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FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-24193
XEROX CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8% ORIGINAL CAPITAL SECURITIES
[LOGO OF [LOGO OF
XEROX] XEROX]
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
XEROX CORPORATION
---------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JUNE 9, 1997, UNLESS EXTENDED
---------------
Xerox Capital Trust I, a trust formed under the laws of the State of Delaware
(the "Trust"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus (as the same may be amended or supplemented from time
to time, the "Prospectus") and in the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"), to exchange up to $650,000,000
aggregate Liquidation Amount of its 8% Series B Capital Securities (the
"Exchange Capital Securities") which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement (as defined herein) of which this Prospectus constitutes a part, for
a like Liquidation Amount of its outstanding 8% Series A Capital Securities
(the "Original Capital Securities"), of which $650,000,000 aggregate
Liquidation Amount are issued and outstanding. Pursuant to the Exchange Offer,
Xerox Corporation, a New York corporation (the "Corporation" or "Xerox"), is
also offering to exchange (i) its guarantee of payments of cash distributions
and payments on liquidation of the Trust or redemption of the Original Capital
Securities (the "Original Guarantee") for a like guarantee in respect of the
Exchange Capital Securities (the "Exchange Guarantee") and (ii) $650,000,000
aggregate principal amount of its 8% Series A Junior Subordinated Deferrable
Interest Debentures due February 1, 2027 (the "Original Junior Subordinated
Debentures") for a like aggregate principal amount of its 8% Series B Junior
Subordinated Deferrable Interest Debentures due February 1, 2027 (the "Exchange
Junior Subordinated Debentures"), which Exchange Guarantee and Exchange Junior
Subordinated Debentures also have been registered under the Securities Act. The
Original Capital Securities, the Original Guarantee and the Original Junior
Subordinated Debentures are collectively referred to herein as the "Original
Securities" and the Exchange Capital Securities, the Exchange Guarantee and the
Exchange Junior Subordinated Debentures are collectively referred to herein as
the "Exchange Securities."
The terms of the Exchange Securities are identical in all material respects
to the respective terms of the Original Securities, except that (i) the
Exchange Securities have been registered under the Securities Act and therefore
will not be subject to certain restrictions on transfer applicable to the
Original Securities, (ii) the Exchange Capital Securities will not contain the
$100,000 minimum Liquidation Amount transfer restriction, (iii) the Exchange
Capital Securities will not provide for any increase in the Distribution rate
thereon and (iv) the Exchange Junior Subordinated Debentures will not provide
for any increase in the interest rate thereon. See "Description of Exchange
Securities" and "Description of Original Securities." The Exchange Capital
Securities are being offered for exchange in order to satisfy certain
obligations of the Corporation and the Trust under the Registration Rights
Agreement dated as of January 29, 1997 (the "Registration Rights Agreement")
among the Corporation, the Trust and the Initial Purchasers (as defined
herein). In the event that the Exchange Offer is consummated, any Original
Capital Securities which remain outstanding after consummation of the Exchange
Offer and the Exchange Capital Securities issued in the Exchange Offer will
vote together as a single class for purposes of determining whether holders of
the requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Trust Agreement.
(Continued on the following page)
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Original Capital Securities on May 9, 1997.
SEE "RISK FACTORS" COMMENCING ON PAGE 15 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER ORIGINAL CAPITAL
SECURITIES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 9, 1997.
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The Exchange Capital Securities and the Original Capital Securities
(collectively, the "Capital Securities") represent beneficial interests in the
assets of the Trust. The Corporation is the owner of all of the beneficial
interests represented by common securities of the Trust (the "Common
Securities," and together with the Capital Securities, the "Trust
Securities"). The First National Bank of Chicago is the Property Trustee (the
"Property Trustee") of the Trust. The Trust exists for the sole purpose of
issuing the Trust Securities and investing the proceeds thereof in the Junior
Subordinated Debentures (as defined herein). The Junior Subordinated
Debentures will mature on February 1, 2027 (the "Stated Maturity"). The
Capital Securities will have a preference over the Common Securities under
certain circumstances with respect to cash distributions and amounts payable
on liquidation, redemption or otherwise. See "Description of Exchange
Securities--Description of Exchange Capital Securities--Subordination of
Common Securities."
As used herein, (i) the "Indenture" means the Indenture, dated as of January
29, 1997, as amended and supplemented from time to time, between the
Corporation and The First National Bank of Chicago, as trustee (the "Debenture
Trustee"), relating to the Junior Subordinated Debentures, (ii) the "Trust
Agreement" means the Amended and Restated Declaration of Trust relating to the
Trust among the Corporation, as Sponsor, The First National Bank of Chicago,
as Property Trustee, First Chicago Delaware Inc., an affiliate of the Property
Trustee, as Delaware Trustee (the "Delaware Trustee"), and the Administrative
Trustees named therein (collectively, with the Property Trustee and Delaware
Trustee, the "Issuer Trustees"), (iii) the "Guarantee" means the Guarantee
Agreement relating to the Capital Securities between the Corporation and The
First National Bank of Chicago, as trustee (the "Guarantee Trustee") and (iv)
the "Common Guarantee" means the Guarantee Agreement relating to the Common
Securities between the Corporation and The First National Bank of Chicago, as
trustee. In addition, as the context may require, (i) "Junior Subordinated
Debentures" includes the Original Junior Subordinated Debentures and the
Exchange Junior Subordinated Debentures and (ii) "Guarantee" includes the
Original Guarantee and the Exchange Guarantee.
Holders of the Capital Securities and the Common Securities will be entitled
to receive preferential cumulative cash distributions arising from the payment
of interest on the Junior Subordinated Debentures, accruing from the date of
original issuance and payable semi-annually in arrears on February 1 and
August 1 of each year, commencing August 1, 1997, at the annual rate of 8% of
the Liquidation Amount of $1,000 per Trust Security ("Distributions"). So long
as no Debenture Event of Default (as herein defined) has occurred and is
continuing, the Corporation will have the right to defer payments of interest
on the Junior Subordinated Debentures at any time and from time to time for a
period not exceeding 10 consecutive semi-annual periods with respect to each
deferral period (each, an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity Date. Upon the termination of any
such Extension Period and the payment of all amounts then due, the Corporation
may elect to begin a new Extension Period, subject to the requirements set
forth herein. If and for so long as interest payments on the Junior
Subordinated Debentures are so deferred, Distributions on the Trust Securities
will also be deferred and the Corporation will not be permitted, subject to
certain exceptions described herein, to declare or pay any cash distributions
with respect to the Corporation's capital stock (which includes common and
preferred stock) or to make any payment with respect to debt securities of the
Corporation that rank pari passu with or junior to the Junior Subordinated
Debentures. During an Extension Period, interest on the Junior Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Trust Securities are entitled will continue to accumulate) at
the rate of 8% per annum, compounded semi-annually, and holders of Trust
Securities will be required to accrue interest income for United States
federal income tax purposes prior to the receipt of the cash attributable to
such income. See "Description of Exchange Securities--Description of Exchange
Junior Subordinated Debentures--Option to Extend Interest Payment Date" and
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
The Corporation will, through the Guarantee, the Common Guarantee, the Trust
Agreement, the Junior Subordinated Debentures and the Indenture, taken
together, fully, irrevocably and unconditionally guarantee all of the Trust's
obligations under the Trust Securities. See "Relationship Among the Exchange
Capital Securities, the Exchange Junior Subordinated Debentures and the
Exchange Guarantee--Full and Unconditional
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(Continued from the previous page)
Guarantee." The Guarantee and the Common Guarantee will guarantee payments of
Distributions and payments on liquidation or redemption of the Trust
Securities, but in each case only to the extent that the Trust holds funds on
hand legally available therefor and has failed to make such payments, as
described herein. See "Description of Exchange Securities--Description of
Exchange Guarantee." If the Corporation fails to make a required payment on
the Junior Subordinated Debentures, the Trust will not have sufficient funds
to make the related payments, including Distributions, on the Trust
Securities. The Guarantee and the Common Guarantee will not cover any such
payment when the Trust does not have sufficient funds on hand legally
available therefor. In such event, a holder of Capital Securities may
institute a legal proceeding directly against the Corporation to enforce its
rights in respect of such payment. See "Description of Exchange Securities--
Description of Exchange Junior Subordinated Debentures--Enforcement of Certain
Rights by Holders of Capital Securities." The obligations of the Corporation
under the Guarantee, the Common Guarantee and the Junior Subordinated
Debentures will be unsecured and subordinate and junior in right of payment to
all Senior Indebtedness (as defined in "Description of Exchange Securities--
Description of Exchange Junior Subordinated Debentures--Subordination"), which
aggregated approximately $12,448 million as of December 31, 1996.
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated
Maturity Date upon repayment of the Junior Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued and unpaid
interest on, the Junior Subordinated Debentures (the "Maturity Redemption
Price"), (ii) in whole but not in part, at any time prior to February 1, 2007,
contemporaneously with the optional prepayment of the Junior Subordinated
Debentures, upon the occurrence and continuation of a Tax Event (as defined
herein) at a redemption price equal to the Tax Event Prepayment Price (as
defined below) (the "Tax Event Redemption Price"), and (iii) in whole or in
part, on or after February 1, 2007, contemporaneously with the optional
prepayment by the Corporation of the Junior Subordinated Debentures, at a
redemption price equal to the Optional Prepayment Price (as defined below)
(the "Optional Redemption Price"). Any of the Maturity Redemption Price, the
Tax Event Redemption Price and the Optional Redemption Price may be referred
to herein as the "Redemption Price." See "Description of Exchange Securities--
Description of Exchange Capital Securities--Redemption."
The Junior Subordinated Debentures will be prepayable prior to the Stated
Maturity Date at the option of the Corporation (i) on or after February 1,
2007, in whole or in part, at a prepayment price (the "Optional Prepayment
Price") equal to 102.451% of the principal amount thereof on February 1, 2007,
declining ratably on each February 1 thereafter to 100% on or after February
1, 2017, plus accrued and unpaid interest thereon to the date of prepayment,
or (ii) at any time prior to February 1, 2007, in whole but not in part, upon
the occurrence and continuation of a Tax Event, at a prepayment price (the
"Tax Event Prepayment Price") equal to the greater of (a) 100% of the
principal amount thereof or (b) the sum, as determined by a Quotation Agent
(as hereinafter defined), of the present values of the principal amount and
premium payable as part of the prepayment price with respect to an optional
prepayment of such Junior Subordinated Debentures on February 1, 2007,
together with scheduled payments of interest accruing from the prepayment date
to February 1, 2007, in each case, discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined herein) plus, in either case,
accrued and unpaid interest thereon to the date of prepayment. Either of the
Optional Prepayment Price or the Tax Event Prepayment Price may be referred to
herein as the "Prepayment Price." See "Description of Exchange Securities--
Description of Exchange Junior Subordinated Debentures--Optional Prepayment"
and "--Tax Event Prepayment."
The Corporation will have the right at any time to terminate the Trust and
cause a Like Amount of the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust, subject to
the Corporation having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital Securities.
Unless the Junior Subordinated Debentures are distributed to the holders of
the Trust Securities, in the event of a liquidation of the Trust as described
herein, after satisfaction of liabilities to creditors of the Trust as
required by applicable law, the holders of the Trust Securities generally will
be entitled to receive a Liquidation Amount of $1,000 per Trust Security plus
accumulated and unpaid Distributions thereon to the date of payment. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of Junior Subordinated
Debentures."
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The Trust is making the Exchange Offer of the Exchange Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
of the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither the Corporation nor the Trust has sought its own interpretive
letter and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject to the two immediately
following sentences, the Corporation and the Trust believe that Exchange
Capital Securities issued pursuant to this Exchange Offer in exchange for
Original Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of
Original Capital Securities who is an "affiliate" of the Corporation or the
Trust or who intends to participate in the Exchange Offer for the purpose of
distributing Exchange Capital Securities, or any broker-dealer who purchased
Original Capital Securities from the Trust to resell pursuant to Rule 144A
under the Securities Act ("Rule 144A") or any other available exemption under
the Securities Act, (a) will not be able to rely on the interpretations of the
staff of the Division of Corporation Finance of the Commission set forth in
the above-mentioned interpretive letters, (b) will not be permitted or
entitled to tender such Original Capital Securities in the Exchange Offer and
(c) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or other transfer of such
Original Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer
holds Original Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Original Capital
Securities for Exchange Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will
be required to represent that (i) it is not an "affiliate" of the Corporation
or the Trust, (ii) any Exchange Capital Securities to be received by it are
being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Capital
Securities, and (iv) if such holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities. In
addition, the Corporation and the Trust may require such holder, as a
condition to such holder's eligibility to participate in the Exchange Offer,
to furnish to the Corporation and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) on behalf of whom such holder holds the Capital Securities to
be exchanged in the Exchange Offer. Each broker-dealer that receives Exchange
Capital Securities for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Original Capital Securities for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such Exchange Capital
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Corporation and
the Trust believe that broker-dealers who acquired Original Capital Securities
for their own accounts, as a result of market-making activities or other
trading activities ("Participating Broker-Dealers"), may fulfill their
prospectus delivery requirements with respect to the Exchange Capital
Securities received upon exchange of such Original Capital Securities (other
than Original Capital Securities which represent an unsold allotment from the
initial sale of the Original Capital Securities)
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with a prospectus meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such
Exchange Capital Securities. Each broker-dealer that receives Exchange Capital
Securities for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such
Exchange Capital Securities. The Letter of Transmittal states that by so
acknowledging and by delivery of a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Capital Securities received in exchange for Original Capital
Securities acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Trust and the Company have agreed
that, ending on the close of business on the 180th day following the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of Exchange Capital Securities
received in exchange for Original Capital Securities pursuant to the Exchange
Offer must notify the Corporation or the Trust, or cause the Corporation or
the Trust to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided
for that purpose in the Letter of Transmittal or may be delivered to the
Exchange Agent at one of the addresses set forth herein under "The Exchange
Offer--Exchange Agent." Any Participating Broker-Dealer who is an "affiliate"
of the Corporation or the Trust may not rely on such interpretive letters and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. See "The Exchange
Offer--Resales of Exchange Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that upon receipt of notice
from the Corporation or the Trust of the occurrence of any event or the
discovery of any fact which makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or which causes
this Prospectus to omit to state a material fact necessary in order to make
the statements contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading or of the occurrence
of certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange Capital
Securities (or the Exchange Guarantee or the Exchange Junior Subordinated
Debentures, as applicable) pursuant to this Prospectus until the Corporation
or the Trust has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer, or the
Corporation or the Trust has given notice that the sale of the Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be. If
the Corporation or the Trust gives such notice to suspend the sale of the
Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable), it shall extend the 180-day period
referred to above during which Participating Broker-Dealers are entitled to
use this Prospectus in connection with the resale of Exchange Capital
Securities by the number of days during the period from and including the date
of the giving of such notice to and including the date when Participating
Broker-Dealers shall have received copies of the amended or supplemented
Prospectus necessary to permit resales of the Exchange Capital Securities or
to and including the date on which the Corporation or the Trust has given
notice that the sale of Exchange Capital Securities (or the Exchange Guarantee
or the Exchange Junior Subordinated Debentures, as applicable) may be resumed,
as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Original Capital Securities. The Exchange Capital
Securities will be a new issue of securities for which there currently is no
market. Although Merrill Lynch & Co., J.P. Morgan & Co. and Morgan Stanley &
Co., the initial purchasers of the Original Capital Securities (the "Initial
Purchasers"), have informed the Corporation and the Trust that they each
currently intend to make a market in the Exchange Capital Securities, they are
not obligated to do so, and any such market making may be discontinued at any
time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Exchange Capital Securities.
The
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Corporation and the Trust currently do not intend to apply for listing of the
Exchange Capital Securities on any securities exchange or for quotation
through the NASD Automated Quotation System.
Any Original Capital Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the same rights and
will be subject to the same limitations applicable thereto under the
Declaration (except for those rights which terminate upon consummation of the
Exchange Offer). Following consummation of the Exchange Offer, the holders of
Original Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Corporation nor the Trust
will have any further obligation to such holders (other than under certain
limited circumstances) to provide for registration under the Securities Act of
the Original Capital Securities held by them. To the extent that Original
Capital Securities are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered Original Capital Securities could be adversely
affected. See "Risk Factors--Consequences of a Failure to Exchange Original
Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
Original Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on June 9, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Corporation or the Trust (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Original Capital Securities may be withdrawn at any time
on or prior to the Expiration Date. The Exchange Offer is not conditioned upon
any minimum Liquidation Amount of Original Capital Securities being tendered
for exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Corporation or the Trust and to the
terms and provisions of the Registration Rights Agreement. Original Capital
Securities may be tendered in whole or in part having an aggregate Liquidation
Amount of not less than $100,000 (100 Capital Securities) or any integral
multiple of $1,000 Liquidation Amount (one Capital Security) in excess
thereof. The Corporation has agreed to pay all expenses of the Exchange Offer.
See "The Exchange Offer--Fees and Expenses." Holders of the Original Capital
Securities whose Original Capital Securities are accepted for exchange will
not receive Distributions on such Original Capital Securities and will be
deemed to have waived the right to receive any Distributions on such Original
Capital Securities accumulated from and after January 29, 1997. Accordingly,
holders of Exchange Capital Securities as of the record date for the payment
of Distributions on August 1, 1997 will be entitled to receive Distributions
accumulated from and after January 29, 1997. See "The Exchange Offer--
Distributions on Exchange Capital Securities."
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities offered hereby. No dealer-
manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
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AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the Exchange
Act and in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices at
7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and
Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material may also be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such information may also be accessed electronically by
means of the Commission's home page on the Internet (http://www.sec.gov). In
addition, such reports, proxy statements and other information concerning the
Corporation may be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005, and the Chicago Stock
Exchange, One Financial Plaza, 120 South La Salle Street, Chicago, Illinois
60603, on which exchanges certain securities of the Corporation are listed.
No separate financial statements of the Trust have been included herein. The
Corporation and the Trust do not consider that such financial statements would
be material to holders of the Capital Securities because the Trust is a newly
formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any
activity other than holding as trust assets the Junior Subordinated
Debentures, issuing the Trust Securities and engaging in incidental
activities. See "Xerox Capital Trust I," "Description of Exchange Securities."
In addition, the Corporation does not expect that the Trust will file reports,
proxy statements and other information under the Exchange Act with the
Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Corporation and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission,
and reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Corporation, the
Trust and the Exchange Securities. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Offering Memorandum by reference (File No. 1-4471):
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996; and
2. The Corporation's Current Reports on Form 8-K dated January 22, 1997
and April 7, 1997.
All documents filed by the Corporation pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the Capital Securities offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such document. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein do not purport to be
complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document. The
Corporation will provide without charge to any person to whom this Prospectus
is delivered, on the written or oral request of such person, a copy of any or
all of the foregoing documents incorporated by reference herein (other than
exhibits not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be directed to: The First
National Bank of Boston, P.O. Box 8038, Boston, Massachusetts 02266-8038,
telephone: 1-800-828-6396.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
XEROX CORPORATION
Xerox Corporation is a New York corporation with its principal executive
offices located at 800 Long Ridge Road, Stamford, Connecticut.
Xerox, The Document Company, is a leader in the global document market,
providing document services that enhance productivity. The Corporation's
Document Processing activities encompass developing, manufacturing, marketing,
servicing and financing a complete range of document processing products and
services designed to make offices around the world more productive.
XEROX CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant to
(i) the Trust Agreement executed by the Corporation, as Sponsor, The First
National Bank of Chicago, as Property Trustee, and First Chicago Delaware Inc.,
as Delaware Trustee and the three individual Administrative Trustees named
therein, and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on January 23, 1997. The Trust's business and affairs are
conducted by the Issuer Trustees: the Property Trustee, the Delaware Trustee,
and the three individual Administrative Trustees who are employees or officers
of or affiliated with the Corporation. The Trust exists for the exclusive
purposes of (i) issuing and selling the Trust Securities, (ii) using the
proceeds from the sale of the Trust Securities to acquire the Junior
Subordinated Debentures issued by the Corporation and (iii) engaging in only
those other activities incidental thereto. Accordingly, the Junior Subordinated
Debentures are now and will be the sole assets of the Trust, and payments under
the Junior Subordinated Debentures will be the sole revenue of the Trust. All
of the Common Securities will be owned by the Corporation.
THE EXCHANGE OFFER
The Exchange Offer.......... Up to $650,000,000 aggregate Liquidation Amount
of Exchange Capital Securities are being offered
in exchange for a like aggregate Liquidation
Amount of Original Capital Securities. Original
Capital Securities may be tendered for exchange
in whole or in part in a Liquidation Amount of
$100,000 (100 Capital Securities) or any integral
multiple of $1,000 (one Capital Security) in
excess thereof. The Corporation and the Trust are
making the Exchange Offer in order to satisfy
their obligations under the Registration Rights
Agreement relating to the Original Capital
Securities. For a description of the procedures
for tendering Original Capital Securities, see
"The Exchange Offer--Procedures for Tendering
Original Capital Securities."
Expiration Date............. 5:00 p.m., New York City time, on June 9, 1997,
unless the Exchange Offer is extended by the
Corporation or the Trust (in which case the
Expiration Date will be the latest date and time
to which the Exchange Offer is extended). See
"The Exchange Offer--Terms of the Exchange
Offer."
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Conditions to the Exchange
Offer....................... The Exchange Offer is subject to certain
conditions, which may be waived by the
Corporation and the Trust in their sole
discretion. The Exchange Offer is not conditioned
upon any minimum Liquidation Amount of Original
Capital Securities being tendered. See "The
Exchange Offer--Conditions to the Exchange
Offer."
Offer....................... The Corporation and the Trust reserve the right
in their sole and absolute discretion, subject to
applicable law, at any time and from time to
time, (i) to delay the acceptance of the Original
Capital Securities for exchange, (ii) to
terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to
extend the Expiration Date of the Exchange Offer
and retain all Original Capital Securities
tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Original
Capital Securities to withdraw their tendered
Original Capital Securities, or (iv) to waive any
condition or otherwise amend the terms of the
Exchange Offer in any respect. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights........... Tenders of Original Capital Securities may be
withdrawn at any time on or prior to the
Expiration Date by delivering a written notice of
such withdrawal to the Exchange Agent in
conformity with certain procedures set forth
below under "The Exchange Offer-- Withdrawal
Rights."
Procedures for Tendering
Original Capital
Securities................. Brokers, dealers, commercial banks, trust
companies and other nominees who hold Original
Capital Securities through The Depository Trust
Company ("DTC") may effect tenders by book-entry
transfer in accordance with DTC's Automated
Tender Offer Program ("ATOP"). Holders of such
Original Capital Securities registered in the
name of a broker, dealer, commercial bank, trust
company or other nominee are urged to contact
such person promptly if they wish to tender
Original Capital Securities. In order for
Original Capital Securities to be tendered by a
means other than by book-entry transfer, a Letter
of Transmittal must be completed and signed in
accordance with the instructions contained
therein. The Letter of Transmittal and any other
documents required by the Letter of Transmittal
must be delivered to The First National Bank of
Chicago (the "Exchange Agent") by mail,
facsimile, hand delivery or overnight courier and
either such Original Capital Securities must be
delivered to the Exchange Agent or specified
procedures for guaranteed delivery must be
complied with. See "The Exchange Offer--
Procedures for Tendering Original Capital
Securities."
Letters of Transmittal and certificates
representing Original Capital Securities should
not be sent to the Corporation or the Trust. Such
documents should only be sent to the Exchange
Agent.
Resales of Exchange Capital
Securities................. The Corporation and the Trust are making the
Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance of
the Commission as set forth in certain
interpretive letters addressed to third parties
in other transactions. However, neither the
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<PAGE>
Corporation nor the Trust has sought its own
interpretive letter and there can be no assurance
that the staff of the Division of Corporation
Finance of the Commission would make a similar
determination with respect to the Exchange Offer
as it has in such interpretive letters to third
parties. Based on these interpretations by the
staff of the Division of Corporation Finance of
the Commission, and subject to the two
immediately following sentences, the Corporation
and the Trust believe that Exchange Capital
Securities issued pursuant to this Exchange Offer
in exchange for Original Capital Securities may
be offered for resale, resold and otherwise
transferred by a holder thereof (other than a
holder who is a broker-dealer) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such Exchange Capital Securities
are acquired in the ordinary course of such
holder's business and that such holder is not
participating, and has no arrangement or
understanding with any person to participate, in
a distribution (within the meaning of the
Securities Act) of such Exchange Capital
Securities. However, any holder of Original
Capital Securities who is an "affiliate" of the
Corporation or the Trust or who intends to
participate in the Exchange Offer for the purpose
of distributing the Exchange Capital Securities,
or any broker-dealer who purchased the Original
Capital Securities from the Trust to resell
pursuant to Rule 144A or any other available
exemption under the Securities Act, (a) will not
be able to rely on the interpretations of the
staff of the Division of Corporation Finance of
the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted
or entitled to tender such Original Capital
Securities in the Exchange Offer and (c) must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any sale or other transfer of
such Original Capital Securities unless such sale
is made pursuant to an exemption from such
requirements. In addition, as described below, if
any broker-dealer holds Original Capital
Securities acquired for its own account as a
result of market-making or other trading
activities and exchanges such Original Capital
Securities for Exchange Capital Securities, then
such broker-dealer must deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resales of such Exchange
Capital Securities.
Each holder of Original Capital Securities who
wishes to exchange Original Capital Securities
for Exchange Capital Securities in the Exchange
Offer will be required to represent that (i) it
is not an "affiliate" of the Corporation or the
Trust, (ii) any Exchange Capital Securities to be
received by it are being acquired in the ordinary
course of its business, (iii) it has no
arrangement or understanding with any person to
participate in a distribution (within the meaning
of the Securities Act) of such Exchange Capital
Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and
does not intend to engage in, a distribution
(within the meaning of the Securities Act) of
such Exchange Capital
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<PAGE>
Securities. Each broker-dealer that receives
Exchange Capital Securities for its own account
in exchange for Original Capital Securities,
where such Original Capital Securities were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will deliver
a prospectus in connection with any resale of
such Exchange Capital Securities. See "Plan of
Distribution". The Letter of Transmittal states
that, by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the
position taken by the staff of the Division of
Corporation Finance of the Commission in the
interpretive letters referred to above, the
Corporation and the Trust believe that
Participating Broker-Dealers who acquired
Original Capital Securities for their own
accounts as a result of market-making activities
or other trading activities may fulfill their
prospectus delivery requirements with respect to
the Exchange Capital Securities received upon
exchange of such Original Capital Securities
(other than Original Capital Securities which
represent an unsold allotment from the initial
sale of the Original Capital Securities) with a
prospectus meeting the requirements of the
Securities Act, which may be the prospectus
prepared for an exchange offer so long as it
contains a description of the plan of
distribution with respect to the resale of such
Exchange Capital Securities. Accordingly, this
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of
Exchange Capital Securities received in exchange
for Original Capital Securities where such
Original Capital Securities were acquired by such
Participating Broker-Dealer for its own account
as a result of market-making or other trading
activities. Subject to certain provisions set
forth in the Registration Rights Agreement and to
the limitations described below under "The
Exchange Offer--Resales of Exchange Capital
Securities," the Corporation and the Trust have
agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by
a Participating Broker-Dealer in connection with
resales of such Exchange Capital Securities for a
period ending 180 days after the Expiration Date
(subject to extension under certain limited
circumstances) or, if earlier, when all such
Exchange Capital Securities have been disposed of
by such Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer
who is an "affiliate" of the Corporation or the
Trust may not rely on such interpretive letters
and must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of
Exchange Capital Securities."
Exchange Agent.............. The exchange agent with respect to the Exchange
Offer is The First National Bank of Chicago (the
"Exchange Agent"). The addresses, and telephone
and facsimile numbers, of the Exchange Agent are
set forth in "The Exchange Offer--Exchange Agent"
and in the Letter of Transmittal.
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<PAGE>
Neither the Corporation nor the Trust will
Use of Proceeds............. receive any cash proceeds from the issuance of
the Exchange Capital Securities offered hereby.
See "Use of Proceeds."
Certain United States
Federal Income Tax
Consequences; ERISA
Considerations............. Holders of Original Capital Securities should
review the information set forth under "Certain
United States Federal Income Tax Consequences"
and "ERISA Considerations" prior to tendering
Original Capital Securities in the Exchange
Offer.
THE EXCHANGE CAPITAL SECURITIES
Securities Offered.......... Up to $650,000,000 aggregate Liquidation Amount
of the Trust's Exchange Capital Securities which
have been registered under the Securities Act
(Liquidation Amount $1,000 per Exchange Capital
Security). The Exchange Capital Securities will
be issued and the Original Capital Securities
were issued under the Trust Agreement. The
Exchange Capital Securities and any Original
Capital Securities which remain outstanding after
consummation of the Exchange Offer will vote
together as a single class for purposes of
determining whether holders of the requisite
percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised
certain rights under the Declaration. See
"Description of Exchange Securities--Description
of Exchange Capital Securities--Voting Rights;
Amendment of the Declaration." The terms of the
Exchange Capital Securities are identical in all
material respects to the terms of the Original
Capital Securities, except that the Exchange
Capital Securities have been registered under the
Securities Act and will not be subject to certain
restrictions on transfer applicable to the
Original Capital Securities and will not provide
for any increase in the Distribution rate
thereon. See "The Exchange Offer--Purpose of the
Exchange Offer," "Description of Exchange
Securities" and "Description of Original
Securities."
Distribution Dates.......... February 1 and August 1 of each year, commencing
August 1, 1997.
Extension Periods........... Distributions on Exchange Capital Securities will
be deferred for the duration of any Extension
Period elected by the Corporation with respect to
the payment of interest on the Exchange Junior
Subordinated Debentures. No Extension Period will
exceed 10 consecutive semi-annual periods or
extend beyond the Stated Maturity Date. See
"Description of Exchange Securities--Description
at Exchange Junior Subordinated Debentures--
Option to Extend Interest Payment Date" and
"Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
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<PAGE>
Ranking..................... The Exchange Capital Securities will rank pari
passu, and payments thereon will be made pro
rata, with the Original Capital Securities and
the Common Securities except as described under
"Description of Exchange Securities--Description
of Exchange Capital Securities--Subordination of
Common Securities." The Exchange Junior
Subordinated Debentures will rank pari passu with
the Original Junior Subordinated Debentures and
all other junior subordinated debentures to be
issued by the Corporation ("Other Debentures"),
which will be issued and sold (if at all) to
other trusts to be established by the Corporation
(if any), in each case similar to the Trust
("Other Trusts"), and will be unsecured and
subordinate and junior in right of payment to all
Senior Indebtedness to the extent and in the
manner set forth in the Indenture. See
"Description of Exchange Securities--Description
of Exchange Junior Subordinated Debentures." The
Exchange Guarantee will rank pari passu with the
Original Guarantee and all other guarantees (if
any) to be issued by the Corporation with respect
to capital or preferred securities (if any)
issued by Other Trusts ("Other Guarantees") and
will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior
in right of payment to all Senior Indebtedness to
the extent and in the manner set forth in the
Guarantee Agreement. See "Description of Exchange
Securities--Description of Exchange Guarantee."
Redemption.................. The Trust Securities will be subject to mandatory
redemption in a Like Amount, (i) in whole but not
in part, on the Stated Maturity Date upon
repayment of the Junior Subordinated Debentures,
(ii) in whole but not in part, at any time prior
to February 1, 2007, contemporaneously with the
optional prepayment of the Junior Subordinated
Debentures by the Corporation upon the occurrence
and continuation of a Tax Event and (iii) in
whole or in part, on or after February 1, 2007
contemporaneously with the optional prepayment by
the Corporation of the Junior Subordinated
Debentures, in each case at the applicable
Redemption Price. See "Description of Exchange
Securities--Description of Exchange Capital
Securities--Redemption."
Ratings..................... The Exchange Capital Securities are expected to
be rated "a2" by Moody's Investors Service, Inc.,
"A-" by Standard & Poor's Ratings Services and
"A-" by Fitch Investors Service, L.P.
Transfer Restrictions....... The Exchange Capital Securities will be issued,
and may be transferred, only in minimum
denominations of not less than $1,000. See
"Description of Exchange Securities--Description
of Exchange Capital Securities-- Restrictions on
Transfer." Any such transfer of Exchange Capital
Securities in denominations of less than $1,000
shall be deemed to be void and of no legal effect
whatsoever.
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<PAGE>
Absence of Market for the
Capital Securities......... The Exchange Capital Securities will be a new
issue of securities for which there currently is
no market. Although the Initial Purchasers have
informed the Trust and the Corporation that they
each currently intend to make a market in the
Capital Securities, the Initial Purchasers are
not obligated to do so, and any such market
making may be discontinued at any time without
notice. Accordingly, there can be no assurance as
to the development or liquidity of any market for
the Capital Securities. The Trust and the
Corporation do not intend to apply for listing of
the Capital Securities on any securities exchange
or for quotation through the NASD Automated
Quotation System. See "Plan of Distribution."
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<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors in connection
with the Exchange Offer and the Exchange Capital Securities offered hereby.
This Prospectus contains certain forward-looking statements and information
relating to the Corporation that are based on the beliefs of management as
well as assumptions made by and information currently available to management.
The words "anticipate," "believe," "estimate," "expect," "intends" and similar
expressions, as they relate to the Corporation or the Corporation's
management, are intended to identify forward-looking statements. Such
statements reflect the current views of the Corporation with respect to future
events and are subject to certain risks, uncertainties and assumptions,
including the risk factors described in this Prospectus. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described
herein as anticipated, believed, estimated or expected. The Corporation does
not intend to update these forward-looking statements.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Corporation under the Guarantee issued by it for the
benefit of the holders of Capital Securities, as well as under the Junior
Subordinated Debentures, will be unsecured and rank subordinate and junior in
right of payment to all Senior Indebtedness. In addition, in the case of a
bankruptcy or insolvency proceeding, the Corporation's obligations under the
Guarantee will also rank subordinate and junior in right of payment to all
liabilities (other than Other Guarantees) of the Corporation. At December 31,
1996, the aggregate principal amount of outstanding Senior Indebtedness was
approximately $12,448 million. None of the Indenture, the Guarantee or the
Trust Agreement places any limitation on the amount of secured or unsecured
debt, including Senior Indebtedness, that may be incurred by the Corporation
or by any subsidiary. See "Description of Exchange Securities--Description of
Exchange Guarantee--Status of the Guarantee" and "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures--
Subordination."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Corporation making payments on the Junior
Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default (as defined under "Description of
Junior Subordinated Debentures--Debenture Events of Default") shall have
occurred and be continuing, the Corporation will have the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures
at any time or from time to time for a period not exceeding 10 consecutive
semi-annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity Date. As a consequence
of any such deferral, semi-annual Distributions on the Capital Securities by
the Trust will be deferred (and the amount of Distributions to which holders
of the Capital Securities are entitled will accumulate additional
Distributions thereon at the rate of 8% per annum, compounded semi-annually),
from the relevant payment date for such Distributions during any such
Extension Period.
Prior to the termination of any such Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any Extension
Period and the payment of all interest then accrued and unpaid on the Junior
Subordinated Debentures (together with interest thereon at the annual rate of
8%, compounded semi-annually, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period, subject to the above
requirements. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period. See "Description of
Exchange Securities--Description of Exchange Capital Securities--
Distributions" and "Description of Exchange Securities--Description of
Exchange Junior Subordinated Debentures--Option to Extend Interest Payment
Date."
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<PAGE>
Should the Corporation exercise its right to defer payments of interest on
the Junior Subordinated Debentures, each holder of Trust Securities will be
required to accrue income (as original issue discount ("OID")) in respect of
the deferred stated interest allocable to its Trust Securities for United
States federal income tax purposes, which will be allocated but not
distributed to holders of Trust Securities. As a result, each such holder of
Capital Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash
related to such income from the Trust if the holder disposes of the Capital
Securities prior to the record date for the payment of Distributions
thereafter. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount" and "--Sales of Capital Securities."
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures in the future, the market price
of the Capital Securities is likely to be affected. A holder that disposes of
its Capital Securities during an Extension Period, therefore, might not
receive the same return on its investment as a holder that continues to hold
its Capital Securities. In addition, merely as a result of the existence of
the Corporation's right to defer payments of interest on the Junior
Subordinated Debentures, the market price of the Capital Securities may be
more volatile than the market prices of other securities that are not subject
to such deferrals.
Although the Corporation has the right to exercise its option to defer
payments of interest on the Junior Subordinated Debentures, the Corporation
has no current intention to defer payments of interest on such Debentures.
TAX EVENT REDEMPTION; POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL
SECURITIES
Upon the occurrence and continuation of a Tax Event (as defined under
"Description of Junior Subordinated Debentures--Tax Event Prepayment"), the
Corporation will have the right to prepay the Junior Subordinated Debentures
in whole (but not in part) at the Tax Event Prepayment Price prior to February
1, 2007 and within 90 days following the occurrence of such Tax Event and
therefore cause a mandatory redemption of the Trust Securities at the Tax
Event Redemption Price. See "Description of Capital Securities--Redemption."
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the United States Treasury Department proposed legislation that
would, among other things, deny an issuer a deduction for United States
Federal income tax purposes for the payment of interest on instruments with
characteristics similar to the Junior Subordinated Debentures. If the proposed
legislation were enacted in its current form, it is not expected to apply to
the Junior Subordinated Debentures since the proposed effective date for this
provision is the date of first committee action. There can be no assurances,
however, that the proposed legislation, if enacted, or similar legislation
enacted after the date hereof would not adversely affect the tax treatment of
the Junior Subordinated Debentures, resulting in a Tax Event, which may permit
the Company, upon the receipt of any required regulatory approval, to cause a
redemption of the Trust Securities at the Tax Event Redemption Price by
electing to prepay the Junior Subordinated Debentures at the Tax Event
Prepayment Price. See "Description of Exchange Securities--Description of
Exchange Capital Securities--Redemption" and "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures--Tax Event
Prepayment." See also "Certain Federal Income Tax Consequences--Proposed Tax
Legislation."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures distributed to the holders of Capital
Securities if a termination of the Trust were to occur. Accordingly, the
Capital Securities or the Junior Subordinated Debentures may trade at a
discount from the price that the investor paid to purchase the Capital
Securities offered hereby. Because holders of Capital Securities may receive
Junior Subordinated Debentures in liquidation of the Trust and because
Distributions are otherwise limited to payments on the Junior Subordinated
Debentures, prospective purchasers of Exchange Capital Securities are also
making an investment decision with regard to the Exchange Junior Subordinated
Debentures and should carefully review all the information regarding the
Exchange Junior Subordinated Debentures contained herein. See "Description of
Exchange Securities--Description of Exchange Junior Subordinated Debentures."
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<PAGE>
RIGHTS UNDER THE GUARANTEE
The First National Bank of Chicago will act as Guarantee Trustee and will
hold the Guarantee for the benefit of the holders of the Capital Securities.
The First National Bank of Chicago will also act as Property Trustee and as
Debenture Trustee under the Indenture. First Chicago Delaware Inc. will act as
Delaware Trustee under the Trust Agreement. The Guarantee will guarantee to
the holders of the Capital Securities the following payments, to the extent
not paid by the Trust: (i) any accumulated and unpaid Distributions required
to be paid on the Capital Securities, to the extent that the Trust has funds
on hand legally available therefor at such time, (ii) the applicable
Redemption Price with respect to any Capital Securities called for redemption,
to the extent that the Trust has funds on hand legally available therefor at
such time, and (iii) upon a voluntary or involuntary termination and
liquidation of the Trust (unless the Junior Subordinated Debentures are
distributed to holders of the Capital Securities), the lesser of (a) the
aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment, to the extent that the Trust has funds
on hand legally available therefor at such time and (b) the amount of assets
of the Trust remaining available for distribution to holders of the Capital
Securities upon a termination and liquidation of the Trust. The holders of a
majority in Liquidation Amount of the Capital Securities will have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust power conferred upon the Guarantee Trustee.
Any holder of the Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity. If the Corporation defaults on its obligation
to pay amounts payable under the Junior Subordinated Debentures, the Trust
will not have sufficient funds for the payment of Distributions or amounts
payable on redemption of the Capital Securities or otherwise, and, in such
event, holders of the Capital Securities will not be able to rely upon the
Guarantee for payment of such amounts. Instead, in the event a Debenture Event
of Default shall have occurred and be continuing and such event is
attributable to the failure of the Corporation to pay principal of (or
premium, if any) or interest on the Junior Subordinated Debentures on the
payment date on which such payment is due and payable, then a holder of
Capital Securities may institute a legal proceeding directly against the
Corporation for enforcement of payment to such holder of the principal of (or
premium, if any) or interest on such Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Capital Securities of
such holder (a "Direct Action"). Notwithstanding any payments made to a holder
of Capital Securities by the Corporation in connection with a Direct Action,
the Corporation shall remain obligated to pay the principal of (and premium,
if any) and interest on the Junior Subordinated Debentures, and the
Corporation shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent of
any payments made by the Corporation to such holder in any Direct Action.
Except as described herein, holders of Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures or to assert directly any other rights in respect of
the Junior Subordinated Debentures. See "Description of Exchange Securities--
Description of Exchange Junior Subordinated Debentures--Enforcement of Certain
Rights by Holders of Capital Securities," "--Description of Junior
Subordinated Debentures--Debenture Events of Default" and "--Description of
Guarantee." The Trust Agreement will provide that each holder of Capital
Securities by acceptance thereof agrees to the provisions of the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have voting rights relating
only to the modification of the Capital Securities, the termination or
liquidation of the Trust, and the exercise of the Trust's rights as holder of
Junior Subordinated Debentures. Holders of Capital Securities will not be
entitled to vote to appoint, remove or replace the Property Trustee or the
Delaware Trustee, and such voting rights are vested exclusively in the holder
of the Common Securities except upon the occurrence of certain events
described herein. See "Description of Exchange Securities--Description of
Exchange Capital Securities--Voting Rights; Amendment of the Trust Agreement"
and "--Removal of Issuer Trustees."
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<PAGE>
CONSEQUENCES OF A FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES
The Original Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws,
or pursuant to an exemption therefrom or in a transaction not subject thereto,
and in each case in compliance with certain other conditions and restrictions.
Original Capital Securities which remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Original Capital Securities which remain outstanding will not be entitled to
any rights to have such Original Capital Securities registered under the
Securities Act or to any similar rights under the Registration Rights
Agreement (subject to certain limited exceptions). The Corporation and the
Trust do not intend to register under the Securities Act any Original Capital
Securities which remain outstanding after consummation of the Exchange Offer
(subject to such limited exceptions, if applicable). To the extent that
Original Capital Securities are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Original Capital Securities could be
adversely affected.
The Exchange Capital Securities and any Original Capital Securities which
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain
actions or exercised certain rights under the Declaration. See "Description of
Exchange Securities--Description of Exchange Capital Securities--Voting
Rights; Amendment of the Declaration."
The Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by
June 28, 1997 and declared effective by July 28, 1997, the Distribution rate
borne by the Original Capital Securities will increase by 0.25% per annum
until such registration statement has been filed or declared effective, as the
case may be. Upon consummation of the Exchange Offer, holders of Original
Capital Securities will not be entitled to any increase in the Distribution
rate thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Description of Original
Securities."
ABSENCE OF PUBLIC MARKET
The Original Capital Securities were issued to, and the Corporation believes
such securities are currently owned by, a relatively small number of
beneficial owners. The Original Capital Securities have not been registered
under the Securities Act and will be subject to restrictions on
transferability if they are not exchanged for the Exchange Capital Securities.
Although the Exchange Capital Securities may be resold or otherwise
transferred by the holders (who are not affiliates of the Corporation or the
Trust) without compliance with the registration requirements under the
Securities Act, they will constitute a new issue of securities with no
established trading market. Original Capital Securities may be transferred by
the holders thereof only in blocks having a Liquidation Amount of not less
than $100,000 (100 Capital Securities). The Corporation and the Trust have
been advised by the Initial Purchasers that the Initial Purchasers presently
intend to make a market in the Exchange Capital Securities. However, the
Initial Purchasers are not obligated to do so and any market-making activity
with respect to the Exchange Capital Securities may be discontinued at any
time without notice. In addition, such market-making activity will be subject
to the limits imposed by the Securities Act and the Exchange Act and may be
limited during the Exchange Offer. Accordingly, no assurance can be given that
an active public or other market will develop for the Exchange Capital
Securities or the Original Capital Securities, or as to the liquidity of or
the trading market for the Exchange Capital Securities or the Original Capital
Securities. If an active public market does not develop, the market price and
liquidity of the Exchange Capital Securities may be adversely affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the financial condition of the Corporation
and the market for similar securities. Depending on these and other factors,
the Exchange Capital Securities may trade at a discount.
18
<PAGE>
Notwithstanding the registration of the Exchange Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Corporation or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions
of Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Original Capital Securities, where such Original
Capital Securities were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Capital
Securities. See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Subject to the conditions set forth under "The Exchange Offer--Conditions to
the Exchange Offer," delivery of Exchange Capital Securities in exchange for
Original Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) certificates for Original Capital Securities or a book-entry confirmation
of a book-entry transfer of Original Capital Securities into the Exchange
Agent's account at DTC, including an Agent's Message (as defined under "The
Exchange Offer--Acceptance for Exchange and Issuance of Exchange Capital
Securities") if the tendering holder does not deliver a Letter of Transmittal,
(ii) a completed and signed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or, in the case of a book-entry transfer,
an Agent's Message in lieu of the Letter of Transmittal, and (iii) any other
documents required by the Letter of Transmittal. Therefore, holders of
Original Capital Securities desiring to tender such Original Capital
Securities in exchange for Exchange Capital Securities should allow sufficient
time to ensure timely delivery. Neither the Company nor the Trust is under a
duty to give notification of defects or irregularities with respect to the
tenders of Original Capital Securities for exchange.
19
<PAGE>
XEROX CORPORATION
Xerox Corporation is a New York corporation with its principal executive
offices located at 800 Long Ridge Road, Stamford, Connecticut 06904, telephone
(203) 968-3000.
Xerox is The Document Company and a leader in the global document market,
providing document services that enhance productivity. References herein to
the "Corporation" refer to Xerox Corporation and consolidated subsidiaries
unless the context specifically requires otherwise. The Corporation
distributes its products in the Western Hemisphere through divisions and
wholly-owned subsidiaries. In Europe, Africa, the Middle East and parts of
Asia, including Hong Kong, India and China, the Corporation distributes
through Rank Xerox Limited and related companies ("Rank Xerox") in which the
Corporation has an 80 percent financial interest and The Rank Organisation Plc
("RO") has a 20 percent financial interest. In Japan and other areas of the
Pacific Rim, Australia and New Zealand, Document Processing products are
distributed by Fuji Xerox Co. Ltd., an unconsolidated joint venture, which is
equally owned by Fuji Photo Film Company, Ltd. of Japan and Rank Xerox. On
February 28, 1995, the Corporation paid RO 620 million pounds sterling, or
$972 million, to increase the Corporation's financial interest in Rank Xerox
to 80 percent from 67 percent.
In January 1996, the Corporation announced agreements to sell its remaining
property and casualty insurance units to investor groups led by Kohlberg
Kravis Roberts & Co. ("KKR") and existing management for consideration
totaling $2.7 billion. On September 11, 1996, the Corporation and KKR
announced that they had mutually agreed to terminate the transactions. In
connection with the anticipated sales, in 1995 Xerox recorded a $1.5 billion
charge. No additional charges are required as a result of this termination.
Following termination of the transactions with KKR, the Corporation
initiated steps for the simultaneous marketing of each of the remaining
property and casualty insurance units, with the objective of completing the
individual sale transactions as soon as possible. On January 23, 1997, the
Corporation announced that an agreement had been reached for the sale of the
Coregis insurance unit, for a total consideration in excess of book value and
consistent with the estimated value of such unit when the Corporation
discontinued its insurance operations in 1995.
The Corporation's Document Processing activities encompass developing,
manufacturing, marketing, servicing and financing a complete range of document
processing products and services designed to make offices around the world
more productive. The Corporation believes that documents will play a central
role in business, government, education and other organizations far into the
future and that efficient processing of documents offers significant
opportunities for productivity improvements. The financing of Xerox equipment
is generally carried out by Xerox Credit Corporation in the United States and
internationally by foreign financing subsidiaries and divisions in most
countries that the Corporation operates. Document Processing operations
employed 86,700 people worldwide at year-end 1996.
In 1993, the Corporation announced a worldwide Document Processing
restructuring program to significantly reduce the cost base and to improve
productivity. The Corporation's objectives were to reduce its worldwide work
force by more than 10,000 employees and to close or consolidate a number of
facilities. The activities associated with the 1993 restructuring program have
reduced employment by 14,000. The Corporation has achieved its restructuring
program objectives, with pre-tax cost savings of approximately $770 million in
1996, $650 million in 1995 and $350 million in 1994. A portion of these
savings has been reinvested to reengineer business processes, support
expansion in growth markets, and mitigate anticipated continuing pricing
pressures.
The Corporation is subject to the information requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. For further information regarding the
Corporation reference is made to such reports, proxy statements and other
information which are available as described under "Available Information" and
"Incorporation of Certain Documents by Reference."
20
<PAGE>
USE OF PROCEEDS
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities and the Exchange Guarantee
offered hereby. In consideration for issuing the Exchange Capital Securities
in exchange for Original Capital Securities as described in this Prospectus,
the Trust will receive Original Capital Securities in like Liquidation Amount.
The Original Capital Securities surrendered in exchange for the Exchange
Capital Securities will be retired and canceled.
The proceeds to the Trust (without giving effect to expenses of the offering
payable by the Corporation) from the offering of the Original Capital
Securities was $643,285,500. All of the proceeds from the sale of the Original
Capital Securities were invested by the Trust in the Original Junior
Subordinated Debentures. The Corporation intends that the net proceeds from
the sale of the Original Junior Subordinated Debentures will be used for
general corporate purposes.
21
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of
the Corporation for the respective periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995 1994 1993* 1992
---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges............... 3.71 3.54 3.23 0.66 2.34
</TABLE>
- --------
*1993 earnings were inadequate to cover fixed charges. The coverage deficiency
was $249 million.
The ratio of earnings to fixed charges has been computed based on the
Corporation's continuing operations by dividing total earnings available for
fixed charges, excluding capitalized interest, by total fixed charges. Fixed
charges consist of interest, including capitalized interest, and one-third of
rent expense as representative of the interest portion of rentals. Debt has
been assigned to discontinued operations based on historical levels assigned
to the businesses when they were continuing operations adjusted for subsequent
paydowns. The discontinued operations consist of the Corporation's Insurance
and other Financial Services businesses and its real-estate development and
third-party financing businesses.
The Corporation's ratio of earnings to fixed charges includes the effect of
the Corporation's finance subsidiaries, which primarily finance Xerox
equipment. Financing businesses are more highly leveraged and, therefore, tend
to operate at lower earnings to fixed charges ratio levels than do non-
financial businesses.
22
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation as of December 31, 1996 and as adjusted to give effect to the
consummation of the offering of the Capital Securities and the application of
the proceeds thereof. The issuance of the Exchange Capital Securities in the
Exchange Offer will have no effect on the capitalization of Xerox.
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-----------------
AS
ACTUAL ADJUSTED
------- --------
(IN MILLIONS)
<S> <C> <C>
Short-term debt.............................................. $ 3,536 $ 2,893
Long-term debt............................................... 8,697 8,697
Deferred ESOP benefits....................................... (494) (494)
Corporation obligated, mandatorily redeemable preferred secu-
rities of subsidiary trust
holding solely subordinated debentures of the Corporation
(1)......................................................... -- 643
Minorities' interests in equity of subsidiaries.............. 843 843
Preferred stock.............................................. 721 721
Common shareholders' equity.................................. 4,367 4,367
------- -------
Total capitalization....................................... $17,670 $17,670
======= =======
</TABLE>
- --------
(1) This item reflects the Capital Securities. The Trust is a subsidiary of
the Corporation and holds the Junior Subordinated Debentures as its sole
asset.
23
<PAGE>
SUMMARY FINANCIAL DATA
The summary below should be read in connection with the financial
information included in the Corporation's 1996 Annual Report on Form 10-K. At
the Corporation's annual meeting on May 16, 1996, shareholders approved an
increase in the number of authorized shares of common stock, from 350 million
to 1.05 billion, to effect a three-for-one stock split. The effective date of
the split was June 6, 1996 for shareholders of record as of May 23, 1996. The
earnings per share information for the three years ended December 31, 1996 has
been restated to retroactively reflect the stock split. In addition, effective
with 1996 reporting, the Corporation's China operations are fully
consolidated. The financial data presented below has been restated to reflect
this change and several other accounting reclassifications to conform with the
1996 presentation. The impact of these changes is not material and did not
affect net income.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1996 1995 1994
------- ------- -------
(IN MILLIONS, EXCEPT
PER SHARE AND RATIO
DATA)
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME DATA
Total Revenues...................................... $17,378 $16,588 $15,084
Total Costs and Expenses............................ 15,434 14,739 13,570
------- ------- -------
Income (Loss) before Income Taxes, Equity Income and
Minorities' Interests.............................. 1,944 1,849 1,514
------- ------- -------
Income (Loss) from Continuing Operations............ 1,206 1,174 794
Discontinued Operations(/1/)........................ -- (1,646) --
------- ------- -------
Net Income (Loss)................................... $ 1,206 $ (472) $ 794
======= ======= =======
PRIMARY EARNINGS (LOSS) PER SHARE
Continuing Operations............................... $ 3.49 $ 3.40 $ 2.24
Discontinued Operations(/1/)........................ -- (4.96) --
------- ------- -------
Primary Earnings (Loss) per Share................... $ 3.49 $ (1.56) $ 2.24
======= ======= =======
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Continuing Operations............................... $ 3.31 $ 3.21 $ 2.15
Discontinued Operations(/1/)........................ -- (4.96) --
------- ------- -------
Fully Diluted Earnings (Loss) per Share............. $ 3.31 $ (1.75) $ 2.15
======= ======= =======
CONSOLIDATED BALANCE SHEET DATA
Accounts and finance receivables, net............... $13,394 $12,389 $11,759
Inventories......................................... 2,676 2,656 2,294
Land, buildings and equipment, net.................. 2,256 2,105 2,108
Investment in discontinued operations............... 4,398 4,810 7,904
Total assets........................................ $26,818 $26,008 $27,278
CAPITALIZATION
Short-term debt..................................... $ 3,536 $ 3,274 $ 3,159
Long-term debt...................................... 8,697 8,148 7,355
Deferred ESOP benefits.............................. (494) (547) (596)
Minorities' interests in equity of subsidiaries..... 843 755 1,021
Preferred stock..................................... 721 763 832
Common shareholders' equity......................... 4,367 3,878 4,177
------- ------- -------
Total capitalization................................ $17,670 $16,271 $15,948
======= ======= =======
RATIO DATA
Ratio of Earnings to fixed charges.................. 3.71 3.54 3.23
</TABLE>
- --------
(1) Insurance operations are accounted for as discontinued operations. The
Document Processing business is the only component of continuing
operations.
24
<PAGE>
XEROX CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Trust Agreement executed by the Corporation, as Sponsor, The First
National Bank of Chicago, as Property Trustee, First Chicago Delaware Inc., as
Delaware Trustee, and the Administrative Trustees named therein, and (ii) the
filing of a certificate of trust with the Delaware Secretary of State on
January 23, 1997. The Trust exists for the exclusive purposes of (i) issuing
and selling the Trust Securities, (ii) using the proceeds from the sale of
Trust Securities to acquire the Junior Subordinated Debentures and (iii)
engaging in only those other activities incidental thereto. Accordingly, the
Junior Subordinated Debentures will be the sole assets of the Trust, and
payments under the Junior Subordinated Debentures will be the sole revenues of
the Trust. All of the Common Securities will be owned by the Corporation. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Capital Securities, except that upon the occurrence and
continuance of an event of default under the Trust Agreement, the rights of
the Corporation as holder of the Common Securities to payments in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Capital Securities. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Subordination of Common Securities." The Corporation has acquired
Common Securities in a Liquidation Amount equal to 3% of the total capital of
the Trust. The Trust has a term of 41 years, but may terminate earlier as
provided in the Trust Agreement. The Trust's business and affairs are
conducted by its trustees, each appointed by the Corporation as holder of the
Common Securities. The trustees for the Trust are The First National Bank of
Chicago, as the Property Trustee (the "Property Trustee"), First Chicago
Delaware Inc., as the Delaware Trustee (the "Delaware Trustee"), and three
individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with the Corporation (collectively, the "Issuer
Trustees"). The First National Bank of Chicago, as Property Trustee, will act
as sole indenture trustee under the Trust Agreement. First Chicago Delaware
Inc. will also act as indenture trustee under the Guarantee and the Indenture.
See "Description of Exchange Securities--Description of Exchange Guarantee"
and "--Description of Junior Subordinated Debentures." The holder of the
Common Securities of the Trust or, if an Event of Default under the Trust
Agreement has occurred and is continuing, the holders of a majority in
Liquidation Amount of the Capital Securities, will be entitled to appoint,
remove or replace the Property Trustee and/or the Delaware Trustee. In no
event will the holders of the Capital Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such voting rights
will be vested exclusively in the holder of the Common Securities. The duties
and obligations of each Issuer Trustee are governed by the Trust Agreement.
The Corporation has and will continue to pay all fees, expenses, debts and
obligations (other than the Trust Securities) related to the Trust and the
offering of the Capital Securities and has and will continue to pay, directly
or indirectly, all ongoing costs, expenses and liabilities of the Trust. The
principal executive office of the Trust is c/o Xerox Corporation, P.O. Box
1600, 800 Long Ridge Road, Stamford, Connecticut 06904.
25
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Original Capital Securities, the
Corporation and the Trust entered into the Registration Rights Agreement with
the Initial Purchasers, pursuant to which the Corporation and the Trust agreed
to file and to use their reasonable efforts to cause to become effective with
the Commission a registration statement with respect to the exchange of the
Original Capital Securities for capital securities with terms identical in all
material respects to the terms of the Original Capital Securities. A copy of
the Registration Rights Agreement has been filed as an Exhibit to the
Registration Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Corporation and the Trust under the Registration Rights Agreement. The
form and terms of the Exchange Capital Securities are the same as the form and
terms of the Original Capital Securities except that the Exchange Capital
Securities have been registered under the Securities Act and will not be
subject to certain restrictions on transfer applicable to the Original Capital
Securities, and will not provide for any increase in the Distribution rate
thereon. In that regard, the Original Capital Securities provide, among other
things, that, if a registration statement relating to the Exchange Offer has
not been filed by June 28, 1997 and declared effective by July 28, 1997, the
Distribution rate borne by the Original Capital Securities will increase by
0.25% per annum until such registration statement is filed or declared
effective, as the case may be. Upon consummation of the Exchange Offer,
holders of Original Capital Securities will not be entitled to any increase in
the Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors-- Consequences of a Failure to Exchange Original Capital Securities"
and "Description of Original Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Original Capital Securities in any jurisdiction
in which the Exchange Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Original Capital Securities
are registered on the books of the Trust or any other person who has obtained
a properly completed bond power from the registered holder, or any person
whose Original Capital Securities are held of record by The Depository Trust
Company ("DTC") who desires to deliver such Original Capital Securities by
book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Corporation will exchange as soon as
practicable after the date hereof, the Original Guarantee for the Exchange
Guarantee and the Original Junior Subordinated Debentures, in an amount
corresponding to the Original Capital Securities accepted for exchange, for a
like aggregate principal amount of the Exchange Junior Subordinated
Debentures. The Exchange Guarantee and Exchange Junior Subordinated Debentures
have been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $650,000,000 aggregate Liquidation Amount of Exchange Capital
Securities for a like aggregate Liquidation Amount of Original Capital
Securities properly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described below. The
Trust will issue, promptly after the Expiration Date, an aggregate Liquidation
Amount of up to $650,000,000 of Exchange Capital Securities in exchange for a
like principal amount of outstanding Original Capital Securities tendered and
accepted in connection with the Exchange Offer. Holders may tender their
Original Capital Securities in whole or in part in a Liquidation Amount of not
less than $100,000 (100 Capital Securities) or any integral multiple of $1,000
Liquidation Amount (one Capital Security) in excess thereof.
26
<PAGE>
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Original Capital Securities being tendered. As of the date of this Prospectus,
$650,000,000 aggregate Liquidation Amount of the Original Capital Securities
is outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original Capital
Securities which are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Declaration, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to
Exchange Original Capital Securities" and "Description of Original
Securities."
If any tendered Original Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Original Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
Exchange Offer. The Corporation will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the Exchange
Offer. See "--Fees and Expenses."
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE CORPORATION NOR ANY
ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF ORIGINAL
CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR
ANY PORTION OF THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES MUST MAKE THEIR OWN
DECISIONS WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE
AGGREGATE AMOUNT OF ORIGINAL CAPITAL SECURITIES TO TENDER BASED ON SUCH
HOLDERS' OWN FINANCIAL POSITIONS AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on June 9,
1997 unless the Exchange Offer is extended by the Corporation or the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Corporation and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Original
Capital Securities have theretofore been accepted for exchange) if the Trust
determines, in its sole and absolute discretion, that any of the events or
conditions referred to under "--Conditions to the Exchange Offer" have
occurred or exist or have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Original Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Original Capital Securities to withdraw their tendered Original Capital
Securities as described under "--Withdrawal Rights," and (iv) to waive any
condition or otherwise amend the terms of the Exchange Offer in any respect.
If the Exchange Offer is amended in a manner determined by the Corporation and
the Trust to constitute a material change, or if the Corporation and the Trust
waive a material condition of the Exchange Offer, the Corporation and the
Trust will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the holders of the Original Capital
Securities, and the Corporation and the Trust will extend the Exchange Offer
to the extent required by Rule 14e-1 under the Exchange Act.
27
<PAGE>
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the
Corporation and the Trust may choose to make any public announcement and
subject to applicable law, the Corporation and the Trust shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange Exchange Capital Securities for Original Capital
Securities validly tendered and not withdrawn (pursuant to the withdrawal
rights described under "--Withdrawal Rights") promptly after the Expiration
Date.
Subject to the conditions set forth under "--Conditions to the Exchange
Offer," delivery of Exchange Capital Securities in exchange for Original
Capital Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of (i)
certificates for Original Capital Securities or a book-entry confirmation of a
book-entry transfer of Original Capital Securities into the Exchange Agent's
account at DTC, including an Agent's Message if the tendering holder does not
deliver a Letter of Transmittal, (ii) a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message in lieu of the
Letter of Transmittal, and (iii) any other documents required by the Letter of
Transmittal. Accordingly, the delivery of Exchange Capital Securities might
not be made to all tendering holders at the same time, and will depend upon
when certificates for Original Capital Securities, book-entry confirmations
with respect to Original Capital Securities and other required documents are
received by the Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Original Capital Securities into the Exchange Agent's
account at DTC. See "--Procedures for Tendering Original Capital Securities--
Book-Entry Transfer." The term "Agent's Message" means a message, transmitted
by DTC to and received by the Exchange Agent and forming a part of a book-
entry confirmation, which states that DTC has received an express
acknowledgment from the tendering participant, which acknowledgment states
that such participant has received and agrees to be bound by the Letter of
Transmittal and that the Trust and the Company may enforce such Letter of
Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Company and
the Trust will be deemed to have accepted for exchange, and thereby exchanged,
Original Capital Securities validly tendered and not withdrawn as, if and when
the Trust gives oral or written notice to the Exchange Agent of the Company's
and the Trust's acceptance of such Original Capital Securities for exchange
pursuant to the Exchange Offer. The Exchange Agent will act as agent for the
Company and the Trust for the purpose of receiving tenders of Original Capital
Securities, Letters of Transmittal and related documents, and as agent for
tendering holders for the purpose of receiving Original Capital Securities,
Letters of Transmittal and related documents and transmitting Exchange Capital
Securities which will not be held in global form by DTC or a nominee of DTC to
validly tendering holders. Such exchange will be made promptly after the
Expiration Date. If for any reason whatsoever, acceptance for exchange or the
exchange of any Original Capital Securities tendered pursuant to the Exchange
Offer is delayed (whether before or after the Company's and the Trust's
acceptance for exchange of Original Capital Securities) or the Company and the
Trust extend the Exchange Offer or are unable to accept for exchange or
exchange Original Capital Securities tendered pursuant to the Exchange Offer,
then, without prejudice to the Company's and the Trust's rights set forth
herein, the Exchange Agent may, nevertheless, on behalf of the Company and the
Trust and subject to Rule 14e-1(c) under the Exchange Act, retain tendered
Original Capital Securities and such Original Capital Securities may not be
withdrawn except to the extent tendering holders are entitled to withdrawal
rights as described under "--Withdrawal Rights."
28
<PAGE>
Pursuant to an Agent's Message or a Letter of Transmittal, a holder of
Original Capital Securities will represent, warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Original Capital Securities, that the Trust will acquire
good, marketable and unencumbered title to the tendered Original Capital
Securities, free and clear of all liens, restrictions, charges and
encumbrances, and the Original Capital Securities tendered for exchange are
not subject to any adverse claims or proxies. The holder also will warrant and
agree that it will, upon request, execute and deliver any additional documents
deemed by the Trust or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment, and transfer of the Original Capital
Securities tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
VALID TENDER
Except as set forth below, in order for Original Capital Securities to be
validly tendered by book-entry transfer, an Agent's Message or a completed and
signed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and in either case any other documents required by the
Letter of Transmittal, must be delivered to the Exchange Agent by mail,
facsimile, hand delivery or overnight courier at one of the Exchange Agent's
addresses set forth under "--Exchange Agent" on or prior to the Expiration
Date and either (i) such Original Capital Securities must be tendered pursuant
to the procedures for book-entry transfer set forth below or (ii) the
guaranteed delivery procedures set forth below must be complied with.
Except as set forth below, in order for Original Capital Securities to be
validly tendered by a means other than by book-entry transfer, a completed and
signed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal must be delivered to the Exchange Agent by mail, facsimile, hand
delivery or overnight courier at one of the Exchange Agent's addresses set
forth under "--Exchange Agent" on or prior to the Expiration Date and either
(i) such Original Capital Securities must be delivered to the Exchange Agent
on or prior to the Expiration Date or (ii) the guaranteed delivery procedures
set forth below must be complied with.
If less than all Original Capital Securities are tendered, a tendering
holder should fill in the amount of Original Capital Securities being tendered
in the appropriate box on the Letter of Transmittal. The entire amount of
Original Capital Securities delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS TO BE BY MAIL, THE USE OF REGISTERED MAIL,
RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE
IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE
TIMELY DELIVERY.
BOOK-ENTRY TRANSFER
The Exchange Agent and DTC have confirmed that any Participant (as defined
in "Description of Exchange Securities--Description of Exchange Capital
Securities--Depositary Procedures") in DTC's book-entry transfer facility
system may utilize DTC's ATOP procedures to tender Original Capital
Securities. The Exchange Agent will establish an account with respect to the
Original Capital Securities at DTC for purposes of the Exchange Offer within
two business days after the date of this Prospectus. Any Participant may make
a book-entry delivery of the Original Capital Securities by causing DTC to
transfer such Original Capital Securities into the Exchange Agent's account at
DTC in accordance with DTC's ATOP procedures for transfer. However, although
delivery
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<PAGE>
of Original Capital Securities may be effected through book-entry transfer
into the Exchange Agent's account at DTC, an Agent's Message or a completed
and signed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other documents required by the Letter of
Transmittal, must in any case be delivered to and received by the Exchange
Agent at one of its addresses set forth under "--Exchange Agent" on or prior
to the Expiration Date, or the guaranteed delivery procedure set forth below
must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Original Capital Securities need
not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Original Capital Securities is
registered in a name other than that of the person surrendering the
certificate or (b) such holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (a) or (b) above, such certificates for Original Capital
Securities must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the Letter
of Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1
to the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Original Capital
Securities pursuant to the Exchange Offer and the certificates for such
Original Capital Securities are not immediately available or time will not
permit all required documents to reach the Exchange Agent on or prior to the
Expiration Date, or the procedure for book-entry transfer cannot be completed
on a timely basis, such Original Capital Securities may nevertheless be
tendered, provided that all of the following guaranteed delivery procedures
are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is
received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(c) the certificates (or a book-entry confirmation) representing all
tendered Original Capital Securities, in proper form for transfer, together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of Exchange Capital
Securities in exchange for Original Capital Securities tendered and accepted
for exchange pursuant to the Exchange Offer will in all cases be made only
after timely receipt by the Exchange Agent of Original Capital Securities, or
of a book-entry confirmation with respect to such Original Capital Securities,
and a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery of
Exchange Capital Securities might not be made to all tendering holders at the
same time, and will depend upon when Original Capital Securities, book-entry
confirmations with respect to Original Capital Securities and other required
documents are received by the Exchange Agent.
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The Trust's acceptance for exchange of Original Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and
subject to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Original Capital Securities will be determined by the
Corporation and the Trust, in their sole discretion, whose determination shall
be final and binding on all parties. The Corporation and the Trust reserve the
absolute right, in their sole and absolute discretion, to reject any and all
tenders determined by them not to be in proper form or the acceptance of
which, or exchange for, may, in the opinion of counsel to the Corporation and
the Trust, be unlawful. The Corporation and the Trust also reserve the
absolute right, subject to applicable law, to waive any of the conditions of
the Exchange Offer as set forth under "--Conditions to the Exchange Offer" or
any condition or irregularity in any tender of Original Capital Securities of
any particular holder whether or not similar conditions or irregularities are
waived in the case of other holders.
The interpretation by the Corporation and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Original Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the
Corporation, the Trust, any affiliates or assigns of the Corporation or the
Trust, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in tenders or incur any liability for
failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the
Corporation and the Trust, proper evidence satisfactory to the Corporation and
the Trust, in their sole discretion, of such person's authority to so act must
be submitted.
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Exchange Capital Securities
in reliance on the position of the staff of the Division of Corporation
Finance of the Commission as set forth in certain interpretive letters
addressed to third parties in other transactions. However, neither the
Corporation nor the Trust sought its own interpretive letter and there can be
no assurance that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Division of Corporation Finance of the
Commission, and subject to the two immediately following sentences, the
Corporation and the Trust believe that Exchange Capital Securities issued
pursuant to this Exchange Offer in exchange for Original Capital Securities
may be offered for resale, resold and otherwise transferred by a holder
thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Capital Securities are acquired in
the ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such Exchange Capital Securities. However, any holder of Original Capital
Securities who is an "affiliate" of the Corporation or the Trust or who
intends to participate in the Exchange Offer for the purpose of distributing
Exchange Capital Securities, or any broker-dealer who purchased Original
Capital Securities from the Trust to resell pursuant to Rule 144A or any other
available exemption under the Securities Act, (a) will not be able to rely on
the
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interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Original Capital Securities in the
Exchange Offer and (c) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
other transfer of such Original Capital Securities unless such sale is made
pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Original Capital Securities acquired for its
own account as a result of market-making or other trading activities and
exchanges such Original Capital Securities for Exchange Capital Securities,
then such broker-dealer must deliver a prospectus meeting the requirements of
the Securities Act in connection with any resales of such Exchange Capital
Securities.
Each holder of Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will
be required to represent that (i) it is not an "affiliate" of the Corporation
or the Trust, (ii) any Exchange Capital Securities to be received by it are
being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Capital
Securities, and (iv) if such holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities. In
addition, the Corporation and the Trust may require such holder, as a
condition to such holder's eligibility to participate in the Exchange Offer,
to furnish to the Corporation and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the meaning of
Rule 13d-3 under the Exchange Act) on behalf of whom such holder holds the
Capital Securities to be exchanged in the Exchange Offer. Each broker-dealer
that receives Exchange Capital Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Original Capital
Securities for its own account as the result of market-making activities or
other trading activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale
of such Exchange Capital Securities. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters referred to
above, the Corporation and the Trust believe that Participating Broker-Dealers
who acquired Original Capital Securities for their own accounts as a result of
market-making activities or other trading activities may fulfill their
prospectus delivery requirements with respect to the Exchange Capital
Securities received upon exchange of such Original Capital Securities (other
than Original Capital Securities which represent an unsold allotment from the
initial sale of the Original Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for
an exchange offer so long as it contains a description of the plan of
distribution with respect to the resale of such Exchange Capital Securities.
Accordingly, this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer during the period
referred to below in connection with resales of Exchange Capital Securities
received in exchange for Original Capital Securities
where such Original Capital Securities were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or other
trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Corporation and the Trust have agreed that
this Prospectus, as it may be amended or supplemented from time to time, may
be used by a Participating Broker-Dealer in connection with resales of such
Exchange Capital Securities for a period ending 180 days after the Expiration
Date (subject to extension under certain limited circumstances described
below) or, if earlier, when all such Exchange Capital Securities have been
disposed of by such Participating Broker-Dealer. See "Plan of Distribution."
However, a Participating Broker-Dealer who intends to use this Prospectus in
connection with the resale of Exchange Capital Securities received in exchange
for Original Capital Securities pursuant to the Exchange Offer must notify the
Corporation or the Trust, or cause the Corporation or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one
of the addresses set forth herein under "--Exchange Agent." Any Participating
Broker-Dealer who is an "affiliate" of the Corporation or the Trust may not
rely on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
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In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that upon receipt of notice
from the Corporation or the Trust of the occurrence of any event or the
discovery of (i) any fact which makes any statement contained or incorporated
by reference in this Prospectus untrue in any material respect or (ii) any
fact which causes this Prospectus to omit to state a material fact necessary
in order to make the statements contained or incorporated by reference herein,
in light of the circumstances under which they were made, not misleading, or
(iii) of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of
Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) pursuant to this Prospectus until the
Corporation or the Trust has amended or supplemented this Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemented Prospectus to such Participating Broker-Dealer, or the
Corporation or the Trust has given notice that the sale of the Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be. If
the Corporation or the Trust gives such notice to suspend the sale of the
Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable), it shall extend the 180-day period
referred to above during which Participating Broker-Dealers are entitled to
use this Prospectus in connection with the resale of Exchange Capital
Securities by the number of days during the period from and including the date
of the giving of such notice to and including the date when Participating
Broker-Dealers shall have received copies of the amended or supplemented
Prospectus necessary to permit resales of the Exchange Capital Securities or
to and including the date on which the Corporation or the Trust has given
notice that the sale of Exchange Capital Securities (or the Exchange Guarantee
or the Exchange Junior Subordinated Debentures, as applicable) may be resumed,
as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original Capital Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "--Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Original Capital Securities to be
withdrawn, the aggregate principal amount of Original Capital Securities to be
withdrawn, and (if certificates for such Original Capital Securities have been
tendered) the name of the registered holder of the Original Capital Securities
as set forth on the Original Capital Securities, if different from that of the
person who tendered such Original Capital Securities. If Original Capital
Securities have been delivered or otherwise identified to the Exchange Agent,
then prior to the physical release
of such Original Capital Securities, the tendering holder must submit the
serial numbers shown on the particular Original Capital Securities to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, except in the case of Original Capital Securities
tendered for the account of an Eligible Institution. If Original Capital
Securities have been tendered pursuant to the procedures for book-entry
transfer set forth in "--Procedures for Tendering Original Capital
Securities," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Original Capital
Securities, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written, telegraphic, telex or facsimile
transmission. Withdrawals of tenders of Original Capital Securities may not be
rescinded. Original Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described above under "--Procedures for Tendering Original Capital
Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all
parties. Neither the Corporation, the Trust, any affiliates or assigns of the
Corporation or the Trust, the Exchange
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Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Original Capital Securities which
have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Holders of Original Capital Securities whose Original Capital Securities are
accepted for exchange will not receive Distributions on such Original Capital
Securities and will be deemed to have waived the right to receive any
Distributions on such Original Capital Securities accumulated from and after
January 29, 1997. Accordingly, holders of Exchange Capital Securities as of
the record date for the payment of Distributions on August 1, 1997 will be
entitled to receive Distributions accumulated from and after January 29, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Corporation and the Trust will not be required to
accept for exchange, or to exchange, any Original Capital Securities for any
Exchange Capital Securities, and, as described below, may terminate the
Exchange Offer (whether or not any Original Capital Securities have
theretofore been accepted for exchange) or may waive any conditions to or
amend the Exchange Offer, if any of the following conditions have occurred or
exists or have not been satisfied:
(a) there shall occur a change in the current interpretation by the staff
of the Commission which permits the Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for Original Capital Securities
to be offered for resale, resold and otherwise transferred by holders
thereof (other than broker-dealers and any such holder which is an
"affiliate" of the Corporation or the Trust within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Capital Securities are acquired in the ordinary course of such
holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such Exchange Capital
Securities; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Corporation or the Trust, would
reasonably be expected to impair its ability to proceed with the Exchange
Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement, or proceedings shall have been initiated or, to the knowledge of
the Corporation or the Trust, threatened for that purpose, or any
governmental approval has not been obtained, which approval the Corporation
or the Trust shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby; or
(d) the Corporation shall receive an opinion of counsel experienced in
such matters to the effect that there is more than an insubstantial risk
that consummation of the Exchange Offer would result in interest payable to
the Trust on the Junior Subordinated Debentures being not deductible by the
Corporation for United States federal income tax purposes.
If the Corporation or the Trust determines in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or
exists or has not been satisfied, it may, subject to applicable law, terminate
the Exchange Offer (whether or not any Original Capital Securities have
theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect. If such waiver
or amendment constitutes a material change to the Exchange Offer, the
Corporation or the Trust will promptly disclose such waiver or amendment by
means of a prospectus supplement that will be distributed to the registered
holders of the Original Capital Securities and will extend the Exchange Offer
to the extent required by Rule 14e-1 under the Exchange Act.
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EXCHANGE AGENT
has been appointed as Exchange Agent for the Exchange Offer. Delivery
of the Letters of Transmittal and any other required documents, questions,
requests for assistance, and requests for additional copies of this Prospectus
or of the Letter of Transmittal should be directed to the Exchange Agent as
follows:
<TABLE>
<S> <C> <C>
By Mail: Fascimile Transmissions: By Hand or Overnight Delivery:
(Registered or Certified Mail (Eligible Institutions Only) The First National Bank of Chicago
recommended) (212) 240-8938 c/o First Chicago Trust
The First National Bank of Chicago To Confirm by Telephone Company of New York
c/o First Chicago Trust or for Information Call: 14 Wall Street
Company of New York (212) 240-8801 8th Floor, Window 2
14 Wall Street New York, New York 10005
8th Floor, Window 2
New York, New York 10005
</TABLE>
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Corporation has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable out-
of-pocket expenses in connection therewith. The Corporation will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus and related documents to the beneficial owners of Original Capital
Securities, and in handling or tendering for their customers.
Holders who tender their Original Capital Securities for exchange will not
be obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Original Capital
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Original Capital Securities in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Neither the Corporation nor the Trust will make any payment to brokers,
dealers or other nominees soliciting acceptances of the Exchange Offer.
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DESCRIPTION OF EXCHANGE SECURITIES
The terms of the Original Securities are identical in all materials respects
to the Exchange Securities, except that (i) the Original Securities have not
been registered under the Securities Act, are subject to certain restrictions
on transfer and are entitled to certain rights under the applicable
Registration Rights Agreement (which rights will terminate upon consummation
of the Exchange Offer, except under limited circumstances), (ii) the Exchange
Capital Securities will not contain the $100,000 minimum Liquidation Amount
transfer restriction and certain other restrictions on transfer applicable to
Original Capital Securities, (iii) the Exchange Capital Securities will not
provide for any increase in the Distribution rate thereon and (iv) the
Exchange Junior Subordinated Debentures will not provide for any increase in
the interest rate thereon. The Original Securities provide that, in the event
that a registration statement relating to the Exchange Offer has not been
filed by June 28, 1997 and been declared effective by July 28, 1997, or, in
certain limited circumstances, in the event a shelf registration statement
(the "Shelf Registration Statement") with respect to the resale of the
Original Capital Securities is not declared effective by the time required by
the Registration Rights Agreement, then liquidated damages will accrue at the
rate of 0.25% per annum on the principal amount of the Original Junior
Subordinated Debentures and Distributions will accrue at the rate of 0.25% per
annum on the Liquidation Amount of the Original Capital Securities, for the
period from the occurrence of such event until such time as such registration
statement has been filed or declared effective, as the case may be. The
Exchange Securities are not, and upon consummation of the Exchange Offer the
Original Securities will not be, entitled to any such additional interest or
Distributions. Accordingly, holders of Original Capital Securities should
review the information set forth under "Risk Factors--Consequences of a
Failure to Exchange Original Capital Securities" and "Description of Exchange
Securities."
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
The Exchange Capital Securities will represent preferred beneficial
interests in the Trust and the holders thereof will be entitled to a
preference over the Common Securities in certain circumstances with respect to
Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust. See "--Subordination of Common Securities." The
Trust Agreement has been qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). This summary of certain provisions of the
Exchange Capital Securities, the Common Securities and the Trust Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Trust Agreement, including
the definitions therein of certain terms.
General. The Exchange Capital Securities will be limited to $650,000,000
aggregate Liquidation Amount at any one time outstanding. The Exchange Capital
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Common Securities except as described under "--Subordination of
Common Securities." Legal title to the Junior Subordinated Debentures will be
held by the Property Trustee in trust for the benefit of the holders of the
Trust Securities. The Exchange Guarantee will not guarantee payment of
Distributions or amounts payable on redemption of the Exchange Capital
Securities or liquidation of the Trust when the Trust does not have funds on
hand legally available for such payments. See "Description of Guarantee."
Distributions. Distributions on the Exchange Capital Securities will be
cumulative, will accumulate from January 29, 1997 and will be payable semi-
annually in arrears on February 1 and August 1 of each year, commencing August
1, 1997, at the annual rate of 8% of the Liquidation Amount to the holders of
record of the Exchange Capital Securities on the January 15 or July 15
immediately preceding such date. The amount of Distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which Distributions are payable on the
Exchange Capital Securities is not a Business Day (as defined below), payment
of the Distribution payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in
respect to any such delay), in each case with the same force and effect as if
made on such date (each date on which Distributions are payable in accordance
with the foregoing, a "Distribution Date"). A "Business Day" shall mean any
day other than a
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Saturday or a Sunday, or a day on which banking institutions in The City of
New York are authorized or required by law or executive order to remain
closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
the payment of interest on the Exchange Junior Subordinated Debentures at any
time or from time to time for a period not exceeding 10 consecutive semi-
annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity Date. Upon any such
election, semi-annual Distributions on the Exchange Capital Securities will be
deferred by the Trust during any such Extension Period. Distributions to which
holders of the Exchange Capital Securities are entitled during any such
Extension Period will accumulate additional Distributions thereon at the rate
per annum of 8% thereof, compounded semi-annually from the relevant
Distribution Date. The term "Distributions," as used herein, shall include any
such additional Distributions.
Prior to the termination of any such Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due, and subject to the
foregoing limitations, the Corporation may elect to begin a new Extension
Period. The Corporation must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any such
Extension Period at least five Business Days prior to the earlier of (i) the
date the Distributions on the Exchange Capital Securities would have been
payable except for the election to begin such Extension Period or (ii) the
date the Administrative Trustees are required to give notice to any securities
exchange or to holders of such Exchange Capital Securities of the record date
or the date such Distributions are payable but in any event not less than five
Business Days prior to such record date. There is no limitation on the number
of times that the Corporation may elect to begin an Extension Period. See "--
Description of Exchange Junior Subordinated Debentures--Option to Extend
Interest Payment Period" and "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
During any such Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal of or premium, if any, or interest on or repay, repurchase or redeem
any debt securities of the Corporation (including Other Debentures) that rank
pari passu with or junior in right of payment to the Exchange Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to
any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation (including Other Guarantees) if such guarantee ranks pari
passu with or junior in right of payment to the Exchange Junior Subordinated
Debentures (other than (a) dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) the purchase of
fractional shares resulting from a reclassification of the Corporation's
capital stock, (e) the exchange or conversion of one class, or series of the
Corporation's capital stock for another class or series of the Corporation's
capital stock, (f) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged; and (g)
any declaration or payment of a dividend on the Corporation's Series B
Preferred Stock as required under the Corporation's Restated Certificate of
Incorporation, in connection with the operation of the Corporation's Employee
Stock Ownership Plan (the "Plan") or the conversion, repurchase or redemption
of such Series Preferred Stock where required by the Plan as at the date
hereof). The Corporation's Series B Preferred Stock is required to be
converted to common stock, redeemed or repurchased where (among other
circumstances) an employee qualified to participate in the Plan ceases to be
employed by the Corporation. The Corporation's Restated Certificate of
Incorporation provides that each share of such stock is entitled to a
cumulative dividend, subject to certain adjustments contained therein.
Although the Corporation has the right in the future to exercise its option
to defer payments of interest on the Exchange Junior Subordinated Debentures
in the future, the Corporation has no current intention to defer payments of
interest on such Exchange Junior Subordinated Debentures.
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The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. See "--Description of Exchange Junior
Subordinated Debentures--General." If the Corporation does not make interest
payments on the Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the Capital Securities. The
payment of Distributions (if and to the extent the Trust has funds on hand
legally available for the payment of such Distributions) will be guaranteed by
the Corporation on a limited basis as set forth herein under "--Description of
Exchange Guarantee."
Redemption. Upon the repayment on the Stated Maturity Date or prepayment
prior to the Stated Maturity Date of the Junior Subordinated Debentures, the
proceeds from such repayment or prepayment shall be applied by the Property
Trustee to redeem a Like Amount (as defined below) of the Trust Securities,
upon not less than 30 nor more than 60 days' notice of a date of redemption
(the "Redemption Date"), at the applicable Redemption Price, which shall be
equal to (i) in the case of the repayment of the Junior Subordinated
Debentures on the Stated Maturity Date, the Maturity Redemption Price (equal
to the principal of, and accrued interest on, the Junior Subordinated
Debentures), (ii) in the case of the optional prepayment of the Junior
Subordinated Debentures prior to February 1, 2007 upon the occurrence and
continuation of a Tax Event, the Tax Event Redemption Price (equal to the Tax
Event Prepayment Price in respect of the Junior Subordinated Debentures) and
(iii) in the case of the optional prepayment of the Junior Subordinated
Debentures on or after February 1, 2007, the Optional Redemption Price (equal
to the Optional Prepayment Price in respect of the Junior Subordinated
Debentures). See "--Description of Exchange Junior Subordinated Debentures--
Optional Prepayment" and "--Tax Event Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be paid in accordance
with their terms and (ii) with respect to a distribution of Junior
Subordinated Debentures upon the liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
Liquidation of the Trust and Distribution of Junior Subordinated
Debentures. The Corporation will have the right at any time to terminate the
Trust and cause the Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. Such right is
subject to the Corporation having received an opinion of counsel to the effect
that such distribution will not be a taxable event to holders of Capital
Securities.
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures
to the holders of the Trust Securities, if the Corporation, as Sponsor, has
given written direction to the Property Trustee to terminate the Trust (which
direction and distribution is optional and, except as described above, wholly
within the discretion of the Corporation, as Depositor); (iii) redemption of
all of the Trust Securities as described under "--Redemption"; (iv) expiration
of the term of the Trust; or (v) the entry of an order for the dissolution of
the Trust by a court of competent jurisdiction.
If a termination occurs as described in clause (i), (ii), (iv), or (v)
above, the Trust shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, to the holders of the Trust Securities a Like Amount of the
Junior Subordinated Debentures, unless such distribution is determined by the
Property Trustee not to be practicable, in which event such holders will be
entitled to receive out of the assets of the Trust legally available for
distribution to holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to the aggregate of the
Liquidation Amount plus accumulated and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets on hand legally available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on
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the Trust Securities shall be paid on a pro rata basis, except that if a
Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a priority over the Common Securities. See "--
Subordination of Common Securities."
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each registered
global certificate, if any, representing Trust Securities and held by DTC or
its nominee will receive a registered global certificate or certificates
representing the Junior Subordinated Debentures to be delivered upon such
distribution and (iii) any certificates representing Trust Securities not held
by DTC or its nominee will be deemed to represent Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of such
Trust Securities, and bearing accrued and unpaid interest in an amount equal
to the accumulated and unpaid Distributions on such Trust Securities until
such certificates are presented to the Administrative Trustees or their agent
for cancellation, whereupon the Corporation will issue to such holder, and the
Debenture Trustee will authenticate, a certificate representing such Junior
Subordinated Debentures.
There can be no assurance as to the market prices for the Capital Securities
or the Junior Subordinated Debentures that may be distributed in exchange for
the Trust Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Capital Securities that an investor may purchase, or
the Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Capital Securities offered hereby.
Redemption Procedures. If applicable, Trust Securities shall be redeemed at
the applicable Redemption Price with the proceeds from the contemporaneous
payment of the Exchange Junior Subordinated Debentures. Any redemption of
Trust Securities shall be made and the applicable Redemption Price shall be
payable on the Redemption Date only to the extent that the Trust has funds
legally available for the payment of such applicable Redemption Price.
If the Trust gives a notice of redemption in respect of the Exchange Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are legally available, with respect to the Exchange
Capital Securities held by DTC or its nominees, the Property Trustee will
deposit irrevocably with DTC funds sufficient to pay the applicable Redemption
Price. See "--Form, Denomination, Book-Entry Procedures and Transfer." With
respect to the Exchange Capital Securities held in certificated form, the
Property Trustee, to the extent funds are legally available, will irrevocably
deposit with the paying agent for the Exchange Capital Securities funds
sufficient to pay the applicable Redemption Price and will give such paying
agent irrevocable instructions and authority to pay the applicable Redemption
Price to the holders thereof upon surrender of their certificates evidencing
the Exchange Capital Securities. See "--Payment and Paying Agency."
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date shall be payable to the holders of such Exchange Capital
Securities on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required,
then upon the date of such deposit, all rights of the holders of the Exchange
Capital Securities will cease, except the right of the holders of the Exchange
Capital Securities to receive the applicable Redemption Price, but without
interest on such Redemption Price, and the Exchange Capital Securities will
cease to be outstanding. In the event that any Redemption Date of Exchange
Capital Securities is not a Business Day, then the applicable Redemption Price
payable on such date will be paid on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day. In the
event that payment of the applicable Redemption Price is improperly withheld
or refused and not paid either by the Trust or by the Corporation pursuant to
the Exchange Guarantee as described under "--Description of Exchange
Guarantee," Distributions on Exchange Capital Securities will continue to
accumulate at the then applicable rate, from the Redemption Date originally
established by the Trust to the date such applicable Redemption Price is
actually paid, in which case the actual payment date will be the Redemption
Date for purposes of calculating the applicable Redemption Price.
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Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time
and from time to time purchase outstanding Capital Securities by tender, in
the open market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Corporation defaults in payment of the
applicable Prepayment Price on, or in the repayment of, the Junior
Subordinated Debentures, on and after the Redemption Date, Distributions will
cease to accrue on the Trust Securities called for redemption.
Subordination of Common Securities. Payment of Distributions on, and the
Redemption Price of, the Capital Securities and Common Securities, as
applicable, shall be made pro rata based on the Liquidation Amount of the
Trust Securities; provided, however, that if on any Distribution Date or
Redemption Date an Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or applicable Redemption Price of, any of the
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of the Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions on
all of the outstanding Capital Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the applicable
Redemption Price the full amount of such Redemption Price, shall have been
made or provided for, and all funds available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions on, or
Redemption Price of, the Capital Securities then due and payable.
In the case of any Event of Default, the Corporation as holder of the Common
Securities will be deemed to have waived any right to act with respect to such
Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of the Capital Securities and not on behalf of
the Corporation as holder of the Common Securities, and only the holders of
the Capital Securities will have the right to direct the Property Trustee to
act on their behalf.
Events of Default; Notice. The occurrence of a Debenture Event of Default
(see "--Description of Exchange Junior Subordinated Debentures--Debenture
Events of Default") constitutes an "Event of Default" under the Trust
Agreement.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Corporation, as Sponsor, unless such Event of
Default shall have been cured or waived. The Corporation, as Sponsor, and the
Administrative Trustees are required to file annually with the Property
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described
under "--Liquidation of the Trust and Distribution of Junior Subordinated
Debentures" and "--Subordination of Common Securities."
Removal of Issuer Trustees. Unless a Debenture Event of Default shall have
occurred and be continuing, any Issuer Trustee may be removed at any time by
the holder of the Common Securities. If a Debenture Event of Default has
occurred and is continuing, the Property Trustee and the Delaware Trustee may
be removed at such time by the holders of a majority in Liquidation Amount of
the outstanding Capital Securities. In no event will the holders of the
Capital Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Corporation as the holder of the Common Securities. No resignation or removal
of an Issuer Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the Trust Agreement.
Merger or Consolidation of Issuer Trustees. Any corporation into which the
Property Trustee, the Delaware Trustee or any Administrative Trustee that is
not a natural person may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which such
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Issuer Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of such Issuer Trustee, shall
be the successor of such Issuer Trustee under the Trust Agreement, provided
such corporation shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust. The
Trust may not merge with or into, consolidate, amalgamate, or be replaced by,
or convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any corporation or other Person, except as
described below. The Trust may, at the request of the Corporation, as Sponsor,
with the consent of the Administrative Trustees but without the consent of the
holders of the Capital Securities, merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to a trust organized as
such under the laws of any State; provided, that (i) such successor entity
either (a) expressly assumes all of the obligations of the Trust with respect
to the Capital Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
the Capital Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Corporation
expressly appoints a trustee of such successor entity possessing the same
powers and duties as the Property Trustee with respect to the Junior
Subordinated Debentures, (iii) the Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Capital
Securities are then listed, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Capital Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Capital Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Corporation has received an opinion from
independent counsel to the Trust experienced in such matters to the effect
that (a) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Capital Securities (including any Successor
Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Trust nor such successor entity will be required to register as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and (viii) the Corporation or any permitted
successor or assignee owns all of the common securities of such successor
entity and guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to
any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Trust or the
successor entity not to be classified as a grantor trust for United States
federal income tax purposes.
Voting Rights; Amendment of the Trust Agreement. Except as provided below
and under "--Mergers, Consolidations, Amalgamations or Replacements of the
Trust" and "--Description of Exchange Guarantee--Amendments and Assignment"
and as otherwise required by law and the Trust Agreement, the holders of the
Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Corporation, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters
or questions arising under the Trust Agreement, which shall not be
inconsistent with the other provisions of the Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities
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are outstanding or to ensure that the Trust will not be required to register
as an "investment company" under the Investment Company Act; provided,
however, that such action shall not adversely affect in any material respect
the interests of the holders of the Trust Securities, and any amendments of
the Trust Agreement shall become effective when notice thereof is given to the
holders of the Trust Securities. The Trust Agreement may be amended by the
Issuer Trustees and the Corporation (i) with the consent of holders
representing a majority (based upon Liquidation Amount) of the outstanding
Trust Securities, and (ii) upon receipt by the Issuer Trustees of an opinion
of counsel to the effect that such amendment or the exercise of any power
granted to the Issuer Trustees in accordance with such amendment will not
affect the Trust's status as a grantor trust for United States federal income
tax purposes or the Trust's exemption from status as an "investment company"
under the Investment Company Act, provided that, without the consent of each
holder of Trust Securities, the Trust Agreement may not be amended to (i)
change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made
in respect of the Trust Securities as of a specified date or (ii) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date. The Exchange Capital Securities and
any Original Capital Securities which remain outstanding after consummation of
the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Trust Agreement.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on such Property Trustee
with respect to the Junior Subordinated Debentures, (ii) waive certain past
defaults under the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Junior
Subordinated Debentures or (iv) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debentures, where such
consent shall be required, without, in each case, obtaining the prior approval
of the holders of a majority in Liquidation Amount of all outstanding Capital
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior approval of each holder of the Capital Securities. The Issuer Trustees
shall not revoke any action previously authorized or approved by a vote of the
holders of the Capital Securities except by subsequent vote of such holders.
The Property Trustee shall notify each holder of Capital Securities of any
notice of default with respect to the Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of such holders of the Capital
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall obtain an opinion of counsel experienced in such matters to the effect
that the Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes on account of such
action.
Any required approval of holders of Exchange Capital Securities may be given
at a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Exchange Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
given to each holder of record of Exchange Capital Securities in the manner
set forth in the Trust Agreement.
No vote or consent of the holders of Capital Securities will be required for
the Trust to redeem and cancel the Capital Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer. The Exchange Capital
Securities initially will be represented by one or more Capital Securities in
registered, global form (collectively, the "Global Capital Securities"). The
Global Capital Securities will be deposited upon issuance with the Property
Trustee as
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custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee, and such transfer shall be effective only when reflected
in the securities register maintained by or on behalf of the Trust. Beneficial
interests in the Global Capital Securities may not be exchanged for Capital
Securities in certificated form except in the limited circumstances described
below. See "--Exchange of Book-Entry Capital Securities for Certificated
Capital Securities".
Other Capital Securities will be issued only in registered, certificated
(i.e., non-global) form. Other Capital Securities may not be exchanged for
beneficial interests in any Global Capital Securities except in the limited
circumstances described below. See "--Exchange of Certificated Capital
Securities for Book-Entry Capital Securities".
Depositary Procedures. DTC has advised the Trust and the Corporation that
DTC is a limited-purpose trust company created to hold securities for its
participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in those securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers
(including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital
Securities, DTC will credit the accounts of Participants designated by the
Initial Purchasers with portions of the Liquidation Amount of the Global
Capital Securities and (ii) ownership of such interests in the Global Capital
Securities will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Capital
Securities).
Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are participants in such system, or indirectly
through organizations which are participants in such system. All interests in
a Global Capital Security may be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take physical
delivery in certificated form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Capital Security to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Capital
Security to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests. For certain other restrictions on the transferability of the
Capital Securities, see "--Exchange of Book-Entry Capital Securities for
Certificated Capital Securities" and "--Exchange of Certificated Capital
Securities for Book-Entry Capital Securities".
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof under the Trust
Agreement for any purpose.
Payments in respect of the Global Capital Security registered in the name of
DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms
of the Trust Agreement, the Property Trustee will treat the persons in whose
names the Capital
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Securities, including the Global Capital Securities, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, neither the Property Trustee nor any
agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in
the Global Capital Securities, or for maintaining, supervising or reviewing
any of DTC's records or any Participant's or Indirect Participant's records
relating to the beneficial ownership interests in the Global Capital
Securities or (ii) any other matter relating to the actions and practices of
DTC or any of its Participants or Indirect Participants. DTC has advised the
Trust and the Corporation that its current practice, upon receipt of any
payment in respect of securities such as the Capital Securities, is to credit
the accounts of the relevant Participants with the payment on the payment
date, in amounts proportionate to their respective holdings in Liquidation
Amount of beneficial interests in the relevant security as shown on the
records of DTC unless DTC has reason to believe it will not receive payment on
such payment date. Payments by the Participants and the Indirect Participants
to the beneficial owners of Capital Securities will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility
of DTC, the Property Trustee, the Trust or the Corporation. Neither the Trust
or the Corporation nor the Property Trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the
Capital Securities, and the Trust or the Corporation and the Property Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee for all purposes.
Secondary market trading activity in interests in the Global Capital
Securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds.
DTC has advised the Trust and the Corporation that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction
of one or more Participants to whose account with DTC interests in the Global
Capital Securities are credited and only in respect of such portion of the
Liquidation Amount of the Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Trust Agreement, DTC reserves the right to exchange the
Global Capital Securities for legended Capital Securities in certificated form
and to distribute such Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Trust and the Corporation believe to
be reliable, but neither the Trust nor the Corporation takes responsibility
for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Capital Securities among participants in DTC, they
are under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Trust or the
Corporation nor the Property Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Exchange of Book-Entry Capital Securities for Certificated Capital
Securities. A Global Capital Security is exchangeable for Exchange Capital
Securities in registered certificated form if (i) DTC (x) notifies the Trust
that it is unwilling or unable to continue as Depositary for the Global
Capital Security and the Trust thereupon fails to appoint a successor
Depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Corporation in its sole discretion elects to
cause the issuance of the Exchange Capital Securities in certificated form or
(iii) there shall have occurred and be continuing an Event of Default or any
event which after notice or lapse of time or both would be an Event of Default
under the Trust Agreement. In all cases, certificated Capital Securities
delivered in exchange for any Global Capital Security or beneficial interests
therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures).
Exchange of Certificated Capital Securities for Book-Entry Capital
Securities. Other Capital Securities, which will be issued in certificated
form, may not be exchanged for beneficial interests in any Global Capital
Security unless such exchange occurs in connection with a transfer of such
Other Capital Securities and the
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transferor first delivers to the Property Trustee a written certificate (in
the form provided in the Trust Agreement) to the effect that such transfer
will comply with the appropriate transfer restrictions applicable to such
Capital Securities.
Payment and Paying Agency. Payments in respect of the Exchange Capital
Securities held in global form shall be made to the Depositary, which shall
credit the relevant accounts at the Depositary on the applicable Distribution
Dates or in respect of the Exchange Capital Securities that are not held by
the Depositary, such payments shall be made by check mailed to the address of
the holder entitled thereto as such address shall appear on the register. The
paying agent (the "Paying Agent") shall initially be the Property Trustee and
any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Corporation. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and the Corporation. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint
a successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Corporation) to act as Paying Agent.
Restrictions on Transfer. The Exchange Capital Securities will be issued,
and may be transferred only, in minimum denominations of not less than $1,000
and multiples of $1,000 in excess thereof. Any transfer, sale or other
disposition of Exchange Capital Securities in a denomination of less than
$1,000 shall be deemed to be void and of no legal effect whatsoever. Any such
transferee shall be deemed not to be the holder of such Exchange Capital
Securities for any purpose, including but not limited to the receipt of
Distributions on such Exchange Capital Securities, and such transferee shall
be deemed to have no interest whatsoever in such Exchange Capital Securities.
Registrar and Transfer Agent. The Property Trustee will act as registrar and
transfer agent for the Exchange Capital Securities.
Registration of transfers of the Exchange Capital Securities will be
effected without charge by or on behalf of the Trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to
be registered the transfer of the Exchange Capital Securities after they have
been called for redemption.
Information Concerning the Property Trustee. The Property Trustee, other
than during the occurrence and continuance of an Event of Default, undertakes
to perform only such duties as are specifically set forth in the Trust
Agreement and, after such Event of Default, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Property Trustee is under
no obligation to exercise any of the powers vested in it by the Trust
Agreement at the request of any holder of Trust Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. If no Event of Default has occurred and is
continuing and the Property Trustee is required to decide between alternative
causes of action, construe ambiguous provisions in the Trust Agreement or is
unsure of the application of any provision of the Trust Agreement, and the
matter is not one on which holders of the Capital Securities or the Common
Securities are entitled under the Trust Agreement to vote, then the Property
Trustee shall take such action as is directed by the Corporation and if not so
directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
Miscellaneous. The Administrative Trustees are authorized and directed to
conduct the affairs of and to operate the Trust in such a way that the Trust
will not be deemed to be an "investment company" required to be registered
under the Investment Company Act or classified as an association taxable as a
corporation for United States federal income tax purposes and so that the
Junior Subordinated Debentures will be treated as indebtedness of the
Corporation for United States federal income tax purposes. In this connection,
the Corporation and the Administrative Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the Trust Agreement, that the Corporation and the Administrative
Trustees determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially adversely affect the
interests of the holders of the Trust Securities.
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Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Original Junior Subordinated Debentures were issued and the Exchange
Junior Subordinated Debentures will be issued under an Indenture, as
supplemented from time to time (as so supplemented, the "Indenture"), between
the Corporation and the Debenture Trustee. The Indenture has been qualified
under the Trust Indenture Act. This summary of certain terms and provisions of
the Exchange Junior Subordinated Debentures and the Indenture does not purport
to be complete, and where reference is made to particular provisions of the
Indenture, such provisions, including the definitions of certain terms, some
of which are not otherwise defined herein, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a
part of the Indenture by the Trust Indenture Act.
General. Concurrently with the issuance of the Trust Securities, the Trust
invested the proceeds thereof in the Original Junior Subordinated Debentures
issued by the Corporation. The Exchange Junior Subordinated Debentures will
bear interest at the annual rate of 8% of the principal amount thereof,
payable semi-annually in arrears on February 1 and August 1 of each year
(each, an "Interest Payment Date"), commencing August 1, 1997, to the person
in whose name each Exchange Junior Subordinated Debenture is registered,
subject to certain exceptions, at the close of business on the January 15 or
July 15 immediately preceding the relevant payment date. It is anticipated
that, until the liquidation, if any, of the Trust, each Exchange Junior
Subordinated Debenture will be held in the name of the Property Trustee in
trust for the benefit of the holders of the Trust Securities. The amount of
interest payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which interest is
payable on the Exchange Junior Subordinated Debentures is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) with the same force and effect as if
made on the date such payment was originally payable. Accrued interest that is
not paid on the applicable Interest Payment Date will bear additional interest
on the amount thereof (to the extent permitted by law) at the rate per annum
of 8% thereof, compounded semi-annually. The term "interest", as used herein,
shall include semi-annual interest payments, interest on semi-annual interest
payments not paid on the applicable Interest Payment Date and Additional
Interest (as defined below), as applicable.
The Exchange Junior Subordinated Debentures will be issued in denominations
of $1,000 and integral multiples thereof. The Exchange Junior Subordinated
Debentures will mature on February 1, 2027 (the "Stated Maturity Date").
The Exchange Junior Subordinated Debentures will rank pari passu with the
Original Junior Subordinated Debentures and all Other Debentures and will be
unsecured and subordinate and junior in right of payment to the extent and in
the manner set forth in the Indenture to all Senior Indebtedness. See "--
Subordination." The Indenture does not limit the incurrence or issuance of
other secured or unsecured debt of the Corporation, including Senior
Indebtedness. See "--Subordination."
Form, Registration and Transfer. If the Exchange Junior Subordinated
Debentures are distributed to the holders of the Trust Securities, the
Exchange Junior Subordinated Debentures may be represented by one or more
global certificates registered in the name of Cede & Co. as the nominee of
DTC. The depositary arrangements for such Exchange Junior Subordinated
Debentures are expected to be substantially similar to those in effect for the
Capital Securities. For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, see "--Description of Exchange Capital
Securities--Form, Denomination, Book-Entry Procedures and Transfer."
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Payment and Paying Agents. Payment of principal of (and premium, if any) and
any interest on Exchange Junior Subordinated Debentures will be made at the
office of the Debenture Trustee in The City of New York or at the office of
such Paying Agent or Paying Agents as the Corporation may designate from time
to time, except that at the option of the Corporation payment of any interest
may be made except in the case of Exchange Junior Subordinated Debentures in
global form, (i) by check mailed to the address of the Person entitled thereto
as such address shall appear in the register for Exchange Junior Subordinated
Debentures or (ii) by transfer to an account maintained by the Person entitled
thereto as specified in such register, provided that proper transfer
instructions have been received by the relevant record date. Payment of any
interest on any Exchange Junior Subordinated Debenture will be made to the
Person in whose name such Exchange Junior Subordinated Debenture is registered
at the close of business on the record date for such interest, except in the
case of defaulted interest. The Corporation may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent;
however the Corporation will at all times be required to maintain a Paying
Agent in each Place of Payment for the Exchange Junior Subordinated
Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Exchange Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any)
or interest has become due and payable shall, at the request of the
Corporation, be repaid to the Corporation and the holder of such Exchange
Junior Subordinated Debenture shall thereafter look, as a general unsecured
creditor, only to the Corporation for payment thereof.
Option to Extend Interest Payment Date. So long as no Debenture Event of
Default has occurred and is continuing, the Corporation will have the right
under the Indenture at any time during the term of the Exchange Junior
Subordinated Debentures to defer the payment of interest at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods
with respect to each Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity Date. At the end of such Extension Period,
the Corporation must pay all interest then accrued and unpaid (together with
interest thereon at the annual rate of 8%, compounded semi-annually, to the
extent permitted by applicable law). During an Extension Period, interest will
continue to accrue and holders of Exchange Junior Subordinated Debentures (and
holders of the Trust Securities while Trust Securities are outstanding) will
be required to accrue interest income for United States federal income tax
purposes prior to the receipt of cash attributable to such income. See
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
During any such Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Corporation (including any Other Debentures) that rank
pari passu with or junior in right of payment to the Exchange Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to
any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation (including any Other Guarantees) if such guarantee ranks pari
passu with or junior in right of payment to the Exchange Junior Subordinated
Debentures (other than (a) dividends or distributions in shares of or options,
warrants or rights to subscribe for or purchase shares of, common stock of the
Corporation, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) the purchase of
fractional shares resulting from a reclassification of the Corporation's
capital stock, (e) the exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the Corporation's
capital stock and (f) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged; and (g)
any declaration or payment of a dividend on the Corporation's Series B
Preferred Stock as required under the Corporation's Restated Certificate of
Incorporation, in connection with the operation of the Corporation's Employee
Stock Ownership Plan (the "Plan") or the conversion, repurchase or redemption
of such Series B Preferred Stock where required by the
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Plan as at the date hereof). The Corporation's Series B Preferred Stock is
required to be converted to common stock, redeemed or repurchased where (among
other circumstances) an employee qualified to participate in the Plan ceases
to be employed by the Corporation. The Corporation's Restated Certificate of
Incorporation provides that each share of such stock is entitled to a
cumulative dividend, subject to certain adjustments contained therein.
Prior to the termination of any such Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Corporation may elect to begin a new Extension Period,
subject to the above requirements. No interest shall be due and payable during
an Extension Period, except at the end thereof. The Corporation must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of any Extension Period (or an extension thereof) at least
five Business Days prior to the earlier of (i) the date the Distributions on
the Trust Securities would have been payable except for the election to begin
or extend such Extension Period or (ii) the date the Administrative Trustees
are required to give notice to any national securities exchange or to holders
of Capital Securities of the record date or the date such Distributions are
payable, but in any event not less than five Business Days prior to such
record date. The Debenture Trustee shall give notice of the Corporation's
election to begin or extend a new Extension Period to the holders of the
Capital Securities. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period.
Optional Prepayment. The Exchange Junior Subordinated Debentures will be
prepayable, in whole or in part, at the option of the Corporation on or after
February 1, 2007, at a prepayment price (the "Optional Prepayment Price")
equal to the percentage of the outstanding principal amount of the Exchange
Junior Subordinated Debentures specified below, plus, in each case, accrued
interest thereon to the date of prepayment if redeemed during the 12-month
period beginning February 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2007............................................................ 102.451%
2008............................................................ 102.205
2009............................................................ 101.960
2010............................................................ 101.715
2011............................................................ 101.470
2012............................................................ 101.225
2013............................................................ 100.980
2014............................................................ 100.735
2015............................................................ 100.490
2016............................................................ 100.245
2017 and thereafter............................................. 100.000
</TABLE>
Tax Event Prepayment. If a Tax Event shall occur and be continuing, the
Corporation may, at its option, prepay the Exchange Junior Subordinated
Debentures in whole (but not in part) at any time prior to February 1, 2007
and within 90 days of the occurrence of such Tax Event, at a prepayment price
(the "Tax Event Prepayment Price") equal to the greater of (i) 100% of the
principal amount of such Exchange Junior Subordinated Debentures or (ii) the
sum, as determined by a Quotation Agent, of the present values of the
principal amount and premium payable with respect to an optional redemption of
Exchange Junior Subordinated Debentures on February 1, 2007, together with
scheduled payments of interest on the Exchange Junior Subordinated Debentures
accruing from the prepayment date to and including February 1, 2007 discounted
to the prepayment date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in
each case, accrued interest thereon to the date of prepayment.
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of (a) any amendment to, or change (including any announced prospective
change) in, the laws or any regulations thereunder of the United States or any
political subdivision
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or taxing authority thereof or therein, or (b) any amendment to or change in
an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory agency (including
the enactment of any legislation, the publication of any judicial decision or
regulatory determination or the issuance by the Internal Revenue Service of a
revenue ruling, revenue procedure, notice or announcement (which notice or
announcement is published in the Internal Revenue Bulletin), on or after
January 29, 1997), there is more than an insubstantial risk that (i) interest
payable to the Trust on the Junior Subordinated Debentures would not be
deductible by the Corporation for United States federal income tax purposes or
(ii) the Trust will be subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
established yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity date corresponding to the Initial Optional
Prepayment Date (if no maturity date is within three months before or after
the Initial Optional Prepayment Date, yields for the first two published
maturities most closely corresponding to the Initial Optional Prepayment Date
shall be interpolated and the Adjusted Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding to the
nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to
the Comparable Treasury Price for such prepayment date plus, in either case
(A) .90% if such prepayment date occurs on or prior to February 1, 1998 and
(B) .50% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity date corresponding to the
Initial Optional Prepayment Date that would be utilized at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities with a maturity date corresponding to the
Initial Optional Prepayment Date. If no United States Treasury security has a
maturity date which is within three months before or after the Initial
Optional Prepayment Date, the two most closely corresponding United States
Treasury securities shall be used as the Comparable Treasury Issue, and the
calculation of the Adjusted Treasury Rate pursuant to clause (ii) of the
definition thereof shall be interpolated or extrapolated on a straight-line
basis, rounding to the nearest month.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Corporation. "Reference Treasury Dealer" means: (i) Merrill Lynch Government
Securities, Inc. and its respective successors; provided, however, that if the
foregoing shall cease to be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Corporation shall substitute
therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury
Dealer selected by the Corporation.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities" or (ii) if such release (or any successor release)
is not published or does not contain such prices on such Business Day, (A) the
average of the Reference Treasury Dealer Quotations for such prepayment date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Debenture Trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any prepayment date, the average, as determined by the
Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third Business Day preceding such prepayment
date.
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"Additional Interest" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on
the outstanding Trust Securities shall not be reduced as a result of any
additional taxes, duties and other governmental charges to which the Trust has
become subject as a result of a Tax Event.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Exchange Junior
Subordinated Debentures to be prepaid at its registered address. Unless the
Corporation defaults in payment of the prepayment price, on and after the
prepayment date interest ceases to accrue on such Exchange Junior Subordinated
Debentures called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Exchange Junior Subordinated Debentures the
Additional Interest.
Neither the Corporation nor the Trust will be responsible for, nor will the
Corporation or the Trust be required to compensate holders of or investors in
the Exchange Capital Securities (or Exchange Junior Subordinated Debentures
that may be distributed by the Trust) for, any withholding taxes that are
imposed on interest payments on the Exchange Junior Subordinated Debentures or
on Distributions with respect to the Exchange Capital Securities.
Restrictions on Certain Payments and Certain Covenants. The Corporation will
also covenant that it will not, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Corporation's capital stock (which includes common
and preferred stock) or (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities of
the Corporation (including Other Debentures) that rank pari passu with or
junior in right of payment to the Exchange Junior Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation
(including under Other Guarantees) if such guarantee ranks pari passu or
junior in right of payment to the Exchange Junior Subordinated Debentures
(other than (a) dividends or distributions in shares of, or options, warrants
or rights to subscribe for or purchase shares of, common stock of the
Corporation, (b) any declaration of a dividend in connection with the
implementation of a stockholder's rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) the purchase of
fractional shares resulting from a reclassification of the Corporation's
capital stock, (e) the exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the Corporation's
capital stock, (f) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged; and (g)
any declaration or payment of a dividend on the Corporation's Series B
Preferred Stock as required under the Corporation's Restated Certificate of
Incorporation, in connection with the operation of the Corporation's Employee
Stock Ownership Plan (the "Plan") or the conversion, repurchase or redemption
of such Series B Preferred Stock where required by the Plan as at the date
hereof) if at such time (1) there shall have occurred and be continuing a
Declaration Event of Default, (2) there shall have occurred and be continuing
a Debenture Event of Default, (3) there shall have occurred and be continuing
a payment default under the Declaration or the Indenture, (4) if such Exchange
Junior Subordinated Debentures are held by the Trust, the Corporation shall be
in default with respect to its payment of any obligations under the Exchange
Guarantee or (5) the Corporation shall have given notice of its election of an
Extension Period as provided in the Indenture and shall not have rescinded
such notice, and such Extension Period, or any extension thereof, shall have
commenced. For the circumstances in which the Corporation's Series B Preferred
Stock is required to be converted, redeemed or repurchased, or when dividends
are required to be paid thereon, see "--Description of Exchange Capital
Securities--Distributions."
For so long as the Trust Securities remain outstanding, the Corporation will
covenant (i) to directly or indirectly maintain 100% direct or indirect
ownership of the Common Securities; provided, however, that any permitted
successor of the Corporation under the Indenture may succeed to the
Corporation's ownership of such
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Common Securities, (ii) not to cause, as sponsor of the Trust, or to permit,
as holder of the Common Securities, the dissolution, winding-up or termination
of the Trust, except in connection with a distribution of the Junior
Subordinated Debentures to the holders of the Trust Securities as provided in
the Declaration, and (iii) to use its reasonable efforts to cause the Trust
(a) to remain a statutory business trust, except in connection with the
distribution of Junior Subordinated Debentures to the holders of Trust
Securities in liquidation of the Trust, the redemption of all the Trust
Securities, or certain mergers or consolidations, each as permitted by the
Declaration, and (b) to otherwise continue to be classified as a grantor trust
for United States federal income tax purposes.
Modification of Indenture. From time to time the Corporation and the
Debenture Trustee may, without the consent of the holders of Exchange Junior
Subordinated Debentures, amend, waive or supplement the Indenture for
specified purposes, including, among other things, curing ambiguities, defects
or inconsistencies (provided that any such action does not materially
adversely affect the interest of the holders of Exchange Junior Subordinated
Debentures) and qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act. The Indenture contains provisions permitting
the Corporation and the Debenture Trustee, with the consent of the holders of
a majority in principal amount of Junior Subordinated Debentures, to modify
the Indenture in a manner affecting the rights of the holders of Junior
Subordinated Debentures; provided, that no such modification may, without the
consent of the holders of each outstanding Exchange Junior Subordinated
Debenture so affected, (i) change the Stated Maturity, or reduce the principal
amount of the Exchange Junior Subordinated Debentures or reduce the rate or
extend the time of payment of interest thereon or (ii) reduce the percentage
of principal amount of Exchange Junior Subordinated Debentures, the holders of
which are required to consent to any such modification of the Indenture.
Debenture Events of Default. The Indenture provides that any one or more of
the following described events with respect to the Exchange Junior
Subordinated Debentures constitutes a "Debenture Event of Default" (whatever
the reason for such Debenture Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) failure for 30 days to pay any interest on the Exchange Junior
Subordinated Debentures or any Other Debentures, when due (subject to the
deferral of any due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the Exchange
Junior Subordinated Debentures or any Other Debentures when due whether at
maturity, upon redemption, by declaration of acceleration of maturity or
otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
the Corporation from the Debenture Trustee or the holders of at least 25%
in aggregate outstanding principal amount of Junior Subordinated
Debentures; or
(iv) certain events of bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Junior Subordinated Debentures
may declare the principal due and payable immediately upon a Debenture Event
of Default. The holders of a majority in aggregate outstanding principal
amount of the Junior Subordinated Debentures may annul such declaration and
waive the default if the default (other than the non-payment of the principal
of the Junior Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders
of all the Junior Subordinated Debentures, waive any past default, except a
default in the payment of principal (or premium, if any) on or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest (and premium, if any) and principal due
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otherwise than by acceleration has been deposited with the Debenture Trustee)
or a default in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Junior Subordinated Debenture.
Enforcement of Certain Rights by Holders of Capital Securities. If a
Debenture Event of Default shall have occurred and be continuing and shall be
attributable to the failure of the Corporation to pay interest (or premium, if
any) on principal of the Exchange Junior Subordinated Debentures on the due
date, a holder of Exchange Capital Securities may institute a Direct Action.
The Corporation may not amend the Indenture to remove the foregoing right to
bring a Direct Action without the prior written consent of the holders of all
of the Capital Securities. If the right to bring a Direct Action is removed
following the Exchange Offer, the Trust may become subject to the reporting
obligations under the Exchange Act. Notwithstanding any payments made to a
holder of Exchange Capital Securities by the Corporation in connection with a
Direct Action, the Corporation shall remain obligated to pay the principal of
(or premium, if any) or interest on the Exchange Junior Subordinated
Debentures, and the Corporation shall be subrogated to the rights of the
holder of such Exchange Capital Securities with respect to payments on the
Exchange Capital Securities to the extent of any payments made by the
Corporation to such holder in any Direct Action.
The holders of the Exchange Capital Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Exchange Junior Subordinated Debentures unless
there shall have been an Event of Default under the Trust Agreement. See "--
Description of Exchange Capital Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions. The Indenture
provides that the Corporation shall not consolidate with or merge into any
other Person or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Corporation or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to
the Corporation, unless: (i) in a case where the Corporation consolidates with
or merges into another Person or conveys or transfers its properties and
assets substantially as an entirety to any Person, the successor Person is
organized under the laws of the United States or any State or the District of
Columbia, and such successor Person expressly assumes the Corporation's
obligations on the Exchange Junior Subordinated Debentures; (ii) immediately
after giving effect thereto, no Debenture Event of Default, and no event
which, after notice or lapse of time or both, would become a Debenture Event
of Default, shall have occurred and be continuing; and (iii) certain other
conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Exchange Junior Subordinated Debentures protection in the event of a highly
leveraged or other transaction involving the Corporation that may adversely
affect holders of the Exchange Junior Subordinated Debentures.
Satisfaction and Discharge. The Indenture provides that when, among other
things, all Junior Subordinated Debentures not previously delivered to the
Debenture Trustee for cancellation (i) have become due and payable or (ii)
will become due and payable at maturity within one year, and the Corporation
deposits or causes to be deposited with the Debenture Trustee funds, in trust,
for the purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if
any) and interest to the date of the deposit or to the Stated Maturity Date,
as the case may be, then the Indenture will cease to be of further effect
(except as to the Corporation's obligations to pay all other sums due pursuant
to the Indenture and to provide the officers' certificates and opinions of
counsel described therein), and the Corporation will be deemed to have
satisfied and discharged the Indenture.
Subordination. The Indenture provides that the Exchange Junior Subordinated
Debentures issued thereunder will be subordinate and junior in right of
payment to all Senior Indebtedness. No payment of principal (including
redemption payments), premium, if any, or interest on the Exchange Junior
Subordinated Debentures may be made at any time when (i) any Senior
Indebtedness is not paid when due, (ii) any applicable grace period with
respect to such default has ended and such default has not been cured or
waived or ceased to exist, or (iii) the maturity of any Senior Indebtedness
has been accelerated because of a default.
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Upon any distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, all Senior Indebtedness must be paid
in full before the holders of the Exchange Junior Subordinated Debentures are
entitled to receive or retain any payment in respect thereof.
The term "Senior Indebtedness" shall mean, with respect to an obligor, (i)
the principal, premium, if any, and interest in respect of (A) indebtedness of
such obligor for money borrowed, and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii)
all capital lease obligations of such obligor, (iii) all obligations of such
obligor issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such obligor and all obligations of such
obligor under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of
such obligor for the reimbursement on any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction, (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise (vi) all obligations of the type referred to
in clauses (i) through (v) above of other persons secured by any lien on any
property or asset of such obligor (whether or not such obligation is assumed
by such obligor), except for (1) any such indebtedness that is by its terms
subordinated to or ranks pari passu the Junior Subordinated Debentures, and
(2) all debt securities or guarantees in respect of those debt securities,
issued to any other trust, or a trustee of such trust, partnership or other
entity affiliated with the Corporation that is a financing vehicle of the
Corporation (a "financing entity") in connection with the issuance by such
financing entity of equity securities or other securities guaranteed by the
Corporation pursuant to an instrument that ranks pari passu with or junior in
right of payment to the Guarantee. Such Senior Indebtedness shall continue to
be Senior Indebtedness and be entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term
of such Senior Indebtedness.
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness.
Restrictions on Transfer. The Exchange Junior Subordinated Debentures will
be issued, and may be transferred only, in minimum denominations of not less
than $1,000 and multiples of $1,000 in excess thereof. Any transfer, sale or
other disposition of Exchange Junior Subordinated Debentures in a denomination
of less than $1,000 shall be deemed to be void and of no legal effect
whatsoever. Any such transferee shall be deemed not to be the holder of such
Exchange Junior Subordinated Debentures for any purpose, including but not
limited to the receipt of payments on such Exchange Junior Subordinated
Debentures, and such transferee shall be deemed to have no interest whatsoever
in such Exchange Junior Subordinated Debentures.
Governing Law. The Indenture and the Exchange Junior Subordinated Debentures
will be governed by and construed in accordance with the laws of the State of
New York.
Information Concerning the Debenture Trustee. Following the Exchange Offer
and the qualification of the Indenture under the Trust Indenture Act, the
Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Exchange Junior Subordinated
Debentures, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The Debenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the Debenture
Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
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DESCRIPTION OF GUARANTEE
The Exchange Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Exchange Capital Securities
for the benefit of the holders from time to time of the Exchange Capital
Securities. The First National Bank of Chicago will act as Guarantee Trustee
under the Exchange Guarantee. The Exchange Guarantee has been qualified under
the Trust Indenture Act. This summary of certain provisions of the Exchange
Guarantee does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of the Exchange Guarantee,
including the definitions therein of certain terms, and the Trust Indenture
Act. The Guarantee Trustee will hold the Exchange Guarantee for the benefit of
the holders of the Exchange Capital Securities.
General. The Corporation will irrevocably agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Exchange Capital Securities, as and when
due, regardless of any defense, right of set-off or counterclaim that the
Trust may have or assert other than the defense of payment. The following
payments with respect to the Exchange Capital Securities, to the extent not
paid by or on behalf of the Trust (the "Guarantee Payments"), will be subject
to the Exchange Guarantee: (i) any accumulated and unpaid Distributions
required to be paid on Exchange Capital Securities, to the extent that the
Trust has funds on hand legally available therefor at such time, (ii) the
applicable Redemption Price with respect to Exchange Capital Securities called
for redemption, to the extent that the Trust has funds on hand legally
available therefor at such time, or (iii) upon a voluntary or involuntary
termination and liquidation of the Trust, the lesser of (a) the Liquidation
Distribution and (b) the amount of assets of the Trust remaining available for
distribution to holders of Exchange Capital Securities. The Corporation's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Corporation to the holders of the Exchange Capital
Securities or by causing the Trust to pay such amounts to such holders.
The Exchange Guarantee will rank subordinate and junior in right of payment
to all Senior Indebtedness to the extent provided therein. See "--Status of
the Exchange Guarantee". The Exchange Guarantee does not limit the incurrence
or issuance of other secured or unsecured debt of the Corporation, including
Senior Indebtedness, whether under the Indenture, any other indenture that the
Corporation may enter into in the future or otherwise.
The Corporation will, through the Exchange Guarantee, the Trust Agreement,
the Exchange Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally guarantee all of the Trust's
obligations under the Exchange Capital Securities.
Status of the Exchange Guarantee. The Exchange Guarantee will constitute an
unsecured obligation of the Corporation and will rank subordinate and junior
in right of payment to all Senior Indebtedness in the same manner as Exchange
Junior Subordinated Debentures.
The Exchange Guarantee will rank pari passu with the Original Guarantee and
all Other Guarantees issued by the Corporation. The Exchange Guarantee will
constitute a guarantee of payment and not of collection (i.e., the guaranteed
party may institute a legal proceeding directly against the Corporation to
enforce its rights under the Exchange Guarantee without first instituting a
legal proceeding against any other person or entity). The Exchange Guarantee
will be held for the benefit of the holders of the Exchange Capital
Securities. The Exchange Guarantee will not be discharged except by payment of
the Guarantee Payments in full to the extent not paid by the Trust or upon
distribution to the holders of the Exchange Capital Securities of the Exchange
Junior Subordinated Debentures. The Exchange Guarantee does not place a
limitation on the amount of additional Senior Indebtedness that may be
incurred by the Corporation. The Corporation expects from time to time to
incur additional indebtedness constituting Senior Indebtedness.
Amendments and Assignment. Except with respect to any changes that do not
materially adversely affect the rights of holders of the Exchange Capital
Securities (in which case no vote will be required), the Exchange Guarantee
may not be amended without the prior approval of the holders of a majority of
the Liquidation Amount of such outstanding Exchange Capital Securities. The
manner of obtaining any such approval will be as set forth
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under "--Description of Exchange Capital Securities--Voting Rights; Amendment
of the Trust Agreement." All guarantees and agreements contained in the
Guarantee Agreement shall bind the successors, assigns, receivers, trustees
and representatives of the Corporation and shall inure to the benefit of the
holders of the Exchange Capital Securities then outstanding.
Events of Default. An event of default under the Exchange Guarantee will
occur upon the failure of the Corporation to perform any of its payment or
other obligations thereunder. The holders of a majority in Liquidation Amount
of the Exchange Capital Securities will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Exchange Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Exchange Guarantee.
Any holder of the Exchange Capital Securities may institute a legal
proceeding directly against the Corporation to enforce its rights under the
Exchange Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity.
The Corporation, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Exchange Guarantee.
Information Concerning the Guarantee Trustee. The Guarantee Trustee, other
than during the occurrence and continuance of a default by the Corporation in
performance of the Exchange Guarantee, will undertake to perform only such
duties as are specifically set forth in the Exchange Guarantee and, after
default with respect to the Exchange Guarantee, must exercise the same degree
of care and skill as a prudent person would exercise or use in the conduct of
his or her own affairs. Subject to this provision, the Guarantee Trustee will
be under no obligation to exercise any of the powers vested in it by the
Exchange Guarantee at the request of any holder of the Exchange Capital
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby.
Termination of the Exchange Guarantee. The Exchange Guarantee will terminate
and be of no further force and effect upon full payment of the applicable
Redemption Price of the Exchange Capital Securities, upon full payment of the
Liquidation Amount payable upon liquidation of the Trust or upon distribution
of Exchange Junior Subordinated Debentures to the holders of the Exchange
Capital Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Exchange
Capital Securities must restore payment of any sums paid under the Exchange
Capital Securities or the Exchange Guarantee.
Governing Law. The Exchange Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
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RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE
JUNIOR SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Exchange Capital
Securities (to the extent the Trust has funds on hand legally available for
the payment of such Distributions) will be irrevocably guaranteed by the
Corporation as and to the extent set forth under "Description of Exchange
Guarantee." Taken together, the Corporation's obligations under the Exchange
Junior Subordinated Debentures, the Indenture, the Trust Agreement and the
Exchange Guarantee will provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of Distributions and other amounts due on
the Exchange Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Exchange Capital
Securities. If and to the extent that the Corporation does not make the
required payments on the Exchange Junior Subordinated Debentures, the Trust
will not have sufficient funds to make the related payments, including
Distributions, on the Exchange Capital Securities. The Exchange Guarantee will
not cover any such payment when the Trust does not have sufficient funds on
hand legally available therefor. In such event, the remedy of a holder of
Exchange Capital Securities is to institute a Direct Action. The obligations
of the Corporation under the Exchange Guarantee will be subordinate and junior
in right of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Exchange Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Exchange Capital Securities,
primarily because: (i) the aggregate principal amount or Prepayment Price of
the Exchange Junior Subordinated Debentures will be equal to the sum of the
Liquidation Amount or Redemption Price, as applicable, of the Exchange Capital
Securities and Common Securities; (ii) the interest rate and interest and
other payment dates on the Exchange Junior Subordinated Debentures will match
the Distribution rate and Distribution and other payment dates for the Trust
Securities; (iii) the Corporation shall pay for all and any costs, expenses
and liabilities of the Trust except the Trust's obligations to holders of
Trust Securities under such Trust Securities; and (iv) the Trust Agreement
will provide that the Trust is not authorized to engage in any activity that
is not consistent with the limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the Exchange
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity. A default or event of
default under any Senior Indebtedness would not constitute a default or Event
of Default under the Trust Agreement. However, in the event of payment
defaults under, or acceleration of, Senior Indebtedness, the subordination
provisions of the Indenture will provide that no payments may be made in
respect of the Exchange Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Exchange Junior
Subordinated Debentures would constitute an Event of Default under the Trust
Agreement.
LIMITED PURPOSE OF THE TRUST
The Exchange Capital Securities will represent preferred beneficial
interests in the Trust, and the Trust exists for the sole purpose of issuing
and selling the Trust Securities, using the proceeds from the sale of the
Trust Securities to acquire the Junior Subordinated Debentures and engaging in
only those other activities incidental thereto.
RIGHTS UPON TERMINATION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary termination and
liquidation of the Trust, the holders of the Trust Securities will be
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entitled to receive, out of assets held by the Trust, the Liquidation
Distribution in cash. See "Description of Exchange Securities--Description of
Exchange Capital Securities--Liquidation of the Trust and Distribution of
Junior Subordinated Debentures." Upon any voluntary or involuntary liquidation
or bankruptcy of the Corporation, the Property Trustee, as holder of the
Exchange Junior Subordinated Debentures, would be a subordinated creditor of
the Corporation, subordinated in right of payment to all Senior Indebtedness
as set forth in the Indenture, but entitled to receive payment in full of
principal (and premium, if any) and interest, before any stockholders of the
Corporation receive payments or distributions. Since the Corporation will be
the guarantor under the Exchange Guarantee and will agree to pay for all
costs, expenses and liabilities of the Trust (other than the Trust's
obligations to the holders of its Trust Securities), the positions of a holder
of Exchange Capital Securities and a holder of Exchange Junior Subordinated
Debentures relative to other creditors and to stockholders of the Corporation
in the event of liquidation or bankruptcy of the Corporation are expected to
be substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Ivins, Phillips & Barker, Chartered, counsel to the
Corporation and the Trust ("Tax Counsel"), the following is a summary of
certain of the material United States federal income tax consequences of the
purchase, ownership and disposition of Capital Securities held as capital
assets by a holder who purchases such Capital Securities upon initial
issuance, except as discussed below. It does not deal with special classes of
holders such as banks, thrifts, real estate investment trusts, regulated
investment companies, non-United States persons engaged in a trade or business
within the United States, insurance companies, dealers in securities or
currencies, tax-exempt investors, or persons that will hold the Capital
Securities as a position in a "straddle," as part of a "synthetic security" or
"hedge," as part of a "conversion transaction" or other integrated investment,
or as other than a capital asset. This summary also does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar or the tax consequences to shareholders, partners or beneficiaries of a
holder of Capital Securities. Further, it does not include any description of
any alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Capital
Securities. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations thereunder and the administrative
and judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Original Securities for Exchange Securities should not be a
taxable event to holders for United States federal income tax purposes. The
exchange of Original Securities for Exchange Securities pursuant to the
Exchange Offer should not be treated as an "exchange" for United States
federal income tax purposes because the Exchange Securities should not be
considered to differ materially in kind or extent from the Original Securities
and because the exchange will occur by operation of the terms of the Original
Securities. Accordingly, the Exchange Junior Subordinated Debentures should
have the same issue price as the Original Junior Subordinated Debentures, and
a holder should have the same adjusted tax basis and holding period in the
Exchange Capital Securities as the holder had in the Original Capital
Securities immediately before the exchange. Moreover, a holder which had
acquired Original Capital Securities with either market discount or bond
premium will be treated as holding Exchange Capital Securities with the same
amount of market discount or bond premium and will be required to include such
market discount in or deduct such bond premium from their income in the same
manner as on the Original Capital Securities. Holders are urged to consult
their tax advisors regarding the applicability of the market discount and bond
premium rules.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Original Junior Subordinated
Debentures, Tax Counsel has rendered its opinion generally to the effect that,
under then current law and assuming full compliance with the terms of the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Original Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Corporation. An opinion of Tax Counsel, however, is not
binding on the Internal Revenue Service (the "IRS") or the courts. Prospective
investors should note that no rulings have been or are expected to be sought
from the IRS with respect to any of these issues and no assurance can be given
that the IRS will not take contrary positions. Moreover, no assurance can be
given that any of the opinions expressed herein will not be challenged by the
IRS or, if challenged, that such a challenge would not be successful.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Original Capital Securities, Tax
Counsel has rendered its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Trust
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Agreement and the Indenture, the Trust will, for United States federal income
tax purposes, be classified as a grantor trust, or in a manner that will have
the same consequences as classification as a grantor trust, and will not be
classified as an association taxable as a corporation. Accordingly, for United
States federal income tax purposes, each holder of Capital Securities
generally will be considered the owner of an undivided interest in the Junior
Subordinated Debentures, and each holder will be required to include in its
gross income any interest (or OID accrued) with respect to its allocable share
of those Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations") applicable to
debt instruments issued on or after August 13, 1996, a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with OID. The Corporation believes that
the likelihood of its exercising its option to defer payments of interest is
"remote" since exercising that option would prevent the Corporation from
declaring dividends on any class of its equity securities. Accordingly, the
Corporation intends to take the position, based on the advice of Tax Counsel,
that the Junior Subordinated Debentures will not be considered to be issued
with OID and, accordingly, stated interest on the Junior Subordinated
Debentures generally will be taxable to a holder as ordinary income at the
time it is paid or accrued in accordance with such holder's method of
accounting.
Under the Regulations, if the Corporation were to exercise its option to
defer payments of interest, the Junior Subordinated Debentures would at that
time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the
Junior Subordinated Debentures remain outstanding. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a
holder of Capital Securities would be required to include in gross income OID
even though the Corporation would not make actual cash payments during an
Extension Period. Moreover, under the Regulations, if the option to defer the
payment of interest was determined not to be "remote", the Junior Subordinated
Debentures would be treated as having been originally issued with OID. In such
event, all of a holder's taxable interest income with respect to the Junior
Subordinated Debentures would be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with
respect to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
The Corporation will have the right at any time to liquidate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Securities. Under current law, such a distribution, for United
States federal income tax purposes, would be treated as a nontaxable event to
each holder, and each holder would receive an aggregate tax basis in the
Junior Subordinated Debentures equal to such holder's aggregate tax basis in
its Capital Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Junior Subordinated Debentures would constitute a taxable
event to holders of Capital Securities and a holder's holding period in Junior
Subordinated Debentures would begin on the date such Junior Subordinated
Debentures were received.
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Under certain circumstances described herein (see "Description of Exchange
Securities--Description of Exchange Capital Securities"), the Junior
Subordinated Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Under current law, such a redemption would, for United States federal income
tax purposes, constitute a taxable disposition of the redeemed Capital
Securities, and a holder could recognize gain or loss as if it sold such
redeemed Capital Securities for cash. See "--Sales of Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities (including pursuant to a redemption
of Capital Securities by the Corporation) will recognize gain or loss equal to
the difference between its adjusted tax basis in the Capital Securities and
the amount realized on the sale of such Capital Securities (other than with
respect to accrued and unpaid interest which has not yet been included in
income, which will be treated as ordinary income). A holder's adjusted tax
basis in the Capital Securities generally will be its initial purchase price
increased by OID (if any) previously includable in such holder's gross income
to the date of disposition and decreased by payments (if any) received on the
Capital Securities in respect of OID. Such gain or loss generally will be a
capital gain or loss and generally will be a long-term capital gain or loss if
the Capital Securities have been held for more than one year.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who uses the accrual method of accounting
for tax purposes (and a cash method holder, if the Junior Subordinated
Debentures are deemed to have been issued with OID) who disposes of his
Capital Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, if applicable, OID), and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than
the holder's adjusted tax basis (which will include all accrued but unpaid
interest) a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the United States Treasury Department proposed legislation that
would, among other things, deny an issuer a deduction for United States
Federal income tax purposes for the payment of interest on instruments with
characteristics similar to the Junior Subordinated Debentures. If the proposed
legislation were enacted in its current form, it is not expected to apply to
the Junior Subordinated Debentures since the proposed effective date for this
provision is the date of first committee action. There can be no assurances,
however, that the proposed legislation, if enacted, or similar legislation
enacted after the date hereof would not adversely affect the tax treatment of
the Junior Subordinated Debentures, resulting in a Tax Event. The occurrence
of a Tax Event may result in the redemption of the Junior Subordinated
Debentures for cash, in which event the holders of the Capital Securities
would receive cash in redemption of their Capital Securities. See "Description
of Exchange Securities--Description of Exchange Capital Securities--
Redemption" and "Description of Exchange Securities--Description of Exchange
Junior Subordinated Debentures--Tax Event Prepayment."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S.
Holder for United States federal income tax purposes. A "U.S. Holder" is a
holder of Capital Securities who or which is a citizen or individual resident
(or is treated as a citizen or individual resident) of the United States for
federal income tax purposes, a corporation or partnership created or organized
(or treated as created or organized for federal income tax purposes) in or
under the laws of the United States or
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any political subdivision thereof, or a trust or estate the income of which is
includable in its gross income for federal income tax purposes without regard
to its source. (For taxable years beginning after December 31, 1996 (or for
the immediately preceding taxable year, if the trustee of a trust so elects),
a trust is a U.S. Holder for federal income tax purposes if, and only if, (i)
a court within the United States is able to exercise primary supervision over
the administration of the trust and (ii) one or more United States trustees
have the authority to control all substantial decisions of the trust.) Under
present United States federal income tax laws: (i) payments by the Trust or
any of its paying agents to any holder of a Capital Security who or which is a
United States Alien Holder will not be subject to United States federal
withholding tax; provided that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the
total combined voting power of all classes of stock of the Corporation
entitled to vote, (b) the beneficial owner of the Capital Security is not a
controlled foreign corporation that is related to the Corporation through
stock ownership, (c) the beneficial owner is not receiving payments on the
Capital Securities ineligible for exemption from withholding tax by reason of
Section 881(c)(3)(A) of the United States Internal Revenue Code, (d) the
beneficial owner is not a foreign private foundation, (e) the beneficial owner
is not receiving payments on the Capital Securities through a partnership that
has income effectively connected with the conduct of a United States trade or
business for purposes of the United States Internal Revenue Code, and (f)
either (A) the beneficial owner of the Capital Security certifies to the Trust
or its agent, under penalties of perjury, that it is not a United States
holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Capital Security in such capacity, certifies to
the Trust or its agent, under penalties of perjury, that such statement has
been received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes the Trust or its agent with
a copy thereof; and (ii) a United States Alien Holder of a Capital Security
will not be subject to United States federal withholding tax on any gain
realized upon the sale or other disposition of a Capital Security, provided
that the beneficial owner of a Capital Security that is sold or otherwise
disposed of is not holding the Capital Security through a partnership that has
income effectively connected with the conduct of a United States trade or
business for purposes of the United States Internal Revenue Code.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will
be allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
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ERISA CONSIDERATIONS
Each of the Corporation (the obligor with respect to the Exchange Junior
Subordinated Debentures held by the Trust) and its affiliates and the Property
Trustee may be considered a "party in interest" (within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to many employee benefit plans ("Plans") that are subject to ERISA.
Any purchaser proposing to acquire Exchange Capital Securities with assets of
any Plan should consult with its counsel. The purchase and/or holding of
Exchange Capital Securities by a Plan that is subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions of
Section 4975 of the Code (including individual retirement arrangements and
other plans described in Section 4975(e)(1) of the Code) and with respect to
which the Corporation, the Property Trustee or any affiliate is a service
provider (or otherwise is a party in interest or a disqualified person) may
constitute or result in a prohibited transaction under ERISA or Section 4975
of the Code, unless such Exchange Capital Securities are acquired pursuant to
and in accordance with an applicable exemption, such as Prohibited Transaction
Class Exemption ("PTCE") 84-14 (an exemption for certain transactions
determined by an independent qualified professional asset manager), PTCE 91-38
(an exemption for certain transactions involving bank collective investment
funds), PTCE 90-1 (an exemption for certain transactions involving insurance
company pooled separate accounts), PTCE 95-60 (an exemption for transactions
involving certain insurance company general accounts), or PTCE 96-23 (an
exemption for certain transactions determined by an in-house asset manager).
In order to avoid prohibited transactions which could result from the exercise
of discretionary authority with respect to the Exchange Junior Subordinated
Debentures by persons who might be deemed parties in interest or disqualified
persons, each investing Plan, by purchasing the Exchange Capital Securities,
will be deemed to have directed the Trust to invest in the Exchange Junior
Subordinated Debentures and to have appointed the Property Trustee.
Nevertheless, a Plan fiduciary considering the purchase of Exchange Capital
Securities should be aware that, because the assets of the Trust may be
considered "plan assets" for ERISA purposes, service providers with respect to
the assets of the Trust may become parties in interest or disqualified persons
with respect to investing Plans.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Capital
Securities received in exchange for Capital Securities where such Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Trust and the Company have agreed
that, starting on the Expiration Date and ending on the close of business on
the 180th day following the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until December 6, 1997, all dealers
effecting transactions in the Exchange Securities may be required to deliver a
prospectus.
The Trust and the Company will not receive any proceeds from any sale of
Exchange Capital Securities by broker-dealers. Exchange Capital Securities
received by broker-dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions, in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Capital Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such Exchange Capital Securities. Any
broker-dealer that resells Exchange Capital Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Capital Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit of any such resale of Exchange Capital Securities and any commissions
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Trust and the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Trust and the Company have
agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Capital Securities) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Capital Securities (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
VALIDITY OF SECURITIES
The validity of the Exchange Capital Securities, the Exchange Guarantee and
the Exchange Junior Subordinated Debentures will be passed upon for the
Corporation by Martin S. Wagner, Associate General Counsel, Corporate, Finance
and Ventures, and Skadden, Arps, Slate, Meagher & Flom LLP, as special counsel
to the Trust. Certain matters relating to United States federal income tax
considerations will be passed upon for the Corporation by Ivins, Phillips &
Barker, Chartered, Washington, D.C.
EXPERTS
The consolidated financial statements and schedule of the Company and
consolidated subsidiaries included in the Company's Annual Report on Form 10-K
as of December 31, 1996 and 1995, and for each of the years in the three-year
period ended December 31, 1996, have been incorporated by reference herein and
elsewhere in the Registration Statement, in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
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NO DEALER, SALESMAN OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE CORPORATION OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information..................................................... 7
Incorporation of Certain Documents by Reference........................... 7
Summary................................................................... 8
Risk Factors.............................................................. 11
Xerox Corporation......................................................... 20
Use of Proceeds........................................................... 21
Ratios of Earnings to Fixed Charges....................................... 22
Capitalization............................................................ 23
Summary Financial Data.................................................... 24
Xerox Capital Trust I..................................................... 25
The Exchange Offer........................................................ 26
Description of Exchange Securities........................................ 36
Relationship Among the Exchange Capital Securities, the Exchange Junior
Subordinated Debentures and the Exchange Guarantee....................... 56
Certain Federal Income Tax Consequences................................... 58
ERISA Considerations...................................................... 62
Plan of Distribution...................................................... 63
Validity of Securities.................................................... 63
Experts................................................................... 63
</TABLE>
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$650,000,000
XEROX CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
XEROX CORPORATION
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PROSPECTUS
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MAY 9, 1997
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