer, director or employee of ABB or any of its Affiliates (other than the Acquired Group);

(y)make any payment or distribution to, or abandon, waive, terminate or otherwise change any right with respect to, ABB, any of its Affiliates (except the Acquired Companies) or any officer, director or employee of ABB or any of its Affiliates (except the Acquired Companies), other than pursuant to binding contractual obligations of an Acquired Company in existence on the date hereof or otherwise permitted to be entered into after the date of this Agreement;

(z)other than with respect to Sirius Belgium, adopt a plan of complete or partial liquidation, dissolution, rehabilitation, restructuring, recapitalization, re-domestication or other reorganization;

(aa)enter into any joint venture, partnership or similar Contract with any Person;

(bb)settle or compromise any claims against an Acquired Company resulting in a gain or loss to such Acquired Company in excess of SEK 5,000,000 (or its foreign currency equivalent) or any order, injunction or equitable relief reasonably likely to impede, to any material extent, the business of such Acquired Company (other than the settlement of claims relating to Direct Insurance Agreements or under Assumed Reinsurance Agreements, Ceded Reinsurance Agreements or Reinsurance Pools, in each case in the ordinary course of the business of the applicable Acquired Company);

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(cc)solely with respect to Sirius Holding, engage in any business or activity or create, incur or assume any liability or obligation, in each case other than (i) the ownership of shares of capital stock of Sirius International and Sirius Rück and activities incidental thereto, (ii) the distribution of the Sirius Holding Dividend, (iii) the payment of Taxes, and (iv) activities necessary to perform its obligations under the Facility Agreement and Pledge Agreement or to effect the termination or release of such obligations;

(dd)enter into any Contracts relating to the Financial Risks Business, provided that this provision shall not limit the Acquired Group’s ability to enter into new Ceded Reinsurance Agreements relating to Contracts in the Financial Risks Business in existence on or prior to the date of this Agreement or to commute existing Contracts relating to the Financial Risks Business;

(ee)take any action that is reasonably likely to result in any representation or warranty of ABB contained herein being inaccurate in any material respect at the Closing or omit to take any action necessary to prevent any such representation or warranty from being inaccurate in any material respect at such time; or

(ff)agree or make an offer capable of acceptance, whether in writing or otherwise, to do any of the foregoing.

7.2.5Purchaser’s Representatives

Purchaser hereby designates Raymond Barrette and Robert L. Seelig acting severally with authority to grant the approvals on behalf of Purchaser that may be requested under this Section 7.2.  Purchaser agrees to act promptly in responding to requests for approvals.

7.2.6Conduct of Business After the Measurement Date

Without limiting the generality of Section 7.2.1, except as otherwise specifically provided in or specifically contemplated by this Agreement, ABB shall ensure that the Acquired Group will not do any of the following from the Measurement Date until the Closing without the prior written consent of Purchaser (which consent may be granted or withheld at Purchaser’s sole discretion):

(a)enter into, amend, commute or terminate any Ceded Reinsurance Agreement (other than in connection with the cessation of the Financial Risks Business) or any Reinsurance Pool, other than as required by Law or by any applicable insurance or regulatory authority;

(b)change in any respect its underwriting, reinsurance, marketing, establishment or release of Reserves, establishment or release of safety reserves, investment or claims adjustment policies or practices or the Investment Guidelines, except, in each case, as required by Law or by any applicable insurance or other regulatory authority;

(c)decrease the value of the Reserves relating to (i) the EPIX/Hartford dispute identified as Treaty 260, all underwriting years, in the Scan Re Memo, (ii) the Reliance Re dispute identified as Treaty 189, all underwriting years, in the Scan Re

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Memo, or (iii) any Scan Re Dispute, in each case below the value of such Reserve as of the Measurement Date; or

(d)take any action described in Section 7.2.4, provided that (i) the actions taken by the Acquired Group from the date of this Agreement to the Measurement Date shall be included, as applicable, in calculating the aggregate values described in Section 7.2.4 and (ii) any written consent of Purchaser provided under Section 7.2.4 shall not apply to this Section 7.2.6, including this clause (d).

7.3.Access to Information

From the date hereof until the Closing, upon reasonable advance notice, ABB shall: (i) to the extent within its control, afford the officers, employees and authorized agents and representatives of Purchaser such reasonable access as Purchaser may from time to time reasonably request, during normal business hours and in a manner which is not disruptive to the operations of the Business or the business of ABB or any of its Affiliates, to the offices, properties, assets, books and records of the Acquired Group and to its and each member of the Acquired Group’s respective officers, employees, agents, accountants and actuaries, in each case solely for the purposes of enabling Purchaser to (w) evaluate the satisfaction of the conditions set forth in Article 8, (x) prepare for its assumption of operational responsibility for the Business as from the Closing Date, (y) prepare for the practicalities of consummating the transactions contemplated by this Agreement and (z) prepare for implementing disclosure controls and procedures and internal controls over financial reporting to its satisfaction from the Closing; and (ii) furnish to Purchaser the following information: (x) the monthly financial management reports regularly prepared for Sirius International; (y) the monthly financial management reports regularly prepared for Sirius America and Scandinavian Re; and (z) the unaudited quarterly financial reports for the Acquired Group which have been prepared from the ABB Group’s ABACUS information, and such other information regarding the assets, properties, goodwill and Business of each member of the Acquired Group as (A) may exist (in the form in which it already exists), or (B) shall have been prepared or compiled by or for ABB or any Acquired Company, or (C) which is reasonably requested from time to time by Purchaser and in ABB’s good faith and reasonable judgment can be prepared by ABB or any Acquired Company without undue burden or expense or disruption to the operations of the Business or other matters required to be performed in accordance with this Agreement.  Neither ABB nor any of its Affiliates shall be under an obligation to disclose to Purchaser or its representatives any information the disclosure of which, according to the advice of ABB’s legal counsel, is restricted by confidentiality obligations or applicable Law or would jeopardize the legal privilege, if any, accorded to any documents produced or prepared by the legal representatives of ABB or its Affiliates.  No investigation or access to information pursuant to this Section 7.3 shall affect any representation or warranty or covenant made by ABB to Purchaser hereunder or otherwise affect the rights and remedies available to Purchaser hereunder.

7.4.Reasonable Efforts

7.4.1Approvals

Each party hereto will use all reasonable efforts to obtain all exemptions, authorizations, consents, orders, approvals and waivers of all governmental authorities and third parties that are required by Law or which ABB and Purchaser, acting reasonably, agree are necessary, for its execution and delivery of, and the performance of its obligations

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pursuant to, this Agreement, and will reasonably cooperate fully with the other party in promptly seeking to obtain all exemptions, authorizations, consents, orders, approvals and waivers that are required by Law or which ABB and Purchaser, acting reasonably, agree are necessary, of all governmental authorities and third parties for such other party’s execution and delivery of, and the performance of such other party’s obligations pursuant to, this Agreement.  Each party hereto agrees to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act and, to the extent required by Law, comparable filings and notifications required to be made by such party under other competition Laws with respect to the transactions contemplated hereby, in each case as soon as reasonably practicable after the date hereof, and to supply promptly any additional information and documentary material that may be requested pursuant to the HSR Act or such other competition Laws.  ABB and Purchaser each agree to make all other appropriate filings as such party may be required to make with the New York Insurance Department, the Delaware Insurance Department, the Swedish Financial Supervisory Authority and the Bermuda insurance regulator and such other filings as such party may be required to make under the insurance and other applicable Laws of the insurance department of any State in the United States where any Acquired Company is deemed commercially domiciled under such State’s Law.  The parties hereto will not knowingly take any action that will have the effect of materially delaying, impairing or impeding the receipt of any required approvals.  Notwithstanding the foregoing or any other provision of this Agreement to the contrary, in no event shall any party hereto be obligated to: (i) agree or proffer to divest or hold separate, or enter into any licensing or similar arrangement with respect to, (x) any properties or assets (whether tangible or intangible), or any portion of any business, of Purchaser or any of its Affiliates; or (y) any properties or assets (whether tangible or intangible), or any portion of any business, of any Acquired Company or any Subsidiary of an Acquired Company; or (ii) litigate any suit, claim, action, investigation or proceeding, whether judicial or administrative, brought by any governmental entity or third party, (x) challenging or seeking to restrain or prohibit the consummation of any of the transactions contemplated hereby; (y) seeking to prohibit or limit in any material respect the ownership or operation by any Acquired Company, Purchaser or any of their respective Affiliates, of a portion of the business or properties or assets of any Acquired Company, Purchaser or any of their respective Affiliates or to require any such Person to dispose of or hold separate any portion of the business or properties or assets of any Acquired Company, Purchaser or any of their respective Affiliates as a result of the transactions contemplated hereby; or (z) seeking to prohibit Purchaser, any Acquired Company or any of their respective Affiliates from effectively controlling in any respect the business or operations of any Acquired Company.

7.4.2Information, Assistance and Cooperation

(a)Each party shall furnish to the other party such necessary information and reasonable assistance as the other party may request in connection with its preparation of any filing, registration or declaration which is necessary under applicable Law; provided, however, that no party shall be obligated with respect to such assistance: (i) to expend any funds except the payment of the fees and expenses of any applicable attorneys, consultants or other advisors retained by it and applicable filing fees; or (ii) to take any actions with respect to its respective businesses or the Business which, in its reasonable judgment, is materially adverse.  Each party shall provide the other party with drafts of all notifications intended to be submitted to any governmental authorities in connection with Section 7.4.1, shall give the other party a reasonable opportunity to comment on such draft notifications, shall consider in good faith such comments and shall not submit such notifications without the prior approval

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of the other party (which approval shall not be unreasonably withheld or delayed).  Each party shall be entitled to attend any meetings with the relevant governmental authorities and each party shall keep the other party informed on a timely basis of all developments or discussions with such governmental authorities.

(b)Notwithstanding anything to the contrary, Purchaser shall, and shall cause the Acquired Group to, in accordance with applicable Law or if none is applicable, the document retention policy of Purchaser and its Affiliates, retain all books, records and other documents pertaining to the businesses of the Acquired Group in existence on the Closing Date and to make the same available for inspection and copying by ABB or its Affiliate or representatives thereof during reasonable business hours, upon reasonable request and upon reasonable notice.  No such books, records or documents shall be destroyed after the Closing Date by Purchaser or a member of the Acquired Group without first advising ABB in writing and giving ABB a reasonable opportunity to obtain possession thereof.  Without limiting the generality of the foregoing, Purchaser shall, and shall cause the Acquired Group to, make available to ABB, its Affiliates and representatives all information reasonably deemed necessary or desirable by ABB, its Affiliates or their representatives in connection with (i) preparing their respective financial statements and Tax Returns and conducting any audits in connection therewith or (ii) claims, proceedings, actions, investigations, audits and other regulatory or legal proceedings involving the operation of the businesses of the Acquired Group before or after the Closing.

(c)Notwithstanding anything to the contrary, ABB shall, and shall cause the ABB Group to, in accordance with applicable Law or, if none is applicable, the ABB Group’s document retention policy, retain all books, records and other documents pertaining to the businesses of the Acquired Group in existence on the Closing Date and which are held by ABB or any of its Affiliates (other than an Acquired Company) and to make the same available for inspection and copying by Purchaser or any of its Affiliates or representatives thereof during reasonable business hours, upon reasonable request and upon reasonable notice.  No such books, records or documents shall be destroyed after the Closing Date by ABB or any member of the ABB Group without first advising Purchaser in writing and giving Purchaser a reasonable opportunity to obtain possession thereof.  Without limiting the generality of the foregoing, ABB shall, and shall cause the ABB Group to, make available to Purchaser, its Affiliates and their representatives all information reasonably deemed necessary or desirable by Purchaser, its Affiliates or their representatives in connection with (i) preparing their respective financial statements and Tax Returns and conducting any audits in connection therewith or (ii) claims, proceedings, actions, investigations, audits and other regulatory or legal proceedings involving the operation of the businesses of the Acquired Group (before or after the Closing).

7.5.Employee Benefit Plans

(a)Schedule 7.5(1) sets forth each plan, program or arrangement providing benefits with respect to retirement, death, disability or voluntary withdrawal from, or involuntary termination of, employment (“Retirement Benefits”) (whether funded or unfunded) which transfers to Purchaser or its Affiliates in its entirety at or after the Closing by operation of law (each, a “Transferred Plan”).  With respect to the three pension plans set forth in relation to Germany on Schedule 7.5(1), ABB shall include, as an accrued liability, the amount derived in accordance with the accounting principles set forth on Schedule 7.5(1) in the Unaudited Closing Financial Statements.

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(b)Schedule 7.5(2) sets forth each plan, program and arrangement providing Retirement Benefits (whether funded or unfunded) maintained by ABB or its Affiliates in which Employees or Former Employees participate but which will be retained by ABB following the Closing (“Retained Plans”).  With regard to the Retained Plans, each Employee who participates in such Retained Plans shall cease to be an active participant under each such plan effective as of the Closing Date.  ABB shall calculate and the parties shall use all reasonable efforts to agree to a transfer payment amount with respect to each Employee who participates in such Retained Plans in accordance with each such Retained Plans’ respective rules and applicable Law.  Following the Closing, such transfer payment amount shall be payable by ABB to an available plan operated by the Purchaser or any of its Affiliates, of which the relevant Employee is a member, or to another plan or arrangement nominated by such Employee.

(c)ABB shall cause the Acquired Group to include as an accrued liability on the Audited Closing Financial Statements to the extent required by U.S. GAAP any bonuses (other than those set forth on Section 5.12.5 of the Disclosure Schedule) payable by an Acquired Company after the Measurement Date to Employees in respect of periods prior to January 1, 2004.

(d)All liabilities of the Acquired Group as of the Measurement Date relating to any payment, benefit or right or increased and/or accelerated payment, benefit or right to which any Employee or Former Employee may be entitled as a result of (i) any adjustment to the Purchase Price pursuant to any provision of this Agreement or (ii) the execution of this Agreement or the consummation of the transactions contemplated hereby, shall be fully accrued on the Audited Closing Financial Statements to the extent required by U.S. GAAP. Upon request and proof of payment, ABB shall reimburse the relevant Acquired Company for any and all payments made after the Measurement Date and not accrued on the Audited Closing Financial Statements required to be paid by an Acquired Company under the arrangements set forth on Section 5.12.5 of the Disclosure Schedule, except for payments made as a result of (i) the termination by an Acquired Company of an Employee’s employment with such Acquired Company after the Closing, (ii) the termination by an Acquired Company of an Employee’s employment with such Acquired Company prior to the Closing if done with the prior written consent of Purchaser, or (iii) the requirements of collective bargaining agreements disclosed in Section 5.12.5 of the Disclosure Schedule.

7.6.Taxes

(a)ABB shall, in a manner consistent with past practice, cause, and shall have the exclusive authority to cause, each Acquired Company to: (i) file when due (x) all Tax Returns which are required to be filed with respect to taxable periods ending on or prior to the date of this Agreement and (y) any other Tax Returns that ABB determines are due on or prior to the Closing Date, with respect to the assets, income or operations of each Acquired Company; and (ii) pay all Taxes shown on such Tax Returns due and payable on or prior to the Closing Date; provided, however, that ABB shall permit Purchaser to review and comment on any Tax Return (to the extent, and only to the extent, it relates to any period after the Measurement Date) prior to filing and no Tax Returns which relate to any period after the Measurement Date shall be filed without the written consent of Purchaser (which consent shall not be unreasonably withheld or delayed).

(b)Except as provided in paragraph (a) of this Section 7.6, Purchaser shall, after the Closing Date, file all other Tax Returns of the Acquired Group; provided,

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however, that with respect to Tax Returns covering a taxable period beginning on or prior to the Measurement Date and ending after the Measurement Date (“Straddle Period”), Purchaser shall treat items on such Tax Returns in accordance with past practice of ABB and the Acquired Group and shall allow ABB to review and comment on such Tax Returns prior to filing and no such Tax Returns shall be filed without the prior written consent of ABB (which consent shall not be unreasonably withheld or delayed).

(c)ABB shall cause each Acquired Company to terminate and discharge on or prior to the Closing Date, without further liability or obligation thereunder, any Tax sharing agreement, Tax indemnity obligation or similar Contract of any Acquired Company with respect to Taxes.

(d)ABB shall cause Sirius International to furnish to Purchaser, on or before the Closing Date, a certificate described in Treasury Regulation Section 1.1445-2(c)(3)(i) stating that Sirius America is not a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code.

7.7.Replacement of Directors and Auditors

7.7.1Election of New Board and Auditors

Promptly after the Closing and subject to applicable Law, Purchaser shall cause each Acquired Company to hold such shareholders’ meetings and take such other actions as may be required in order to elect a new board of directors (or other comparable managing body) and elect new auditors.  Purchaser shall ensure that, promptly thereafter, each Acquired Company makes all necessary filings with the relevant governmental authorities and takes all other necessary action to register in the applicable public registry, if required, the resignation of the retiring board members and the matters decided pursuant to this Section 7.7.1.

7.7.2Discharge of Directors

Purchaser shall procure that, at the first shareholders’ meeting or otherwise whenever the question of discharge is raised after the Closing, each member of the board and, where applicable, the managing director of each Acquired Company is discharged in full from any liability as a member of the board or managing director, as the case may be, in relation to the period prior to the Closing, provided that the auditor of such Acquired Company has recommended such discharge.

7.8.No Solicitation/No Hire of Employees

For a period of eighteen (18) months from the Closing, ABB shall not, and shall cause its Affiliates not to, directly or indirectly, solicit for employment or employ any Employee, without the prior written consent of Purchaser; provided that: (i) the placing of an advertisement of a post available to a member of the public generally, the hiring of any Employee in response to such an advertisement shall not constitute a breach of this Section 7.8; and (ii) this obligation shall not prevent ABB or any of its Affiliates from employing, mandating or otherwise engaging any Employee whose employment with Purchaser or its relevant Affiliate has been terminated by Purchaser or any of its Affiliates.

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7.9.No Solicitation of Offers

From the date of this Agreement, ABB shall not, nor shall it permit any of its Affiliates to, nor shall they authorize any of their directors, officers or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by them or any of their Affiliates to, and they shall use all reasonable efforts to ensure that such persons do not, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes, or is likely to lead to any proposal to acquire all or any significant portion of any Acquired Company or (ii) participate in any discussions or negotiations regarding any such proposal.

7.10.Notice of Certain Matters

7.10.1Notices by ABB

(a)Up to the Closing Date, ABB covenants and agrees to give prompt notice in writing to Purchaser of:  (i) any information evidencing that any representation or warranty given by it herein was not true and correct as of the date hereof or will not be true and correct as of the Measurement Date or the Closing Date, as applicable; (ii) the occurrence of any event which will, or is reasonably likely to, result in the failure to satisfy a condition specified in Section 8.1 or 8.2; (iii) any written notice or other written communication from any third party alleging that the consent of such third party is required in connection with the transactions contemplated by this Agreement; (iv) except as prohibited by applicable Law, any notice or other communication from any governmental entity in connection with the transactions contemplated by this Agreement; (v) any written notice of, or other written communication relating to, any default under any Disclosed Insurance Agreement within the terms of Section 5.10.1(h) or any Material Contract; or (vi) any change in the officers or directors of any Acquired Company.

(b)ABB covenants and agrees to notify Purchaser of any governmental complaints, investigations or hearings or adjudicatory proceedings involving any material property or asset of any Acquired Company and will keep Purchaser reasonably informed of such events and permit Purchaser’s representatives reasonable access to all materials prepared by or on behalf of ABB or its Affiliates in connection therewith (except where, in the good faith judgment of ABB, the disclosure of any documents produced or prepared by the legal representatives of ABB or its Affiliates would reasonably be expected to jeopardize the legal privilege otherwise accorded such documents).

7.10.2Notices by Purchaser

Purchaser covenants and agrees to give prompt notice in writing to ABB of:  (i) any information evidencing that any representation or warranty given by it herein was not true and correct as of the date hereof or will not be true and correct as of the Closing Date; (ii) the occurrence of any event which will, or is reasonably likely to, result in the failure to satisfy a condition specified in Section 8.1 or 8.3; or (iii) any written notice or other written communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement.

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7.10.3Consequences of Notices

The giving of any notice under this Section 7.10 shall in no way change or modify ABB’s or Purchaser’s representations and warranties and covenants or the conditions to any party’s obligations contained herein or otherwise affect the remedies available to Purchaser or ABB hereunder.

7.11.Intercompany Accounts

Except as otherwise specifically provided in this Agreement, ABB shall cause all intercompany accounts receivable or payable (whether or not currently due or payable) in an aggregate amount in excess of SEK 800,000 (or its foreign currency equivalent), including any amounts receivable or payable in connection with any Affiliate Contract, other than Direct Insurance Agreements, Assumed Reinsurance Agreements or Ceded Reinsurance Agreements, between (i) any member of the Acquired Group, on the one hand, and (ii) ABB, any of its Affiliates (other than the Acquired Companies), or any of their respective officers, directors or employees, on the other hand to be settled in full (without any premium or penalty) at or prior to the Closing.  Within five (5) Business Days prior to the Closing, ABB shall prepare and deliver to Purchaser a preliminary statement setting out in reasonable detail the calculation of all such intercompany account balances as of such date based upon the latest available financial information as of such date.  ABB shall deliver to Purchaser reasonable supporting documentation verifying the underlying intercompany charges and transactions.

7.12.Investment Portfolio

Prior to the Closing Date, ABB shall deliver to Purchaser, within fifteen (15) Business Days after the end of each calendar month, a true and correct list of all investments constituting the Investment Portfolio as of the end of such month, the issuer of such investments, the nominal amount owned and the market value with respect to public investments (or book value with respect to private investments) of such investments as of the end of such month.

7.13.Assignment of Confidentiality Agreements

Prior to or at the Closing, ABB shall cause any confidentiality agreements entered into by ABB or any of its Affiliates since January 1, 2002 relating solely to the Business or any properties, assets, liabilities or activities of any Acquired Company in connection with a sale or disposition of the Business or a part thereof that are not agreements to which an Acquired Company is a party to be assigned to an Acquired Company unless prohibited by the terms of such confidentiality agreement.

7.14.Amendment of Leases

Prior to the Closing, ABB shall use its reasonable efforts to cause the leases under which ABB or any of its Affiliates (other than an Acquired Company) leases any real property used by an Acquired Company immediately prior to the execution of this Agreement to be amended, to the extent necessary, to permit such Acquired Company to directly lease such real property after the Closing on terms and conditions consistent in all material respects with the terms under which ABB or its Affiliates lease such property.

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7.15.Sirius Belgium

After the Closing, Purchaser agrees that: (i) it shall not liquidate Sirius Belgium prior to the full realization of all refunds, credits or offsets of Taxes described in Section 9.6.4(b) (including the final settlement of any Tax Claims relating thereto); and (ii) it shall reasonably cooperate with ABB and follow ABB’s reasonable instructions (at the expense of ABB) in the liquidation of Sirius Belgium as soon as practicable after its receipt of any refunds, credits or offsets contemplated in clause (i) above.

7.16.Access to Purchaser Auditors

From the delivery of the Audited Closing Financial Statements to ABB and Purchaser pursuant to Section 3.4.2 until the Closing, ABB shall afford Purchaser’s auditors, employees and representatives such reasonable access as they may from time to time reasonably request, during normal business hours and in a manner which is not disruptive to the operations of the Business or the business of ABB or any of its Affiliates to the Acquired Group’s and each member of the Acquired Group’s respective officers, employees, agents, accountants (including the Business Auditors) and actuaries and to the premises, properties, books, accounting records and other documents (including supporting contractual documentation and the work papers of the Business Auditors relating to the audit of the Financial Statements and the Audited Closing Financial Statements, provided that Purchaser’s auditors, employees and representatives have signed any release letter reasonably required by the Business Auditors in connection therewith) of the Acquired Group or available to the Acquired Group, in each case solely for the purpose of enabling Purchaser’s auditors, employees and representatives to prepare and audit a consolidated balance sheet of the Acquired Group as of December 31, 2003, together with related consolidated income statements and statements of cash flow for the twelve month period then ended.

7.17.Facility Agreement

ABB shall promptly after the date of this Agreement commence such actions as shall be reasonably necessary to enable it to obtain the certificates from the Pledge Agent and Lenders required to be delivered pursuant to Section 8.2(d).

7.18.Purchaser Disclosure Procedures

Prior to the Closing, ABB shall permit Purchaser to liaise with the Senior Executives to ensure that such controls and procedures as Purchaser intends to implement for the Acquired Group as and from the Closing to satisfy its obligations under Rules 13a-15(e) and (f) and 15d-15(e) and (f) promulgated under the U.S. Securities Exchange Act of 1934, as amended, can reasonably be implemented with effect from the Closing.  Nothing in this Section 7.18 shall require ABB to implement any such controls and procedures prior to the Closing.

7.19.Dividends

(a)In the event that ABB proposes to authorize any Acquired Company to make the ABB Distribution prior to the delivery by ABB of the Unaudited Closing Financial Statements pursuant to Section 3.4.1, ABB shall prepare in good faith and in consultation with the Business Auditors: (i) an unaudited consolidated balance sheet of the Acquired Group as of December 31, 2003, together with a related unaudited consolidated income

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statement for the twelve month period then ended, each in accordance with U.S. GAAP, as applied by the ABB Group in its U.S. GAAP ABACUS reporting system and in the form of Schedule 3.4.1(2) (the “ABACUS Financial Statements”); and (ii) a statement showing the calculation of Net Equity (the “ABACUS Net Equity”), determined on the basis of the ABACUS Financial Statements and taking into account the adjustments set out in Schedule 3.4.1(1) (the “ABACUS Net Equity Statement”), and shall deliver such ABACUS Financial Statements and ABACUS Net Equity Statement to Purchaser at least five (5) Business Days prior to the date of the ABB Distribution.

(b)Within 30 days after the Measurement Date, ABB, after consulting with its auditors, shall deliver to Purchaser a certificate setting forth the maximum amount, in Swedish kronor (the “Permitted ABB Distribution Amount”), that ABB in its good faith and reasonable judgment believes that the Acquired Group may distribute to ABB or any of its Affiliates (other than the Acquired Companies) under applicable Law.  ABB shall cause a member of the Acquired Group to pay a dividend or other distribution (the “ABB Distribution”) to ABB or any of its Affiliates (other than an Acquired Company) after the Measurement Date and prior to the Closing but no earlier than five (5) Business Days after delivery of (i) the Unaudited Closing Financial Statements and Unaudited Closing Net Equity Statement pursuant to Section 3.4.1 or (ii) the ABACUS Financial Statements and ABACUS Net Equity Statement pursuant to this Section 7.19, which ABB Distribution shall be in an amount (the “ABB Distribution Amount”) equal to the lesser of:

(x) the Permitted ABB Distribution Amount;

(y) (A) the amount by which the ABACUS Net Equity exceeds the Guaranteed Net Equity if the Unaudited Closing Financial Statements have not been delivered to Purchaser at least five (5) Business Days prior to the date of the ABB Distribution; (B) the amount by which the Unaudited Net Equity exceeds the Guaranteed Net Equity, if the Audited Closing Financial Statements have not been delivered to Purchaser at least five (5) Business Days prior to the date of the ABB Distribution; (C) the amount by which the Audited Net Equity exceeds the Guaranteed Net Equity, if the Final Closing Financial Statements have not been delivered to Purchaser at least five (5) Business Days prior to the date of the ABB Distribution; or (D) the amount by which the Final Net Equity exceeds the Guaranteed Net Equity, if the Final Closing Financial Statements have been delivered to Purchaser at least five (5) Business Days prior to the date of the ABB Distribution; or

(z)such lesser amount as ABB proposes and has been approved by Purchaser (such approval not to be unreasonably withheld or delayed); provided, however, that, without prejudice to Purchaser’s right of approval generally, it shall not be unreasonable for Purchaser to withhold its consent if it or any of its Affiliates would (i) suffer any economic loss (other than an immaterial loss) or (ii) incur any financing costs.

(c)The parties agree that, notwithstanding any other provisions of this Agreement, Sirius Holding may pay the Sirius Holding Dividend to ABB or any of its Affiliates prior to the Measurement Date.

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7.20.ABB Intellectual Property

7.20.1Branded Assets

To the extent any trademarks, registered or unregistered (including logos or other devices), or any trading names owned by ABB or any of its Affiliates (other than the Acquired Companies) (including, for the avoidance of doubt, the words “ABB”, “BBC”, “Asea”, “Brown” or “Boveri”) are included in any business stationery, brochures, technical literature, drawings and other documents, or are displayed on any premises, signs, vehicles or uniforms, which are owned by any Acquired Company (collectively, “Branded Assets”), Purchaser may, for a period of sixty (60) days after the Closing Date, use such Branded Assets, after which date it shall cross out, mark over or otherwise cover or redact such references and otherwise clearly indicate on such Branded Assets that the Business is no longer owned by ABB or any of its Affiliates (other than the Acquired Companies).

7.20.2No Other Use

Except as permitted by Section 7.20.1, Purchaser shall not, and shall procure that none of its Affiliates shall, after the Closing, use in any way whatsoever any registered or unregistered trademarks, including any logos or other devices, or any trading names which are owned by ABB or any of its Affiliates (other than the Acquired Companies) (including, for the avoidance of doubt, any reference to “ABB”, “BBC”, “Asea”, “Brown” or “Boveri”).

7.21.Amendments to Certain Contracts

ABB shall use its reasonable efforts to cause each Contract set forth on Schedule 7.21 to be amended, effective as of the Closing, to permit each Acquired Company that is a party thereto to directly lease the personal property subject to such Contract directly from the lessor on the terms applicable to each Acquired Company under such Contract as at the date of this Agreement; provided, however, that if amending any such Contract will cause the aggregate amounts payable, determined on a monthly basis, by the Acquired Companies that are a party to such amended Contract to increase by more than 20% over the aggregate amounts payable, determined on a monthly basis, by or on behalf of the same Acquired Companies under the applicable Contract as at the time immediately prior to the Closing, ABB shall be responsible for 50% of such excess monthly amounts payable for a period starting from the Closing Date and ending on the date on which such amended Contract would have terminated in accordance with its terms and without penalty to any Acquired Company that is a party thereto, assuming a notice of termination was provided under such amended Contract on the Closing Date.

7.22.Employees

Purchaser agrees to promptly inform ABB of any Contract with any Employee that it or any of its Affiliates enters into between the date of this Agreement and the Closing Date that provides for any payments or benefits to such Employee as a result of any adjustment to the Purchase Price pursuant to any provision of this Agreeement.

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ARTICLE 8
CONDITIONS TO CLOSING

8.1.Conditions of Both Parties

The obligation of each of ABB and Purchaser to consummate the transactions contemplated hereby is subject to the fulfillment of each of the following conditions prior to or at the Closing:

(a)no injunction, restraining order or other order issued by any court of competent jurisdiction or governmental authority or other legal or regulatory restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in effect;

(b)the consents and authorizations by or of, and filings with and notifications to, governmental authorities set forth in Schedule 8.1 shall have been obtained or effected, and all applicable waiting periods set forth in Schedule 8.1 shall have expired or been terminated and, in the case of such consents and authorizations, shall be in full force and effect;

(c)the U.S. Closing shall have occurred immediately prior to the Closing; and

(d)at least fifteen (15) days shall have passed since the Business Auditors delivered the Audited Closing Financial Statements and Audited Closing Net Equity Statement to ABB and Purchaser.

8.2.Additional Conditions of Purchaser

The obligation of Purchaser to consummate the transactions contemplated hereby is subject to the fulfillment of the following conditions prior to or at the Closing (which may be waived by Purchaser in writing in its sole discretion):

(a)the representations and warranties of ABB set forth herein shall be true and correct, both when made and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had and is not reasonably likely to result in a Material Adverse Effect (it being agreed that for the purpose of calculating whether the effect of breaches of such representations and warranties have had or are reasonably likely to result in a Material Adverse Effect, but not for the determination of breaches themselves, such representations and warranties shall be deemed not qualified by any references therein to materiality or Material Adverse Effect);

(b)ABB shall have performed and complied in all material respects with all of its undertakings and agreements required by this Agreement to be performed or complied with by it prior to the Closing;

(c)ABB shall have delivered to Purchaser a legal opinion from Froriep Renggli, counsel to ABB and ABB Ltd, substantially in the form of Annex 3,

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addressed to Purchaser and White Mountains Insurance Group, Ltd. and dated the Closing Date;

(d)ABB shall have delivered to Purchaser either (i) if the Facility Agreement and Pledge Agreement have not been terminated prior to the Closing, certificates from the Pledge Agent and each Lender stating: (x) the total amount required to be paid to the Lenders to cause them to terminate in full the Facility Agreement and the Pledge Agreement (the “Lenders’ Payment”); and (y) that the Facility Agreement and Pledge Agreement shall be deemed terminated as of the Closing Date upon the Lenders receipt of the Lenders’ Payment on such date, or (ii) if the Facility Agreement and Pledge Agreement have been terminated prior to Closing, certificates from the Pledge Agent and each Lender stating: (x) the Facility Agreement and Pledge Agreement have been terminated; and (y) neither the Facility Agent nor any Lender has any Encumbrances over the shares of Sirius International;

(e)there shall not be pending any suit, action or proceeding brought by any governmental authority (i) challenging or seeking to restrain or prohibit the consummation of any of the transactions contemplated hereby; (ii) seeking to prohibit or limit in any material respect the ownership or operation by any Acquired Company, Purchaser or any of their respective Affiliates of a portion of the business, Properties or assets of any Acquired Company, any Subsidiary of an Acquired Company, Purchaser or any Affiliate of Purchaser or to require any such Person to dispose of or hold separate any portion of the business, Properties or assets of any Acquired Company, any Subsidiary of an Acquired Company, Purchaser or any Affiliate of Purchaser as a result of the transactions contemplated hereby; or (iii) seeking to prohibit Purchaser, any Acquired Company or any of their Affiliates from effectively controlling in any respect the business or operations of any Acquired Company or any Subsidiary of an Acquired Company; provided that Purchaser or such of its Affiliates as are party to such suit, action or proceeding shall use their reasonable efforts to obtain settlement or discharge of such suit, action or proceeding, but provided further that Purchaser or its Affiliates shall not be required to dispose of or hold separate any portion of their businesses or properties or assets, or those of the Acquired Group, or to accept any limitations upon the ownership or operation by Purchaser or its Affiliates or any Acquired Company of a portion of any of the business, properties or assets, in connection with any such settlement or discharge; and

(f)since the date of this Agreement, there shall not have occurred any change in, or effect on, the Acquired Group which individually or in the aggregate is, or is reasonably likely to be, materially adverse to the financial condition of the Acquired Group, taken as a whole, other than changes or effects resulting from (i) changes in general economic conditions or financial market conditions (including currency rate fluctuations and interest rate changes), (ii) any decline in the value of the Investment Portfolio, (iii) catastrophe events with an impact in the ordinary course of the Business, (iv) legal or regulatory changes affecting the property and casualty insurance or reinsurance industry generally that do not specifically relate to any Acquired Company or disproportionately affect any Acquired Company (by way of example and not by way of limitation, the full extent of any change that specifically relates to any Acquired Company or disproportionately affects any Acquired Company shall be considered in determining whether there is, or is reasonably likely to be, a material adverse change or effect on the financial condition of the Acquired

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Group) or (v) the announcement of this Agreement or the consummation of the transactions specifically contemplated hereby, including the cessation of the Financial Risks Business pursuant to Section 7.2.4(dd).

8.3.Additional Conditions of ABB

The obligation of ABB to consummate the transactions contemplated hereby is subject to the fulfillment of the following conditions prior to or at the Closing (which may be waived by ABB in writing in its sole discretion):

(a)the representations and warranties of Purchaser set forth herein shall be true and correct, both when made and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date) except where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not materially adversely affected and is not reasonably likely to materially adversely affect the ability of Purchaser to complete the transactions contemplated hereby (it being agreed that for the purpose of calculating whether the effect of breaches of such representations and warranties has materially adversely affected or is reasonably likely to materially adversely affect the ability of Purchaser to complete the transactions contemplated hereby, but not for the determination of breaches themselves, such representations and warranties shall be deemed not qualified by any references therein to materiality);

(b)Purchaser shall have performed and complied in all material respects with all of its undertakings and agreements required by this Agreement to be performed or complied with by it prior to the Closing;

(c)Purchaser shall have delivered to ABB a legal opinion from Advokatfirman Vinge KB, counsel to Purchaser, substantially in the form of Annex 4, addressed to ABB and dated the Closing Date; and

(d)Purchaser shall have delivered to ABB a legal opinion from Conyers, Dill & Pearman, counsel to White Mountains Insurance Group, Ltd., substantially in the form of Annex 6, addressed to ABB and dated the Closing Date.

8.4.Frustration of Closing Conditions

No party may rely on the failure of any condition set forth in Section 8.1, 8.2 or 8.3, as the case may be, to be satisfied if such failure was caused by such party’s failure, subject to the terms and conditions of this Agreement, to use reasonable efforts to consummate the transactions contemplated by this Agreement.

ARTICLE 9
LIABILITY AND RELATED MATTERS

9.1.Indemnification by ABB

From and after the Closing, ABB shall indemnify Purchaser and its Affiliates (including, for the avoidance of doubt, the Acquired Companies) and each of their respective officers, directors, employees, heirs, successors and assigns against and hold them harmless

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from (whether in connection with a Third Party Claim or a Direct Claim) any Loss (payable promptly upon agreement between ABB and Purchaser or upon final determination of ABB’s liability pursuant to the provisions of Section 11.10, for such Third Party Claim or Direct Claim) by any such Indemnified Party caused by or resulting from:

(a)any breach of any representation or warranty of ABB contained in Article 5 or in any certificate delivered by or on behalf of ABB at the Closing (it being agreed that for purposes of such indemnification, the representations and warranties of ABB shall, with respect to calculation of Losses only (but not for determination of breaches), be deemed not qualified by any references therein to materiality or to the occurrence or reasonable likelihood of a Material Adverse Effect);

(b)any breach of any obligation of ABB contained in this Agreement;

(c)the liabilities of Sirius Holding on a stand-alone basis (disregarding any obligations or liabilities of any other Acquired Company) incurred prior to the Closing;

(d)the Facility Agreement and the Pledge Agreement;

(e)the liabilities of Sirius Belgium (other than liabilities incurred by Sirius Belgium after the Closing Date as a result of actions taken after the Closing Date by Purchaser or its Affiliates (including any Acquired Company) and not authorized in writing by ABB);

(f)any breaches of Law or Contract resulting from the Sirius International Swedish defined contribution funded Retirement Plan having been converted from a defined benefit plan to a defined contribution plan (any claims alleged in connection with any such breaches to be administered in accordance with Section 9.4);

(g)any obligation or liabilities relating exclusively to the ABB Group (excluding the Acquired Group) for which Purchaser or any of its Affiliates (including, for the avoidance of doubt, any Acquired Company) becomes liable (excluding, for the avoidance of doubt, any obligations or liabilities arising out of Contracts to which an Acquired Company is a party); or

(h)any Retained Plan, other than a Loss resulting from liabilities and obligations included in the calculation of the transfer payment amounts applicable to such Retained Plan and agreed by Purchaser and ABB in accordance with Section 7.5(b);

provided, however, that ABB shall not be required to indemnify or hold harmless any Person, and shall not have any liability:

(i)under clause (a) of this Section 9.1, other than any liability relating to a representation or warranty of ABB contained in Sections 5.1, 5.2.1, 5.3, 5.4, 5.20 or 5.21 of this Agreement (collectively, the “ABB Specified Claims”), (x) unless the aggregate of all Losses relating thereto for which ABB would, but for this proviso, be liable exceeds on a cumulative basis an amount equal to SEK 55 million, and then only to the extent of any

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such excess; and (y) for any individual breach where the Loss with respect to such individual breach is less than SEK 5 million, provided, that (i) the term “individual breach” shall mean each individual breach of a particular warranty and not the aggregation of individual breaches of a particular warranty into a single breach (e.g., if ABB failed to disclose five contracts under a particular warranty, and the failure to disclose any one of those contracts would be a breach, then the five contracts together would be considered multiple breaches, of which each such undisclosed contract would be an “individual breach”), and (ii) for purposes of the calculation of the Loss with respect to such individual breach, a series of separate Losses caused by or resulting from the same individual breach shall be aggregated (e.g., if an individual breach causes or results in two separate Losses of SEK 3 million each, such Losses shall be aggregated to a sum of SEK 6 million for purposes of determining whether the “Loss with respect to such individual breach” is less than SEK 5 million), provided, however, that this clause (i) shall not apply with respect to Losses in respect of a failure to disclose in Section 5.10.1(1), 5.10.1(2), 5.10.1(3), 5.10.1.(4) or 5.10.1(5) of the Disclosure Schedule any Direct Insurance Agreement, Assumed Reinsurance Agreement, Ceded Reinsurance Agreement, Reinsurance Pool or Scan Re Agreement required to be disclosed by ABB pursuant to Section 5.10.1 (the “Insurance Agreement Claims”); and

(ii)under clause (a) of this Section 9.1 for any Losses in excess of an amount equal to 80% of the International Purchase Price; provided, however, that this limitation shall not apply to any Losses relating to an ABB Specified Claim.

This Section 9.1 shall not apply to any claim for indemnification with respect to any Taxes, which claims shall be governed by Section 9.6.

9.2.Indemnification by Purchaser

From and after the Closing, Purchaser shall indemnify ABB and its Affiliates, officers, directors, employees, heirs, successors and assigns against and hold them harmless from (whether in connection with a Third Party Claim or a Direct Claim) any Loss payable promptly upon agreement between ABB and Purchaser or upon final determination of Purchaser’s liability pursuant to the provisions of Section 11.10, as applicable, for such Third Party Claim or Direct Claim by any such Indemnified Party caused by or resulting from:

(a)any breach of any representation or warranty of Purchaser contained in Article 6 or any certificate delivered by or on behalf of Purchaser at the Closing (it being agreed that for the purposes of such indemnification, the representations and warranties of Purchaser shall, with respect to calculation of Losses only (but not for determination of breaches), be deemed not qualified by any references therein to materiality); or

(b)any breach of any obligation of Purchaser contained in this Agreement;

(c)any of the employee benefit, bonus, incentive compensation, severance, salary continuation, termination or retention pay, death benefit, welfare benefit (including all obligations under Section 4980B of the Code and Part 6 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as

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amended), profit-sharing, pension, retirement, deferred compensation, medical, life insurance, disability, accident, accrued leave, vacation, sick pay, sick leave, unemployment benefit and fringe benefit plans, programs and arrangements and employment, consulting, termination, retirement and severance contracts and agreements, including the Transferred Plans, which transfer to Purchaser or its Affiliates in their entirety at or after the Closing by operation of Law, other than (i) Losses caused by a failure by ABB and its Affiliates (including the Acquired Group) prior to the Closing to comply with Law or the terms of such plans, programs, arrangements, contracts or agreements or (ii) Losses for which ABB has agreed to indemnify the Purchaser under Section 9.1;

provided, however, that Purchaser shall not be required to indemnify or hold harmless any Person, and shall not have any liability:

(i)under clause (a) of this Section 9.2, other than any liability relating to a representation or warranty of Purchaser contained in Section 6.1 or 6.2.1 of this Agreement (collectively, the “Purchaser Specified Claims”), (x) unless the aggregate of all Losses relating thereto for which Purchaser would, but for this proviso, be liable exceeds on a cumulative basis an amount equal to SEK 55 million, and then only to the extent of any such excess; and (y) for any individual breach where the Loss with respect to such individual breach is less than SEK 5 million, provided, that (i) the term “individual breach” shall mean each individual breach of a particular warranty and not the aggregation of individual breaches of a particular warranty into a single breach (e.g., if Purchaser failed to disclose five contracts under a particular warranty, and the failure to disclose any one of those contracts would be a breach, then the five contracts together would be considered multiple breaches, of which each such undisclosed contract would be an “individual breach”), and (ii) for purposes of the calculation of the Loss with respect to such individual breach, a series of separate Losses caused by or resulting from the same individual breach shall be aggregated (e.g., if an individual breach causes or results in two separate Losses of SEK 3 million each, such Losses shall be aggregated to a sum of SEK 6 million for purposes of determining whether the “Loss with respect to such individual breach” is less than SEK 5 million); and

(ii)under clause (a) of this Section 9.2 for any Losses in excess of an amount equal to 80% of the International Purchase Price; provided, however, that this limitation shall not apply to any Losses relating to a Purchaser Specified Claim.

9.3.Termination of Indemnification

The obligations to indemnify and hold harmless any party:

(a)pursuant to clause (a) of each of Sections 9.1 and 9.2, other than such obligations relating to the Insurance Agreement Claims, the ABB Specified Claims or the Purchaser Specified Claims, shall terminate on the second anniversary of the Closing Date; provided, however, that such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the Person to be indemnified

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shall have, before the second anniversary of the Closing Date, provided notice with respect to a Third Party Claim or Direct Claim, as applicable;

(b)pursuant to clause (a) of Section 9.1 for obligations relating to the Insurance Agreement Claims shall terminate on the fifth anniversary of the Closing Date; provided, however, that such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the Person to be indemnified shall have, before the fifth anniversary of the Closing Date, provided notice with respect to a Third Party Claim or Direct Claim, as applicable; and

(c)pursuant to: (i) clause (a) of Sections 9.1 and 9.2 for ABB Specified Claims or Purchaser Specified Claims; (ii) pursuant to the clauses of Sections 9.1 and 9.2 other than clause (a); (iii) Section 9.8; (iv) Section 9.9; and (v) Section 9.10 shall not terminate with respect to any item as to which the Person to be indemnified shall have, before the expiration of the applicable statute of limitations, if any, provided notice with respect to a Third Party Claim or Direct Claim, as applicable.

9.4.Procedures Relating to Third Party and Direct Indemnification Claims

9.4.1Third Party Claims

(a)In order for a Person (the “Indemnified Party”) to be entitled to any indemnification pursuant to this Article 9 in respect of, arising out of or involving a claim or demand (other than a claim or demand relating to Taxes) made by any Person other than a party hereto against the Indemnified Party (a “Third Party Claim”), such Indemnified Party must notify the Person obligated to provide indemnification pursuant to this Article 9 (the “Indemnifying Party”) in writing of the Third Party Claim promptly, and in any event within thirty (30) days, after receipt by such Indemnified Party of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided under this Agreement except to the extent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure.  Such written notice shall describe in reasonable detail the facts and circumstances known to the Indemnified Party with respect to the subject matter of such Third Party Claim.  Thereafter, the Indemnified Party shall deliver to the Indemnifying Party promptly, and in any event within ten (10) Business Days after the Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim; provided, however, that failure to make such delivery shall not affect the indemnification provided under this Agreement except to the extent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure.

(b)If a Third Party Claim is made against an Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges its obligation to fully indemnify the Indemnified Party therefor in accordance with this Agreement, to assume and control the defense thereof with counsel selected by the Indemnifying Party, the selection of whom shall be subject to prior consultation and cooperation with the Indemnified Party for a period of no less than ten (10) days (but not the consent of the Indemnified Party) unless the Third Party Claim seeks an order or injunction or other relief requiring a response from the Indemnifying Party in less than ten (10) days, provided that the Indemnifying Party keeps the Indemnified Party and its attorneys reasonably informed as to the progress of the defense and any proposed settlement.  If the Indemnifying Party so elects to assume the defense of a Third Party Claim, the

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Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof.  If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ at its own expense counsel not reasonably objected to by the Indemnifying Party separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense, subject to the remaining terms of this Section 9.4.1.

(c)The Indemnifying Party shall be liable for the reasonable fees and expenses of one primary counsel, and to the extent reasonably required in connection with such Third Party Claim, one or more local counsel, and such other counsel as may be reasonably required due to a conflict of interest among Indemnified Parties, in each case employed by the Indemnified Party for any period during which the Indemnifying Party has not assumed the defense thereof.

(d)If the Indemnifying Party chooses to defend or prosecute any Third Party Claim, all the parties hereto shall reasonably cooperate and shall cause their Affiliates to reasonably cooperate in the defense or prosecution thereof.  Such cooperation shall include the retention and (upon the Indemnifying Party’s request) the provision to the Indemnifying Party of records and information that are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

(e)Whether or not the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnifying Party’s prior written consent (which consent shall not be unreasonably withheld or delayed).  If the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall agree to any settlement, compromise or discharge of such Third Party Claim that the Indemnifying Party may recommend and that by its terms (or pursuant to a binding commitment of the Indemnifying Party) obligates the Indemnifying Party to pay the full amount (subject to any limitation on payment contained in this Article 9) of such liability in connection with such Third Party Claim which releases the Indemnified Party completely in connection with such Third Party Claim.

(f)Notwithstanding anything to the contrary in this Section 9.4.1, the Indemnified Party may assume the exclusive right to defend any Third Party Claim (and the Indemnifying Party shall be liable for the reasonable fees and expenses of one primary counsel, and to the extent reasonably required in connection with such Third Party Claim, one or more local counsel, and such other counsel as may be reasonably required due to a conflict of interest among Indemnified Parties, incurred by the Indemnified Party in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for non-monetary damages against the Indemnified Party that cannot be separated from any related claim for money damages; provided that upon the non-appealable grant or dismissal of all such applications for an order, injunction or other equitable relief or relief for non-monetary damages, the Indemnifying Party may resume the exclusive right to defend such Third Party Claim.  If all of such injunctive, equitable and other non-monetary relief portions of the Third Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages.  In the event the Indemnified Party assumes the exclusive right to defend any such Third Party Claim under this Section 9.4.1, the Indemnifying Party will not be bound by any

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determination of such claim or proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld or delayed).

(g)If the Indemnifying Party shall fail to defend any claim or proceeding for which it has assumed the defense hereunder, or if, after commencing or undertaking any such defense, the Indemnifying Party fails to diligently prosecute and defend or withdraws from such defense, then the Indemnified Party may notify the Indemnifying Party of this circumstance, and the Indemnifying Party shall have fifteen (15) days to rectify this failure.  If such failure is not rectified within such period, then the Indemnified Party shall have the right to defend such Third Party Claim by giving the Indemnifying Party written notice of such decision within fifteen (15) days after the expiration of the fifteen-day cure period referred to in the previous sentence; provided, however, that the Indemnified Party shall not admit any liability or consent to the entry of any judgment or enter into any settlement without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed).  If the Indemnified Party assumes the defense of a Third Party claim pursuant to this Section 9.4.1, the Indemnifying Party shall be entitled to (i) participate in the defense of such Third Party Claim, and (ii) employ counsel, at its own expense, separate from the counsel employed by Indemnified Party.

9.4.2Direct Claims

In the event any Indemnified Party should have an indemnification claim against any Indemnifying Party under this Agreement that does not involve a Third Party Claim being asserted against or sought to be collected from such Indemnified Party (a “Direct Claim”), the Indemnified Party shall promptly deliver notice of such Direct Claim to the Indemnifying Party, which notice must refer to this Section 9.4.2 and expressly state that the Indemnifying Party’s failure to dispute any such Direct Claim within thirty (30) days following the Indemnifying Party’s receipt of such notice shall result in such Direct Claim being conclusively deemed a liability of the Indemnifying Party pursuant to this Section 9.4.2.  The failure by any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability that it may have to such Indemnified Party, except to the extent that the Indemnifying Party has been actually and materially prejudiced by such failure.  If the Indemnifying Party does not notify the Indemnified Party within thirty (30) days following its receipt of such notice that the Indemnifying Party disputes such Direct Claim, such Direct Claim specified by the Indemnified Party in such notice shall be conclusively deemed a liability of the Indemnifying Party under this Article 9, and the Indemnifying Party shall pay the amount of such liability to the Indemnified Party on demand, or in the case of any notice in which the amount of the Direct Claim is estimated, on such later date when the amount of such Direct Claim is finally determined; provided that in any such case such payment shall be made in accordance with Section 9.7.  If the Indemnifying Party disputes its liability with respect to such Direct Claim in a timely manner, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that either party may at any time refer such dispute to arbitration pursuant to Section 11.10.

9.5.Assignment of Rights

Promptly upon request by the Indemnifying Party after having paid in full the Indemnified Party for any Loss in accordance with this Article 9, the Indemnified Party shall use reasonable efforts to assign, or cause to be assigned, to the Indemnifying Party or its designated Affiliate any and all rights (including any rights to indemnification and

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reimbursement) of the Indemnified Party and its Affiliates against any Person (other than an Affiliate of the Indemnified Party) in relation to and to the extent of the Loss so indemnified by the Indemnifying Party.

9.6.Tax Indemnification and Related Matters

Notwithstanding anything in this Agreement to the contrary:

9.6.1Tax Indemnification

(a)ABB shall indemnify Purchaser and its Affiliates and each of their respective officers, directors, employees, heirs, successors and assigns against and hold them harmless on an after-Tax basis from (i) all liability for Taxes of each Acquired Company (including Taxes resulting from any Tax sharing, allocation, indemnification or similar agreement between any Acquired Company and any other Person) and each affiliated group of which any Acquired Company is or has been a member with respect to any taxable period ending on or before the Measurement Date or with respect to the portion ending on the Measurement Date of any taxable period that includes (but does not end on) such date (each, a “Pre-Measurement Tax Period”), to the extent such Taxes are not reflected in the Final Closing Financial Statements, (ii) all Taxes imposed on the Acquired Companies, as a result of United States Treasury Regulation Section 1.1502-6(a) (or a similar provision of state, local or foreign law), (iii) any Taxes in the form of value added tax imposed by any taxing authority in Switzerland upon any Acquired Company after the Measurement Date in connection with the Acquired Group being an Affiliate of the ABB Group prior to the Closing, (iv) all liability for Taxes of ABB, the Acquired Group and all of their Affiliates arising (directly or indirectly) as a result of any merger, consolidation or other restructuring described in Schedule 11.6 prior to the Closing and, except as provided in Section 11.12.2, all liability for Taxes of ABB, the Acquired Group and all of their Affiliates arising (directly or indirectly) as a result of the ABB Distribution or the sale by ABB of the International Shares (but not, for the avoidance of doubt, the sale of the U.S. Shares), (v) any breach of any representation or warranty contained in Section 5.13 or a similar provision of state, local or foreign law, and (vi) all liability for reasonable legal fees and expenses for any item attributable to any item in clauses (i) through (v).

(b)In the case of a Straddle Period: (i) real, personal and intangible property Taxes (“Property Taxes”) for the Pre-Measurement Tax Period shall be equal to the amount of such Property Taxes for such entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that are in the Pre-Measurement Tax Period and the denominator of which is the number of days in the Straddle Period; and (ii) all other Taxes for the Pre-Measurement Tax Period shall be determined based on an actual closing of the books as if such taxable period ended as of the close of business on the Measurement Date and, in the case of any Taxes attributable to the ownership of any equity interest in any partnership or other “flow through” entity, based on an actual closing of the books as if the taxable period of such partnership or other “flow through” entity ended as of the close of business on the Measurement Date.

9.6.2Tax Indemnity Payments

(a)Any Tax indemnity payment to be made hereunder shall be paid in accordance with Section 9.7 and within ten (10) days after the Indemnified Party makes written demand upon the Indemnifying Party, but in no case earlier than five (5) Business

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Days prior to the date on which the relevant Taxes are required to be paid to the relevant taxing authority (including as estimated Tax payments).

(b)For the avoidance of doubt, all indemnity payments under this Section 9.6 shall be made on a one-for-one basis, without regard to any caps, floors, baskets or other similar limitations.

9.6.3Tax Claims

(a)If a claim shall be made by any taxing authority, which, if successful, might result in an indemnity payment to the Indemnified Party pursuant to this Section 9.6, the Indemnified Party shall notify in writing the Indemnifying Party reasonably promptly of such claim (a “Tax Claim”); provided, however, that the failure to give such prompt written notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party has actually and materially been prejudiced as a result of such failure.

(b)With respect to any Tax Claim relating to Taxes with respect to any taxable period ending on or before the Measurement Date, ABB shall control all proceedings and may make all decisions in connection with such Tax Claim, including initiating any claim for refund, amending any Tax Return and contesting, resolving and defending against any assessment for additional Taxes, notice of Tax deficiency or other adjustment of Taxes, provided that Purchaser, and counsel of Purchaser’s own choosing, shall have the right to comment on all aspects of the prosecution or defense of such Tax Claim that could affect the Taxes of Purchaser or any Acquired Company after the Measurement Date, and provided further that ABB shall not settle any Tax Claim that could affect the Taxes of Purchaser or any Acquired Company after the Measurement Date without the prior written consent of Purchaser (which consent shall not be unreasonably withheld or delayed).  Except as provided in the preceding sentence, Purchaser shall control all proceedings with respect to all other Tax Claims and may make all decisions in connection with such Tax Claims; provided, however, that Purchaser or any Affiliate or representative thereof shall not settle any Tax Claim that could affect the Tax liability of ABB or any Affiliate thereof before the Measurement Date without prior written consent of ABB (which consent shall not be unreasonably withheld or delayed).

9.6.4Tax Refunds

(a)Except as provided in Section 9.6.4(b), the amount or economic benefit of any refunds, credits or offsets of Taxes (including any interest in respect thereof) of any Acquired Company (including any foreign tax credits for taxes incurred during any Pre-Measurement Tax Period) for any Pre-Measurement Tax Period, to the extent not reflected in the Final Closing Financial Statements, shall be for the account of ABB.  Notwithstanding the foregoing and provided that Sirius America cannot elect to waive a carryback without causing its U.S. Affiliates to also waive a carryback, any such refunds, credits or offsets of income Taxes shall be for the account of Purchaser to the extent that such refunds, credits or offsets of income Taxes are attributable (determined on a marginal basis) to the carryback from a taxable period beginning after the Measurement Date (or the portion of a Straddle Period that begins on the day after the Measurement Date) of items of loss, deductions, or other Tax items, of any Acquired Company (or any of their respective Affiliates, including Purchaser).  The amount or economic benefit of any refunds, credits or

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offsets of Taxes of any Acquired Company for any taxable period beginning after the Measurement Date shall be for the account of Purchaser.  The amount or economic benefit of any refunds, credits or offsets of Taxes of any Acquired Company for any Straddle Period shall be equitably apportioned between ABB and Purchaser; provided, however, that any refunds, credits or offsets of Taxes (including any interest in respect thereof) reflected in the Closing Financial Statements shall be excluded from any such apportionment.

(b)Notwithstanding anything to the contrary, the amount or economic benefit of any refunds, credits or offsets of Taxes (including any interest in respect thereof) attributable to or resulting from Tax repayments claimed by Sirius Belgium with respect to reassessments of Taxes with the Belgian tax authorities for any Pre-Measurement Tax Period (the “Belgian Tax Reassessments”) shall be for the account of ABB.  ABB and Purchaser agree that ABB shall prepare and file all amended Tax Returns with respect to the Belgian Tax Reassessments and shall control any Tax Claim arising therefrom. Purchaser shall cooperate, so long as such cooperation in Purchaser’s good faith and reasonable judgment can be made without undue burden or expense or disruption to the operations of the Business, with ABB’s reasonable requests for information held by an Acquired Company in order to enable ABB to prepare the Tax Returns with respect to the Belgian Tax Reassessments.  Purchaser shall be under no obligation to utilize any refunds, credits or offsets of Taxes attributable to or resulting from the liquidation of Sirius Belgium.  If Purchaser, in its sole discretion, determines that, after first taking into account all other items of income, gain, loss, deduction, credit or reserve (including safety reserve) that are available for the relevant taxable period or periods, Sirius International or any affiliate or successor thereto actually utilized any credits or offsets resulting from the liquidation of Sirius Belgium and either (i) such utilization actually reduces the amount of Taxes that Sirius International or any affiliate or successor thereto otherwise would have been required to pay to a taxing authority had it not utilized such credits or offsets or (ii) Sirius International or any affiliate or successor thereto receives a refund or credit against its Taxes from a taxing authority that it would not otherwise have received had it not utilized such credits or offsets, then the amount of such reduction of Taxes paid or the amount of such refund or credit shall be 80 percent for the account of ABB and 20 percent for the account of Purchaser; provided, however, that ABB agrees to repay to Purchaser its 80 percent portion of the amount of such reduction or the amount of such refund or credit (plus any penalties, interest or other charges imposed by a taxing authority) in the event that (x) it is determined by a taxing authority that Sirius International was not entitled to such reduction of Taxes paid or (y) Sirius International or any affiliate or successor thereto is required to repay such refund to a taxing authority.  ABB and Purchaser agree that (i) ABB will provide reasonable instructions in the preparation and filing of all Tax Returns that relate to the liquidation of Sirius Belgium and (ii) all expenses relating to the liquidation of Sirius Belgium and the preparation of such Tax Returns shall be borne solely by ABB.  For the avoidance of doubt, the amount or economic benefit of any refunds, credits or offsets of Taxes attributable to or resulting from the Belgian Tax Reassessments or the liquidation of Sirius Belgium shall not in any way increase Net Equity.

(c)Each party shall forward, and shall cause its Affiliates to forward, to the party entitled pursuant to this Section 9.6.4 to receive the amount or economic benefit of a refund, credit or offset to Tax the amount of such refund, or the economic benefit of such credit or offset to Tax, within 10 days after such refund is received or after such credit or offset is allowed or applied against another Tax liability, as the case may be.

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9.6.5Amended Tax Returns

None of Purchaser and the Acquired Group and any Affiliate thereof shall file any amended Tax Returns with respect to any Pre-Measurement Tax Period without prior written consent of ABB (which consent shall not be unreasonably withheld or delayed).

9.6.6Termination of Tax Indemnification

The representations and warranties contained in Section 5.13 shall terminate upon the expiration of the applicable statute of limitations period.  The obligations to indemnify and hold harmless a party hereto pursuant to this Section 9.6 shall terminate at the time the applicable statutes of limitations with respect to the Tax liabilities in question expire (giving effect to any extension thereof); provided, however, that such obligations to indemnify and hold harmless shall not terminate with respect to any Tax as to which the Indemnified Party shall have, before the expiration of the statute of limitations, previously made a claim by delivering a notice of such claim (stating in reasonable detail the basis of such claim) to the Indemnifying Party.

9.7.Indemnity Payments

Any indemnity payment hereunder (i) shall be made to Purchaser or ABB, as the case may be, by wire transfer to an account specified by the Indemnified Party in Swedish kronor in immediately available funds together with interest thereon from the date of delivery of notice of the Third Party Claim or Direct Claim, as applicable, by any Indemnified Party to the date of payment at an annual rate of 3% (such interest shall be calculated on the basis of a year of 365 days and the actual number of days elapsed), compounded annually and (ii) shall be treated as an adjustment to the International Purchase Price for all Tax purposes to the extent permitted by Law.

9.8.Scandinavian Re Indemnity

9.8.1Indemnity by ABB

(a)After the Closing and subject to clause (c) below, ABB agrees to indemnify Purchaser and its Affiliates (including, for the avoidance of doubt, the Acquired Companies) and each of their respective officers, directors, employees, heirs, successors and assigns against, and hold them harmless from, eighty percent (80%) of all Losses In Excess Of Reserves (as defined below) incurred by any of them arising out of or relating to the following disputes involving Scandinavian Re (the “Scan Re Disputes”):

(i)the BCS Insurance/NAWS dispute identified as item 180 in the Scandinavian Re Running Reserve Memo dated July 22, 2003 (the “Scan Re Memo”);

(ii)the BIG/Superior National dispute identified as Treaty 201, all underwriting years, in the Scandinavian Re Memo;

(iii)the Gerling dispute identified as Treaty 193, all underwriting years, in the Scan Re Memo; and

(iv)the Verzekerd dispute identified as Treaty 176, all underwriting years, in the Scan Re Memo.

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(b)The term “Losses In Excess Of Reserves” means all Losses incurred by Purchaser and any of its Affiliates (including the Acquired Group) with respect to any Scan Re Dispute after the Measurement Date which are in excess of any net loss Reserves and any net payables/receivables which are specifically set forth in the balance sheet included in the Final Closing Financial Statements with respect to the applicable Scan Re Dispute.

(c)Notwithstanding the fact that, pursuant to clause (a) above, Purchaser shall be liable for twenty percent (20%) of all Losses In Excess Of Reserves, if the aggregate liability of Purchaser and its Affiliates and each of their respective officers, directors, employees, heirs, successors and assigns for such twenty percent (20%) of Losses In Excess Of Reserves should exceed $4,000,000, then ABB agrees to indemnify Purchaser and its Affiliates and each of their respective officers, directors, employees, heirs, successors and assigns for the portion of all amounts in excess of such $4,000,000.

9.8.2Payments by Purchaser

(a)After the Closing, Purchaser agrees that it shall pay to ABB eighty percent (80%) of all Gains (as defined below) obtained or otherwise recognized by Purchaser or any of its Affiliates (including the Acquired Group).  Such payment shall be made to ABB or, at ABB’s discretion, one of its Affiliates, in Swedish kronor, by electronic transfer in immediately available funds and to the account designated by ABB, within five (5) Business Days after such Gain has been obtained.  A Gain shall be deemed to have been “obtained” by Purchaser or its Affiliates at the time that a final, non-appealable and binding settlement or resolution of a Scan Re Dispute has been paid.

(b)A “Gain” means the difference (assuming a positive number) between: (i) the total amount of any net loss Reserves and any net payables/receivables which have been established in the Final Closing Financial Statements with respect to any Scan Re Dispute; and (ii) the amount of Losses, if any, actually incurred or recognized by Scandinavian Re after the Measurement Date under any final, non-appealable and binding settlement or resolution of such Scan Re Dispute.  For the avoidance of doubt, in no case shall the Gain with respect to any Scan Re Dispute be greater than the total amount of any net loss Reserves and any net payables/receivables which have been established in the Final Closing Financial Statements with respect to such Scan Re Dispute.

9.8.3Prosecution and Settlement of Scan Re Disputes

(a)Notwithstanding anything to the contrary contained in this Agreement, ABB shall have the right, in its sole and absolute discretion, to settle or compromise any of the Scan Re Disputes prior to the Measurement Date; provided, however, that ABB shall not enter into any such settlement that imposes any injunctive or similar equitable obligations on any Acquired Company without the prior written consent of Purchaser (which consent shall not be unreasonably withheld or delayed).

(b)After the Measurement Date and up to the Closing Date, ABB shall not settle or compromise any of the Scan Re Disputes without the prior written consent of Purchaser (which consent shall not be unreasonably withheld or delayed).

(c)After the Closing Date, the provisions of Section 9.4 shall apply, mutatis mutandis, in connection with the defense and prosecution of any remaining Scan Re Disputes; provided, however, that (i) Purchaser shall have the sole right to control the defense

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and prosecution of any remaining Scan Re Disputes and ABB shall not be able to assume the defense or prosecution of any such Scan Re Dispute and (ii) Purchaser’s obligation to obtain ABB’s consent (which shall not be unreasonably withheld or delayed) prior to settling, compromising, or discharging any Scan Re Dispute shall be conditional on ABB’s diligent review on an ongoing basis of the facts and law with respect to such Scan Re Dispute and ABB’s employment (at ABB’s sole expense) of counsel qualified in insurance and reinsurance litigation to review facts and law with respect to such Scan Re Dispute on behalf of ABB (the selection of which counsel shall be subject to the prior consultation and cooperation with Purchaser (but not the consent of Purchaser)) for a period of no less than ten (10) days unless the proposed settlement, comprise or discharge of such Scan Re Dispute requires a response from ABB in less than ten (10) days.  Notwithstanding any other provision of this Agreement, if Purchaser does not accept any settlement, compromise or discharge of any Scan Re Dispute due to ABB withholding its consent with respect to such settlement, compromise or discharge, ABB shall indemnify Purchaser for 100% of any Losses resulting from the applicable Scan Re Dispute that are in excess of the Losses that would have resulted from such Scan Re Dispute had such settlement, compromise or discharge been accepted.

9.9.Special Indemnity in Respect of Alstom Instruments

(a)After the Closing, ABB agrees to indemnify Purchaser and its Affiliates (including, for the avoidance of doubt, the Acquired Companies) and each of their respective officers, directors, employees, heirs, successors and assigns (the “Alstom Indemnified Parties”) against, and hold them harmless from, all Losses (the “Alstom Losses”) arising out of or relating to each Alstom Instrument listed or required to be listed in Section 5.22 of the Disclosure Schedule, other than Losses resulting from any action taken by the Alstom Indemnified Parties to transfer their obligations under such Alstom Instrument to any Person other than an Affiliate.

(b)Notwithstanding clause (a) above, ABB shall have no obligation to indemnify Purchaser and its officers, directors, employees, heirs, successors and assigns against, and hold them harmless from, any Alstom Losses unless Purchaser and its Affiliates shall have exhausted all remedies available to them (including prosecuting an action or otherwise litigating), whether in law and/or equity, to prevent such Alstom Losses from arising or to recover such Alstom Losses from the Alstom Group; provided, however, that if any member of the Alstom Group should become the subject of a rehabilitation, liquidation, conservatorship, receivership, bankruptcy, proceeding for relief or composition of debts or similar proceeding and such proceeding shall not have been terminated within sixty (60) days from commencement, Purchaser and its Affiliates shall be deemed to have exhausted all remedies available to them if Purchaser or any of its Affiliates files a claim with respect to the Alstom Instrument in connection with such proceeding.

9.10.Special Indemnity in Respect of ABB Instruments

After the Closing, ABB agrees to indemnify Purchaser and its Affiliates (including, for the avoidance of doubt, the Acquired Companies) and each of their respective officers, directors, employees, heirs, successors and assigns against, and hold them harmless from, all Losses arising out of or relating to each ABB Instrument listed or required to be listed in Section 5.23 of the Disclosure Schedule.

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9.11.Other Limitations; Indemnity Provisions

9.11.1Losses Accounted for in Final Closing Financial Statements

ABB’s liability hereunder for Losses shall be reduced to the extent of the amount of (i) any specific provision or reserve in respect of the relevant Losses established in the Final Closing Financial Statements and (ii) any general or bulk reserve pool in the Final Closing Financial Statements that ABB demonstrates was established in respect of the relevant Losses.

9.11.2Insurance Proceeds

The amounts which, but for this Section 9.11.2, would be recoverable under this Agreement, shall be reduced when and to the extent any insurance proceeds are recovered in respect thereof by the Indemnified Party or any of its Affiliates under any policy of insurance carried by any of them (net of all reasonable out-of-pocket expenses incurred in obtaining such recovery and net of any increase in the relevant insurance premium directly attributable to such recovery as verified in writing by the relevant insurance carrier at the time of recovery).

9.11.3Subsequent Recovery

If the Indemnifying Party pays an amount in discharge of any claim under this Agreement and the Indemnified Party or any of its Affiliates subsequently recovers from a third Person a sum which is attributable to the subject matter of the claim, the Indemnified Party shall promptly pay to the Indemnifying Party an amount equal to all amounts recovered up to the aggregate amount thus paid by the Indemnifying Party hereunder.

9.11.4Claims Satisfied under Other Provisions

For the avoidance of doubt, it is understood and agreed that to the extent that a claim with respect to a Loss has been satisfied under a provision of this Agreement, a claim for indemnification or reimbursement for such Loss may not be made under any other provision of this Agreement.

9.11.5Tax Savings

The amounts which, but for this Section 9.11.5, would be recoverable under this Article 9 from an Indemnifying Party shall be (i) increased by any net Tax cost incurred by the Indemnified Party or any of its Affiliates arising from receipt of indemnity payments hereunder and (ii) reduced by any net Tax benefits arising from the incurrence or payment of any Loss.  In computing the amount of any such Tax cost or Tax benefit, the Indemnified Party shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any indemnified Loss.  Any indemnification payment hereunder shall initially be calculated without regard to this Section 9.11.5 and shall be increased or reduced to reflect any such net Tax cost or net Tax benefit only after the Indemnified Party has actually realized such cost or benefit.  For purposes of this Agreement, an Indemnified Party shall be deemed to have “actually realized” a net Tax cost or a net Tax benefit when and to the extent that the amount of Taxes payable by such Indemnified Party is increased above or reduced below, as the case may be, the amount of Taxes that such Indemnified Party would be required to pay but for the receipt of the

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indemnity payment or the incurrence or payment of such Loss.  If a Tax benefit arising from the incurrence or payment of a Loss is actually realized prior to the fifth anniversary of the date of the related payment or payments made by ABB under this Article 9 in respect of such Loss (“Prior ABB Payments”), Purchaser shall pay to ABB the amount of such Tax benefit (up to the amount of the Prior ABB Payments) no later than 15 days after such Tax benefit is actually realized, and any excess of such Tax benefit over the Prior ABB Payments shall be applied to reduce any future payments to be made by ABB pursuant to Article 9; provided that if Purchaser is required to refund any part of such Tax benefit to any taxing authority for which ABB received the benefit prior to the fifth anniversary of the related payment made under this Article 9, ABB shall reimburse Purchaser for the amount of such refund.

9.11.6Mitigation

Neither party shall have liability hereunder for Losses from a breach of any of its representations, warranties or covenants to the extent that such Losses would not have arisen but for a failure by the other party or any of its Affiliates, upon becoming aware of such breach, to use reasonable efforts to mitigate the Losses resulting from such breach.

9.11.7Changes in Laws

An Indemnifying Party shall have no liability hereunder to the extent that any alteration or repeal or enactment of any applicable Law after the Closing Date increases the Losses resulting from a failure of any of its representations or warranties in Article 5 or Article 6.

9.11.8Right to Cure

Each party agrees that it will promptly inform the other party of any breach of representation, warranty or covenant in this Agreement by such other party which may lead to a Direct Claim or a Third Party Claim upon becoming aware of such breach, so that the other party may commence remedial action; provided, however, that this Section 9.11.8 shall not in any way affect either party’s right to indemnification under this Article 9.

9.11.9Exclusive Remedy

Each party acknowledges and agrees that its sole and exclusive remedy with respect to any and all claims relating to the subject matter of this Agreement made after the Closing shall be pursuant to the indemnification and other provisions set forth in this Article 9, or elsewhere in this Agreement, and hereby waives, to the fullest extent permitted under applicable Law, any and all rights, claims, causes of action and remedies (including but not limited to any right to rescind this Agreement) it may have against the other party under applicable Law in connection with the transactions contemplated hereby (other than claims for fraud).  Nothing in this Section 9.11.9 shall limit the right, if any, of such party to (i) obtain specific performance of this Agreement in the event of the other party’s breach of its obligations hereunder or (ii) pursue its rights under common law prior to the Closing with respect to claims relating to the subject matter of this Agreement.

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9.12.Survival of Representations and Warranties and Covenants

Except as otherwise expressly stated in this Agreement, the representations, warranties, covenants and agreements of each party contained in this Agreement shall survive the Closing indefinitely.

9.13.Reliance on Representations and Warranties

Each party acknowledges for purposes of any claim by it with respect to this Agreement that it has not relied on any representations or warranties of the other party in connection with the transactions contemplated hereby other than those expressly made in this Agreement or any certificate delivered by or on behalf of the other party at the Closing; provided that this Section 9.13 shall not prejudice any rights Purchaser may have in connection with claims for fraud under applicable Law in connection with the transactions contemplated hereby.

9.14.ABB’s Disclosure

Each representation or warranty given by ABB in Article 5 is qualified by any matter which is fairly disclosed in or pursuant to the Disclosure Schedule (but only to the extent that such disclosure specifically refers to the Section of this Agreement containing such representation or warranty) and any matter expressly provided for under the terms of this Agreement.  Certain information set forth in the Disclosure Schedule or other Schedules is included for informational purposes and may not be required to be disclosed pursuant to this Agreement.  The disclosure of any information shall not be deemed to constitute an acknowledgement that such information is required to be disclosed in connection with the representations and warranties made by ABB in this Agreement or that it is material, nor shall such information be deemed to establish a standard of materiality.

ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER

10.1.Termination

10.1.1Termination Events

Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing:

(a)by the written consent of ABB and Purchaser;

(b)by either ABB or Purchaser, if the Closing shall not have been consummated by July 31, 2004; provided, however, that the right to terminate this Agreement under this clause (b) shall not be available to a party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date;

(c)by ABB, if Purchaser in any material respect shall have breached or failed to perform or comply with any of its representations, warranties, covenants or

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other agreements contained in this Agreement, which breach or failure to perform or comply: (i) would give rise to the failure of a condition set forth in Section 8.3; and (ii) has not been, or is incapable of being, cured by Purchaser within 30 days of Purchaser’s receipt of written notice thereof from ABB;

(d)by Purchaser, if ABB in any material respect shall have breached or failed to perform or comply with any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform or comply: (i) would give rise to the failure of a condition set forth in Section 8.2; and (ii) has not been, or is incapable of being, cured by ABB within 30 days of ABB’s receipt of written notice thereof from Purchaser;

(e)by Purchaser, if there has occurred any change in, or effect on, the Acquired Group which (i) would give rise to the failure of the condition set forth in Section 8.2(f); and (ii) has not been, or is incapable of being, cured by ABB within 30 days of ABB’s receipt of written notice thereof from Purchaser;

(f)by Purchaser, if any proceeding is instituted by ABB (or any parent company of ABB), or ABB (or such parent company) publicly announces an intention to institute such a proceeding, to adjudicate any of them bankrupt or insolvent, or seeking liquidation, winding up or reorganization arrangements, or adjustment, protection, relief or composition of its debts under any Law relating to bankruptcy, insolvency or reorganization (but excluding, for the avoidance of doubt, the merger contemplated by Schedule 11.6 of this Agreement); and

(g)by ABB, if any proceeding is instituted by Purchaser (or any parent company of Purchaser), or Purchaser (or such parent company) publicly announces an intention to institute such a proceeding, to adjudicate any of them bankrupt or insolvent, or seeking liquidation, winding up or reorganization arrangement, adjustment, protection, relief or composition of its debts under any Law relating to bankruptcy, insolvency or reorganization.

10.1.2Notice of Termination

Termination by either party pursuant to this Section 10.1 shall be effected by the giving of written notice thereof to the other party.

10.1.3Effects of Termination

If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this Section 10.1, this Agreement shall become null and void and of no further force and effect, except for the provisions of this Agreement relating to expenses (including but not limited to Section 11.12), this Section 10.1, and Articles 9 and 11. Nothing in this Section 10.1 shall be deemed to release either party from any liability for any breach by such party of the terms and provisions of this Agreement prior to termination.

10.1.4Return or Destruction of Documents

If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this Section 10.1, Purchaser shall promptly return to ABB or certify the destruction of: (i) all documents and other material received by Purchaser or any

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of its Affiliates from ABB and/or its Affiliates relating to such transactions, whether so obtained before or after the execution hereof; and (ii) all written information received by Purchaser with respect to the Business and the other operations of ABB and/or its Affiliates (in each case together with all copies thereof); provided, however, that Purchaser may retain any documents that it reasonably determines are relevant in connection with prosecuting or defending claims arising hereunder.

10.2.Amendments and Waivers

10.2.1Amendments

This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto by their duly authorized representatives.

10.2.2Waivers

No delay or failure on the part of any party to exercise any right, power or remedy in respect of this Agreement shall constitute a waiver thereof (other than a failure to provide a notice or take any action which is subject to a time limit as specified in this Agreement).

ARTICLE 11
GENERAL PROVISIONS

11.1.No Announcement; Confidentiality

11.1.1No Announcement

Each party hereto agrees to keep the existence and content of this Agreement confidential and will make no public announcement or other disclosure with respect thereto: (i) without the prior written approval of the other party (such approval not to be unreasonably withheld or delayed); (ii) except disclosure made in connection with an offering of notes, debentures, equity or other securities by either party or any of its Affiliates and deemed by such party’s counsel to be reasonably necessary or advisable to comply with applicable Law or (iii) except as required by Law.  ABB, on behalf of itself and its Affiliates, hereby consents to the disclosure of Confidential Information in respect of the Acquired Group (but not any member of the ABB Group) by Purchaser and its Affiliates in connection with the disclosure described in Section 11.1.1(ii).

11.1.2Confidentiality

(a)Neither party hereto shall, and each party hereto shall use all reasonable efforts to ensure that none of its Affiliates will, for a period of three (3) years from the Closing Date, disclose any information of a confidential nature relating to the Business or any Acquired Company (in the case of ABB) or to ABB (in the case of Purchaser) to any third Person.  The obligation of either party under this Section 11.1.2 shall not apply to any of the following: (i) disclosure of such confidential information required by applicable Law; (ii) disclosure of such confidential information to such party’s professional advisors who have been made aware of the confidential nature of such information; (iii) disclosure of such confidential information for the purpose of defending any claim against the other party under

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this Agreement or enforcing its rights hereunder (including making any claims or counterclaims against third parties pursuant to Section 9.4); or (iv)  disclosure of such confidential information which is or comes into the public domain other than as a result of the breach by such party of this Section 11.1.2.

(b)Each party shall have the right to retain copies of all documents delivered or made available by or to such party or its Affiliates in connection with the transactions contemplated hereby to the extent reasonably required for the purpose of defending any claim against it under this Agreement or enforcing its rights hereunder (including making any claims or counterclaims against third parties pursuant to Section 9.4).

(c)Notwithstanding any other provision of this Agreement to the contrary, any party to this Agreement (and any employee, representative or other agent of such party) may disclose to any and all persons, without limitation of any kind, the U.S. federal, state and local income Tax treatment and U.S. federal income tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure, except that: (i) U.S. federal, state and local income tax treatment and U.S. federal, state and local income tax structure shall not include the identity of any existing or future party (or any affiliate of such party) to this Agreement except to the extent necessary to disclose the tax treatment or the tax structure of the transactions contemplated by this Agreement; and (ii) this provision shall not permit disclosure to the extent that nondisclosure is reasonably necessary in order to comply with applicable securities Laws.  Nothing in this Agreement shall in any way limit any party’s ability to consult any tax advisor (including a tax advisor independent from all other entities involved in the transactions contemplated by this Agreement) regarding the U.S. federal, state and local income tax treatment or U.S. federal, state and local income tax structure of the transactions contemplated by this Agreement.

11.2.Cooperation

Unless otherwise expressly provided in this Agreement, whenever the parties are required to cooperate for any particular purpose hereunder, neither party, nor their respective Affiliates, shall be required to make any material monetary expenditure, commence or be a plaintiff in any litigation or offer or grant any material accommodation or concession (financial or otherwise) to any Person.

11.3.Entire Agreement

This Agreement and the confidentiality undertaking dated March 20, 2003 given by White Mountains Insurance Group, Ltd. in favor of Deutsche Bank AG (on behalf of ABB Asea Brown Boveri Ltd) (the “Confidentiality Agreement”) contain the entire understanding of the parties hereto with respect to the subject matter contained herein and supersede and cancel all prior agreements and negotiations, of the parties, respecting such subject matter.  There are no representations or warranties of any party hereto with respect to the transactions contemplated hereby other than those set forth in Articles 5 and 6 herein or made hereunder, in or under the Confidentiality Agreement or in or under any certificate delivered by or on behalf of either party at the Closing. There are no agreements of any party hereto with respect to the transactions contemplated hereby other than those set forth herein or made hereunder or in or under the Confidentiality Agreement.

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11.4.Severability

If at any time any provision of this Agreement is or becomes invalid, illegal or unenforceable under the laws of the State of New York, the validity, legality and enforceability of the remainder of this Agreement shall not be affected. In the event any provision is held in any proceeding pursuant to Section 11.9 or 11.10 to be invalid, illegal or unenforceable, the parties shall replace that provision with a new provision permitted by the laws of the State of New York and having an economic effect as close as possible to the deficient provision.

11.5.No Third Party Beneficiaries

Except for the provisions of this Agreement relating to Indemnified Parties, this Agreement shall be directed and interpreted to the advantage of the parties only and their permitted assignees, and no third Person shall obtain any rights by virtue hereof.

11.6.Assignment

Neither party may assign its rights or obligations under this Agreement to any third Person without the prior written consent of the other party; provided, however, that such consent shall not be unreasonably withheld or delayed in relation to assignment of rights if the assignment is to an Affiliate of such party.  The parties agree that the merger under applicable Law of either party with any of its Affiliates as described in Schedule 11.6 pursuant to which the obligations under this Agreement vest in the surviving party shall not constitute an assignment within this Section 11.6.

11.7.Notices

All notices and other communications that are required or permitted to be given under this Agreement shall be in writing, in the English language and shall be deemed to have been duly give or made as of: (i) the time delivered, if delivered personally against written receipt; or (ii) the time faxed to the recipient (if the appropriate answerback or fax confirmation shall have been received).  All such notices and communications shall be delivered to the following addresses or numbers (or at such other address or number for a party as shall be specified by like notice):

If to ABB:

ABB Holding AG, Zurich
Affolternstrasse 44
8050 Zurich
Switzerland

Fax No.:	+ 41 43 317 7958
Attention:	General Counsel

If to Purchaser :

Lagrummet December nr 919 AB
(under change of name to “Fund American Holdings AB”)
Reg. No. 556651-1084
Bohusgatan 14,

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SE 10660 Stockholm,
Sweden

Fax No.:	+ 46-8-714-7611
Attention:	Lena Marie Kjellenberg Heynes

Copied to:

White Mountains Insurance Group, Ltd.
80 South Main Street
Hanover, New Hampshire 03755-2053
U.S.A

Fax No.:	+ 1 603 643 4592
Attention:	Robert L. Seelig Vice President & General Counsel

11.8.Governing Law

This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

11.9.Pre-Closing Dispute Resolution

11.9.1Jurisdiction; Service of Process

Any action or proceeding initiated prior to the Closing and arising out of or relating to this Agreement or any transaction contemplated hereby shall be brought in the United States District Court for the Southern District of New York, or, if a party cannot acquire jurisdiction in such federal court, shall be brought in the courts of the State of New York, County of New York, Borough of Manhattan (and the parties shall seek to have the matter tried by the Special Commercial Part of the New York Supreme Court), and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such action or proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the action or proceeding shall be heard and determined only in any such court and agrees not to bring any action or proceeding arising out of or relating to this Agreement or any transaction contemplated hereby in any other court; provided, however, that any such action or proceeding which remains outstanding at the Closing shall be withdrawn from such court on or prior to the Closing Date and submitted to arbitration pursuant to Section 11.10.1 without prejudicing in any way any claim of either party thereto.  For the avoidance of doubt, any action or proceeding brought under this Section 11.9.1 for which a judgment has been rendered shall not be deemed an outstanding action or proceeding at the Closing and neither party may submit such judgment to arbitration under Section 11.10.1 after the Closing or otherwise appeal or seek to review such judgment.  The parties agree that any or all of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained agreement among the parties irrevocably to waive any objections to venue or to convenience of forum.  Process in any action or proceeding referred to in the first sentence of this Section may be served on any party anywhere in the world.

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11.9.2Waiver of Jury Trial

Each party hereby waives, to the fullest extent permitted by applicable Law, any right it may have to a trial by jury in respect of any action or proceeding initiated prior to the Closing and arising out of or relating to this Agreement or any transaction contemplated hereby.  Each party (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such party would not, in the event of any action, suit or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties have been induced to enter into this Agreement, by, among other things, the mutual waiver and certifications in this Section 11.9.

11.10.Post-Closing Dispute Resolution

11.10.1Arbitration

Subject to the last sentence of this Section 11.10.1, any action or proceeding initiated after the Closing and out of or relating to this Agreement or any transaction contemplated hereby shall be determined, at the request of either party, by arbitration in the English language conducted in London, England, in accordance with the then-existing International Arbitration Rules of the American Arbitration Association (the “Rules”).  The arbitration shall be conducted by three (3) arbitrators, of which each party shall appoint one (1) arbitrator and the two (2) arbitrators thus appointed shall appoint the presiding arbitrator (the “Chairman”).  The Chairman shall (i) be admitted to practice as an attorney and counselor at law in the State of New York; (ii) be a partner or of counsel or retired partner or retired of counsel at a prominent United States-based law firm; and (iii) have expertise in mergers and acquisitions and international arbitration.  The arbitrators shall permit the parties to adduce expert testimony in connection with any action or proceeding under this Section 11.10.1 and shall consider such expert testimony in rendering their awards.  The arbitrators shall give reasonably detailed justifications for their awards in any proceeding and any judgment or award rendered by the arbitrator shall be final, binding and unappealable and may be entered by any court having jurisdiction thereof.  The parties hereby agree to the institution of any available “fast track” or other mechanisms or procedures that would have the effect of streamlining or increasing the speed of the arbitration.  Subject to the last sentence of this Section 11.10.1, any controversy concerning whether a dispute is an arbitrable dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation or enforceability of this paragraph shall be determined by the arbitrators.  In their award, the arbitrators shall allocate, in their discretion, among the parties to the arbitration, all costs of the arbitration, including the fees and expenses of the arbitration proceedings and reasonable attorneys’ fees, costs and expert witness expenses of the parties.  The parties hereto agree to comply with any award made in any such arbitration proceedings that has become final in accordance with the Rules and agree to the entry of a judgment in any jurisdiction upon any award rendered in such proceedings becoming final under the Rules.  The arbitrators shall be entitled, if appropriate, to award any remedy in such proceedings, including monetary damages, specific performance and all other forms of legal and equitable relief, including punitive damages (to the extent not prohibited by this Agreement).  The provisions of this Section 11.10.1 shall not apply to the matters provided for in Section 3.4 of this Agreement.

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11.11.Enforcement

The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.

11.12.Costs, Expenses, Transfer Taxes and Fees

11.12.1Costs and Expenses

Unless otherwise expressly provided in this Agreement, all costs and expenses incurred in connection with the preparation, negotiation and implementation of this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses.

11.12.2Transfer Taxes and Fees

All Transfer Taxes and all notarial, registration and filing fees incurred in connection with this Agreement and the transactions contemplated hereby shall be borne 25% by Purchaser and 75% by ABB whether or not the Closing shall have occurred.

11.13.No Set-Off

11.13.1No Set-Off

Subject to Section 11.13.2, under no circumstances shall any amounts payable by Purchaser or any of its Affiliates to ABB or any of its Affiliates or by ABB or any of its Affiliates to Purchaser or any of its Affiliates, pursuant to this Agreement be set off against each other.

11.13.2Exceptions

Each party hereto may set off a sum equal to the amount of all claims it may have against the other party hereto pursuant to this Agreement, provided such claims have either been agreed by such other party or been finally determined to be due in accordance with the provisions of Section 3.4 or finally adjudged by the arbitrators pursuant to Section 11.9, against amounts payable by such first party to such other party pursuant to this Agreement.

11.14.Further Assurances

After the Closing Date, the parties shall execute such other documents or take, or cause to be taken, such other actions to the extent they have not been accomplished on or by the Closing Date, as may be required to transfer the U.S. Shares to U.S. Purchaser or to transfer the International Shares to Purchaser in accordance with the terms and conditions of this Agreement.

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11.15.Certain Insurance

11.15.1Purchaser Insurance

Notwithstanding any provision of this Agreement to the contrary, each of Purchaser, any of its Affiliates or any of their respective officers, directors, employees, stockholders (or security or rights holders), agents, representatives, heirs, successors and assigns under this Agreement may enter into insurance policies or any other Contract or purchase or otherwise acquire any financial instruments to indemnify Purchaser, any of its Affiliates and/or any of their respective officers, directors, employees, stockholders (or security or rights holders), agents, representatives, heirs, successors and assigns under this Agreement from any liabilities, contingent or otherwise, arising from or related to the transactions contemplated by this Agreement.  Notwithstanding any provision of this Agreement to the contrary, including Section 9.11.2, the parties agree that no benefit from such insurance policies, Contracts or financial instruments shall inure to the benefit of ABB or any of its Affiliates (except for the Acquired Group).

11.15.2ABB Insurance

Notwithstanding any provision of this Agreement to the contrary, each of ABB, any of its Affiliates or any of its respective officers, directors, employees, stockholders (or security or rights holders), agents, representatives, heirs, successors and assigns under this Agreement may enter into insurance policies or any other Contract or purchase or otherwise acquire any financial instruments to indemnify ABB, any of its Affiliates and/or any of its respective officers, directors, employees, stockholders (or security or rights holders), agents, representatives, heirs, successors and assigns under this Agreement from any liabilities, contingent or otherwise, arising from or related to the transactions contemplated by this Agreement.  Notwithstanding any provision of this Agreement to the contrary, including Section 9.11.2, the parties agree that no benefit from such insurance policies, Contracts or financial instruments shall inure to the benefit of Purchaser and its Affiliates.

[signature page immediately follows]

88

Each of the parties hereto has caused this Agreement to be executed by its duly authorized representatives on the date first set forth above.

ABB HOLDING AG, ZURICH		LAGRUMMET DECEMBER NR 919 AB (under change of name to “FUND AMERICAN HOLDINGS AB”)
By:	/s/ Erich Koefer	By:	/s/ Raymond Barrette
	Name:  Erich Koefer		Name: Raymond Barrette
	Title:  Group Vice President		Title: Director of the Board
By:	/s/ Daniel Schindleman	By:	/s/ Lena Kjellenberg Heynes
	Name: Daniel Schindleman		Name: Lena Kjellenberg Heynes
	Title:		Title:  Director of the Board

EX-8.1

Exhibit 8.1

ABB GROUP COMPANIES (CONSOLIDATED) BY COUNTRY AS PER MARCH 31, 2004

Country Company	ABB Interest %	Share Capital in 1000	Curr- ency
ALGERIA
ABB Electrical Service Company Spa, Hydra	60.00	108000	DZD
SpA ABB Lummus Global Algeria, Hydra	100.00	21000	DZD
SARPI - Société Algérienne pour la réalisation de projets industriels, Alger	50.00	420282	DZD
ANGOLA
ABB Electrica SGPS, Lda., Luanda	100.00	200	USD
EAM - Empresa Angolana de Metalomecânica SARL, Luanda	100.00	200	USD
ARGENTINA
ABB S.A., Buenos Aires	100.00	10510	ARS
Modulec S.A., San Luis	100.00	800	ARS
ABB Vetco Gray Argentina S.A., Pcia. de Buenos Aires	100.00	3	ARS
ARUBA (NL)
ABB Import & Export Services Ltd., Oranjestad/Aruba (NA)	100.00	10005	USD
AUSTRALIA
ABB Australia Pty Limited, Sydney	100.00	122436	AUD
Babcock Australia Pty Limited, Sydney, NSW	100.00	2500	AUD
ABB Group Investment Management Pty. Ltd., Sydney	100.00	9110	AUD
ABB Group Holdings Pty. Ltd., Sydney	100.00	316200	AUD
ABB Administrative Services Pty. Ltd., Regents Park, NSW	100.00	9973	AUD
ABB Group Investment LLP, Sydney	100.00	146232	AUD
ABB Financial Services Australia Limited, Sydney	100.00	3000	AUD
ABB Vetco Gray Australia Pty Ltd., Melbourne, VIC	100.00	383	AUD
AUSTRIA
ABB Montage GmbH, Innsbruck	100.00	42	EUR
BAHRAIN
ABB Automation E.C., Bahrain	100.00	500	USD
BELGIUM
Asea Brown Boveri Europe Ltd., Brussels	100.00	2500	BEF
S.A. Helvimo N.V., Brussels	99.00	62400	BEF
Asea Brown Boveri Jumet S.A., Jumet	100.00	1487	EUR
Sirius Belgium Reassurances S.A., Liege	100.00	1246	EUR
BOLIVIA
Asea Brown Boveri Ltda., La Paz-Bolivia	100.00	98	USD
BOTSWANA
ABB (Pty) Ltd., Gaborone	100.00	541	BWP
BRAZIL
ABB Ltda., Osasco	100.00	506026	BRL
ABB aleo e Gás Ltda, Osasco	100.00	28100	BRL
ABB aleo e Gás Manutenç¦o e Modifacaç¦o Ltd., Macaé	100.00	5000	BRL
ABB ParticipaçSes Ltda., Osasco	100.00	189566	BRL
Termobahia II Ltda., Bahia	100.00	3	BRL

BULGARIA
ABB Bulgaria EOOD, Sofia	100.00	10	BGL
ABB Avangard AD, Sevlievo	88.10	111	BGL
ABB Control EOOD, Petrich	100.00	34	BGL
CAMEROON
Asea Brown Boveri S.A., Douala	100.00	30000	XAF
CANADA
ABB Inc., St. Laurent, Quebec	100.00	247157	CAD
ABB Bomem Inc., Quebec	100.00	18219	CAD
Combustion Engineering Technology Investment Corp., St.Laurent, Quebec	100.00	27285	CAD
ABB International Projects Inc., St.Laurent, QC	100.00	100	CDN
ABB Offshore Systems Canada Inc., Nisku	100.00		CDN
ABB Vetco Gray Canada Inc., Edmonton, Alberta	100.00	0	CAD
CHILE
Asea Brown Boveri S.A., Santiago	100.00	2959294	CLP
CHINA
ABB (China) Ltd., Beijing	100.00	120000	USD
ABB Engineering (Shanghai) Ltd., Shanghai	100.00	4000	USD
ABB Bailey Beijing Controls Co. Ltd., Beijing	51.00	1796	USD
ABB Chongqing Transformer Company Ltd., Chongqing City	62.20	48647	USD
ABB Distribution Transformer (Hefei) Limited, Anhui	100.00	8000	USD
ABB Xiamen Switchgear Co. Ltd., Xiamen	66.20	5000	USD
ABB (China) Engineering Co. Ltd. Xiamen	100.00	2100	USD
ABB Huadian High Voltage Switchgear (Xiamen) Company Ltd., Xiamen	51.00	3000	USD
ABB Holding Ltd., Hong Kong	100.00	27887	HKD
ABB Beijing Drive Systems Co. Ltd., Beijing	90.00	5000	USD
ABB LV Installation Materials Co. Ltd., Beijing	85.70	17100	USD
ABB Xinhui Low Voltage Switchgear Co. Ltd., Xinhui (Guangdong)	60.00	6200	USD
ABB Xiamen Low Voltage Equipment Co. Ltd., Xiamen	94.00	6200	USD
ABB Shanghai Motors Co. Ltd., Shanghai	75.00	11216	USD
ABB Shanghai Transformer Co. Ltd., Shanghai	51.00	7000	USD
ABB High Voltage Switchgear Co. Ltd., Beijing	60.00	11400	USD
ABB Hefei Transformer Co. Ltd., Hefei	85.83	21000	USD
ABB Xi’an Power Capacitor Company Limited, Xi’an	51.00	4500	USD
Vetco Gray Petroleum Equipment (Shanghai) Co. Ltd., Shanghai	60.00	1800	USD
ABB Xiamen Electrical Controlgear Co. Ltd., Fujian Province	80.00	4300	USD
ABB Zhongshan Transformer Company Ltd., Zhongshan City	51.00	15000	USD
COLOMBIA
Asea Brown Boveri Ltda., Bogotá	99.99	485477	COP
COTE D’IVOIRE/IVORY COAST
ABB Technology SA, Abidjan	99.00	178540	XOF
CROATIA
ABB Ltd., Zagreb	100.00	2730	HRK
CZECH REPUBLIC
Entrelec Ceska Sro, Brno	100.00	8250	CZK
ABB s.r.o., Prague	100.00	100100	CZK

DENMARK
ABB A/S, Skovlunde	100.00	241000	DKK
ABB Offshore Danmark A/S, Kolding	100.00	350	DKK
ECUADOR
Asea Brown Boveri S.A., Quito	96.87	325	USD
EGYPT
Asea Brown Boveri S.A.E., Cairo	100.00	20040	EGP
ABB Arab Contractors for Construction, Heliopolis	65.00	5000	EGP
ABB Arab S.A.E., Cairo	80.00	40000	EGP
ABB Automation S.A.E., Heliopolis	100.00	17000	EGP
ABB Group Process Center S.A.E., Cairo	100.00	250	EGP
ABB High Voltage Co. S.A.E., Heliopolis/Cairo	100.00	5000	EGP
ABB Metals & Plastics Manufact. Co. SAE, 10th of Ramadan City	80.00	5000	EGP
ABB Petroleum Technology, Cairo	100.00	500	USD
ABB SUSA Egypt, Maadi	100.00	50	EGP
ABB Turbochargers S.A.E., Suez	100.00	100	EGP
ABB Transformers S.A.E., El-Nozha El-Gedida	65.00	30000	EGP
EL SALVADOR
ABB S.A. de CV, San Salvador	100.00	30	SVC
FINLAND
ABB Credit Oy, Helsinki	100.00	1682	EUR
ABB Current Oy, Helsinki	100.00	58866	EUR
ABB East Ventures Oy, Helsinki	100.00	8412	EUR
Kiinteistö Oy Bölenraitti 10, Helsinki	100.00	25	EUR
ABB Sähkörinne Kiinteistö Oy, Helsinki	100.00	1348	EUR
FRANCE
ABB S.A., Paris La Défense	100.00	38921	EUR
ABB Automation SAS, Massy	100.00	8789	EUR
ABB Business Services, Paris la Défense	100.00	40	EUR
Cogelub, Persan	50.95	510	FRF
L’Ebenoid, Villeurbanne	100.00	1000	EUR
Helita, Persan	93.06	320	EUR
ABB Entrelec SAS, Villeurbanne	100.00	25000	EUR
Soule Materiel Electrique, Bagnères de Bigorre	93.06	13625	EUR
Soule Finance Developpement, Bagnères de Bigorre	99.60	8923	EUR
Soule Protection Surtensions, Lyon	93.06	3851	EUR
ABB Full Maintenance SAS, Persan	100.00	40	EUR
ABB Instrumentation, Massy	100.00	668	EUR
ABB Lummus Global SarL., Paris La Défense	100.00	200	EUR
ABB Process Industrie, Aix les Bains	100.00	3466	EUR
Striebel & John France S.A.R.L., Wesserling	51.00	686	EUR
ABB ITI, Nanterre Cedex	100.00	1380	EUR
ABB Spie Tableaux, Geispolsheim-Gare	75.00	1641	EUR
ABB Vetco Gray France S.A.R.L, Pau	100.00	1000	FFR
GERMANY
ABB Automatisierungsanlagen Cottbus GmbH, Cottbus	100.00	12000	DEM
ABB Airport Technologies GmbH, Mannheim	100.00	5700	DEM
ABB AG, Mannheim	100.00	167500	EUR
ABB Automation Products GmbH, Eschborn	100.00	20750	DEM
ABB Asset Finance GmbH, Mannheim	100.00	100	DEM
ABB Stotz-Kontakt/Striebel & John Vertriebs-GmbH, Sasbach	75.50	511	EUR
ABB Schaltanlagentechnik GmbH, Ladenburg	100.00	1500	EUR
ABB Automation Beteiligungs GmbH, Mannheim	100.00	37800	DEM
Busch-Jaeger Elektro GmbH, Mannheim/Lüdenscheid	100.00	3000	DEM
ABB Bauprojektmanagement GmbH, Mannheim	100.00	50	EUR
ABB Beteiligungen GmbH, Mannheim	100.00	125	EUR
ABB Beteiligungs- und Verwaltungsges. GmbH, Mannheim	100.00	120000	DEM

ABB Calor Emag Hochspannung GmbH, Hanau	100.00	100	EUR
ABB Calor Emag Mittelspannung GmbH, Ratingen	100.00	28751	DEM
EDR Energiedienstleistungsges. Ratingen GmbH, Freiburg	100.00	50	DEM
ABB Finanzierungs- und Verwaltungs GmbH, Mannheim	100.00	50	EUR
ABB Fläkt GmbH, Butzbach	100.00	51292	DEM
ABB Grundbesitz GmbH, Mannheim	100.00	10000	DEM
ABB Grundbesitz Berlin GmbH & Co. Objekte Berlin OHG, Berlin	100.00		DEM
ABB Group Services Center GmbH, Mannheim	100.00	2560	DEM
ABB Gebäudetechnik AG, Mannheim	100.00	12315	DEM
ABB Grundbesitz-Verwaltung-GmbH, Mannheim	100.00	50	DEM
Hartmann & Braun GmbH & Co. KG, Eschborn	100.00	6080	DEM
ABB Isolrohr GmbH, Fulda	100.00	5000	DEM
JLEC Power Ventures GmbH, Mannheim	100.00	50	DEM
Komposit-Risikoberatungs- und Versicherungsvermittlungs-GmbH, Heidelberg	100.00	50	DEM
ABB Logistics Center Europe GmbH, Menden	100.00	50	DEM
Asea Brown Boveri AG & Co. Leasing KG, Mannheim	100.00	2	DEM
ABB Robotics GmbH, Friedberg	100.00	7200	DEM
ABB Patent GmbH, Mannheim	100.00	50	DEM
ABB Process Industries GmbH, Eschborn	100.00	18870	EUR
Pucaro Elektro-Isolierstoffe GmbH, Roigheim	100.00	4500	DEM
ABB Service GmbH, Bobingen	100.00	50	DEM
Sirius Rückversicherungsservice GmbH, Hamburg	100.00	51	EUR
ABB Stotz-Kontakt GmbH, Mannheim	100.00	7500	EUR
Striebel & John GmbH & Co. KG, Sasbach-Obersasbach	51.00	2000	DEM
Striebel Vermögensverwaltungs-GmbH, Sasbach-Obersasbach	51.00	50	DEM
ABB Training Center Berlin GmbH, Berlin	100.00	18000	DEM
ABB Training Center Rhein-Neckar GmbH, Mannheim	100.00	50	DEM
ABB Technologie GmbH, Mannheim	100.00	25	DEM
ABB Transformatoren GmbH, Bad Honnef	100.00	16300	DEM
ABB Treasury Services GmbH, Frankfurt	100.00	100	DEM
ABB Utilities GmbH, Mannheim	100.00	14775	EUR
ABB Wirtschaftsbetriebe GmbH, Mannheim	100.00	500	DEM
GREECE
Asea Brown Boveri S.A., Metamorphossis Attica	100.00	1182	EUR
SAE Hellas A.E., Società Anonima Tecnica Elettrificazione, Athens	100.00	1000	EUR
ABB Trade S.A., Metamorphossis Attica	99.99	2059	EUR
Wind Park of Rhodes SA, Rhodes	90.00	30000	GDR
WRE Hellas SA, Athens	100.00	477000	GDR
HONG KONG
ABB (Hong Kong) Ltd., Hong Kong	100.00	20000	HKD
ABB Asia Pacific Ltd., Hong Kong	100.00	4249	HKD
ABB Asia Pacific Services Ltd., Hong Kong	100.00	1000	HKD
Industrial and Building Systems (H.K.) Limited, Hong Kong	100.00	6000	HKD
INDIA
ABB Limited, Bangalore	52.11	423817	INR
ABB Holdings (South Asia) Ltd., Bangalore	100.00	205930	INR
ABB Industrial IT Development Center Limited, Bangalore	100.00	4500	INR
INDONESIA
PT ABB Bailey, Jakarta	100.00	1000	USD
PT ABB Batam	100.00	520511	IDR
PT ABB Installation Materials, Jakarta	95.00	3655000	IDR
PT ABB Sakti Industri, Jakarta	51.00	4000	USD
PT ABB Transmission and Distribution, Jakarta	60.00	11050	USD
PT Vetco Gray Indonesia, Jakarta	100.00	5600	IDR

IRAN, ISLAMIC REPUBLIC OF
ABB (P.J.S.C.), Teheran	100.00	6444000	IRR
ABB Petroleum Equipment Industries Company (PJSC), Tehran	65.00	1680000	IRR
IRELAND
ABB Ltd, Dublin	100.00	2871	EUR
ABB Holdings Ireland Ltd., Dublin	100.00	635	EUR
ABB Transformers Ltd., Waterford	100.00	2316	EUR
Rialto Cables & Plastics Ltd., Dublin	75.00	10	IEP
Wessel Energy Cables Ltd., Dublin	75.00	0	IEP
Wessel Cable Ltd., Longford	75.00	2401	IEP
Wessel Industries Holdings Ltd., Dublin	75.00	6400	IEP
Wessel Industries Ltd., Dublin	75.00	689	IEP
Wessel Promotion Ltd., Dublin	75.00	61	IEP
Wessel (R&D) Ltd., Dublin	75.00	0	IEP
ISRAEL
ABB Technologies Ltd., Tirat Carmel	99.99	420	ILS
ITALY
ABB S.p.A., Milan	100.00	22000	EUR
ABB SACE S.p.A., Sesto S. Giovanni (MI)	100.00	60000	EUR
ABB Reno De Medici s.r.l. Milan	60.00	41	EUR
ABB Corporate Administration & Properties S.p.A., Milan	99.98	7142	EUR
Euroenergetica srl, Milano	100.00	10	EUR
ABB Estense Service S.p.A., Ferrara	51.00	196	EUR
ABB Installazioni S.p.A., Milan	99.99	500	EUR
ABB Corporate Service s.r.l., Milan	100.00	650	EUR
ABB Lummus Global Italia S.r.l., Milan	100.00	99000	ITL
ABB Trasmissione & Distribuzione S.p.A., Milan	100.00	35000	EUR
PR.ENER.CA Ceresio S.r.l., Milan	100.00	12	EUR
ABB Group Service Center srl., Milano	100.00	650	EUR
SACEM-Sarda Costruzioni e Montaggi Industriali S.p.A., Milan	100.00	516	EUR
ABB Servomotors S.r.l., Milan	100.00	1291	EUR
ABB Process Solutions & Services SPA, Milan	100.00	8500	EUR
ABB Energy Automation S.p.A., Milan	100.00	15492	EUR
Telesafe Energy S.r.l., Massa	51.00	93	EUR
ABB Vetco Gray Italia S.R.L., Milan	100.00	23700	ITL
JAPAN
ABB K.K., Tokyo	100.00	1000000	JPY
JORDAN
ABB Ltd. Jordan, Amman	100.00	350	JOD
ABB Near East Trading Ltd., Amman	95.00	30	JOD
KAZAKHSTAN
ABB Ltd., Almaty	100.00	300	USD
KENYA
Asea Brown Boveri Ltd., Nairobi	100.00	15500	KES
KOREA, REPUBLIC OF
ABB Ltd., Seoul	100.00	18670000	KRW
KUWAIT
ABB Engg. Technologies Co. (KSCC), Safat	49.00	100	KWD
LEBANON
ABB Electrical Co. S.A.L., Beirut	67.00	155000	LBP
LITHUANIA
ABB UAB, Vilnius	100.00	1554	LTL

MALAYSIA
ABB Holdings Sdn. Bhd., Subang Jaya	100.00	4490	MYR
ABB Industrial and Building Syst. Sdn. Bhd., Subang Jaya	100.00	3000	MYR
ABB Malaysia Sdn Bhd, Subang Jaya	100.00	3500	MYR
ABB Manufacturing Sdn. Bhd., Subang Jaya	49.00	700	MYR
ABB Sapura Sdn.Bhd., Kuala Lumpur	49.00	500	MYR
ABB Transmission and Distribution Sdn. Bhd., Subang Jaya	66.00	3500	MYR
MALI
Asea Brown Boveri Mali, Bamako	100.00	5000	XOF
MALTA
ABB Lummus Malta Limited, Floriana	100.00	100	EUR
MAURITIUS
Asea Brown Boveri Ltd., Port Louis	51.00	3000	MUR
ABB International Holdings Ltd., Port Louis	100.00	0	USD
ABB Lummus Crest Mauritius, Port Louis	100.00
MEXICO
Asea Brown Boveri S.A. de C.V., Tlalnepantla	100.00	419096	MXN
Entrelec SA de CV, Nuevo Leon	100.00	1000	MXN
ABB Mexico S.A. de C.V., Tlalnepantla	100.00	156618	MXN
ABB Vetco Gray Mexico S.A. de C.V., Santa Clara Coatitla	100.00	25800	USD
Komposit Asia Pacific Limited, Labuan	100.00	300	MYR
MOROCCO
Asea Brown Boveri S.A., Casablanca	100.00	5400	MAD
MOZAMBIQUE
ABB Tecnel Limitada, Maputo	60.00	3307500	MZM
NAMIBIA
Asea Brown Boveri (Pty) Ltd., Windhoek	100.00	3036	NAD
NETHERLANDS
ABB Holdings BV, Amsterdam	100.00	119	EUR
ABB Capital, B.V., Amsterdam	100.00	20000	NLG
Lummus JSC Russia B.V. The Hague	100.00	100	NLG
Elsag Bailey Hartmann & Braun Nederland BV, Delft	100.00	476	EUR
ABB Entrelec BV, Hengelo	100.00	25	EUR
ABB Equity BV, Amsterdam	100.00	150	EUR
ABB Equity Ventures B.V., Amsterdam	100.00	40	NLG
ABB Finance B.V., Amsterdam	100.00	40	NLG
ABB Financial Services B.V., Amsterdam	100.00	16786	NLG
ABB Power Investment (India) B.V., Amsterdam	100.00	40	NLG
ABB Lummus Global B.V., The Hague	100.00	12000	NLG
ABB Lummus Heat Transfer B.V., The Hague	100.00	361	NLG
ABB Lummus Project Participations B.V., The Hague	100.00	18	EUR
Lummus Contracting B.V., The Hague	100.00	40	NLG
Maynard BV, Breda	100.00	21	EUR
Novolen Technology Holding, C.V., The Hague	80.00
ABB New Ventures B.V., Amstelveen	100.00	200	EUR
ABB Energy Ventures Projects B.V., Amsterdam	100.00	40	NLG
ABB Payment Services B.V., Amstelveen	100.00	100	EUR
ABB SattLine BV, Etten-Leur	100.00	45	EUR
ABB Structured Finance Investment BV, Amstelveen	100.00	40	NLG
NEW ZEALAND
ABB Limited, Auckland	100.00	34000	NZD
ABB Maintenance Services Limited, Auckland	100.00	1	NZD

NIGERIA
ABB NG Ltd., Ikeja/Lagos	60.00	5671	NGN
ABB Electrical Systems Ltd., Lagos	90.00	56000	NGN
ABB Oil & Gas Nigeria Ltd., Lagos	60.00	4970	NGN
ABB Lummus Global Nigeria Ltd., Nigeria	60.00	2000	NGN
ABB Powerlines Limited., Lagos	52.23	5000	NGN
Vetco Gray Nigeria Limited, Port Harcourt	60.00	337	NGN
NORWAY
ABB Holding AS, Billingstad	100.00	800000	NOK
ABB Gas Technology AS, Bergen	52.00	1494	NOK
ABB Industri og Offshore AS, Billingstad	100.00	50	NOK
J.P. Kenny AS, Forus	100.00	6629	NOK
Nordisk Eiendomsforvaltning AS, Billingstad	100.00	500000	NOK
ABB Offshore Systems AS, Billingstad	100.00	900000	NOK
ABB Vetco Gray AS, Stavanger	100.00	500	NOK
OMAN
ABB LLC, Al Hamriya	65.00	150	OMR
PAKISTAN
ABB (Pvt) Ltd., Lahore	100.00	31966	PKR
PANAMA
ABB S.A., Panama	100.00	100	USD
Tradeinvest Centroamericana S.A., Panama	99.74	2000	USD
PAPAUA, NEW GUINEA
EPT (PNG) Limited, Port Moresby	100.00	0	PGK
ABB James Watt (PNG) Limited, Regents Park, NSW	100.00	0	PGK
PERU
Asea Brown Boveri S.A., Lima	99.99	17152	PEN
PHILIPPINES
Asea Brown Boveri Inc., Paranaque, Metro Manila	100.00	123180	PHP
POLAND
ABB Sp. zo.o., Warsaw	96.01	208843	PLN
Entrelec Polzka Sp. zo.o., Leborska	100.00	900	PLN
ABB Instal Sp. zo.o., Wroclaw	100.00	34200	PLN
ABB Zamech Gazpetro Sp. zo.o., Elblag	100.00	68290	PLN
ABB Zamech Marine Sp. zo.o., Elblag	100.00	7000	PLN
PORTUGAL
ABB S.G.P.S, S.A., Amadora	100.00	4117	EUR
ABB Stotz Kontakt Eléctrica, Unipessoal, Lda., Porto	100.00	700	EUR
SGIE 2000 - Consultores em Organizaçao Industrial S.A., Lisboa	100.00	400	EUR
ROMANIA
ABB SRL, Bucharest	100.00	2300	USD
RUSSIA
Asea Brown Boveri Ltd., Moscow	100.00	333	USD
ABB El Bushing Ltd., Moscow	100.00	1700	USD
ABB Communications and Information Systems Ltd., Moscow	100.00	200	USD
ABB Electroengineering Ltd., Moscow	100.00	2100	USD
ABB Energosvyaz LLC, Moscow	100.00	3	USD
ABB Industrial and Building Systems Ltd., Moscow	100.00	4000	USD
ABB Moskabel Ltd., Moscow	100.00	7500	USD
000 ABB Lummus Global, Moscow	100.00	10	RUR
ABB Moselectro Ltd., Moscow	100.00	2000	USD
ABB Automation LLC, Moscow	76.20	2200	USD

ABB UETM Ltd., Ekaterinburg	100.00	2740	USD
SAUDI ARABIA
ABB Contracting Company Ltd., Riyadh	65.00	10000	SAR
ABB Electrical Industries Ltd., Riyadh	65.00	59000	SAR
ABB Automation Co. Ltd., Riyadh	65.00	10250	SAR
Electrical Materials Center, Riyadh		500	SAR
Saudi SAE Technical Construction Co. Ltd., Riyadh	99.99	10000	SAR
ABB Service Co. Ltd., Al Khobar	65.00	2000	SAR
SENEGAL
ABB Technologies S.A., Dakar	100.00	475200	XOF
SERBIA AND MONTENEGRO
ABB d.o.o., Belgrade	100.00	5	USD
SINGAPORE
ABB Agencies Pte. Ltd., Singapore	100.00	410	SGD
Entrelec Asia, Singapore	100.00	200	SGD
ABB Holdings Pte. Ltd., Singapore	100.00	25597	SGD
ABB Industry Pte. Ltd., Singapore	100.00	6845	SGD
ABB Offshore Systems Pte. Ltd., Singapore	100.00	894	SGD
ABB Support Pte. Ltd., Singapore	100.00	11000	SGD
ABB Treasury Center (Asia Pacific) Pte. Ltd., Singapore	100.00	10000	USD
SLOVAKIA
ABB s.r.o., Bratislava	100.00	9289	SKK
ABB Elektro s.r.o., Bratislava	100.00	10000	SKK
ABB Komponenty s.r.o., Kosice	100.00	40066	SKK
SLOVENIA
ABB D.o.o., Ljubljana	100.00	300	USD
SOUTH AFRICA
ABB Holdings (Pty) Ltd., Sunninghill	80.00	4050	ZAR
Desta Power Matla Holdings (Pty) Ltd., Pretoria	19.96		ZAR
Desta Power Matla (Pty) Ltd., Pretoria	29.98	22	ZAR
ABB Karebo Manufacturers (Pty), Midrand	48.00	4000	ZAR
Primkop Airport Management (Pty) Ltd., Nelspruit	90.00	4000	ZAR
ABB Powertech Transformers (Pty) Ltd., Pretoria	40.00	128	ZAR
ABB South Africa (Pty) Ltd., Sunninghill	80.00	5000	ZAR
SPAIN
Asea Brown Boveri S.A., Madrid	100.00	5543595	ESP
ABB Automation Products S.A., Barcelona	100.00	5234	EUR
ABB Sistemas Industriales S.A., San Quirze del Vallés	100.00	910000	ESP
ABB Stotz Kontakt, S.A., Getafe	100.00	3030	EUR
ABB Power Technology S.A., Zaragoza	100.00	2484530	ESP
SWEDEN
ABB Participation AB, Västerås	100.00	2344783	SEK
ABB AB, Västerås	100.00	400000	SEK
ABB Construction AB, Västerås	100.00	10000	SEK
ABB CSC Finance AB, Stockholm	100.00	500	SEK
Romania Invest AB, Västerås	75.00	100	SEK
AB Cythere 61, Västerås	100.00	100	SEK
AB Electro-Invest, Västerås	100.00	24000	SEK
ABB Industriunderhåll AB, Degerfors	51.00	300	SEK
ABB Fastighet AB, Västerås	100.00	3000	SEK
ABB Virkestorkar AB, Skellefteå	100.00	1000	SEK
ABB Industriservice AB, Uppsala	91.00	1000	SEK
ABB Insurance Holding Sweden AB, Stockholm	100.00	100	SEK
ABB Norden Holding AB, Stockholm	100.00	459000	SEK
ABB Automation Technologies AB, Västerås	100.00	280000	SEK
ABB Power Technologies AB, Ludvika	100.00	260000	SEK

ABB I-R Waterjet AB, Ronneby	51.00	6000	SEK
ABB Structured Finance Investment AB, Stockholm	100.00	100	SEK
ABB Hälsan AB, Västerås	100.00	6800	SEK
ABB TD Finance AB, Stockholm	100.00	100	SEK
ABB Financial Services AB, Sollentuna	100.00	50000	SEK
ABB Financial Holding AB, Västerås	100.00	100	SEK
SWITZERLAND
ABB Ltd, Zurich	100.00	5175787	CHF
ABB Asea Brown Boveri Ltd., Zurich	100.00	2768000	CHF
ABB Schweiz Holding AG, Baden	100.00	200000	CHF
ABB Insurance Brokers AG, Baden	100.00	100	CHF
ABB AP Trading & Engineering AG, Zurich	100.00	100	CHF
ABB Automation Technologies Management Ltd., Zurich	100.00	100	CHF
ABB Credit, Baden	100.00
ABB Dicoesa, Belfaux	100.00	5000	CHF
ABB Energy Engineering AG, Zurich	100.00	100	CHF
ABB MEA Participation Ltd., Zurich	100.00	1000	CHF
ABB Energy Services International Ltd., Zurich	100.00	100	CHF
ABB Information Systems Ltd., Zurich	100.00	500	CHF
ABB Handels- und Verwaltungs AG, Zurich	100.00	1000	CHF
ABB Intra AG, Zurich	100.00	100	CHF
ABB Immobilien AG, Baden	100.00	20000	CHF
ABB International Services AG, Zurich	100.00	1000	CHF
Micafil AG, Zurich	100.00	4000	CHF
ABB Oil, Gas and Petrochemicals Management Ltd., Zurich	100.00	100	CHF
ABB International Marketing Ltd., Zurich	100.00	1000	CHF
ABB Power Technologies Management Ltd., Zurich	100.00	100	CHF
ABB Research Ltd., Zurich	100.00	100	CHF
ABB Sécheron S.A., Satigny	99.97	22000	CHF
ABB Technology Ltd., Zurich	100.00	100	CHF
ABB Turbo-Systems Holding Ltd., Baden	100.00	40000	CHF
ABB Turbo-Systems AG, Baden	100.00	10000	CHF
TAIWAN
ABB Ltd., Taipei	100.00	200000	TWD
TANZANIA, UNITED REPUBLIC
Asea Brown Boveri Ltd., Dar Es Salaam	100.00	141000	TZS
ABB Tanelec Ltd., Arusha	70.00	2196591	TZS
THAILAND
ABB LIMITED, Bangkok	100.00	784000	THB
Asea Brown Boveri Holding Ltd., Samutprakarn	100.00	1100	THB
ABB Bailey Limited, Ladyao Jatuchak	98.00	9800	THB
TUNISIA
L’Ebenoid Production, Tunisie	100.00	180000	TDN
ABB Maghreb Services S.A., Tunis	100.00	83	USD
TURKEY
ABB Holding A.S., Istanbul	99.95	12844	USD
ABB Elektrik Sanayi A.S., Istanbul	99.94	10568	USD
UGANDA
ABB Ltd., Kampala	100.00	20	USD
UKRAINE
ABB Ltd., Kiev	100.00	5860	USD
UNITED ARAB EMIRATES
ABB Energy Automation S.p.A., Abu Dhabi	100.00
ABB Transmission & Distribution Ltd., Abu Dhabi	49.00	150	AED
ABB Industries (L.L.C), Dubai	49.00	5000	AED

UNITED KINGDOM
ABB Credit Ltd., London	100.00				USD
ABB Consultancy Services Ltd., Hants	99.80		50		GBP
Elsag Bailey Ltd., Telford	100.00		6187		GBP
ABB Equity Development Company Ltd., London	100.00		0		GBP
ABB Equity Ventures (UK) Ltd., London	100.00
ABB Equity Limited, Guernsey	100.00		10		GBP
ABB Eurofin Limited, Guernsey	100.00		1000		EUR
ABB Equity Ventures (Jersey) Ltd., Jersey	100.00		0		USD
ABB Holdings Ltd., London	100.00		74366		GBP
ABB International Finance Limited, Guernsey	100.00		230		USD
ABB Insurance Limited, Guernsey	100.00		4000		USD
ABB IOP Services Ltd., Surrey	100.00		1		GBP
ABB Investments Ltd., London	100.00		13		GBP
ABB Instrumentation Ltd., St. Neots	100.00		2280		GBP
ABB Lummus Crest Ltd., Redhill	100.00		1		GBP
Lighting for Staffordshire Holdings Ltd., Staffordshire	60.00		10		GBP
Lighting for Staffordshire Ltd., Staffordshire	60.00		10		GBP
ABB Lutech Resources Ltd., Redhill	100.00		1		GBP
GN Novinvest Ltd., St. Helier	100.00		100		CHF
ABB Transinvest Limited, St. Helier, Guernsey	100.00		3641		CHF
West Africa Completion Services Ltd., London	100.00		1		GBP
UNITED STATES
Asea Brown Boveri Inc., Norwalk, CT	100.00		2		USD
ABB Barranquilla Inc., Princeton, NJ	100.00		0		USD
ABB Capital (USA) LLC, Delaware	100.00		250		USD
Combustion Engineering Inc., Norwalk, CT	100.00		1		USD
Connecticut Valley Claims, CT	100.00		1
DLI Engineering Corp., Bainbridge Island	100.00
ABB Susa/Dillingham, North Brunswick	55.00		0
ABB Equity Ventures Inc., Princeton, NJ	100.00		0
ABB Financial Services Inc., Norwalk, CT	100.00		1		USD
ABB Holdings Inc., Norwalk	100.00		2		USD
ABB Investments LLC, Norwalk, CT	100.00		0
ABB Susa/Brown & Root, North Brunswick	51.00
ABB Susa/KDL, North Brunswick	51.00
KOMPOSIT AMERICAS Risk Management, Consultancy & Insurance Brokerage Serv. California	100.00
Lummus Catalyst Company, Bloomfield, NJ	100.00		0		USD
ABB Finance Inc., Norwalk, CT	100.00		0		USD
ABB Lummus Global Overseas Corporation, Bloomfield, NJ	100.00		1		USD
ABB Prospects Inc., Norwalk	100.00
ABB Susa Inc., North Brunswick, NJ	100.00		1999		USD
Camelot IS-2 International, Inc. D/B/A Skyva International, Wickliffe	99.97	20693988		USD
ABB Semiconductors Inc., Norwalk, CT	100.00		1		USD
ABB Susa/Cegaz, North Brunswick	62.50
ABB Susa International Inc., North Brunswick, NJ	100.00		1		USD
ABB Treasury Center USA Inc., Norwalk, CT	100.00		0		USD
URUGUAY
ABB CL Logistic S.A., Montevideo	100.00		125		UYU
UZBEKISTAN
ABB CHTZ Closed Joint Stock Company, Chirchik	68.00		860		USD
ABB Tamir Ltd., Nurabad	51.00		2500		USD
VENEZUELA
Asea Brown Boveri S.A., Caracas	100.00		4899373		VEB
ABB Servicios Vetco Gray de Venezuela C.A., Las Morochas	100.00		50		VEB
ABB Vetco Gray de Venezuela, C.A., Maracaibo	100.00		500		VEB
VIETNAM
ABB Ltd., Hanoi	100.00		12771		USD

ZAMBIA
ABB Ltd., Lusaka	100.00	100	ZMK
ZIMBABWE
ABB (Private) Ltd., Harare	100.00	1000	ZWD

EX-12.1

Exhibit 12.1

CERTIFICATIONS

I, Jürgen Dormann, certify that:

1.I have reviewed this annual report on Form 20-F of ABB Ltd;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:  April 9, 2004

 /s/ Jürgen Dormann

Jürgen Dormann

Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATIONS

I, Peter Voser, certify that:

1.I have reviewed this annual report on Form 20-F of ABB Ltd;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:  April 9, 2004

 /s/ Peter Voser

Peter Voser

Chief Financial Officer

EX-13.1

Exhibit 13.1

SECTION 906 CERTIFICATION

CERTIFICATION

(pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Annual Report on Form 20-F for the fiscal year ended December 31, 2003 of ABB Ltd (the “Company”) as filed with the U.S. Securities and Exchange Commission (the “Commission”) on the date hereof (the “Report”) and pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Jürgen Dormann, Chief Executive Officer of the Company, certify, that:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Jürgen Dormann
Name:		Jürgen Dormann
Title:		Chief Executive Officer

Date: April 9, 2004

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to ABB Ltd and will be retained by ABB Ltd and furnished to the Securities and Exchange Commission or its staff upon request.

EX-13.2

Exhibit 13.2

SECTION 906 CERTIFICATION

CERTIFICATION

(pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Annual Report on Form 20-F for the fiscal year ended December 31, 2003 of ABB Ltd (the “Company”) as filed with the U.S. Securities and Exchange Commission (the “Commission”) on the date hereof (the “Report”) and pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Peter Voser, Chief Financial Officer of the Company, certify, that:

(1)           the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)           the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Peter Voser
Name:		Peter Voser
Title:		Chief Financial Officer

Date: April 9, 2004

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to ABB Ltd and will be retained by ABB Ltd and furnished to the Securities and Exchange Commission or its staff upon request.