<PAGE> 1
Pursuant to Rule 424(b)(5)
Registration Nos. 333-34333, 333-34333-01
and 333-34333-02
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED SEPTEMBER 26, 1997)
U.S. $2,250,000,000
XEROX CORPORATION
XEROX OVERSEAS HOLDINGS PLC
IRREVOCABLY AND UNCONDITIONALLY GUARANTEED BY XEROX CORPORATION
RANK XEROX CAPITAL (EUROPE) PLC
IRREVOCABLY AND UNCONDITIONALLY GUARANTEED BY XEROX CORPORATION
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------------
Any of Xerox Corporation ("Xerox" or the "Company"), Xerox Overseas Holdings
PLC ("Xerox Overseas") and Rank Xerox Capital (Europe) plc ("Xerox Capital") may
offer from time to time its Medium-Term Notes, Series E (the "Notes") initially
limited in aggregate principal amount (or, if any Notes are to be issued as
Discount Notes or Indexed Notes (each as defined below), aggregate initial
offering price) to U.S. $2,250,000,000 or the equivalent in foreign currencies
or currency units. Xerox Overseas and Xerox Capital are collectively referred to
herein as the "Subsidiary Issuers" and, the Company, in its capacity as an
issuer, and the Subsidiary Issuers are collectively referred to herein as the
"Issuers". Each Note will mature nine months or more from the date of issue, as
selected by the purchaser and agreed to by the applicable Issuer, and may be
subject to redemption and/or repayment prior to the Maturity Date (as defined
below). The Notes may be denominated in U.S. dollars or in such foreign
currencies or currency units (the "Specified Currency") as may be described in a
pricing supplement to this Prospectus Supplement (a "Pricing Supplement").
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars or European Currency
Units ("ECU") will not be sold in or to residents of the country issuing such
Specified Currency. See "Important Currency Exchange Information" and
"Currency-Related Risk Factors -- Foreign Currency Risks." Each Note will bear
interest at a fixed rate (a "Fixed Rate Note"), which may be zero in the case of
certain Notes issued at a price representing a substantial discount from the
principal amount payable upon the Maturity Date, or at a floating rate (a
"Floating Rate Note"), as set forth therein and specified in the applicable
Pricing Supplement. A Fixed Rate Note may pay a level amount in respect of both
interest and principal amortized over the life of such Note (an "Amortizing
Note"). See "Description of Notes -- Fixed Rate Notes." The principal amount
payable at maturity of, or the interest on, each Note, or both, may be
determined by reference to the relationship between two or more Specified
Currencies (a "Currency Indexed Note"), or by reference to the price of one or
more specified securities or commodities or to one or more securities or
commodities exchange indices or other indices or by other similar methods (an
"Indexed Note," such term to include Currency Indexed Notes) as described in the
applicable Pricing Supplement. See "Description of Notes -- Currency Indexed
Notes" and "Description of Notes -- Other Indexed Notes."
Unless otherwise specified in the applicable Pricing Supplement, the dates
on which interest, if any, will be payable for each Fixed Rate Note (other than
an Amortizing Note) will be April 15 and October 15 of each year and at Maturity
(as defined below). The dates on which interest will be payable for each
Floating Rate Note will be established on the date of issue of such Note and
will be set forth in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, each Amortizing Note will pay
principal and interest (i) semi-annually each April 15 and October 15, or (ii)
quarterly each January 15, April 15, July 15 and October 15 and (iii) at
Maturity.
The aggregate amount of debt of the Company outstanding as of July 31, 1997
was approximately $13,702,000,000.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be issued only in registered form in minimum denominations of U.S. $1,000
and any amount in excess thereof that is an integral multiple thereof or, in the
case of Notes denominated in a Specified Currency other than U.S. dollars, the
authorized denominations set forth in the applicable Pricing Supplement. See
"Description of Notes -- General."
Each Note will be represented by either a Global Security registered in the
name of a nominee of The Depository Trust Company, as Depositary, or other
depositary (a "Book-Entry Note"), or a certificate issued in definitive form (a
"Certificated Note"), as set forth in the applicable Pricing Supplement.
Beneficial Interests in Book-Entry Notes will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary and its
participants. See "Description of Notes -- Global Securities and Book-Entry
System."
FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED HEREBY, SEE "RISK FACTORS" ON
PAGE S-2.
------------------------
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 SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO PUBLIC(1)(2) AGENTS' COMMISSIONS(2)(3) PROCEEDS TO COMPANY(2)(3)(4)
--------------------- ---------------------------------- -----------------------------------------
<S> <C> <C> <C>
Per Note......... 100.000% .125%-.750% 99.875%-99.250%
Total............ U.S. $2,250,000,000 U.S. $2,812,500-U.S. $16,875,000 U.S. $2,247,187,500-U.S. $2,233,125,000
</TABLE>
- ---------------
(1) Unless otherwise specified in the applicable Pricing Supplement, the Price
to Public will be 100% of the principal amount.
(2) Or the equivalent thereof in foreign denominated currencies or units
consisting of multiple currencies.
(3) Unless otherwise specified in the applicable Pricing Supplement, with
respect to Notes with Maturity Dates of 30 years or less from the date of
issue, the applicable Issuer will pay a commission (or grant a discount) to
Goldman, Sachs & Co., Lehman Brothers, Lehman Brothers Inc., Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc., Morgan Stanley & Co. Incorporated or Salomon Brothers Inc,
or to any other person subsequently appointed by the applicable Issuer (each
an "Agent," and collectively the "Agents"), ranging from .125% to .750% of
the principal amount of each Note, depending upon its Maturity Date, sold
through such Agent, and may sell Notes to any Agent, as principal, at a
discount for resale to purchasers at varying prices related to prevailing
market prices at the time of resale, or, if set forth in the applicable
Pricing Supplement, at a fixed public offering price, to be determined by
such Agent. With respect to Notes with a Maturity Date that is longer than
30 years from the date of issue sold through any Agent, the rate of
commission (or discount) will be negotiated at the time of sale and will be
specified in the applicable Pricing Supplement. Unless otherwise specified
in the applicable Pricing Supplement, any Note purchased by an Agent as
principal will be purchased at 100% of the principal amount thereof less a
percentage equal to the commission applicable to an agency sale of a Note of
identical maturity. No commission will be payable on any sales made directly
by the Issuers. See "Plan of Distribution."
(4) Before deducting expenses payable by the Issuers estimated at $1,406,061, in
the aggregate, including reimbursement of Agents' expenses.
------------------------
The Notes are offered on a continuous basis by the Issuers through the
Agents, each of which has agreed to use its reasonable best efforts to solicit
purchases of the Notes. Each Issuer reserves the right to appoint additional
agents for the purpose of soliciting offers to purchase the Notes and each
Issuer further reserves the right to sell, and may accept offers to purchase,
the Notes directly on its own behalf in those jurisdictions where it is
authorized to do so. The Notes will not be listed on any securities exchange,
and there can be no assurance that the Notes offered by this Prospectus
Supplement will be sold or that there will be a secondary market for the Notes.
Each Issuer reserves the right to withdraw, cancel or modify the offer made
hereby without notice. Any Issuer, any Agent or any other agent who solicits any
offer may reject such offer in whole or in part. See "Plan of Distribution."
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
------------------------
The date of this Prospectus Supplement is October 21, 1997.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION".
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus Supplement and the Prospectus to which
this Prospectus Supplement relates, the following factors in connection with the
Notes offered hereby. This Prospectus Supplement and the Prospectus to which
this Prospectus Supplement relates contain or incorporate by reference certain
forward-looking statements and information relating to the Issuers 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 Issuers or the Issuers' management, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Issuers with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in this
Prospectus Supplement. 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, expected or intended. The Issuers do not intend to update these
forward-looking statements.
This Prospectus Supplement does not describe all of the risks of an
investment in Notes that result from such Notes being denominated or payable in
or with respect to which payments are determined by reference to a currency or
composite currency other than United States dollars or to one or more interest
rates, currencies or other indices or formulas, either as such risks exist on
the date of this Prospectus Supplement or as they may change from time to time.
Prospective investors should consult their own financial and legal advisors as
to the risks entailed by an investment in such Notes. Such Notes are not an
appropriate investment for investors who are unsophisticated with respect to
foreign currency transactions or transactions involving the applicable interest
rate, currency or other indices or formulas.
FOREIGN CURRENCY RISKS
Governing Law and Judgments
The Notes will be construed in accordance with and governed by the laws of
the State of New York, except that all matters governing the authorization and
execution of the Notes will be governed by the laws of the jurisdiction of
organization of the applicable Issuer. Courts in the United States have not
customarily rendered judgments for money damages denominated in any currency
other than the U.S. dollar. New York statutory law provides, however, that a
court shall render a judgment or decree in the foreign currency of the
underlying obligation and that the judgment or decree shall be converted into
U.S. dollars at a rate of exchange prevailing on the date of the entry of the
judgment or decree.
Exchange Rates and Exchange Controls
An investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars ("Foreign
Currency Notes") entails significant risks that are not associated with a
similar investment in a security denominated in U.S. dollars. Similarly, an
investment in a Currency Indexed Note entails significant risks that are not
associated with a similar investment in non-Indexed Notes. Such risks include,
without limitation, the possibility of significant market changes in rates of
exchange between the U.S. dollar and the various foreign currencies or composite
currencies (and, in the case of Currency Indexed Notes, the rate of exchange
between the Specified Currency and the Indexed Currency for such Currency
Indexed Notes), the possibility of significant changes in rates of exchange
between the U.S. dollar and the various foreign currencies resulting from
official redenomination with respect to a Specified Currency and the possibility
of the imposition or modification of foreign
S-2
<PAGE> 3
exchange controls by either the United States or foreign governments. Such risks
generally depend on factors over which the Issuers have no control, such as
economic and political events and on the supply of and demand for the relevant
currencies. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies have been volatile and such volatility may be
expected to continue in the future. Fluctuations in any particular exchange rate
that have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Foreign Currency
Note. Depreciation of the Specified Currency of a Foreign Currency Note against
the U.S. dollar would result in a decrease in the effective yield of such
Foreign Currency Note below its coupon rate, and in certain circumstances could
result in a loss to the investor, on a U.S. dollar basis. Similarly,
depreciation of the Denominated Currency with respect to a Currency Indexed Note
against the applicable Indexed Currency would result in the principal amount
payable with respect to such Currency Indexed Note at the Maturity Date being
less than the Face Amount of such Currency Indexed Note which, in turn, would
decrease the effective yield of such Currency Indexed Note below its applicable
interest rate and could also result in a loss to the investor. See "Description
of Notes -- Currency Indexed Notes".
The Foreign Currency Notes provide that, in the event of an official
redenomination of a foreign currency or currency unit, the obligations of the
applicable Issuer with respect to payments on Foreign Currency Notes denominated
in such foreign currency or currency unit shall, in all cases, be deemed
immediately following such redenomination to provide for the payment of that
amount of redenominated currency representing the amount of such obligations
immediately before such redenomination. In no event, however, shall any
adjustment be made to any amount payable under the Notes as a result of (a) any
change in the value of a foreign currency or currency unit relative to any other
currency due solely to fluctuations in exchange rates or (b) any redenomination
of any component currency of any foreign currency unit (unless such foreign
currency unit is itself officially redenominated).
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency at an Interest Payment Date or at Maturity of a Foreign
Currency Note. There can be no assurance that exchange controls will not
restrict or prohibit payments of principal (and premium, if any) or interest in
any Specified Currency other than U.S. dollars. Even if there are no actual
exchange controls, it is possible that at an Interest Payment Date or at
Maturity of any particular Foreign Currency Note, the Specified Currency for
such Foreign Currency Note would not be available to the Company due to
circumstances beyond the control of the Company. In any such event, the Company
will make required payments in U.S. dollars on the basis described herein. See
"Payment Currency".
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. In addition, banks
currently do not generally offer non-U.S. dollar denominated checking or savings
account facilities in the United States. Accordingly, payments on Foreign
Currency Notes made in a Specified Currency other than U.S. dollars will be made
from an account with a bank located outside the United States. See "Payment
Currency".
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars or ECU will not be
sold in or to residents of the country issuing the Specified Currency. The
information set forth in this Prospectus Supplement is directed to prospective
purchasers who are United States residents, and the Issuers disclaim any
responsibility to advise prospective purchasers who are residents of countries
other than the United States with respect to any matters that may affect the
purchase, holding or receipt of payments of principal (and premium, if any) or
interest on the Notes. Such persons should consult their own counsel with regard
to such matters.
Pricing Supplements relating to Foreign Currency Notes or Indexed Notes
will contain information concerning historical exchange rates for the applicable
Specified Currency against the U.S. dollar or other relevant currency and a
description of the currency or currencies and any exchange controls affecting
such currency or currencies. The information therein concerning exchange rates
is furnished as a matter of information only and should not be regarded as
indicative of the range of or trends in fluctuations in currency exchange rates
that may occur in the future.
S-3
<PAGE> 4
Payment Currency
Except as set forth below, if payment on a Foreign Currency Note is
required to be made in a Specified Currency other than U.S. dollars and such
currency is unavailable due to the imposition of exchange controls or other
circumstances beyond an Issuer's control, or is no longer used by the government
of the country issuing such currency or for the settlement of transactions by
public institutions of or within the international banking community, then all
payments due on that due date with respect to such Foreign Currency Note shall
be made in U.S. dollars. The amount so payable on any date in such Specified
Currency shall be converted into U.S. dollars at a rate determined by the
Exchange Rate Agent on the basis of the noon buying rate in The City of New York
for cable transfers in the Specified Currency as certified for customs purposes
by the Federal Reserve Bank of New York (the "Market Exchange Rate") for such
Specified Currency on the second Business Day prior to such payment date, or as
otherwise indicated in an applicable Pricing Supplement. In the event such
Market Exchange Rate is not then available, such Issuer will be entitled to make
payments in U.S. dollars (i) if such Specified Currency is not a composite
currency, on the basis of the most recently available Market Exchange Rate for
such Specified Currency or (ii) if such Specified Currency is a composite
currency, in an amount determined by the Exchange Rate Agent to be the sum of
the results obtained by multiplying the number of units of each component
currency of such composite currency, as of the most recent date on which such
composite currency was used, by the Market Exchange Rate for such component
currency on the second Business Day prior to such payment date (or, if such
Market Exchange Rate is not then available, by the most recently available
Market Exchange Rate for such component currency).
If payment on a Foreign Currency Note is required to be made in ECU and ECU
are unavailable due to the imposition of exchange controls or other
circumstances beyond an Issuer's control, or are no longer used in the European
Monetary System, all payments due on that due date with respect to such Foreign
Currency Notes shall be made in U.S. dollars. The amount so payable on any date
in ECU shall be converted into U.S. dollars at a rate determined by the Exchange
Rate Agent as of the second Business Day prior to the date on which such payment
is due on the following basis. The component currencies of the ECU for this
purpose (the "Components") shall be the currency amounts that were components of
the ECU as of the last date on which ECU were used in the European Monetary
System. The equivalent of ECU in U.S. dollars shall be calculated by aggregating
the U.S. dollar equivalents of the Components. The U.S. dollar equivalent of
each of the Components shall be determined by the Exchange Rate Agent on the
basis of the most recently available Market Exchange Rate, or as otherwise
indicated in the applicable Pricing Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall have a value on
the date of division equal to the amount of the former component currency
divided by the number of currencies into which that currency was divided.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion (except to the extent expressly provided herein that
any determination is subject to approval by the applicable Issuer) and, in the
absence of manifest error, shall be conclusive for all purposes and binding on
Holders of the Notes and the Exchange Rate Agent shall have no liability
therefor.
RISKS ASSOCIATED WITH INDEXED NOTES
An investment in Notes indexed, as to principal or interest or both, to one
or more values of currencies or composite currencies (including exchange rates
and swap indices or formulas between currencies or composite currencies),
commodities or interest rate indices entails significant risks that are
S-4
<PAGE> 5
not associated with similar investments in a conventional fixed-rate debt
security. If the interest rate on such a Note is so indexed, it may result in an
interest rate that is less than that payable on a conventional fixed-rate debt
security issued at the same time, including the possibility that no interest
will be paid or that negative interest will accrue, and, if the principal amount
of such a Note is so indexed, the principal amount payable at maturity may be
less than the original purchase price of such Note if allowed pursuant to the
terms of such Note, including the possibility that no principal will be paid, or
if such principal amount is utilized to net against accrued negative interest,
the principal amount payable at maturity may be less than the original purchase
price of such Note if allowed pursuant to the terms of such Note, including the
possibility that no principal will be paid. The secondary market for such Notes
will be affected by a number of factors, independent of the creditworthiness of
the issuer and the value of the applicable currency, commodity or interest rate
index, the time remaining to the maturity of such Notes, the amount outstanding
of such Notes and market interest rates. The value of the applicable currency,
commodity or interest rate index depends on a number of interrelated factors,
including economic, financial and political events, over which the Issuers have
no control. Additionally, if the formula used to determine the principal amount
or interest payable with respect to such Notes contains a multiple or leverage
factor, the effect of any change in the applicable currency, commodity or
interest rate index will be increased. The historical experience of the relevant
currencies, commodities or interest rate indices should not be taken as an
indication of future performance of such currencies, commodities or interest
rate indices during the term of any Note.
The credit ratings assigned to the Issuers' medium-term note program are a
reflection of the Issuers' and the Guarantor's credit status, and in no way are
a reflection of the potential impact of the factors discussed above, or any
other factors, on the market value of the Notes. Accordingly, prospective
investors should consult their own financial and legal advisors as to the risk
entailed by an investment in such Notes and the suitability of such Notes in
light of their particular circumstances.
SUMMARIZED FINANCIAL INFORMATION OF XEROX OVERSEAS
Xerox Overseas, which was formed in November 1996, is the majority
shareholder of Xerox Limited and also owns 100 percent of those companies of
Rank Group which were acquired in June 1997. See "The Company." The following
table presents combined financial information of Xerox Overseas and its
subsidiaries as if Xerox Overseas owned those subsidiaries since November 1,
1993. Effective as of January 1, 1995, Xerox Overseas changed its fiscal year
end to December 31 from October 31. The results of operations during the period
between the end of the 1994 fiscal year and the beginning of the new calendar
year amounted to a loss of $21 million. The loss was charged to retained
earnings to avoid reporting more than 12 months results of operations in one
year.
INCOME STATEMENT INFORMATION:
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------
SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
----------------- ----------------- OCTOBER 31,
1997 1996 1996 1995 1994
------ ------ ------ ------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Total Revenues.......................... $2,676 $2,723 $5,630 $5,749 $ 5,050
Income Before Income Taxes, Equity
Income and Minorities' Interests...... 196 227 561 777 286
Equity in Net Income of Unconsolidated
Affiliates............................ 73 70 135 15 4
Minorities' Interests in Earnings of
Subsidiaries.......................... 2 3 7 3 3
Net Income.............................. $ 206 $ 220 $ 502 $ 563 $ 198
</TABLE>
S-5
<PAGE> 6
BALANCE SHEET INFORMATION:
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, 1997 1996 1995
---------------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Total Current Assets..................... $3,049 $3,120 $3,050
Total Current Liabilities................ 4,321 3,092 2,726
Total Non Current Assets................. 5,305 4,535 4,422
Total Non Current Liabilities............ 1,328 1,132 1,520
Minorities' Interests in Equity of
Subsidiaries........................... 20 21 11
</TABLE>
DESCRIPTION OF NOTES
The Notes are a series of Debt Securities described in the accompanying
Prospectus. Reference should be made to the accompanying Prospectus for a
detailed summary of additional provisions of the Notes and of the indenture
under which the Notes are issued. Unless otherwise specified in a Pricing
Supplement, the following description of the Notes will apply.
GENERAL
The Notes are to be issued as a series of Debt Securities initially limited
to U.S. $2,250,000,000 aggregate principal amount (or if any Notes are to be
issued as Discount Notes or Indexed Notes (each as defined below), aggregate
initial offering price), or the equivalent in foreign currencies or currency
units, under an indenture dated as of October 21, 1997 (as the same may be
amended, supplemented or modified from time to time, the "Indenture"), among the
Company, the Subsidiary Issuers and Citibank, N.A., as trustee (the "Trustee"),
which Indenture is described more fully under "Description of the Debt
Securities" in the accompanying Prospectus. The Issuers may, however, increase
the foregoing limit if they determine in the future that they wish to sell
additional Notes. The U.S. dollar equivalent of Notes denominated in a Specified
Currency other than U.S. dollars will be determined upon issuance by the
Exchange Rate Agent (as defined below), on the basis of the Market Exchange Rate
(as defined below) for such Specified Currency on the applicable trade dates.
The statements herein concerning the Notes and the Indenture do not purport to
be complete. They are qualified in their entirety by reference to the provisions
of the Indenture, including the definitions of certain terms used herein without
definition. The Notes constitute a single series for purposes of the Indenture.
The Company will irrevocably and unconditionally guarantee payments of
principal, premium, if any, and interest, if any, with respect to Notes issued
by the Subsidiary Issuers.
The Notes will be offered on a continuous basis and will mature on any day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by the applicable Issuer, and may be subject to redemption and/or
repayment prior to their Maturity Date if so provided in the applicable Pricing
Supplement. See "Redemption and Repayment" below. Each Note will bear interest
from the Original Issue Date (as defined below) at either (a) a fixed rate,
which may be zero in the case of a Note issued at an Issue Price (as defined
below) representing a substantial discount from the principal amount payable
upon the Maturity Date (a "Zero-Coupon Note"), or (b) a floating rate or rates
determined by reference to one or more Base Rates which may be adjusted by a
Spread and/or Spread Multiplier, if any (each as defined below).
The Notes will be issued initially as either Book-Entry Notes or
Certificated Notes in fully registered form without coupons. Except as set forth
in the Prospectus under "Description of the Debt Securities -- Global
Securities" and under "Global Securities and Book-Entry System" below,
Book-Entry Notes will not be issuable as Certificated Notes.
Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of Notes denominated in U.S. dollars will be U.S.
$1,000 and any integral multiple in excess thereof. The authorized denominations
of Notes denominated in a Specified Currency other than U.S. dollars will be as
set forth in the applicable Pricing Supplement.
S-6
<PAGE> 7
The Notes issued by the Company and the Guarantees will be unsecured
obligations of the Company, and will rank pari passu with all other unsecured
and unsubordinated debt of the Company. The Notes issued by a Subsidiary Issuer
will be unsecured obligations of such Subsidiary Issuer, and will rank pari
passu with all other unsecured and unsubordinated debt of such Subsidiary
Issuer. See "Description of the Debt Securities -- Ranking". With respect to any
Debt Securities issued by Xerox Capital, in the event of a default by Xerox
Capital in the performance of its obligations to pay the principal of, and
premium, if any, and interest, if any, on any such Debt Securities, any Holder
of such Debt Securities shall be entitled to serve upon Xerox Capital a demand
and upon receipt Xerox Capital shall, if and to the extent that it shall have
rights to call for the subscription of further shares under the Amended and
Restated Subscription Agreement between Rank Xerox Limited and Xerox Capital
(the "Original Subscription Agreement"), serve upon Rank Xerox Limited, or if
the proposed Amended and Restated Subscription Agreement among Rank Xerox
Limited, Xerox Overseas and Xerox Capital (the "Subscription Agreement") shall
than have been executed, serve upon Rank Xerox Limited or, if Xerox Capital
shall then have become a majority-owned subsidiary of Xerox Overseas, Xerox
Overseas a written demand for the subscription of additional shares in the share
capital of Xerox Capital pursuant to and subject to the provisions of the
Original Subscription Agreement or the Subscription Agreement, as the case may
be.
Debt Securities issued by the Subsidiary Issuers in respect of which the
Issue proceeds are to be accepted by the Subsidiary Issuers in the United
Kingdom and which are issued pursuant to an exempt transaction under regulation
13(1) or (3) of the Banking Act 1997 (Exempt Transactions) Regulations 1997 of
the United Kingdom (the "U.K. Regulations") will constitute shorter term debt
securities or longer term debt securities (in each case, as defined in the U.K.
Regulations), as specified in such Debt Securities, in each case issued in
accordance with regulations made under section 4 of the Banking Act 1987 of the
United Kingdom. The Subsidiary Issuers are not authorized institutions or
European authorized institutions (as such terms are defined in the U.K.
Regulations) and repayment of the principal and payment of any interest or
premium in connection with such Debt Securities will be guaranteed by the
Guarantor, which is not an authorized institution or a European authorized
institution.
The Pricing Supplement will indicate either that the Notes cannot be
redeemed prior to their Maturity Date or that the Notes will be redeemable at
the option of the Issuer thereof on or after a specified date prior to their
Maturity Date at par or at prices declining from a specified premium to par
after a later date, together with accrued interest to the date of redemption.
The Pricing Supplement will also indicate either that the Notes cannot be repaid
prior to their Maturity Date or that the Notes will be repayable at the option
of the Holder thereof on a date or dates specified prior to their Maturity Date
at the price or prices set forth in the applicable Pricing Supplement, together
with accrued interest to the date of repayment. Unless otherwise specified in
the applicable Pricing Supplement, the Notes will not be subject to any sinking
fund. See "Redemption and Repayment" below.
References herein to "U.S. dollars", "dollars", "U.S.$" or "$" are to the
currency of the United States of America.
Unless otherwise specified in the applicable Pricing Supplement, as used
herein:
(i) "Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions are
authorized or required by law, regulation or executive order to be closed
in The City of New York and (x) with respect to Notes denominated in a
Specified Currency other than U.S. dollars or ECUs, in the Principal
Financial Center (as defined below) of the country of such Specified
Currency, (y) with respect to Notes denominated in ECUs, in the City of
London and Luxembourg City, Luxembourg, and (z) with respect to LIBOR Notes
(as defined below), is also a London Banking Day. "London Banking Day"
means any day (i) if the Index Currency (as defined below) is other than
ECU, on which dealings in such Index Currency are transacted in the London
interbank market or (ii) if the Index Currency is ECU, that is not
designated as an ECU Non-Settlement Day by the ECU Banking Association or
is otherwise generally regarded in the ECU interbank market as a day on
which payments in ECUs shall be made;
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(ii) "Discount Note" means (a) a Note, including any Zero-Coupon Note,
that has been issued at an issue price lower than the principal amount
thereof and which provides that upon redemption, repayment or acceleration
of the maturity thereof an amount less than the principal amount thereof
will become due and payable and (b) any other Note that for United States
Federal income tax purposes would be considered an original issue discount
note; and
(iii) "Maturity Date" with respect to any Note means the date on which
such Note will mature, as specified therein, and "Maturity" means the date
on which the principal of a Note becomes due and payable in accordance with
its terms, whether at its Maturity Date or by declaration of acceleration,
call for redemption, put for repayment or otherwise.
The Pricing Supplement relating to each Note will identify the Issuer of
such Note and describe the following terms: (1) the Specified Currency with
respect to such Note (and, if such Specified Currency is other than U.S.
dollars, certain other terms relating to such Note); (2) whether such Note is a
Fixed Rate Note, an Amortizing Note, a Floating Rate Note, a Discount Note or a
Zero-Coupon Note; (3) whether such Note is a Currency Indexed Note or other
Indexed Note, and if so the special terms thereof; (4) if other than 100%, the
price (expressed as a percentage of the aggregate principal amount thereof) at
which such Note will be issued (the "Issue Price"); (5) the date on which such
Note will be issued (the "Original Issue Date"); (6) the Maturity Date of such
Note and whether such Maturity Date may be extended by the Issuer of such Note;
(7) if such Note is a Fixed Rate Note, the rate per annum at which such Note
will bear interest, if any; (8) if such Note is a Floating Rate Note, the Base
Rate, the Initial Interest Rate, the Interest Reset Period, the Interest Reset
Dates, the Interest Payment Dates, the Index Maturity, the Maximum Interest Rate
and Minimum Interest Rate, if any, and the Spread and/or Spread Multiplier, if
any (all as defined herein), and any other terms relating to the particular
method of calculating the interest rate for such Note; (9) if such Note is an
Amortizing Note, whether payments of principal thereof and interest thereon will
be made quarterly or semi-annually, and the repayment information in respect
thereof; (10) whether such Note may be redeemed or repaid prior to its Maturity
Date, and if so, the provisions relating to such redemption or repayment; (11)
whether such Note will be issued initially as a Book-Entry Note or a
Certificated Note; (12) original issue discount provisions, if any, and (13) any
other terms of such Note not inconsistent with the provisions of the Indenture.
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement and except
as otherwise provided with respect to Currency Indexed Notes, the principal (and
premium, if any) and interest, if any, on the Notes will be paid by the Issuer
thereof in U.S. dollars in the manner described in the following paragraphs,
even if a Note is denominated in a Specified Currency other than U.S. dollars;
provided, however, that the Holder of a Note may (if such Note is denominated in
a Specified Currency other than U.S. dollars and if the applicable Pricing
Supplement and the Note so indicate) elect to receive all such payments in such
Specified Currency (subject to certain conditions, see "Foreign Currency
Risks -- Payment Currency") by delivery of a written request to the applicable
Issuer's paying agent (the "Paying Agent") in The City of New York, which must
be received by the Paying Agent on or prior to the applicable record date or at
least fifteen calendar days prior to Maturity, as the case may be. Such election
shall remain in effect unless and until changed by written notice to the Paying
Agent, but the Paying Agent must receive written notice of any such change on or
prior to the applicable record date or at least fifteen calendar days prior to
Maturity, as the case may be. Until the Notes are paid or payment thereof is
provided for, the Issuers will, at all times, maintain a Paying Agent in The
City of New York capable of performing the duties described herein to be
performed by the Paying Agent. The Issuers have initially appointed Citibank,
N.A., New York, New York as Paying Agent. Each Issuer will notify the Holders of
its Notes in accordance with the indenture of any change in the Paying Agent or
its address.
All currency exchange costs, if any, will be borne by the applicable Issuer
unless any Holder of a Note has made the election referred to in the preceding
paragraph. In that case, each electing Holder shall bear its pro-rata portion of
currency exchange costs, if any, by deductions from payments otherwise due to
such Holder.
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Unless otherwise specified in the applicable Pricing Supplement, in the
case of a Note denominated in a Specified Currency other than U.S. dollars,
unless the Holder thereof has elected otherwise, the amount of U.S. dollar
payments in respect of such Note will be determined by an agent appointed by the
Issuer of such Note (the "Exchange Rate Agent"), which shall initially be
Citibank, N.A., based on the highest firm bid quotation received by such
Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the
second Business Day preceding the applicable payment date, from three recognized
foreign exchange dealers selected by the Exchange Rate Agent and approved by
such Issuer (one of which may be the Exchange Rate Agent) for the purchase by
the quoting dealer, for settlement on such payment date, of the aggregate amount
of the Specified Currency payable on such payment date in respect of all Notes
denominated in such Specified Currency on which payments are to be made in U.S.
dollars. If three such bid quotations are not available, payments will be made
in the Specified Currency, which will yield the largest number of U.S. dollars
when such Issuer is receiving U.S. dollars in lieu of the Specified Currency and
will require the smallest number of U.S. dollars when such Issuer is paying U.S.
dollars in lieu of the Specified Currency. Unless otherwise specified in the
applicable Pricing Supplement, such selection shall be made from among the
quotations appearing in the display "page" within the Reuters or Telerate
Monitor Foreign Exchange Service, as may be agreed to by such Issuer and such
Exchange Rate Agent (or, if such display "page" is not available or such
Specified Currency is a composite currency for which separate current composite
currency quotations are not available, such other comparable display or other
comparable manner of obtaining quotations as may be agreed to by such Issuer and
such Exchange Rate Agent), used to determine the U.S. dollar equivalent of such
Specified Currency (the "Exchange Rate"). If no such indicative quotations are
available, payments will be made in the Specified Currency unless such Specified
Currency is unavailable due to the imposition of exchange controls or to other
circumstances beyond such Issuer's control, in which case such Issuer will be
entitled to make payments as described under "Currency-Related Risk
Factors -- Foreign Currency Risks -- Payment Currency".
In the event of an official redenomination of a Specified Currency, the
obligations of an Issuer with respect to payments on Notes denominated in such
Specified Currency shall, in all cases, be deemed immediately following such
redenomination to provide for payment of that amount of redenominated currency
representing the amount of such obligations immediately before such
redenomination. In no event, however, shall any adjustment be made to any amount
payable under the Notes as a result of any change in the value of such Specified
Currency relative to any other currency due solely to fluctuations in exchange
rates. See "Currency-Related Risk Factors -- Foreign Currency Risks -- Exchange
Rates and Exchange Controls".
Unless otherwise specified in the applicable Pricing Supplement, interest
on Certificated Notes and principal of Amortizing Notes (issued in certificated
form) (in each case, other than interest or, in the case of Amortizing Notes,
principal paid at Maturity) will be paid by mailing a check (from an account at
a bank outside the United States if such interest is payable in a currency other
than U.S. dollars) to the Holder at the address of such Holder appearing on the
security register of the Issuer of such Notes on the applicable record date
(which, in the case of Global Securities representing Book-Entry Notes, will be
a nominee of the Depositary); provided, however, that in the case of a Note
issued between a Regular Record Date and the initial Interest Payment Date
relating to such Regular Record Date, interest for the period beginning on the
Original Issue Date and ending on such initial Interest Payment Date shall be
paid on the next succeeding Interest Payment Date to the registered Holder of
such Note on the related Regular Record Date. Notwithstanding the foregoing, a
Holder of U.S. $10,000,000 or more in aggregate principal amount of Notes of
like tenor and terms (or a Holder of the equivalent thereof in a Specified
Currency other than U.S. dollars) shall be entitled to receive such interest
payments by wire transfer in immediately available funds, but only if
appropriate instructions have been received in writing by the Paying Agent on or
prior to the applicable Record Date. Simultaneously with the election by any
Holder to receive payments in a Specified Currency other than U.S. dollars (as
provided above), such Holder may, if applicable, provide appropriate
instructions to the Paying Agent, and all such payments will be made in
immediately available funds to an account maintained by the payee with a bank
located outside the United States. Unless otherwise specified in the applicable
Pricing Supplement, payments of principal
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(and premium, if any) and interest at Maturity will be made to the Holder on the
date of Maturity in immediately available funds (payable to an account
maintained by the payee with a bank located outside of the United States if
payable in a Specified Currency other than U.S. dollars) upon surrender of the
Notes at the Corporate Trust Office of Citibank, N.A. in the Borough of
Manhattan, The City of New York (or at such other location as may be specified
in the applicable Pricing Supplement), provided that the Note is presented to
the Paying Agent in time for the Paying Agent to make such payments in such
funds in accordance with its customary procedures. See "Important Currency
Exchange Information" below. The applicable Issuer will pay any administrative
costs imposed by banks in connection with making payments in immediately
available funds, but any tax, assessment or governmental charge imposed upon
payments will be borne by the Holders of the Notes in respect of which such
payments are made.
Each date on which interest is payable on a Note (other than at Maturity)
is referred to herein as an "Interest Payment Date". The Interest Payment Dates
and the Regular Record Dates for Fixed Rate Notes shall be as described below
under "Fixed Rate Notes". The Interest Payment Dates for Floating Rate Notes
shall be as indicated in the applicable Pricing Supplement and, unless otherwise
specified in the applicable Pricing Supplement, each "Regular Record Date" for a
Floating Rate Note will be the fifteenth day (whether or not a Business Day)
next preceding each Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest on a Note
will be rounded, if necessary, to the nearest one one-hundred-thousandth of a
percent (with five one-millionths of a percentage point being rounded upwards)
and all currency amounts used in or resulting from any calculation on a Note
will be rounded to the nearest one one-hundredth of a unit (with five
one-thousandths of a unit being rounded upwards).
Interest rates offered by an Issuer with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of Notes
purchased in any single transaction. Interest rates, interest rate formulas and
other variable terms of the Notes are subject to change by an Issuer from time
to time, but no such change will affect any Note already issued or as to which
an offer to purchase has been accepted by such Issuer.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date at the
rate per annum set forth therein and in the applicable Pricing Supplement
(except as described below under "Subsequent Interest Periods" and "Extension of
Maturity Date") until the principal amount thereof is paid or made available for
payment. Interest on Fixed Rate Notes, if any, will, unless otherwise specified
in the applicable Pricing Supplement, be computed on the basis of a 360-day year
of twelve 30-day months. Unless otherwise specified in the applicable Pricing
Supplement, interest on each Fixed Rate Note (other than a Zero-Coupon Note or
an Amortizing Note) will be payable at Maturity and semi-annually each April 15
and October 15, and the "Regular Record Dates" will be March 31 and September 30
(whether or not a Business Day), respectively. Unless otherwise specified in the
applicable Pricing Supplement, principal of and interest on each Amortizing Note
will be payable at Maturity and either semi-annually each April 15 and October
15, or quarterly each January 15, April 15, July 15 and October 15, and the
"Regular Record Dates" will be March 31 and September 30 (whether or not a
Business Day), in the case where the principal of and interest on such
Amortizing Note are payable semi-annually, and December 31, March 31, June 30
and September 30 (whether or not a Business Day), in the case where the
principal of and interest on such Amortizing Note are payable quarterly.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. A table setting forth repayment information in respect of each
Amortizing Note will be set forth in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, each
payment of interest on a Fixed Rate Note shall include interest accrued through
the day before the Interest Payment Date or Maturity, as the case may be.
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FLOATING RATE NOTES
Except for the period from the Original Issue Date to the first Interest
Reset Date set forth in the applicable Pricing Supplement, each Floating Rate
Note will bear interest from its Original Issue Date until the principal amount
thereof is paid or made available for payment at a rate determined by reference
to an interest rate base (the "Base Rate"), which may be adjusted by a Spread
and/or Spread Multiplier, if any (each as defined below). The applicable Pricing
Supplement will designate one of the following Base Rates as applicable to each
Floating Rate Note: (a) the CD Rate (a "CD Rate Note"), (b) the CMT Rate (a "CMT
Rate Note"), (c) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (d)
the Federal Funds Rate (a "Federal Funds Rate Note"), (e) the J.J. Kenny Rate (a
"J.J. Kenny Rate Note"), (f) LIBOR (a "LIBOR Note"), (g) the Treasury Rate (a
"Treasury Rate Note"), (h) the Prime Rate (a "Prime Rate Note"), (i) the 11th
District Cost of Funds Rate (an "11th District Cost of Funds Rate Note") or (j)
such other Base Rate as is set forth in such Pricing Supplement and in such
Floating Rate Note. The "Index Maturity" for any Floating Rate Note is the
designated maturity of the investment or obligation from which the Base Rate is
calculated as specified in the applicable Pricing Supplement.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period ("Maximum
Interest Rate"); and (ii) a minimum limitation, or floor, on the rate at which
interest may accrue during any interest period ("Minimum Interest Rate"). In
addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by applicable
law, as the same may be modified by United States law of general application.
The Notes will be governed by the law of the State of New York and, under
present New York law, the maximum rate of interest, with certain exceptions, for
any loan in an amount less than $250,000 is 16% and for any loan in an amount of
$250,000 or more but less than $2,500,000 is 25% per annum on a simple interest
basis. These limits do not apply to loans of $2,500,000 or more.
The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually, annually or otherwise (the "Interest
Reset Period"), as specified in the applicable Pricing Supplement. Unless
otherwise specified in the applicable Pricing Supplement, the date or dates on
which interest will be reset (each an "Interest Reset Date") will be, in the
case of Floating Rate Notes that reset daily, each Business Day; in the case of
Floating Rate Notes (other than Treasury Rate Notes) that reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes that reset weekly,
the Tuesday of each week (except as provided below); in the case of Floating
Rate Notes that reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes that reset quarterly, the third Wednesday of March, June,
September and December; in the case of Floating Rate Notes that reset
semi-annually, the third Wednesday of the two months specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes that reset annually,
the third Wednesday of the month specified in the applicable Pricing Supplement;
provided, however, that the interest rate in effect from the Original Issue Date
to the first Interest Reset Date will be the Initial Interest Rate (as defined
below). If any Interest Reset Date for any Floating Rate Note would otherwise be
a day that is not a Business Day, such Interest Reset Date shall be postponed to
the succeeding Business Day, except that, in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Business Day. If an auction for Treasury
bills falls on a day that is an Interest Reset Date for Treasury Rate Notes, the
Interest Reset Date shall be the next succeeding Business Day. The interest rate
in effect with respect to a Floating Rate Note from the Original Issue Date to
the first Interest Reset Date (the "Initial Interest Rate") or the method of
calculating such rate will be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one basis point equals one one-hundredth of a percentage point) specified in
the applicable Pricing
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Supplement as being applicable to the interest rate for such Floating Rate Note,
and the "Spread Multiplier" is the percentage specified in the applicable
Pricing Supplement as being applicable to the interest rate for such Floating
Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, the
interest payable on each Interest Payment Date or at Maturity for Floating Rate
Notes will be the amount of interest accrued from and including the Original
Issue Date or from and including the last Interest Payment Date to which
interest has been paid to, but excluding, such Interest Payment Date or date of
Maturity, as the case may be (an "Interest Period").
With respect to a Floating Rate Note, accrued interest will be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the Interest Period or from the last
date from which accrued interest is being calculated. Unless otherwise specified
in the applicable Pricing Supplement, the interest factor for each such day is
computed by dividing the interest rate applicable on such day by 360, in the
cases of CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes,
J.J. Kenny Rate Notes, LIBOR Notes, Prime Rate Notes and 11th District Cost of
Funds Rate Notes, or by the actual number of days in the year, in the case of
Treasury Rate Notes and CMT Rate Notes.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate in effect on each day will be (i) if such day is an Interest Reset
Date, the interest rate as determined, in accordance with the procedures
hereinafter set forth, with respect to the Interest Determination Date (as
defined below) pertaining to such Interest Reset Date, or (ii) if such day is
not an Interest Reset Date, the interest rate for the immediately preceding
Interest Reset Date (or, if none, the Initial Interest Rate), subject in either
case to any Maximum or Minimum Interest Rate limitation, or any other interest
rate limitation, referred to above and to any adjustment by a Spread and/or
Spread Multiplier referred to above; provided, however, that the interest rate
in effect from the Original Issue Date to the first interest Reset Date will be
the Initial Interest Rate.
Unless otherwise specified in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes that reset daily, weekly or
monthly, on the third Wednesday of each month or on the third Wednesday of
March, June, September and December of each year, as specified in the applicable
Pricing Supplement; in the case of Floating Rate Notes that reset quarterly, on
the third Wednesday of March, June, September and December of each year; in the
case of Floating Rate Notes that reset semi-annually, on the third Wednesday of
the two months specified in the applicable Pricing Supplement; in the case of
Floating Rate Notes that reset annually, on the third Wednesday of the month
specified in the applicable Pricing Supplement; and, in each case, at Maturity.
Unless otherwise specified in the applicable Pricing Supplement, if an Interest
Payment Date with respect to any Floating Rate Note would otherwise be a day
that is not a Business Day with respect to such Floating Rate Note, such
Interest Payment Date shall be postponed to the next succeeding Business Day
with respect to such Floating Rate Note, except in the case of LIBOR Notes, if
such day would fall in the next succeeding calendar month, such Interest Payment
Date with respect to such LIBOR Note will be the immediately preceding Business
Day. Any payment of principal (and premium, if any) and interest required to be
made on a Floating Rate Note on a date of Maturity that is not a Business Day
will be made on the next succeeding Business Day with respect to such Floating
Rate Note (with the same force and effect as if made on such date of Maturity,
and no additional interest shall accrue as a result of any such delayed
payment).
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be the
rate determined as of the applicable Interest Determination Date on or prior to
the Calculation Date (as defined below). Unless otherwise specified in the
applicable Pricing Supplement, the "Interest Determination Date" pertaining to
an Interest Reset Date will be (i) the second Business Day next preceding such
Interest Reset Date, in the case of CD Rate Notes, CMT Rate Notes, Commercial
Paper Rate Notes, Federal Funds Rate Notes, J.J. Kenny Rate Notes and Prime Rate
Notes (ii) the second London Banking Day next preceding such Interest Reset
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Date, in the case of LIBOR Notes, (iii) the last working day of the month next
preceding the applicable Interest Reset Date on which the FHLB of San Francisco
(as defined below) publishes the 11th District Cost of Funds Index (as defined
below), in the case of 11th District Cost of Funds Rate Notes, and (iv) the day
of the week in which such Interest Reset Date falls on which Treasury bills of
the applicable Index Maturity are auctioned, in the case of Treasury Rate Notes.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, except that such auction may be held on the preceding Friday.
If, as the result of a legal holiday, an auction is so held on the preceding
Friday, such Friday will, unless otherwise specified in the applicable Pricing
Supplement, be the Interest Determination Date pertaining to the Interest Reset
Date occurring in the next succeeding week.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date", if applicable, pertaining to an Interest Determination Date
will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if any such day is not a Business Day, the next
succeeding Business Day and (ii) the Business Day preceding the applicable
Interest Payment Date or Maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, Citibank,
N.A. will be the calculation agent (the "Calculation Agent") with respect to the
Floating Rate Notes. Upon the request of the Holder of any Floating Rate Note,
the Calculation Agent will provide the interest rate then in effect and, if
determined, the interest rate that will become effective on the next Interest
Reset Date with respect to such Floating Rate Note.
CD Rate Notes
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "CD
Rate" means, with respect to any Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the applicable Index
Maturity, as published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates", or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)") under the heading "CDs (Secondary Market)" or, if not so published
by 9:00 a.m., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the CD Rate will be the rate on such Interest
Determination Date for negotiable certificates of deposit of the applicable
Index Maturity as published by the Federal Reserve Bank of New York in its daily
statistical release, "Composite 3:30 p.m. Quotations for U.S. Government
Securities", or any successor publication of the Federal Reserve Bank of New
York ("Composite Quotations") under the heading "Certificates of Deposit". If
such rate is not yet published in Composite Quotations by 3:00 p.m., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, then the CD Rate on such Interest Determination Date will be calculated by
the Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 a.m., New York City time, on such Interest
Determination Date, of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money center
banks (in the market for negotiable certificates of deposit) with a remaining
maturity closest to the applicable Index Maturity in a denomination of U.S.
$5,000,000; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting such rates as mentioned in this sentence, the
rate of interest in effect for the applicable period will be the rate of
interest in effect on such Interest Determination Date.
CD Rate Notes, like other Notes, are not deposit obligations of a bank and
are not insured by the Federal Deposit Insurance Corporation.
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CMT Rate Notes
CMT Rate Notes will bear interest at the interest rates (calculated with
references to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "CMT
Rate" means, with respect to any Interest Determination Date relating to a CMT
Rate Note, the rate displayed on the Designated CMT Telerate Page under the
caption "...Treasury Constant Maturities...Federal Reserve Board Release
H.15...Mondays Approximately 3:45 P.M.", under the column for the Designated CMT
Maturity Index for (i) if the Designated CMT Telerate Page is 7055, the rate on
such Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the week, or the month, as applicable, ended immediately preceding the
week in which the related Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 p.m., New
York City time, on the related Calculation Date, then the CMT Rate for such
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or if not published by 3:00 p.m., New York City
time, on the related Calculation Date, then the CMT Rate for such Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the Interest Determination Date with respect
to such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 p.m., New York
City time, on the related Calculation Date, then the CMT Rate for the Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market closing
offer side prices as of approximately 3:30 p.m. (New York City time) on the
Interest Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York selected by the Calculation Agent
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Note quotations, the CMT
Rate for such Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity based on the arithmetic mean of the
secondary market offer side prices as of approximately 3:30 p.m. (New York City
time) on the Interest Determination Date of three Reference Dealers in The City
of New York (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate will be the CMT Rate in effect on such Interest
Determination Date. If two Treasury Notes with an original maturity as described
in the second preceding sentence have remaining terms to maturity equally close
to the Designated CMT Maturity Index, the quotes for the CMT Rate Note with the
shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purposes of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
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purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) on such date of the rate for
commercial paper having the applicable Index Maturity, as published in H.15(519)
under the heading "Commercial Paper -- Non-financial" or, if unreliable, under
such other heading representing commercial paper issued by non-financial
entitities whose bond rating is "AA", or the equivalent, from a nationally
recognized statistical rating organization, or, if not so published by 9:00
a.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate will be the Money Market
Yield on such Interest Determination Date of the rate for commercial paper
having the applicable Index Maturity, as published in Composite Quotations under
the heading "Commercial Paper". If such rate is not yet published in Composite
Quotations by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Commercial Paper Rate will be the Money
Market Yield of the arithmetic mean of the offered rates as of 11:00 a.m., New
York City time, on such Interest Determination Date, of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper placed for industrial issuers whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency, having the applicable
Index Maturity; provided, however, that if the dealers selected as aforesaid by
the Calculation Agent are not quoting offered rates as mentioned in this
sentence, the rate of interest in effect for the applicable period will be the
rate of interest in effect on such Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
Money Market Yield = D X 360
------------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the period for which interest is being calculated.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date, the
rate on such date for Federal Funds as published in H.15(519) under the heading
"Federal Funds (Effective)" or, if not so published by 9:00 a.m., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Federal Funds Rate will be the rate on such Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate". If such rate is not yet published by 3:00 p.m., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate for
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such Interest Determination Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the rates for the last transaction in overnight
Federal Funds arranged by three leading brokers of Federal Funds transactions in
The City of New York selected by the Calculation Agent as of 9:00 a.m., New York
City time, on such Interest Determination Date; provided, however, that if the
brokers selected as aforesaid by the Calculation Agent are not quoting such
rates as mentioned in this sentence, the rate of interest in effect for the
applicable period will be the rate of interest in effect on such Interest
Determination Date.
J.J. Kenny Rate Notes
J.J. Kenny Rate Notes will bear interest at the interest rates (calculated
with reference to the J.J. Kenny Rate and the Spread and/or Spread Multiplier,
if any) specified in the J.J. Kenny Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "J.J.
Kenny Rate" means, with respect to any Interest Determination Date relating to a
J.J. Kenny Rate Note, the rate in the high grade weekly index (the "Weekly
Index") on such date made available by Kenny Information Systems ("Kenny") to
the Calculation Agent. The Weekly Index is, and shall be, based upon 30-day
yield evaluations at par of bonds, the interest of which is exempt from Federal
income taxation under the Internal Revenue Code of 1986, as amended, of not less
than five high grade component issuers selected by Kenny which shall include,
without limitation, issuers of general obligation bonds. The specific issuers
included among the component issuers may be changed from time to time by Kenny
in its discretion. The bonds on which the Weekly Index is based shall not
include any bonds on which the interest is subject to a minimum tax or similar
tax under the Internal Revenue Code of 1986, as amended, unless all tax-exempt
bonds are subject to such tax. In the event Kenny fails to make available such
Weekly Index prior to the relevant Calculation Date, a successor indexing agent
will be selected by the Calculation Agent, such index to reflect the prevailing
rate for bonds rated in the highest short-term rating category by Moody's
Investors Service, Inc. and Standard & Poor's Corporation in respect of issuers
most closely resembling the high grade component issuers selected by Kenny for
its Weekly Index, the interest on which is (A) variable on a weekly basis, (B)
exempt from Federal income taxation under the Internal Revenue Code of 1986, as
amended, and (C) not subject to a minimum tax or similar tax under the Internal
Revenue Code of 1986, as amended, unless all tax-exempt bonds are subject to
such tax. If such successor indexing agent is not available, the rate for any
Interest Determination Date shall be 67% of the rate determined if the Treasury
Rate had been originally selected as the interest rate for the Notes. The
Calculation Agent shall calculate the J.J. Kenny Rate in accordance with the
foregoing. At the request of a Holder of a Floating Rate Note bearing interest
at the J.J. Kenny Rate, the Calculation Agent will provide such holder with the
interest rate that will become effective as of the next Interest Reset Date.
LIBOR Notes
LIBOR Notes will bear interest at the rates (calculated with reference to
LIBOR and the Spread and/or Spread Multiplier, if any) specified in such LIBOR
Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate shall be used) for deposits in
the Index Currency having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Banking Day immediately
following such LIBOR Interest Determination Date, that appear on the
Designated LIBOR Page specified in the applicable Pricing Supplement as of
11:00 A.M., London time, on such LIBOR Interest Determination Date, if at
least two such offered rates appear (unless, as aforesaid, only a
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single rate is required) on such Designated LIBOR Page, or (b) if "LIBOR
Telerate" is specified in the applicable Pricing Supplement or if neither
"LIBOR Reuters" nor "LIBOR Telerate" is specified as the method for
calculating LIBOR, the rate for deposits in the Index Currency having the
Index Maturity designated in the applicable Pricing Supplement, commencing
on the second London Banking Day immediately following such LIBOR Interest
Determination Date that appears on the Designated LIBOR Page specified in
the applicable Pricing Supplement as of 11:00 A.M., London time, on such
LIBOR Interest Determination Date. If fewer than two such offered rates
appear (unless the specified Designated LIBOR Page by its terms provides
only for a single rate, in which case such single rate shall be used), or
if no such rate appears, as applicable, LIBOR in respect of the related
LIBOR Interest Determination Date will be determined in accordance with the
provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the applicable Designated LIBOR Page as specified in clause (i)
above, the Calculation Agent will request the principal London offices of
each of four major reference banks in the London interbank market, as
selected by the Calculation Agent, to provide the Calculation Agent with
its offered quotation for deposits in the Index Currency for the period of
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following such
LIBOR Interest Determination Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If
at least two such quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 A.M., in the applicable Principal Financial Center,
on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
designated in the applicable Pricing Supplement and in a principal amount
that is representative for a single transaction in such Index Currency in
such market at such time; provided, however, that if the banks so selected
by the Calculation Agent are not quoting as mentioned in this sentence,
LIBOR determined as of such LIBOR Interest Determination Date will be LIBOR
in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is specified in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is specified
in the applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified as the method for calculating LIBOR, the display on the
Dow Jones Telerate Service for the purpose of displaying the London interbank
rates of major banks for the applicable Index Currency.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to United
States dollars, Deutsche Marks, Dutch Guilders, Italian Lire, Swiss Francs and
ECUs, the Principal Financial Center shall be The City of New York, Frankfurt,
Amsterdam, Milan, Zurich and Luxembourg, respectively.
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the rate
for the auction held on such Interest Determination Date of direct obligations
of the United States ("Treasury bills") having the applicable Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities -- Treasury
bills -- auction average (investment)" or, if not so published by 9:00 a.m., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate (expressed as a bond equivalent,
rounded to the nearest one one-hundredth of a percent, with five one-thousandths
of a percent rounded upward, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury bills having the applicable Index Maturity are not published or
announced as provided above by 3:00 p.m., New York City time, on such
Calculation Date, or if no such auction is held on such Interest Determination
Date, then the Treasury Rate shall be calculated by the Calculation Agent and
shall be a yield to maturity (expressed as a bond equivalent, rounded to the
nearest one one-hundredth of a percent, with five one-thousandths of a percent
rounded upward, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time, on such Interest
Determination Date, of three leading primary United States government securities
dealers selected by the Calculation Agent for the issue of Treasury bills with a
remaining maturity closest to the applicable Index Maturity; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting bid rates as mentioned in this sentence, the interest rate for the
applicable period will be the interest rate in effect on such Interest
Determination Date.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement,
except that the initial interest rate for each Prime Rate Note will be the rate
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Prime
Rate" means, with respect to any Interest Determination Date, the rate on such
date as published by the Board of Governors of the Federal Reserve System in
H.15(519) under the heading "Bank Prime Loan". If such rate is not published by
9:00 a.m., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean of the rates of interest
publicly announced by each bank named on the "Reuters Screen USPRIME1 Page" (as
defined below) as such bank's prime rate or base lending rate as in effect for
such Interest Determination Date. "Reuters Screen USPRIME1 Page" means the
display designated as page "USPRIME1" on the Reuters Monitor Money Rates Service
(such term to include such other page as may replace the USPRIME1 page on that
Service for the purpose of displaying prime rates or base lending rates of major
United States banks). If fewer than four such rates but more than one such rate
appear on the Reuters Screen USPRIME1 Page for such Interest Determination Date,
the Prime Rate will be determined by the Calculation Agent and will be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent from a list approved by the Company. If fewer
than two such rates appear on the Reuters Screen USPRIME1 Page, the Prime Rate
will be calculated by the Calculation Agent and will be determined as the
arithmetic mean of the prime rates furnished in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any state thereof, in each case
having total equity capital of at least $500,000,000 and being subject to
supervision or examination by Federal or state authority, selected by the
Calculation Agent from a list approved by the applicable Issuer to provide such
rate or rates; provided, however, that if the banks or trust companies selected
as aforesaid by the Calculation Agent from a list approved by the applicable
Issuer are not quoting as mentioned in this sentence, the rate of
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interest in effect for the applicable period will be the rate of interest in
effect on such Interest Determination Date.
11th District Cost of Funds Rate Notes
11th District Cost of Funds Rate Notes will bear interest at the interest
rates (calculated with reference to the 11th District Cost of Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in the 11th District Cost of
Funds Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to an 11th District Cost of Funds Rate Note, the rate equal to the
monthly weighted average cost of funds for the calendar month immediately
preceding the month in which such Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00 a.m.,
San Francisco time, on such Interest Determination Date. If such rate does not
appear on Telerate Page 7058 on any related Interest Determination Date, the
11th District Cost of Funds Rate for such Interest Determination Date shall be
the monthly weighted average cost of funds paid by member institutions of the
11th Federal Home Loan Bank District that was most recently announced (the "11th
District Cost of Funds Index") by the Federal Home Loan Bank of San Francisco
(the "FHLB of San Francisco") as such cost of funds for the calendar month
immediately preceding the date of such announcement. If the FHLB of San
Francisco fails to announce such rate for the calendar month immediately
preceding such Interest Determination Date, then the 11th District Cost of Funds
Rate determined as of such Interest Determination Date will be the 11th District
Cost of Funds Rate in effect on such Interest Determination Date.
CURRENCY INDEXED NOTES
General
The Issuers may from time to time offer Currency Indexed Notes, the
principal amount of which payable at the Maturity Date is determined by
reference to the rate of exchange between the currency or composite currency in
which such Notes are denominated (the "Denominated Currency") and the other
currency or currencies or composite currency or composite currencies specified
as the Indexed Currency (the "Indexed Currency") in the applicable Pricing
Supplement, or as determined in such other manner as may be specified in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, Holders of Currency Indexed Notes will be entitled to
receive a principal amount in respect of such Currency Indexed Notes exceeding
the amount designated as the face amount of such Currency Indexed Notes in the
applicable Pricing Supplement (the "Face Amount") if, at the Maturity Date, the
rate at which the Denominated Currency can be exchanged for the Indexed Currency
is greater than the rate of such exchange designated as the Base Exchange Rate,
expressed in units of the Indexed Currency per one unit of the Denominated
Currency, in the applicable Pricing Supplement (the "Base Exchange Rate").
Holders of Currency Indexed Notes will be entitled to receive a principal amount
in respect of such Currency Indexed Notes less than the Face Amount of such
Currency Indexed Notes if, at the Maturity Date, the rate at which the
Denominated Currency can be exchanged for the Indexed Currency is less than such
Base Exchange Rate. The Base Exchange Rate is determined as described below
under "Payment of Principal and Interest". Information as to the relative
historical value (which information is not necessarily indicative of relative
future value) of the applicable Denominated Currency against the applicable
Indexed Currency, any exchange controls applicable to such Denominated Currency
or Indexed Currency and certain tax consequences to holders will be set forth in
the applicable Pricing Supplement. See "Currency-Related Risk Factors -- Foreign
Currency Risks".
Unless otherwise specified in the applicable Pricing Supplement, the term
"Exchange Rate Day" shall mean any day (a) which is a Business Day in The City
of New York and (b)(i) if the Denominated Currency or Indexed Currency is any
currency or composite currency other than the U.S. dollar or the ECU, a Business
Day in the principal financial center of the country of such Denominated
Currency or
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Indexed Currency or (ii) if the Denominated Currency or Indexed Currency is the
ECU, a Business Day with respect to the ECU.
Payment of Principal and Interest
Unless otherwise specified in the applicable Pricing Supplement, interest,
if any, on the Notes will be payable by the Issuer thereof in the Denominated
Currency based on the Face Amount of the Currency Indexed Notes and at the rate
and times and in the manner set forth herein and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, principal
of a Currency Indexed Note will be payable by the Issuer thereof in the
Denominated Currency at Maturity in an amount equal to the Face Amount of the
Currency Indexed Note, plus or minus an amount of the Denominated Currency
determined by the Exchange Rate Agent by reference to the difference between the
Base Exchange Rate and the rate at which the Denominated Currency can be
exchanged for the Indexed Currency as determined on the second Exchange Rate Day
(the "Exchange Rate Date") prior to Maturity by the Exchange Rate Agent based
upon the indicative quotation, selected by such Exchange Rate Agent at
approximately 11:00 a.m., New York City time, on such Exchange Rate Date, for
the Indexed Currency (spot bid quotation for the Denominated Currency) which
will yield the largest number of units of the Indexed Currency per one unit of
the Denominated Currency, for an amount of Indexed Currency equal to the Face
Amount of such Currency Indexed Note multiplied by the Base Exchange Rate with
the Denominated Currency for settlement at Maturity (such rate of exchange, as
so determined and expressed in units of the Indexed Currency per one unit of the
Denominated Currency, is hereafter referred to as the "Spot Rate"). Unless
otherwise provided in the Pricing Supplement, such selection shall be made from
among the quotations appearing on the display "page" within the Reuters or
Telerate Monitor Foreign Exchange Service, as may be agreed to by such Issuer
and such Exchange Rate Agent (or, if such display "page" is not available or
such Indexed Currency or Denominated Currency is a composite currency for which
separate current composite currency quotations are not available, such other
comparable display or other comparable manner of obtaining quotations as may be
agreed to by such Issuer and such Exchange Rate Agent), used to determine the
Spot Rate. The principal amount of the Currency Indexed Notes determined by the
Exchange Rate Agent to be payable at Maturity will be payable to the Holders
thereof in the manner set forth herein and in the applicable Pricing Supplement.
In the absence of manifest error, the determination by the Exchange Rate Agent
of the Spot Rate and the principal amount of Currency Indexed Notes payable at
Maturity thereof shall be final and binding on such Issuer and the holders of
such Currency Indexed Notes.
The formula to be used by the Exchange Rate Agent to determine the
principal amount of a Currency Indexed Note payable at the Maturity Date will be
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, in the
event of any redemption or repayment of a Currency Indexed Note prior to its
scheduled Maturity Date, the term "Maturity" used above would refer to the
redemption or repayment date of such Currency Indexed Note.
OTHER INDEXED NOTES
The Notes may be issued as Indexed Notes, other than Currency Indexed
Notes, the principal amount of which payable at Maturity or the interest (or
premium, if any) thereon, or both, may be determined by reference to the price
of one or more specified securities or commodities, to one or more securities or
commodities exchange indices or other indices or by other similar methods or
formulas. The Pricing Supplement relating to such an Indexed Note will describe,
as applicable, the method by which the amount of interest payable and the amount
of principal payable at the Maturity Date in respect of such Indexed Note will
be determined, certain special tax consequences to holders of such Notes,
certain risks associated with an investment in such Notes and other information
relating to such Notes.
Unless otherwise specified in the applicable Pricing Supplement, (a) for
the purpose of determining whether Holders of the requisite principal amount of
Securities outstanding under the Senior Indenture
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have made a demand or given a notice or waiver or taken any other action, the
outstanding principal amount of Indexed Notes will be deemed to be the face
amount thereof, and (b) in the event of an acceleration of the Maturity of an
Indexed Note, the principal amount payable to the Holder of such Note upon
acceleration will be the principal amount determined by reference to the formula
by which the principal amount of such Note would be determined on the Maturity
Date thereof, as if the date of acceleration were the Maturity Date.
SUBSEQUENT INTEREST PERIODS
The Pricing Supplement relating to each Note will indicate whether the
Issuer thereof has the option with respect to such Note to reset the interest
rate, in the case of a Fixed Rate Note, or to reset the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, and, if so, the date or dates
on which such interest rate or such Spread and/or Spread Multiplier, as the case
may be, may be reset (each an "Optional Reset Date"). If an Issuer has such
option with respect to any Note, the following procedures shall apply, unless
modified as set forth in the applicable Pricing Supplement.
Such Issuer may at any time and from time to time exercise such option with
respect to a Note by notifying the Trustee of such exercise at least 50 but not
more than 60 days prior to an Optional Reset Date for such Note. Not later than
10 days after receipt of such notice from such Issuer but in any event not later
than 40 days prior to such Optional Reset Date, the Trustee will mail to the
Holder of such Note a notice (the "Reset Notice") setting forth (i) the election
of such Issuer to reset the interest rate, in the case of a Fixed Rate Note, or
the Spread and/or Spread Multiplier, in the case of a Floating Rate Note, (ii)
such new interest rate or such new Spread and/or Spread Multiplier, as the case
may be, and (iii) the provisions, if any, for redemption or repayment during the
period from such Optional Reset Date to the next Optional Reset Date or, if
there is no such next Optional Reset Date, to Maturity of such Note (each such
period a "Subsequent Interest Period"), including the date or dates on which or
the period or periods during which the price or prices at which such redemption
may occur during such Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 days prior to an Optional
Reset Date for a Note, such Issuer may, at its option, revoke the interest rate,
in the case of a Fixed Rate Note, or the Spread and/or Spread Multiplier, in the
case of a Floating Rate Note, provided for in the Reset Notice and establish an
interest rate, in the case of a Fixed Rate Note, or a Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, that is higher than the
interest rate, Spread and/or Spread Multiplier, as the case may be, provided for
in the Reset Notice, for the Subsequent Interest Period commencing on such
Optional Reset Date by causing the Trustee to transmit notice of such higher
interest rate or higher Spread and/or Spread Multiplier, as the case may be, to
the Holder of such Note. Such notice shall be irrevocable. All Notes with
respect to which the interest rate or Spread and/or Spread Multiplier is reset
on an Optional Reset Date and with respect to which the Holders of such Notes
have not tendered such Notes for repayment (or have validly revoked any such
tender pursuant to the next succeeding paragraph) will bear such higher interest
rate, in the case of a Fixed Rate Note, or higher Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, whether or not tendered for
repayment.
If such Issuer elects to reset the interest rate or the Spread and/or
Spread Multiplier of a Note, the Holder of such Note will have the option to
elect repayment of such Note by such Issuer on any Optional Reset Date at a
price equal to the aggregate principal amount thereof outstanding on, plus any
accrued interest to, such Optional Reset Date. In order for a Note to be so
repaid on an Optional Reset Date, the Trustee or any other person designated by
such Issuer for such purpose must receive at least 25 days but not more than 35
days prior to such Optional Reset Date (i) if such Note is a Certificated Note,
the Note with the form entitled "Option to Elect Repayment" on the reverse side
of the Note duly completed or (ii) if such Note is a Book-Entry Note, such
notices as may be set forth in the applicable Pricing Supplement. The repayment
option may be exercised by the Holder of a Note for less than the aggregate
principal amount of the Note then outstanding; provided, however, that the
principal amount of the Note remaining outstanding after repayment is an
authorized denomination. A Holder who has tendered a note for repayment pursuant
to a Reset Notice may, by delivery by the close of business on the tenth day
prior
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to such Optional Reset Date of written notice to the Senior Trustee, revoke any
such tender for repayment.
If a Note is represented by a Global Security, the Depositary's nominee
will be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will exercise timely a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right of repayment. Different firms
have different cut-off times for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a Note in
order to ascertain the cut-off time by which such an instruction must be given
in order for timely notice to be delivered to the Depositary.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note (other than an Amortizing
Note) will indicate whether the Maturity Date of such Note may be extended, and
if so, whether such Maturity Date may be extended at the option of the Issuer
thereof or the Holder of such Note, or both, for one or more periods (each an
"Extension Period") up to but not beyond the date (the "Final Maturity Date")
set forth in such Pricing Supplement.
If an Issuer has such option with respect to any Note (other than an
Amortizing Note), the following procedures shall apply, unless modified as set
forth in the applicable Pricing Supplement. Such Issuer may at any time and from
time to time exercise such option with respect to a Note (other than an
Amortizing Note) by notifying the Trustee of such exercise at least 50 but not
more than 60 days prior to the Maturity Date of such Note in effect immediately
prior to the exercise of such option (the "Prior Maturity Date"). Not later than
10 days after receipt of such Notice from such Issuer but in any event not later
than 40 days prior to the Prior Maturity Date, the Trustee will mail to the
Holder of such Note a notice (the "Extension Notice") relating to such Extension
Period, setting forth (i) the election of such Issuer to extend the Prior
Maturity Date, (ii) the new Maturity Date, (iii) in the case of a Fixed Rate
Note, the interest rate applicable to the Extension Period or, in the case of a
Floating Rate Note, the Spread and/or Spread Multiplier applicable to the
Extension Period, and (iv) the provisions, if any, for redemption by the Company
or repayment to the Holder, or both, during the Extension Period, including the
date or dates on which or the period or periods during which and the price or
prices at which such redemption or repayment may occur during the Extension
Period. Upon the transmittal by the Trustee of an Extension Notice to the Holder
of a Note, the Prior Maturity Date shall be extended automatically, and, except
as modified by the Extension Notice and as described in the next paragraph, such
Note will have the same terms as prior to the transmittal of such Extension
Notice.
Notwithstanding the foregoing, not later than 20 days prior to the Prior
Maturity Date for a Note, such Issuer may, at its option, revoke the interest
rate, in the case of a Fixed Rate Note, or the Spread and/or Spread Multiplier,
in the case of a Floating Rate Note, provided for in the Extension Notice and
establish an interest rate, in the case of a Fixed Rate Note, or a Spread and/or
Spread Multiplier, in the case of a Floating Rate Note, that is higher than the
interest rate, Spread and/or Spread Multiplier, as the case may be, provided for
in the Extension Notice, for the Extension Period commencing on such Prior
Maturity Date by causing the Trustee to transmit notice of such higher interest
rate or higher Spread and/or Spread Multiplier, as the case may be, to the
Holder of such Note. Such notice shall be irrevocable. All Notes with respect to
which the Maturity Date is extended and with respect to which the Holders of
such Notes have not tendered such Notes for repayment (or have validly revoked
any such tender) pursuant to the next succeeding paragraph will bear such higher
interest rate, in the case of a Fixed Rate Note, or higher Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, for the Extension Period.
If such Issuer elects to extend the Maturity Date of a Note, the Holder of
such Note will have the option to elect repayment of such Note by such Issuer on
the immediately Prior Maturity Date at a price equal to the principal amount
thereof outstanding on, plus any accrued interest to, such Prior Maturity Date.
In order for a Note to be so repaid on such Prior Maturity Date, the Trustee or
any other person
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designated by such Issuer for such purpose must receive at least 25 days but not
more than 35 days prior to such Prior Maturity Date (i) if such Note is a
Certificated Note, the Note with the form entitled "Option to Elect Repayment"
on the reverse of the Note duly completed or (ii) if such Note is a Book-Entry
Note, such notices as may be set forth in the applicable Pricing Supplement. The
repayment option may be exercised by the Holder of a Note for less than the
aggregate principal amount of the Note then outstanding; provided, however, that
the principal amount of the Note remaining outstanding after repayment is an
authorized denomination. A Holder who has tendered a Note for repayment pursuant
to an Extension Notice may, by delivery of written notice by the close of
business on the tenth day prior to such Prior Maturity date to the Trustee,
revoke any such tender for repayment.
If a Note is represented by a Global Security, see "Description of
Notes -- Subsequent Interest Periods" above for the manner by which a right to
repayment may be exercised.
If the Holder of a Note (other than an Amortizing Note) has the option to
extend the Maturity Date of such Note for one or more Extension Periods up to
but not beyond the Final Maturity Date set forth in the Pricing Supplement
relating to such Note, the following provisions shall apply, unless modified as
set forth in such Pricing Supplement. The Holder of a Note (other than an
Amortizing Note) may, at such time or times as set forth in the applicable
Pricing Supplement, exercise such option by delivery to the Trustee by the date
set forth in such Pricing Supplement of a written notice of such election (the
"Holder's Extension Notice"). Such Holder's Extension Notice will be irrevocable
and will specify the new Maturity Date. Upon the transmittal by such Holder of
such Holder's Extension Notice to the Trustee, the applicable Prior Maturity
Date shall be extended automatically, and, except as modified pursuant to this
paragraph, such Note will have the same terms as prior to the transmittal of
such Holder's Extension Notice.
REDEMPTION AND REPAYMENT
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to its Maturity Date or that such Note will be
redeemable at the option of the Issuer thereof on a date or dates specified
prior to such Maturity Date at a price or prices set forth in the applicable
Pricing Supplement, together with accrued interest to the date of redemption. An
Issuer may redeem any of its Notes that are redeemable and remain outstanding
either in whole or from time to time in part, upon not less than 30 nor more
than 60 days' notice to each Holder of such Note. If Notes of different tenor
and terms are to be redeemed, the applicable Issuer shall select the Notes to be
redeemed. If less than all of the Notes with like tenor and terms are to be
redeemed, the Notes to be redeemed shall be selected by the Trustee by such
method as the Trustee shall deem fair and appropriate. Unless otherwise
specified in the applicable Pricing Supplement, the Notes will not be subject to
any sinking fund.
The Pricing Supplement relating to each Note will indicate that such Note
cannot be repaid prior to its Maturity Date or that such Note will be repayable
at the option of the Holder thereof on a date or dates specified prior to its
Maturity Date at the price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of repayment.
Unless otherwise specified in the applicable Pricing Supplement, in order
for a Note to be repaid at the option of the Holder thereof, the Trustee or any
other person designated by the Issuer thereof must receive at least 15 days but
not more than 30 days prior to the repayment date, (i) if such Note is a
Certificated Note, the Note with the form entitled "Option to Elect Repayment"
on the reverse side of the Note duly completed or (ii) if such Note is a
Book-Entry Note, such notices as may be set forth in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement, the
repayment option may be exercised by the Holder of a Note for less than the
aggregate principal amount of the Note then outstanding; provided, however, that
the principal amount of the Note remaining outstanding after repayment is an
authorized denomination. Unless otherwise specified in the applicable Pricing
Supplement, exercise of the repayment option by the Holder of a Note will be
irrevocable.
If a Note is represented by a Global Security, see "Description of Notes --
Subsequent Interest Periods" above for the manner by which a right to repayment
may be exercised.
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REPURCHASE
The Issuers may at any time and from time to time purchase Notes at any
price in the open market or otherwise. Notes so purchased by any such Issuer
may, at its discretion, be held, resold or surrendered to the Trustee for
cancellation.
GLOBAL SECURITIES AND BOOK-ENTRY SYSTEM
Upon issuance, all Book-Entry Notes having the same Specified Currency,
Original Issue Date, Maturity Date, redemption provisions (if any), Interest
Payment Dates and, in the case of Fixed Rate Notes, interest rate (if any) or in
the case of Amortizing Notes, amortization schedule or, in the case of Floating
Rate Notes, Base Rate, Initial Interest Rate, Index Maturity, Interest Reset
Period and Dates, Spread and/or Spread Multiplier (if any), Minimum Interest
Rate (if any), original issue discount provisions (if any) and Maximum Interest
Rate (if any), will be represented by a single Global Security. Each Global
Security representing Book-Entry Notes will be deposited with, or on behalf of,
The Depository Trust Company, New York, New York (the "Depositary") or such
other depositary as is specified in the applicable Pricing Supplement, and
registered in the name of a nominee of the Depositary. Unless otherwise
specified in the applicable Pricing Supplement, Book-Entry Notes will not be
exchangeable for Certificated Notes and, except under the circumstances
described in the Prospectus under "Description of the Debt Securities -- Global
Securities" and as described below, will not otherwise be issuable in definitive
form.
The Depositary has advised the Issuers, the Guarantor and the Agents as
follows: The Depositary is a limited-purpose trust company organized under the
laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations, and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Upon the issuance of a Global Security, the Depositary for such Global
Security, or its nominee, will credit the accounts of persons held with it with
the respective amount of the Book-Entry Notes represented by such Global
Security. Such accounts shall be designated by the Agent or Agents with respect
to such Book-Entry Notes or by the Company if such Book-Entry Notes are offered
and sold directly by the Company. Ownership of beneficial interests in such
Global Security will be limited to persons that have accounts with the
Depositary for such Global Security or its nominee ("participants") or persons
that may hold interests through participants. Ownership of beneficial interests
in such Global Security will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the Depositary or its
nominee (with respect to interests of participants) for such Global Security and
on the records of participants (with respect to interests of persons other than
participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Book-Entry
Notes represented by such Global Security for all purposes under the Senior
Indenture governing such Book-Entry Notes. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have
Book-Entry Notes represented by such Global Security registered in their names,
will not receive or be entitled to receive Certificated Notes in exchange for
the
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<PAGE> 25
Global Security representing such Book-Entry Notes and will not be considered
the owners or Holders thereof under the Indenture.
Principal, premium, if any, and interest payments on Book-Entry Notes
registered in the name of a Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
Global Security representing such Book-Entry Notes. None of the Issuers, the
Guarantor, the Trustee, any Paying Agent and the Security Registrar for such
Book-Entry Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Security for such Book-Entry Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Issuers expect that the Depositary for Book-Entry Notes or its nominee,
upon receipt of any payment of principal, premium, if any, or interest, if any,
will credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Security for such Book-Entry Notes as shown on the records of such
Depositary or its nominee. The Issuers also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers which are registered in "street name", and will be the responsibility
of such participants.
If the Depositary for Book-Entry Notes is at any time unwilling or unable
to continue as depositary and a successor depositary is not appointed by the
Issuer of such Notes within 90 days, such Issuer will issue Certificated Notes
in exchange for the Global Security representing such Book-Entry Notes. In
addition, such Issuer may at any time and in its sole discretion determine not
to have Book-Entry Notes represented by Global Securities and, in such event,
will issue Certificated Notes in exchange for all Global Securities representing
such Book-Entry Notes. In any such instance, an owner of a beneficial interest
in a Global Security will be entitled to physical delivery of Certificated Notes
represented by such Global Security equal in principal amount to such beneficial
interest and to have such Certificated Notes registered in its name. Unless
otherwise specified by such Issuer in a Pricing Supplement or otherwise,
Certificated Notes will be so issued in denominations of U.S. $1,000 and any
integral multiple in excess thereof (or the equivalent thereof in a Specified
Currency other than U.S. dollars).
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for Notes in the Specified Currency and
payments of principal of (and premium, if any) and interest, if any, on such
Notes will be made in the Specified Currency, unless otherwise provided in the
applicable Pricing Supplement. Currently, there are limited facilities in the
United States for conversion of U.S. dollars into foreign currencies and vice
versa and banks do not generally offer non-U.S. dollar checking or savings
account facilities in the United States. Accordingly, unless otherwise specified
in a Pricing Supplement or unless alternative arrangements are made between the
Company and a prospective purchaser of Notes, payment of principal of (and
premium, if any) and interest, if any, on Notes in a Specified Currency other
than U.S. dollars will be made to an account at a bank outside the United
States. However, if requested by a prospective purchaser of Notes denominated in
a Specified Currency other than U.S. dollars, the Agent soliciting the offer to
purchase will arrange for the conversion of U.S. dollars into such Specified
Currency to enable the purchaser to pay for such Notes. Such request must be
made on or before the fifth Business Day preceding the date of delivery of the
Notes, or by such other date as is determined by the Agent that presents such
offer to the Issuer of such Notes. Each such conversion will be made by the
relevant Agent on such terms and subject to such conditions, limitations and
charges as such Agent may from time to time establish in accordance with its
regular foreign exchange practice. All costs of exchange, if any, will be borne
by the purchasers of the Notes.
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<PAGE> 26
UNITED STATES TAXATION
In the opinion of Ivins, Phillips & Barker, Chartered, special U.S. tax
counsel to the Issuers and the Guarantor, the following summary correctly
describes certain United States Federal income tax consequences resulting from
the purchase, ownership or disposition of Notes by an initial Holder (unless
otherwise indicated) subject to United States income taxation. It does not
purport to consider all the possible tax consequences of the purchase, ownership
or disposition of the Notes, and it is not intended to reflect the individual
tax position of any Holder. It deals only with Notes and currencies or composite
currencies other than U.S. dollars ("Foreign Currency") held as capital assets.
It does not deal with special tax situations, such as dealers in securities or
currencies, Notes (or Foreign Currency) held as a hedge against currency risks
or as part of a straddle with other investments or as part of a "synthetic
security" or other integrated investment (including a "conversion transaction")
comprised of a Note and one or more other investments, or (except for the
discussion of "Non-United States Persons" below) situations in which the
functional currency of the Holder is not the U.S. dollar. It is based upon the
United States Federal tax laws and regulations as now in effect and as currently
interpreted, and does not take into account possible changes in such tax laws or
such interpretations. It does not include any description of the tax laws of any
state or local governments, or of any foreign government, that may be applicable
to the Notes or Holders thereof. Persons considering the purchase of Notes
should consult their own tax advisers concerning the application of the United
States Federal tax laws to their particular situations as well as any
consequences arising under the laws of any other taxing jurisdiction. The
following discussion applies only to Notes under which all payments are
denominated in, or determined with reference to, a single currency, either a
single Foreign Currency or the U.S. dollar. If Notes are issued under which
payments are denominated in, or determined with reference to, more than one
currency, their tax treatment will be discussed in the applicable Pricing
Supplement relating to the issuance of such Notes.
The Tax Reform Act of 1986 made major changes in the United States Federal
tax laws that affect the treatment of currency gains and losses. Final
regulations and proposed regulations dealing with currency gains and losses were
issued by the Internal Revenue Service ("IRS") on March 17, 1992 (the "Foreign
Currency Regulations"). The following summary reflects the terms of the Foreign
Currency Regulations. Under the proposed Foreign Currency Regulations, however,
for taxable years ending on or after the date on which the proposed Foreign
Currency Regulations become final, certain Holders may elect to mark to market
foreign currency transactions based on the Holder's method of financial
accounting. Moreover, the Foreign Currency Regulations do not cover all issues,
and subsequent versions of such regulations (including the final form of the
proposed Foreign Currency Regulations) may adopt positions that would apply to
the Notes and that may be contrary to the positions discussed below.
UNITED STATES PERSONS
The following addresses the principal United States Federal income tax
consequences resulting from the ownership of a Note by a Holder who is a United
States person.
For purposes of the following discussion, the term "United States person"
means a citizen or resident of the United States, a corporation, partnership or
other entity created or organized under the laws of the United States or an
estate or trust the income of which is subject to United States Federal income
taxation regardless of its source, and "United States" means the United States
of America (including the States and the District of Columbia).
A Holder that is a nonresident alien individual as to the United States and
a bona fide resident of Puerto Rico, Guam, American Samoa or the Northern
Mariana Islands during the entire taxable year is also subject to the rules
described in this section as if such Holder were a United States person. Such a
Holder may also be subject to United States Federal withholding tax under the
rules described in the first paragraph under "Non-United States Persons" below.
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Payments of Interest
Except as described below under "Original Issue Discount", interest on a
Note (whether payable in a Foreign Currency or in U.S. dollars) will be taxable
to a Holder as ordinary income at the time it accrues or is received in
accordance with the Holder's method of accounting for tax purposes.
If payment of interest is denominated in or determined in reference to the
value of a Foreign Currency, then in the case of a cash method Holder who is not
required to accrue such interest prior to its receipt, the amount of interest
income is determined by translating the Foreign Currency into U.S. dollars at
the "spot rate" on the date of receipt. In the case of an accrual method Holder
or in the case of interest that must be accrued prior to receipt or payment
(such as original issue discount) the amount of interest income that is taken
into income for any interest accrual period is determined by translating the
Foreign Currency into U.S. dollars at the "average rate" for the interest
accrual period, or, with respect to an interest accrual period that spans two
taxable years, at the "average rate" for the partial period within the taxable
year. At the time the interest so accrued in a prior accrual period is received,
the Holder will realize exchange gain or loss equal to the difference, if any,
between the "spot rate" of the Foreign Currency received by the Holder with
respect to such accrual period on the date the interest is received and the
amount of interest income previously accrued for such period. A Holder may elect
to use, instead of such "average rate", the "spot rate" on the last day of the
accrual period (or, if the accrual period spans two of the Holder's taxable
years, the last day of the first taxable year). In addition, if the interest is
actually received within five Business Days of the end of such accrual period or
taxable year, an accrual method Holder making the election may instead use the
spot rate on the date the interest is received for purposes of translating
accrued interest income into U.S. dollars (in which case no exchange gain or
loss will be taken into account upon receipt). The election applies to all debt
instruments held by the Holder and cannot be changed without the consent of the
IRS.
The exchange gain or loss described in the immediately preceding paragraph
is ordinary and will generally not be considered additional interest income or
expense. The IRS has authority to issue regulations recharacterizing interest as
principal, or principal as interest, for obligations denominated in a
hyperinflationary currency. Under the proposed Foreign Currency Regulations,
which would become effective for transactions entered into after such
regulations are finalized, if a Holder acquires a Note denominated in a Foreign
Currency that is a hyperinflationary currency at the time of such acquisition,
the Holder would be required to realize exchange gain or loss on the Note each
year that the Holder holds the Note based (in general) on the change in exchange
rates between the Specified Currency and the U.S. dollar from the beginning to
the end of the year. Such exchange gain or loss would generally be treated,
respectively, as additional interest income or as an offset to interest income.
For purposes of this discussion, the "spot rate" generally means a rate
that reflects a fair market rate of exchange available to the public for
currency under a "spot contract" in a free market and involving representative
amounts. A "spot contract" is a contract to buy or sell a currency on or before
two Business Days following the date of the execution of the contract. If such a
spot rate cannot be demonstrated, the District Director of the IRS has the
authority to determine the spot rate. The "average rate" for an accrual period
(or partial period) is the simple average of the spot exchange rates for each
Business Day of such period, or other average exchange rate for the period
reasonably derived and consistently applied by the Holder.
Purchase, Sale and Retirement of Notes
A purchaser of a Note using Foreign Currency as the consideration for such
Note will generally be treated for Federal income tax purposes as though the
Foreign Currency used to purchase the Note were instead exchanged for U.S.
dollars, and the U.S. dollars received in such exchange were used to purchase
the Note. Thus, such a purchaser generally will be required to recognize
ordinary income or loss equal to the difference, if any, between the U.S. dollar
spot rate of the Foreign Currency used to purchase the Note on the date of
purchase, and the purchaser's U.S. dollar tax basis in the Foreign Currency.
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<PAGE> 28
Upon the sale, exchange or retirement of a Note, a Holder will recognize
gain or loss equal to the difference between the amount realized (less any
accrued but unpaid qualified stated interest which will be taxable as such) and
the Holder's tax basis in the Note. If the amount received on the sale, exchange
or retirement is not in U.S. dollars, the amount realized will be based on the
spot rate of the Foreign Currency on the date of disposition. In the case of a
Note denominated in Foreign Currency, to the extent such recognized gain or loss
is attributable to changes in Foreign Currency exchange rates between the date
of acquisition and disposition of the Note, such gain or loss ("exchange gain or
loss") will be treated as ordinary income or loss (but will generally not be
treated as interest income or expense). However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction. Except as provided below, any gain or loss in excess of such
exchange gain or loss will be capital gain or loss, and will be long-term
capital gain or loss if the Note had been held for more than one year.
If a Holder has a tax basis for a Note, other than a Note with a fixed
Maturity Date of one year or less from the date of issue, that is less than its
principal amount (or, in the case of an Original Issue Discount Note, less than
its original issue price plus original issue discount includable, without regard
to adjustments for acquisition premium discussed below under "Original Issue
Discount", in gross income by the prior Holder or Holders), the Note may be
considered to have "market discount". As a general matter, gain on a Note is
treated as ordinary income rather than capital gain to the extent of market
discount accrued while the Holder held the Note, although Holders may elect to
accrue market discount into income on a current basis. Such an election applies
to all debt instruments with market discount acquired by the electing Holder on
or after the first day of the first taxable year to which the election applies
and may not be revoked without the consent of the IRS. Market discount will be
treated as accruing on a ratable basis or, at the election of the Holder, based
on a constant interest method. Furthermore, unless a Holder elects to include
market discount into income on a current basis as described above, a Holder of a
Note having market discount may be required to defer the deduction of all or a
portion of the interest expense on any indebtedness incurred or maintained to
purchase or carry such Note until the Maturity Date of the Note or its earlier
disposition in a taxable transaction. In the case of a Note payable in a Foreign
Currency, (1) market discount is determined in units of the Foreign Currency,
(2) accrued market discount required to be taken into account on the Maturity or
earlier disposition of a
Note is translated into U.S. dollars at the spot rate on the Maturity or
disposition date (and no part is treated as exchange gain or loss), and (3)
accrued market discount currently includible in income by a Holder is translated
into U.S. dollars at the average exchange rate for the accrual period, and
exchange gain or loss is determined on the Maturity or disposition of the Note
in the manner described in "Payments of Interest" above, with respect to
computation of exchange gain or loss on the receipt of accrued interest.
If a Holder has a tax basis for a Note that is greater than its principal
amount, the Note may be considered to have "bond premium". The Holder may elect
to amortize such premium as offsets to interest income over the remaining life
of the Note under a constant interest method. (The treatment of Original Issue
Discount Notes purchased at a premium is discussed below. See "Original Issue
Discount".) Such an election generally applies to all Notes held by the Holder
at the beginning of the taxable year to which the election applies or thereafter
acquired by the Holder and is irrevocable without the consent of the IRS.
However, if such Note may be optionally redeemed after the Holder acquires it at
a price in excess of its principal amount, special rules would apply that could
result in a deferral of the amortization of some bond premium until later in the
term of the Note. In the case of a Note denominated in Foreign Currency, bond
premium is computed in units of Foreign Currency and amortizable bond premium
reduces interest income in units of the Foreign Currency. At the time amortized
bond premium offsets interest income, foreign currency exchange gain or loss
(taxable as ordinary income or loss, but not generally as interest income or
expense) is realized based on the difference between spot rates at that time and
at the time of the acquisition of the Note. With respect to a Holder that does
not elect to amortize bond premium, the amount of bond premium constitutes a
capital loss when the bond matures. In the case of a Note denominated in Foreign
Currency, foreign currency exchange gain or loss with respect to the premium is
realized based on the difference between the spot rates on the Maturity Date
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and at the time of the acquisition of the Note. In such case, the amount of
capital loss relating to the premium may be offset or eliminated by exchange
gain.
Receipt of Foreign Currency
The tax basis of Foreign Currency received by a Holder generally will equal
the U.S. dollar equivalent of such Foreign Currency at the spot rate on the date
it is received. Upon the subsequent exchange of such Foreign Currency for U.S.
dollars, another currency, or property, a Holder will generally recognize
exchange gain or loss equal to the difference between the Holder's tax basis for
the Foreign Currency and the U.S. dollars received (or, if another currency is
received, the U.S. dollar value of the other currency at the spot rate on the
date of the exchange) or, if property is received, the U.S. dollar value of the
Foreign Currency based on the spot rate on the date of purchase. Such gain or
loss will be ordinary in character.
Indexed Notes
The specific treatment of any Indexed Notes issued will be discussed in
applicable Pricing Supple-
ment relating to the issuance of such Notes and would generally be subject to
different rules from those set forth in this discussion.
Original Issue Discount
The following summary is a general discussion of the United States Federal
income tax consequences to Holders who are United States persons of Notes issued
with original issue discount ("Original Discount Notes"). It is based in part
upon income tax regulations (the "OID Regulations") that were published in the
Federal Register on April 4, 1994. Additionally, the summary includes a
discussion of final regulations published in the Federal Register on June 14,
1996, relating primarily to contingent payment debt instruments with original
issue discount (the "Contingent Payment Debt Regulations"). The discussion
assumes that the Notes will not qualify as "applicable high-yield discount
obligations" under the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of an Original Issue
Discount Note over its "issue price" (defined as the first price at which a
substantial amount of the Original Issue Discount Notes have been sold) unless,
in most circumstances, such excess is less than 0.25% of the Original Issue
Discount Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity. The stated redemption price at maturity of an
Original Issue Discount Note is the total of all payments to be made under the
Original Issue Discount Note other than "qualified stated interest." The term
"qualified stated interest" means, in general, stated interest that is
unconditionally payable in cash or property at least annually at a single fixed
rate (or at certain floating rates) that appropriately takes into account the
length of the interval between stated interest payments.
In certain cases, Notes that bear stated interest and are issued at par may
be deemed to bear original issue discount for Federal income tax purposes, with
the result that the inclusion of interest in income for Federal income tax
purposes may vary from the actual cash payments of interest made on such Notes,
generally accelerating income for cash method taxpayers. Under the OID
Regulations, a Note may be an Original Issue Discount Note where, among other
things, (i) a Floating Rate Note provides for a maximum interest rate or a
minimum interest rate that is reasonably expected as of the issue date to cause
the yield on the debt instrument to be significantly less, in the case of a
maximum rate, or more, in the case of a minimum rate, than the expected yield
determined without the maximum or minimum rate, as the case may be; (ii) a
Floating Rate Note provides for a significant front-loading or back-loading of
interest; or (iii) a Note bears interest at a floating rate in combination with
one or more other floating or fixed rates. Notice will be given in the
applicable Pricing Supplement if the Company determines that a particular Note
will be an Original Issue Discount Note. Unless specified in the applicable
Pricing Supplement, Floating Rate Notes will not be Original Issue Discount
Notes.
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Persons holding Original Issue Discount Notes having maturities in excess
of one year are required to include original issue discount in income before the
receipt of cash attributable to such income. The amount of original issue
discount includible in income by the initial Holder of such Original Issue
Discount Notes and, subject to an adjustment, by any subsequent Holder, is the
sum of the daily portions of the original issue discount with respect to the
Original Issue Discount Note for each day during the taxable year in which such
Holder held the Original Issue Discount Note ("accrued original issue
discount"). The daily portion of the original issue discount on any Original
Issue Discount Note is determined by allocating to each day in any "accrual
period" a ratable portion of the original issue discount allocable to that
accrual period. The term "accrual period" generally means the period between
interest payment dates (or shorter period from the date of issue to the first
interest payment date and from the last interest payment date prior to maturity
to the date of maturity).
For any accrual period, the original issue discount allocable to the
accrual period is an amount equal to the excess, if any, of (a) the product of
the Original Issue Discount Note's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of compounding
at the close of each accrual period and adjusted for the length of the accrual
period) over (b) the sum of the qualified stated interest, if any, allocable to
such accrual period. The "adjusted issue price" of an Original Issue Discount
Note at the beginning of the first accrual period is the issue price and at the
beginning of any accrual period thereafter is (x) the sum of the issue price of
such Original Issue Discount Note, the accrued original issue discount for each
prior accrual period (determined without regard to the amortization of any
acquisition premium, as discussed below, or bond premium, as discussed above),
and the amount of any qualified stated interest on the Note that has accrued
prior to the beginning of the accrual period but is not payable until a later
date, less (y) any prior payments on the Original Issue Discount Note that were
not qualified stated interest. If a payment (other than a payment of qualified
stated interest) is made on the first day of an accrual period, then the
adjusted issue price at the beginning of such accrual period is reduced by the
amount of the payment.
Under the above rules, persons holding Original Issue Discount Notes will
be required to include in income increasingly greater amounts of original issue
discount in successive accrual periods, assuming that no payments other than
qualified stated interest are made prior to the maturity of the Note.
If an Issuer has an option to redeem a Note, or the Holder has an option to
cause a Note to be repurchased, prior to the Note's stated maturity, such option
will be presumed to be exercised if, by utilizing any date on which such Note
may be redeemed or repurchased as the maturity date and the amount payable on
such date in accordance with the terms of such Note (the "redemption price") as
the stated redemption price at maturity, the yield on the Note would be (i) in
the case of an option of an Issuer, lower than its yield to stated maturity, or
(ii) in the case of an option of the Holder, higher than its yield to stated
maturity. If such option is not in fact exercised when presumed to be exercised,
the Note would be treated solely for original issue discount purposes as if it
were redeemed or repurchased, and a new Note were issued on the presumed
exercise date for an amount equal to the Note's adjusted issue price on that
date.
Original issue discount on an Original Issue Discount Note denominated in,
or under which all payments are determined with reference to, a single Foreign
Currency will be determined for any accrual period in that Foreign Currency and
then translated into U.S. dollars in the same manner as other interest income
accrued by an accrual method Holder before receipt, as described above under
"Payments of Interest". Likewise, as described therein, exchange gain or loss
will be recognized when the original issue discount is paid. For this purpose,
all payments (other than qualified stated interest) on a Note will first be
viewed as payments of previously accrued original issue discount (to the extent
thereof), with payments considered made for the earliest accrual periods first.
The Contingent Payment Debt Regulations address, among other things, the
accrual of original issue discount on, and the character of gain recognized on
the sale, exchange, or retirement of debt instruments providing for contingent
payments. Prospective Holders of Notes with contingent payments should refer to
the discussion regarding taxation in the applicable Pricing Supplement.
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Different rules apply to Original Issue Discount Notes having maturities of
not more than one year ("Short-Term Discount Notes"). A Holder of a Short-Term
Discount Note who uses the cash method of tax accounting will generally not be
required to include original issue discount in income on a current basis (but
may be required to defer a deduction for a portion or all of the interest paid
or accrued on any indebtedness incurred to purchase or carry such Short-Term
Discount Note). Rather, such a Holder will be required to treat any gain
realized on a sale, exchange or retirement of the Short-Term Discount Note as
ordinary income to the extent such gain does not exceed the original issue
discount accrued with respect to the Short-Term Discount Note during the period
the Holder held the Short-Term Discount Note. Holders using the accrual method
of tax accounting, and certain cash method Holders (including banks, securities
dealers and regulated investment companies) will generally be required to
include original issue discount on the Short-Term Discount Note in income on a
current basis. Notwithstanding the foregoing, a cash method Holder of a
Short-Term Discount Note may elect to accrue original issue discount into income
on a current basis (in which case the limitation on the deductibility of
interest described above will not apply). Original issue discount will be
treated as accruing for these purposes on a ratable basis or, at the election of
the Holder, on a constant interest basis. Furthermore, any Holder (whether cash
or accrual method) of a Short-Term Discount Note can elect to accrue the
"acquisition discount", if any, with respect to the Short-Term Discount Note on
a current basis in lieu of original issue discount. Acquisition discount is the
excess of the stated redemption price at maturity of the Short-Term Discount
Note over the Holder's tax basis in the Note at the time of acquisition.
Acquisition discount will be treated as accruing on a ratable basis or, at the
election of the Holder, using a constant interest method. The market discount
rules do not apply with respect to Short-Term Discount Notes.
For purposes of determining the amount of original issue discount subject
to these rules, the OID Regulations provide that no interest payments on Notes
with maturities of one year or less are qualified stated interest, but instead
such interest payments are included in such Note's stated redemption price at
maturity.
In the event that a person purchases an Original Issue Discount Note
(including a Short-Term Discount Note) at an acquisition premium, i.e., at a
price in excess of the issue price plus the original issue discount accrued
prior to acquisition and minus any payments (other than payments of qualified
stated interest) made with respect to such Note prior to acquisition (such
amount, the Note's "revised issue price"), the amount includible in income in
each taxable year as original issue discount will be reduced by that portion of
the acquisition premium properly allocable to such year or, alternatively, a
Holder may elect to treat its purchase price as the Note's issue price.
The market discount and bond premium rules discussed above under "Purchase,
Sale and Retirement of Notes" may apply to an Original Issue Discount Note
purchased at a price that is less than such Note's revised issue price (in the
case of market discount) or that is greater than such Note's remaining stated
redemption price at maturity (in the case of bond premium), respectively. In
such case, the amount of market discount will generally equal the excess of the
Original Issue Discount Note's revised issue price over the Holder's purchase
price for the Note, and the amount of bond premium will equal the excess of the
Holder's purchase price over the Original Issue Discount Note's remaining stated
redemption price at maturity. A Holder of an Original Issue Discount Note with
bond premium will not be subject to the original issue discount rules described
above.
A Holder's tax basis of an Original Issue Discount Note generally will be
the Holder's cost increased by any original issue discount included in income
(and market discount, if any, if the Holder has elected to include accrued
market discount in income on an annual basis) and decreased by the amount of any
payment (other than qualified stated interest) received with respect to the
Original Issue Discount Note. Gain or loss on the sale, exchange or redemption
of an Original Issue Discount Note generally will be long-term capital gain or
loss if the Original Issue Discount Note has been held for more than a year
except to the extent that gain represents market discount not previously
included in the Holder's income.
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The original issue discount rules will not be applied to treat Notes as
having original issue discount solely by virtue of the contingent U.S. dollar
values of payments on Notes denominated in a Foreign Currency.
A Holder may elect to treat all interest that accrues on a Note as original
issue discount applying the constant yield method described above to accrue such
interest, with the modifications described below. For purposes of this election,
interest includes stated interest, original issue discount, de minimis original
issue discount, market discount, acquisition discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium
(described above) or acquisition premium.
In applying the constant yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
Holder's adjusted basis in the Note immediately after its acquisition, the issue
date of the Note will be the date of its acquisition by the electing Holder, and
no payments on the Note will be treated as payments of qualified stated
interest. This election will generally apply only to the Note with respect to
which it is made and may not be revoked without the consent of the IRS. If this
election is made with respect to a Note with amortizable bond premium, then the
electing Holder will be deemed to have elected to apply amortizable bond premium
against interest with respect to all debt instruments with amortizable bond
premium (other than debt instruments the interest on which is excludable from
gross income) held by such electing Holder as of the beginning of the taxable
year in which the Note with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the IRS.
If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Note that has market discount, as
described above, then the electing Holder will be treated as having made the
election discussed above under "Purchase, Sale, and Retirement of Notes" to
include market discount in income currently over the life of all debt
instruments held or thereafter acquired by such Holder.
Subsequent Interest Periods and Extensions of Maturity
If a reset of the interest rate, Spread and/or Spread Multiplier of a Note
(either alone or in conjunction with each other) by any Issuer or extension of
the maturity of a Note is treated as an exchange of such Note for a new Note,
then a United States person who is a Holder of such Note may recognize taxable
gain or loss (subject to characterization as capital gain or loss or ordinary
income or loss depending on the effect of the original issue discount, foreign
currency, or other rules described herein) equal to the difference between the
fair market value of such Note and the Holder's adjusted tax basis in such Note
at the time of the reset or extension. In such case, the Holder will have a tax
basis in a new Note equal to such fair market value. The tax consequences
described above with respect to the timing and character of income, gain or loss
would apply to the holding of the new Note. If, on the other hand, the interest
reset or maturity extension is not treated as an exchange, then a United States
person who is a Holder will not recognize gain or loss upon the reset or
extension, but the reset or extension may affect the timing, character, and
amount of income, gain or loss with respect to the subsequent holding period of
the Note. On June 26, 1996, final regulations were published in the Federal
Register which govern the resolution of the issue or whether an interest reset
or maturity extension would or would not result in an exchange.
NON-UNITED STATES PERSONS
Under the United States Federal tax laws as in effect on the date of this
Prospectus Supplement and subject to the discussion of backup withholding below,
payments of principal (and premium, if any) and interest, including original
issue discount, by any Issuer, the Guarantor or any agent of such Issuer or the
Guarantor (acting in its capacity as such) to any Holder of a Note who is not a
United States person will not be subject to United States Federal withholding
tax, provided, in the case of interest, including original issue discount, that
(i) such Holder does not actually or constructively own 10% or more of the
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total combined voting power of all classes of stock of such Issuer entitled to
vote, (ii) such Holder is not a controlled foreign corporation for United States
tax purposes that is related to such Issuer through stock ownership, (iii) the
Holder is not receiving interest ineligible for exemption from withholding by
reason of the application of Section 881(c)(3)(A) of the Code, (iv) the Holder
is not a foreign private foundation and (v) either (A) the beneficial owner of
the Note certifies to the last United States person (the "Withholding Agent") in
the chain of payment, under penalties of perjury, that he is a non-United States
person and provides his 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 such Note certifies to the Withholding Agent, under
penalties of perjury, that such statement has been received from the beneficial
owner by it or by another financial institution and furnishes the payor with a
copy thereof. Applicable regulations contain certain other requirements
regarding the timing, form, and maintenance by the Withholding Agent of the
certification described in the preceding sentence. Recently finalized
regulations would modify the certification requirements for payments of interest
made after December 31, 1998.
Notes issued by both of the Subsidiary Issuers will be considered debt of
the respective Subsidiary Issuer. Subject to the discussion below under "Backup
Withholding and Information Reporting", no United States withholding tax should
apply to payments of principal or interest on such Notes by either the
respective Subsidiary Issuer or the Guarantor.
Payments of certain types of contingent interest to a person who is not a
United States person may be subject to United States withholding tax equal to
30% of each such payment (or such lower amount as provided by treaty). The
applicable Pricing Supplement will state whether any Notes having contingent
payments will be subject to any U.S. withholding taxes.
If a Holder of a Note who is not a United States person is engaged in a
trade or business in the United States and interest, including original issue
discount, on the Note is effectively connected with the conduct of such trade or
business, such Holder, although exempt from the withholding tax discussed in the
preceding paragraph, may be subject to United States Federal income tax on such
interest, and original issue discount, in the same manner as if it were a United
States person. In addition, if such a Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments. For
purposes of the branch profits tax, interest (including original issue discount)
on a Note will be included in the earnings and profits of such Holder if such
interest (or original issue discount) is effectively connected with the conduct
by such Holder of a trade or business in the United States. In lieu of the
certificate described in the second preceding paragraph, such a Holder must
provide the payor with a properly executed Internal Revenue Service Form 4224 to
claim an exemption from United States Federal withholding tax. However, such a
Holder of a Note may still be required to provide the certification described in
the second preceding paragraph in order to obtain an exemption from "backup"
withholding, discussed below.
Any capital gain or market discount realized upon retirement or disposition
of a Note by a Holder who is not a United States person will not be subject to
United States Federal income or withholding taxes if (i) such gain is not
effectively connected with a United States trade or business of the Holder, and
(ii) in the case of an individual, such Holder is either (A) not present in the
United States for 183 days or more in the taxable year of the retirement or
disposition or (B) such individual does not have a "tax home" (as defined in the
Code) in the United States and the gain is not attributable to an office or
other fixed place of business maintained by such individual in the United
States.
Notes held by an individual who is neither a citizen nor a resident of the
United States for United States Federal income tax purposes at the time of such
individual's death will not be subject to United States Federal estate tax
provided that the income from such Notes was not or would not have been
effectively connected with a United States trade or business of such individual
and that such individual qualified for the exemption from United States Federal
withholding tax (without regard to the certification requirements) that is
described above.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
For each calendar year in which the Notes are outstanding, the payor of
interest (including original issue discount, if any), principal, premium, or the
proceeds of disposition to a Holder is required to provide the IRS with certain
information, including the Holder's name, address and taxpayer identification
number ("TIN") (either the Holder's Social Security number or its employer
identification number, as the case may be), the aggregate amount of principal,
interest (including original issue discount, if any), premium, or the proceeds
of disposition paid to that Holder during the calendar year and the amount of
tax withheld, if any. This obligation, however, does not apply with respect to
certain United States persons who are Holders, including corporations,
tax-exempt organizations, qualified pension and profit sharing trusts and
individual retirement accounts, but such entities may be required to establish
their status as such.
A "backup withholding" tax equal to 31% of each payment on the Notes will
apply to a United States person who is a Holder subject to the reporting
requirements described above if such Holder (i) fails to furnish his TIN or (ii)
under certain circumstances, fails to certify, under penalty of perjury, that he
has both furnished a correct TIN and not been notified by the IRS that he is
subject to backup withholding for failure to report interest and dividend
payments. Backup withholding will also apply if the payor is notified by the IRS
that the payee has failed to report properly a correct TIN or interest and
dividends earned by the payee. This backup withholding tax is not an additional
tax and may be credited against the United States person's United States Federal
income tax liability.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments made by any Issuer, the Guarantor or any
agent of such Issuer or the Guarantor (in its capacity as such) to a Holder of a
Note who is not a United States person if the Holder has provided required
certification that it is not a United States person as set forth in clause
(v)(A) in the first paragraph under "Non-United States Persons", or has
otherwise established an exemption (provided that none of such Issuer, the
Guarantor and such agent has actual knowledge that the Holder is a United States
person or that the conditions of any exemption are not in fact satisfied).
If such principal or interest is collected outside the United States by the
non-United States office of a foreign custodian, foreign nominee or other
foreign agent of the beneficial owner of a Note and is paid by such office
outside the United States to such owner, or if the non-United States office of a
foreign "broker" (as defined in the Treasury regulations) pays the proceeds of
the sale or exchange of a Note outside the United States to the seller thereof,
backup withholding and information reporting will not apply to such payment
(provided, except in the case of interest on a Note of a Subsidiary Issuer, that
such nominee, custodian, agent or broker derives less than 50% of its gross
income for certain specified periods from the conduct of a trade or business in
the United States and is not a controlled foreign corporation for United States
tax purposes). Except in the case of interest on a Note of a Subsidiary Issuer,
principal and interest so paid by the non-United States office of other
custodians, nominees or agents, or the payment by the foreign office of other
brokers of the proceeds of the sale or exchange of a Note will not be subject to
backup withholding, but will be subject to information reporting unless the
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner or seller is not or was not, as the case may be, a United
States person who is a Holder and certain conditions are met or the beneficial
owner or seller otherwise establishes an exemption. (Under current regulations,
interest on a Note of a Subsidiary Issuer paid outside the United States is not
subject to information reporting or backup withholding under any circumstances.
Under recently finalized regulations, which are generally effective for payments
of interest made after December 31, 1998, the information reporting requirements
with respect to such payments will be conformed to the existing rules applicable
to interest on a Note of the Company paid outside the United States as discussed
above.) Principal and interest on any Note paid by the United States office of a
custodian, nominee or agent, or the payment by the United States office of a
broker of the proceeds of a sale or exchange of a Note is subject to both backup
withholding and information reporting unless the beneficial owner or seller
certifies its non-United States person status under penalties of perjury or
otherwise establishes an exemption.
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Recently finalized regulations, which are generally effective for payments
of interest made after December 31, 1998, would modify the application of
information reporting requirements and the backup withholding tax to non-United
States persons. However, compliance with the certification procedures described
in the preceding section would generally continue the exemption (from
information reporting requirements and the backup withholding tax) for
non-United States persons who are exempt recipients.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by each Issuer through
the Agents, each of which has agreed to use its reasonable best efforts to
solicit purchases of the Notes. Unless otherwise specified in the applicable
Pricing Supplement, with respect to Notes with Maturity Dates of 30 years or
less from the date of issue, the Issuer thereof will pay each Agent a commission
(or grant a discount) ranging from .125% to .750% of the principal amount of
each Note, depending upon the Maturity Date, sold through such Agent. With
respect to Notes with a Maturity Date that is longer than 30 years from the date
of issue sold through any Agent, the rate of commission (or discount) will be
negotiated at the time of sale and will be specified in the applicable Pricing
Supplement.
The Notes also may be sold by any of the Issuers to any Agent, acting as
principal, at a discount for resale to one or more purchasers at varying prices
related to prevailing market prices at the time of resale, or, if set forth in
the applicable Pricing Supplement, the Agent may also resell such Notes at a
fixed public offering price, as determined by the Agent. In connection with any
resale of Notes purchased, an Agent may use a selling or dealer group and may
reallow any portion of the discount or commission payable pursuant thereto to
dealers or purchasers. After any initial public offering of Notes to be resold
to investors and other purchasers, the public offering price (in the case of
Notes to be resold at a fixed public offering price), the commission and
discount may be changed. Unless otherwise specified in the applicable Pricing
Supplement, any Note purchased by an Agent as principal will be purchased at
100% of the principal amount thereof less a percentage equal to the commission
(or discount) applicable to an agency sale of a Note of identical Maturity Date.
In addition, any of the Issuers may appoint additional agents for the purpose of
soliciting offers to purchase the Notes. Each such additional agent will solicit
purchasers of the Notes on a reasonable best efforts basis. Any of the Issuers
may also sell the Notes directly to, and may accept offers to purchase the Notes
from, investors on its own behalf in those jurisdictions where it is authorized
to do so. In the case of sales made directly by an Issuer, no commission will be
payable and no discount will be granted. The Issuers have agreed to reimburse
the Agents for certain of the Agents' expenses, and the Issuers contemplate that
they will enter into similar arrangements with any additional agents that they
subsequently appoint.
Each Issuer will have the sole right to accept offers to purchase Notes to
be issued by it and may reject any proposed purchase of Notes to be issued by it
in whole or in part. Each Agent (and each additional agent subsequently
appointed) will have the right, in its discretion reasonably exercised, to
reject in whole or in part any offer to purchase Notes received by such Agent.
Each Agent, as an agent or principal, and each additional agent
subsequently appointed by an Issuer, may be deemed to be an "underwriter" within
the meaning of the Securities Act of 1933. Each Issuer has agreed to indemnify
each Agent (and will agree to indemnify each additional agent that it
subsequently appoints) against certain liabilities, including liabilities under
the Securities Act of 1933, or to contribute to payments each Agent (or
additional agent) may be required to make in respect thereof.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. Each Agent and each subsequently
appointed agent may make a market in the Notes, but such Agent or agent is not
obligated to do so and may discontinue any marketmaking at any time without
notice. There can be no assurance of a secondary market for any Notes or that
the Notes will be sold.
In connection with the offering, the Agents may purchase and sell the Notes
in the open market. These transactions may include overallotment and stabilizing
transactions and purchases to cover short positions created by the Agents in
connection with the offering. The Agents also may impose a penalty
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<PAGE> 36
bid, whereby selling concessions allowed to broker-dealers in respect of the
securities sold in the offering may be reclaimed by the Agents if such Notes are
repurchased by the Agents in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Notes, which may be higher than the price that might otherwise prevail in the
open market, and these activities, if commenced, may be discontinued at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
In the ordinary course of their respective businesses, Goldman, Sachs & Co.
and affiliates, Lehman Brothers, Lehman Brothers Inc. and affiliates, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and affiliates, Morgan Stanley & Co.
Incorporated and affiliates, and Salomon Brothers Inc and affiliates have
engaged, and may in the future engage, in investment banking transactions with
each of the Issuers and its affiliates. In the ordinary course of its business,
J.P. Morgan Securities Inc. and affiliates have engaged, and may in the future
engage, in investment banking and commercial banking transactions with each of
the Issuers and its affiliates.
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PROSPECTUS
XEROX CORPORATION
XEROX OVERSEAS HOLDINGS PLC
IRREVOCABLY AND UNCONDITIONALLY GUARANTEED BY XEROX CORPORATION
RANK XEROX CAPITAL (EUROPE) PLC
IRREVOCABLY AND UNCONDITIONALLY GUARANTEED BY XEROX CORPORATION
DEBT SECURITIES
Any of Xerox Corporation, a New York corporation ("Xerox" or the
"Company"), Xerox Overseas Holdings PLC ("Xerox Overseas") and Rank Xerox
Capital (Europe) plc ("Xerox Capital") may from time to time issue debt
securities (the "Debt Securities") from which the applicable issuer will receive
proceeds of up to an aggregate of $2,250,000,000 (or the equivalent thereof in
one or more foreign denominated currencies or units consisting of multiple
currencies, including European Currency Units ("ECU")) and which will be offered
on terms to be determined at the time of sale. Xerox Overseas is a wholly-owned
subsidiary of Xerox, and Xerox Capital is a wholly-owned subsidiary of Rank
Xerox Limited, which in turn is a wholly-owned subsidiary of Xerox. Both Xerox
Overseas and Xerox Capital are public limited companies organized under the laws
of England and Wales. Xerox Overseas and Xerox Capital are collectively referred
to herein as the "Subsidiary Issuers" and, Xerox, in its capacity as an issuer,
and the Subsidiary Issuers are collectively referred to herein as the "Issuers".
The Debt Securities may be issued in one or more series with the same or various
maturities at par or with an original issue discount and may be issued as
individual securities in registered form without coupons or as one or more
global securities in registered form (each a "Global Security"). The purchase
price for the principal of and any premium and any interest on the Debt
Securities may be payable in U.S. dollars or in one or more foreign denominated
currencies or currency units.
The specific title, aggregate principal amount, designated currency or
currency units, offering price, maturity, rate (which may be fixed or variable)
or method of calculating interest and time of any payment of interest (if any),
the currency or currency units in which payments of Debt Securities may be made,
any right on the part of the holders of Debt Securities to require the
repurchase thereof by the applicable Issuer, any redemption, prepayment, sinking
fund and other terms and any securities exchange listing of Debt Securities (the
"Offered Debt Securities") in respect of which this Prospectus is being
delivered will be set forth in a supplement to this Prospectus (the "Prospectus
Supplement") together with the terms of the offering. The Prospectus Supplement
will also contain information where applicable about material United States
Federal income tax considerations relating to the Debt Securities covered by
such Prospectus Supplement.
The Debt Securities offered by the Company are unsecured and will rank pari
passu with all other unsecured and unsubordinated debt of the Company. The Debt
Securities offered by the Subsidiary Issuers will be irrevocably and
unconditionally guaranteed (the "Guarantees") by the Company (in such capacity,
the "Guarantor"), and the Guarantees will rank pari passu with all other
unsecured and unsubordinated debt of the Company.
The Issuers may sell the Offered Debt Securities in any one or more of the
following ways: (1) directly to investors, (2) to investors through agents, (3)
to broker-dealers as principals, (4) through underwriting syndicates led by one
or more managing underwriters as the applicable Issuer may select from time to
time, or (5) through one or more underwriters acting alone. If any underwriters,
agents or dealers are involved in the sale of the Offered Debt Securities, their
names and any applicable fee, commission or discount arrangements with them will
be set forth in the Prospectus Supplement. See "Plan of Distribution".
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED DEBT
SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------------------
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 September 26, 1997.
<PAGE> 38
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street
N.W. (Room 1024), Judiciary Plaza, Washington, D.C. 20549, as well as at the
Regional Offices of the Commission located at Northwestern Atrium Center, 500
West Madison Street (Suite 1400), Chicago, Illinois 60661; and Seven World Trade
Center (13th Floor), New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission
at http://www.sec.gov. Such reports, proxy statements and other information
concerning the Company also 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 LaSalle Street, Chicago, Illinois
60603. This Prospectus does not contain all the information set forth in the
Registration Statement and Exhibits thereto which the Issuers have filed with
the Commission under the Securities Act of 1933 and to which reference is hereby
made.
The Company, on behalf of the Subsidiary Issuers, and each Subsidiary
Issuer intend to make application to the Commission for an order of the
Commission exempting each Subsidiary Issuer from the reporting requirements of
the Exchange Act. If such order is granted, or the Commission otherwise grants
relief to the Subsidiary Issuers from such reporting requirements, neither of
the Subsidiary Issuers will be subject to the reporting requirements of the
Exchange Act. Subject to Commission relief, the Company intends to include in
its audited consolidated financial statements separate financial information
with respect to Xerox Overseas, but does not intend to include in its
consolidated financial statements any separate financial information with
respect to Xerox Capital. In addition, in view of the Guarantees of the Debt
Securities of the Subsidiary Issuers given by the Company, neither of the
Subsidiary Issuers intends to furnish to holders of its Debt Securities separate
financial statements or other reports.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents filed
with the Commission (File No. 1-4471) by the Company pursuant to the Exchange
Act:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1996, as amended;
(2) Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1997, as amended, and June 30, 1997; and
(3) Current Reports on Form 8-K dated January 22, 1997, April 7, 1997,
May 19, 1997, June 6, 1997, June 30, 1997, August 1, 1997,
September 18, 1997 and October 9, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
(other than the information required by paragraphs (k) and (l) of sec.229.402 of
Regulation S-K) or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offerings of the Debt Securities
offered hereby shall be deemed to be incorporated by reference into this
Prospectus. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, including any beneficial owner, upon written or oral
request of such person, a copy of any or all of the foregoing documents
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference in such documents).
Requests should be directed to The Customer Service Unit of State Street Bank
and Trust Company, Two International Place, Boston, Massachusetts 02110,
telephone: (617) 664-5750.
2
<PAGE> 39
THE COMPANY
Xerox 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 solutions that enhance productivity. References herein to
"Xerox" refer to Xerox and consolidated subsidiaries unless the context
specifically requires otherwise. Xerox 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, Xerox
distributes through Rank Xerox Limited and related companies ("Xerox Limited").
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 Xerox Limited.
In June 1997, Xerox acquired the remaining 20 percent of Xerox Limited from
The Rank Group Plc ("Rank Group") in a transaction valued at 940 million pounds
sterling, or approximately $1.5 billion. As a result of this transaction, Xerox
now owns 100 percent of Xerox Limited. The transaction was funded entirely by
debt consisting of 500 million pounds sterling of third party debt and 440
million pounds sterling of notes payable issued to Rank Group, which will be
paid in deferred installments, half within one year and the other half at the
end of two years. An additional payment of up to 60 million pounds sterling
would be made in 2000 based upon achievement of certain Xerox Limited earnings
growth targets by 1999.
Beginning in 1995, the results of Xerox' Insurance operations were
accounted for as discontinued operations. The Document Processing business is
now the only component of continuing operations.
Xerox' 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 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 ("XCC") in the United States and internationally by foreign
financing subsidiaries and divisions in most countries that Xerox operates.
Document Processing operations employed 86,700 people worldwide at year-end
1996.
XEROX OVERSEAS
Xerox Overseas was organized as a private limited company on November 7,
1996 under the name of 2032nd Single Member Shelf Investment Company Limited
pursuant to the Companies Act 1985 of England and Wales. Its name was
subsequently changed on June 10, 1997 to Xerox Overseas Holdings Limited, and on
June 13, 1997 it was re-registered as a public company under the name Xerox
Overseas Holdings Public Limited Company. Its principal executive offices are
located at Parkway, Marlow, Buckinghamshire 5L7 1YL, England, and the telephone
number at such address is 44-1-628-89-0000. Xerox Overseas is a wholly-owned
subsidiary of the Company. Xerox Overseas is the majority shareholder of Xerox
Limited and also owns 100 percent of those companies of Rank Group which were
acquired in June 1997. See "The Company". Xerox Overseas may undertake
borrowings on behalf of the Company and certain of its subsidiaries and advance
the proceeds of such borrowings to the Company and certain of its subsidiaries.
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES
Some of the directors and executive officers of Xerox Overseas (and certain
of the experts named herein) are citizens or residents of jurisdictions other
than the United States. All or a substantial portion of the assets of such
directors, executive officers and experts residing outside of the United States
and all of the assets of Xerox Overseas are or may be located outside the United
States. As a result, it may not be possible to effect service of process on such
directors, executive officers or experts or Xerox Overseas in the United States
or to enforce, collect or realize, in United States courts, upon judgments that
may be
3
<PAGE> 40
obtained against such persons in United States courts and predicated upon civil
liability under United States securities laws. The Company and Xerox Overseas
have been advised by Lovell White Durrant, special English counsel to the
Company and Xerox Overseas, that there is doubt as to the enforceability in
England and Wales, in original actions or actions for the enforcement of
judgments of United States courts, of civil liabilities predicated solely on
United States Federal securities laws. The indenture pursuant to which the Debt
Securities will be issued will provide that Xerox Overseas will appoint the
Company as its agent for service of process in any suit, action or proceeding
with respect to such indenture brought under Federal or state securities laws in
any Federal or state court located in The City of New York, and will submit to
such jurisdiction.
XEROX CAPITAL
Xerox Capital was organized as a public limited company on June 20, 1995
under the name of Timedfuture Plc pursuant to the Companies Act 1985 of England
and Wales. Its name was subsequently changed on November 28, 1995 to Rank Xerox
Capital (Europe) plc and its principal executive offices are located at Parkway,
Marlow, Buckinghamshire, SL7 1YL, England, and the telephone number at such
address is 44-1-628-89-0000. Xerox Capital is a wholly-owned subsidiary of Rank
Xerox Limited, a private limited company incorporated under the laws of England
and Wales and a wholly-owned subsidiary of the Company. The purpose of Xerox
Capital is to undertake borrowings on behalf of the Company and certain of its
subsidiaries and to advance the proceeds of such borrowings to the Company and
certain of its subsidiaries.
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES
Some of the directors of Xerox Capital (and certain of the experts named
herein) are citizens or residents of jurisdictions other than the United States.
All or a substantial portion of the assets of such directors, executive officers
and experts reading outside of the United States and all of the assets of Xerox
Capital are or may be located outside the United States. As a result, it may not
be possible to effect service of process on such directors, executive officers
or experts or Xerox Capital in the United states or to enforce, collect or
realize, in United States courts, upon judgments that may be obtained against
such persons in United States courts and predicated upon civil liability under
United States securities laws. The Company and Xerox Capital have been advised
by Lovell White Durrant, special English counsel to the Company and Xerox
Capital, that there is doubt as to the enforceability in England and Wales in
original actions or actions for the enforcement of judgments of United States
courts, of civil liabilities predicated solely on United States Federal
securities laws. The indenture pursuant to which the Debt Securities will be
issued will provide that Xerox Capital will appoint the Company as its agent for
service of process in any suit, action or proceeding with respect to such
indenture brought under Federal or state securities laws in any Federal or state
court located in The City of New York, and will submit to such jurisdiction.
Xerox Capital, Xerox Overseas and Rank Xerox Limited are proposing to enter
into an Amended and Restated Subscription Agreement (the "Subscription
Agreement") which, when executed, will amend and restate an existing amended and
restated subscription agreement dated as of April 18, 1997 between Rank Xerox
Limited and Xerox Capital (the "Original Subscription Agreement"). Pursuant to
the Subscription Agreement, Rank Xerox Limited or, if Xerox Capital shall at the
relevant time have become a majority-owned subsidiary of Xerox Overseas, Xerox
Overseas will agree, on written demand by Xerox Capital, to subscribe for
additional shares in the share capital of Xerox Capital and to pay in cash to
Xerox Capital in exchange therefor an amount equal to the Required Amount, which
is 25 percent of Xerox Capital's then outstanding indebtedness (excluding
contingent liabilities). In addition, if at any time after Xerox Capital has
served a first demand under the Subscription Agreement, the Shareholding, which
is an amount equal to the par value, together with any premium, of Rank Xerox
Limited's or Xerox Overseas', as the case may be, shareholding in Xerox Capital,
shall be less than the Required Amount, Rank Xerox Limited or, if Xerox Capital
at the relevant time shall have become a majority-owned subsidiary of Xerox
Overseas, Xerox Overseas, will agree, upon written demand by Xerox Capital, to
4
<PAGE> 41
subscribe and pay in cash for further shares of Xerox Capital in an amount equal
to the difference between the Required Amount and the Shareholding. In the
indenture pursuant to which any Debt Securities of Xerox Capital will be issued,
Xerox Capital has agreed that, in the event of a default by Xerox Capital in the
performance of its obligations to pay the principal of, premium, if any, and
interest, if any, on any such Debt Securities, any Holder of such Debt
Securities shall be entitled to serve upon Xerox Capital a demand requiring it
to serve a written demand on Rank Xerox Limited or, if the Subscription
Agreement shall have been executed and if Xerox Capital shall then have become a
majority-owned subsidiary of Xerox Overseas, Xerox Overseas for the subscription
of additional shares in the share capital of Xerox Capital in accordance with
and subject to the provisions of the Subscription Agreement (or, prior to
execution thereof, the Original Subscription Agreement). The Original
Subscription Agreement and (following the execution thereof) the Subscription
Agreement may be inspected during normal business hours at the principal
executive office of Xerox Capital. The obligations of Rank Xerox Limited and
Xerox Overseas under the Original Subscription Agreement and the Subscription
Agreement are and will be unsecured, and Rank Xerox Limited is not subject to
any restrictive covenants thereunder. The Original Subscription Agreement and
the Subscription Agreement are and will be governed by English Law.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
net proceeds from the sale of the Debt Securities will be added to the general
funds of the Issuers and their subsidiaries and will be used for general
corporate purposes and for the financing or refinancing of any indebtedness
incurred in connection with the acquisition of Rank Group's remaining 20 percent
financial interest in Xerox Limited. See "The Company". The approximate amount
of such net proceeds will be specified in the applicable Prospectus Supplement
and will depend upon the type, aggregate principal amount and initial offering
price of the particular series of Debt Securities to be determined at the time
of sale.
RATIO OF EARNINGS TO FIXED CHARGES OF THE COMPANY
The following table shows the ratio of earnings to fixed charges of the
Company for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------ ---------------------------------
1997 1996 1996 1995 1994 1993* 1992
---- ---- ---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)(2)..... 3.44 3.28 3.71 3.54 3.23 0.66 2.34
</TABLE>
- ---------------
(1) The ratio of earnings to fixed charges has been computed based on the
Company'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, one-third of
rent expense as representative of the interest portion of rentals, and
preferred stock dividend requirements of subsidiaries. Debt has been
assigned to discontinued operations based on historical levels assigned to
the businesses when they were continuing operations, adjusted for subsequent
paydowns. Discontinued operations consist of the Company's Insurance and
Other Financial Services businesses and its real-estate development and
third-party financing businesses.
(2) The Company's ratio of earnings to fixed charges includes the effect of the
Company'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.
* 1993 earnings were inadequate to cover fixed charges. The coverage
deficiency was $249 million.
5
<PAGE> 42
DESCRIPTION OF THE DEBT SECURITIES AND THE GUARANTEES
The following description of the terms of the Debt Securities and the
Guarantees sets forth certain general terms and provisions of the Debt
Securities and Guarantees to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities and Guarantees offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply to
the Debt Securities and Guarantees will be described in the Prospectus
Supplement relating to such Debt Securities and Guarantees. Accordingly, for a
description of the terms of a particular issue of Debt Securities, reference
must be made to both the Prospectus Supplement relating thereto and to the
following description.
The Debt Securities and Guarantees will be issued in one or more series
under an Indenture dated as of October 4, 1997, among the Company, the
Subsidiary Issuers and Citibank, N.A., as Trustee (the "Trustee") (as may be
amended, supplemented or modified from time to time, the "Indenture"). A copy of
the Indenture is filed as an exhibit to the Registration Statement. The
following summaries of certain provisions of the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture and the provisions of the Trust
Indenture Act of 1939, as amended (the "TIA"). Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Indenture.
References in parentheticals below to sections or articles are to Sections or
Articles of the Indenture.
The Indenture does not contain any covenants or provisions which may afford
holders of Debt Securities protection in the event of a highly leveraged
transaction by any of the Issuers. No such transaction is contemplated.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder. The Debt Securities may be issued in
one or more series as may be authorized from time to time by the applicable
Issuer. The Company will irrevocably and unconditionally guarantee payments of
principal, premium, if any, and interest, if any, with respect to Debt
Securities issued by the Subsidiary Issuers. Reference is made to the applicable
Prospectus Supplement for the following terms of the Debt Securities: (1) the
title and aggregate principal amount of such Debt Securities; (2) the percentage
or percentages of their principal amount at which such Debt Securities will be
issued; (3) the date or dates on which such Debt Securities will mature; (4) the
rate or rates (which may be fixed or variable) or the method of determination
thereof, at which such Debt Securities will bear interest, if any; (5) the dates
on which such interest, if any, shall accrue or the method by which such dates
shall be determined and the dates on which such interest, if any, will be
payable; (6) the terms for redemption or early repayment, if any; (7) the
denominations in which such Debt Securities are authorized to be issued; (8)
whether such Debt Securities are issuable in registered and/or bearer form; (9)
whether such Debt Securities are to be issued as Discount Securities (as defined
below) and the amount of discount with which such Debt Securities will be
issued; (10) whether such Debt Securities are to be issued in whole or in part
in the form of one or more Global Securities and, if so, the identity of the
Depositary (as defined below) for such Global Security or Securities; (11) if a
temporary Debt Security is to be issued with respect to such series, whether any
interest thereon payable on an Interest Payment Date prior to the issuance of a
definitive Debt Security of the series will be credited to the account of the
Persons entitled thereto on such Interest Payment Date; (12) if a temporary
Global Security is to be issued with respect to such series, the terms upon
which beneficial interests in such temporary Global Security may be exchanged in
whole or in part for beneficial Interests in a definitive Global Security or for
individual Debt Securities of the series and the terms upon which beneficial
interests in a definitive Global Security, if any, may be exchanged for
individual Debt Securities of the series; (13) the currency, currencies or
currency units in which the purchase price for, the principal of and any premium
and any interest on, the Debt Securities may be payable; (14) if the currency,
currencies or currency units in which the purchase price for, the principal of
and any premium and any interest on, the Debt Securities may be payable is at
the purchaser's election, the time period within which, and the manner in which
and the terms and conditions upon which such election may be made; (15) the
securities exchange or exchanges, if any, on which the
6
<PAGE> 43
Debt Securities will be listed; (16) whether any underwriter(s) will act as
market maker(s) for the Debt Securities; (17) if the Debt Securities are listed
on a securities exchange and no underwriter(s) intends to make a market in the
Debt Securities, the nature of the exchange market for the Debt Securities; (18)
if the Debt Securities are not listed on a securities exchange, the extent to
which a secondary market is expected to develop; (19) any addition to or change
in the Events of Default with respect to the Debt Securities and any change in
the right of the Trustee or the holders to declare the principal, premium and
interest with respect to such Debt Securities due and payable; (20) Debt
Securities issued by a Subsidiary Issuer will be entitled to the benefits of the
Guarantees afforded by the Indenture, or any other form of Guarantee to be
endorsed on the Debt Securities; and (21) any additional terms (which terms
shall not be inconsistent with the provisions of the Indenture).
One or more series of Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates ("Discount Securities"). One
or more series of Debt Securities may be variable rate debt securities that may
be exchanged for fixed rate Debt Securities. Federal income tax consequences and
special considerations applicable to any such series will be described in the
Prospectus Supplement relating thereto.
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest, if any,
payable on an interest payment date, to be determined by reference to one or
more currency exchange rates, commodity prices, equity indices or other factors.
Holders of such Debt Securities may receive a principal amount on any principal
date, or a payment of interest, if any, on any interest payment date, that is
greater than or less than the amount of principal or interest otherwise payable
on such dates, depending upon the value on such dates of the applicable
currencies, commodities, equity indices or other factors. Information as to the
methods for determining the amount of principal or interest, if any, payable on
any date, the currencies, commodities, equity indices or other factors to which
the amount payable on such date is linked and certain additional Federal income
tax considerations will be set forth in the Prospectus Supplement relating
thereto.
As used herein, the term Debt Securities shall include Debt Securities
denominated in U.S. dollars or, at the option of the applicable Issuer if so
specified in the applicable Prospectus Supplement, in any other freely
transferable currency or units based on or relating to foreign currencies,
including ECU.
If a Prospectus Supplement specifies that Debt Securities are denominated
in a currency or currency unit other than U.S. dollars, such Prospectus
Supplement shall also specify the denominations in which such Debt Securities
will be issued and the coin or currency in which the principal, premium, if any,
and interest, if any, on such Debt Securities, will be payable, which may be
U.S. dollars based upon the exchange rate for such other currency existing on or
about the time a payment is due.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued in fully registered form without coupons and in
denominations of $1,000 and any integral multiple thereof. (Section 3.02)
Subject to the limitations provided in the Indenture and in the Prospectus
Supplement relating thereto, Debt Securities which are issued in registered form
may be transferred or exchanged at the office of the transfer agent maintained
in the Borough of Manhattan, The City of New York or the Principal Corporate
Trust Office of the Trustee, without the payment of any service charge, other
than any tax or other governmental charge payable in connection therewith.
(Section 3.05)
GUARANTEES
The Company will irrevocably and unconditionally guarantee to each Holder
of Debt Securities issued by a Subsidiary Issuer the due and punctual payment of
the principal of, and any premium and interest on, such Debt Securities, when
and as the same shall become due and payable, whether at maturity, upon
acceleration or otherwise. The Company has (a) agreed that its obligations under
the Guarantees upon the occurrence and continuance of an Event of Default will
be as if it were principal obligor and not merely surety, and will be
enforceable irrespective of any invalidity, irregularity or unenforceability of
any series of the Debt Securities or the Indenture and (b) waived its right to
require the Trustee or the
7
<PAGE> 44
Holders of Debt Securities to pursue or exhaust their legal or equitable
remedies against the applicable Subsidiary Issuer prior to exercising their
rights under the Guarantees.
With respect to any Debt Securities issued by Xerox Capital, in the event
of a default by Xerox Capital in the performance of its obligations to pay the
principal of, premium, if any, and interest, if any, on any such Debt
Securities, any Holder of such Debt Securities shall be entitled to serve upon
Xerox Capital a demand and upon receipt Xerox Capital shall, if and to the
extent that it shall have rights to call for the subscription of further shares
under the Original Subscription Agreement, serve upon Rank Xerox Limited, or if
the Subscription Agreement shall then have been executed, serve upon Rank Xerox
Limited or, if Xerox Capital shall then have become a majority-owned subsidiary
of Xerox Overseas, Xerox Overseas, a written demand for the subscription of
additional shares in the share capital of Xerox Capital pursuant to and subject
to the provisions of the Original Subscription Agreement or the Subscription
Agreement, as the case may be.
RANKING
The Debt Securities issued by the Company and the Guarantees will be
unsecured obligations of the Company, and will rank pari passu with all other
unsecured and unsubordinated debt of the Company. The Debt Securities issued by
a Subsidiary Issuer will be unsecured obligations of such Subsidiary Issuer, and
will rank pari passu with all other unsecured and unsubordinated debt of such
Subsidiary Issuer.
GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, the
following provisions will apply to Debt Securities issued by the Issuers.
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Global Securities will be issued in registered form and
in either temporary or definitive form. Unless and until it is exchanged in
whole or in part for the individual Debt Securities represented thereby, a
Global Security may not be transferred except as a whole by the Depositary for
such Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of such Depositary or a nominee of
such successor. (Sections 3.01, 3.03 and 3.05)
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series and the rights of and limitations upon owners of
beneficial interests in a Global Security representing a series of Debt
Securities will be described in the Prospectus Supplement relating to such
series. The Issuers anticipate that the following provisions will generally
apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary. Such accounts shall be designated by the dealers,
underwriters or agents with respect to such Debt Securities or by the Company if
such Debt Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to persons that have
accounts with the applicable Depositary ("participants") or persons that may
hold interests through participants. Ownership of beneficial interests in such
Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants). The
laws of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or
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holder of the Debt Securities represented by such Global Security for all
purposes under the Indenture governing such Debt Securities. Except as provided
below, owners of beneficial interests in a Global Security will not be entitled
to have any of the individual Debt Securities of the series represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture governing such Debt Securities.
Payments of principal, premium, if any, and interest, if any, on individual
Debt Securities represented by a Global Security registered in the name of a
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner of the Global Security representing such
Debt Securities. None of the Issuers, the Trustee for such Debt Securities, any
paying agent (a "Paying Agent"), or the Registrar for such Debt Securities will
have any responsibility or liability for any aspect of the records relating to
or payments made by the Depositary or any participants on account of beneficial
ownership interests of the Global Security for such Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Issuers expect that the Depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security representing any of such Debt Securities,
immediately will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security for such Debt Securities as shown on the records of such
Depositary or its nominee. The Issuers also expect that payments by participants
to owners of beneficial interests in such Global Security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name". Such payments will be the responsibility of
such participants.
If the Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the applicable Issuer within 90 days, such Issuer will issue
definitive Debt Securities of such series in exchange for the Global Security or
Securities representing such series of Debt Securities. In addition, the
applicable Issuer may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities, determine not to have any Debt Securities of a series represented by
one or more Global Securities, and, in such event, will issue definitive Debt
Securities of such series in exchange for the Global Security or Securities
representing such series of Debt Securities. Further, if the applicable Issuer
so specifies with respect to the Debt Securities of a series, an owner of a
beneficial interest in a Global Security representing Debt Securities of such
series may, on terms acceptable to such Issuer, the Trustee, and the Depositary
for such Global Security, receive definitive Debt Securities of such series in
exchange for such beneficial interests, subject to any limitations described in
the Prospectus Supplement relating to such Debt Securities. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery of definitive Debt Securities of the series
represented by such Global Security equal in principal amount to such beneficial
interest and to have such Debt Securities registered in its name. Definitive
Debt Securities of such series so issued will be issued in denominations, unless
otherwise specified by the applicable Issuer, of $1,000 and integral multiples
thereof.
COVENANTS
Limitations on Liens. So long as any of the Debt Securities of any Issuer
are outstanding, the Company will not create or suffer to exist, or permit any
of its Restricted Subsidiaries to create or suffer to exist, any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement, upon or with respect to any of its properties (other than "margin
stock" as that term is defined in Regulation U issued by the Board of Governors
of the Federal Reserve System), whether now owned or hereafter acquired, or
assign, or permit any of its Restricted Subsidiaries to assign, any right to
receive income, in each case to secure any Debt without making effective
provision whereby all of the Debt Securities of each series (together with, if
the Company shall so determine, any other Debt of the Company or such Restricted
Subsidiary then existing or thereafter created which is not subordinate to the
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Debt Securities) shall be equally and ratably secured with the indebtedness or
obligations secured by such security; provided, however, that the Company or its
Restricted Subsidiaries may create or suffer to exist any lien, security
interest, charge, encumbrance or preferential arrangement of any kind in, of or
upon any of the properties or assets of the Company or its Restricted
Subsidiaries to secure any Debt or Debts in an aggregate amount at any time
outstanding not greater than 20% of the Consolidated Net Worth of the Company;
and provided, further, that the foregoing restrictions shall not apply to any of
the following: (1) deposits, liens or pledges arising sin the ordinary course of
business to enable the Company or any of its Restricted Subsidiaries to exercise
any privilege or license or to secure payments of workers' compensation or
unemployment insurance, or to secure the performance of bids, tenders, contracts
(other than for the payment of money) or statutory landlords' liens or to secure
public or statutory obligations or surety, stay or appeal bonds, or other
similar deposits or pledges made in the ordinary course of business; (2) liens
imposed by law or other similar liens, if arising in the ordinary course of
business, such as mechanic's, materialman's, workman's, repairman's or carrier's
liens, or deposits or pledges in the ordinary course of business to obtain the
release of such liens; (3) liens arising out of judgments or awards against the
Company or any of its Restricted Subsidiaries in an aggregate amount not to
exceed the greater of (a) 15% of the Consolidated Net Worth of the Company or
(b) the minimum amount which, if subtracted from such Consolidated Net Worth,
would reduce such Consolidated Net Worth below $3.2 billion and, in each case,
with respect to which the Company or such Restricted Subsidiary shall in good
faith be prosecuting an appeal or proceedings for review, or liens for the
purpose of obtaining a stay or discharge in the course of any legal proceedings;
(4) liens for taxes if such taxes are not delinquent or thereafter can be paid
without penalty, or are being contested in good faith by appropriate
proceedings, or minor survey exceptions or minor encumbrances, easements or
restrictions which do not in the aggregate materially detract from the value of
the property so encumbered or restricted or materially impair their use in the
operation of the business of the Company or any Restricted Subsidiary owning
such property; (5) liens in favor of any government or department or agency
thereof or in favor of a prime contractor under a government contract and
resulting from the acceptance of progress or partial payments under government
contracts or subcontracts thereunder; (6) liens, security interests, charges,
encumbrances, preferential arrangements and assignments of income existing on
the date of the Indenture; (7) purchase money liens or security interests in
property acquired or held by the Company or any Restricted Subsidiary in the
ordinary course of business to secure the purchase price thereof or indebtedness
incurred to finance the acquisition thereof; (8) liens or security interests
existing on property at the time of its acquisition; (9) the rights of XCC
relating to a certain reserve account established pursuant to an operating
agreement dated as of November 1, 1980, between the Company and XCC; (10) the
replacement, extension or renewal of any of the foregoing and (11) liens on any
assets of any Restricted Subsidiary of up to $500,000,000 incurred in connection
with the sale or assignment of assets of such Restricted Subsidiary for cash
where the proceeds are applied to repayment of Debt of such Restricted
Subsidiary and/or invested by such Restricted Subsidiary in assets which would
be reflected as receivables on the balance sheet of such Restricted Subsidiary.
(Section 5.06)
"Consolidated Net Worth" means, at any time, as to a given entity, (a) the
sum of the amounts appearing on the latest consolidated balance sheet of such
entity and its Subsidiaries, prepared in accordance with generally accepted
accounting principles consistently applied, as (i) the par or stated value of
all outstanding capital stock (including preferred stock), (ii) capital paid-in
and earned surplus or earnings retained in the business plus or minus cumulative
translation adjustments, (iii) any unappropriated surplus reserves, (iv) any net
unrealized appreciation of equity investments, and (v) minorities' interests in
equity of subsidiaries, less (b) treasury stock, plus (c) in the case of the
Company, $600,000,000.
"Debt" means (i) indebtedness for borrowed money or for the deferred
purchase price of property or services (excluding trade accounts payable
incurred in the ordinary course with a maturity of not greater than 90 days),
(ii) obligations as lessee under capital leases, (iii) obligations under direct
or indirect guaranties in respect of, and obligations (contingent or otherwise)
to purchase or otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others
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of the kinds referred to in clause (i) or (ii) (excluding obligations of the
Company from time to time under (1) a certain support agreement between the
Company and XCC, and (2) a certain support agreement between Xerox Canada Inc.
and Xerox Canada Finance Inc.), and (iv) the amount of unfunded benefit
liabilities, as defined in Section 4001 (a)(18) of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and any successor
statute or statute, under plans covered by Title IV thereof.
"Restricted Subsidiary" means any consolidated Subsidiary of the Company
from time to time having a Consolidated Net Worth of at least $100 million;
provided, however, that "Restricted Subsidiary" does not include Xerox Financial
Services, Inc., XCC and any other corporation principally engaged in any
business or businesses other than development, manufacture and/or marketing of
(x) business equipment (including, without limitation, reprographic, computer
(including software) and facsimile equipment), (y) merchandise or (z) services
(other than financial services). At the date hereof, the Company has the
following Restricted Subsidiaries: (i) Lyell Holdings Limited, (ii) Rank Xerox
Limited, (iii) Rank Xerox Holding B.V., (iv) Rank Xerox Manufacturing
(Nederland) B.V., (v) Xerox do Brazil Ltda., (vi) Xerox Canada Inc., (vii) Xerox
Canada Ltd., and (viii) Xerox Mexicana S.A. de C.V. The Company intends to
change the names of Rank Xerox Limited, Rank Xerox Holding B.V. and Rank Xerox
Manufacturing (Nederland) B.V. to Xerox Limited, Xerox Holding B.V. and Xerox
Manufacturing (Nederland) B.V., respectively, or to other names which denote the
nonaffiliation of Rank Group in such companies.
"Subsidiary" means, as to any entity, any corporation of which more than
50% of the outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation is at the time directly
or indirectly owned by such entity.
Consolidation, Merger or Sale of Assets of the Company. The Company shall
not consolidate with or merge into any other corporation or sell its assets
substantially as an entirety, unless (1) the corporation formed by such
consolidation or into which the Company is merged or the corporation which
acquires its assets is organized in the United States and expressly assumes the
due and punctual payment of the principal of, premium, if any, and interest, if
any, on all the Debt Securities of the Company and the Guarantees and the
performance of every covenant of the Indenture on the part of the Company to be
performed or observed and (2) immediately after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time, or both, would become an Event of Default, shall have occurred and be
continuing. (Section 10.01) Upon any such consolidation, merger or sale, the
successor corporation formed by such consolidation or into which the Company is
merged or to which such sale is made shall succeed to and be substituted for the
Company under the Indenture. (Section 10.02)
Consolidation, Merger or Sale of Assets of Subsidiary Issuers. Neither of
the Subsidiary Issuers shall consolidate with or merge into any other
corporation or sell its assets substantially as an entirety, unless (1) the
corporation formed by such consolidation or into which such Subsidiary Issuer is
merged or the corporation which acquires its assets is organized in the United
States or in England and Wales and expressly assumes the due and punctual
payment of the principal of, premium, if any, and interest, if any, on all the
Debt Securities of such Subsidiary Issuer and the performance of every covenant
of the Indenture on the part of such Subsidiary Issuer to be performed or
observed and (2) immediately after giving effect to such transaction, no Event
of Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have occurred and be continuing. (Section
10.02) Notwithstanding the foregoing, any Subsidiary Issuer shall be entitled at
any time to sell, transfer or assign all or any part of its assets for fair
value or grant any interest therein to any person or persons in accordance with
any Securitization in relation to such assets (whether or not by such Subsidiary
Issuer or any of its subsidiaries) and to enter into any arrangements in
connection therewith. (Section 10.02) Upon any such consolidation, merger or
sale, the successor corporation formed by such consolidation, or into which any
such Subsidiary Issuer is merged or to which such sale is made shall succeed to
and be substituted for such Subsidiary Issuer under the Indenture. (Section
10.03)
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For the purposes of the immediately preceding paragraph, "Securitization"
means any financing (whether or not by any Subsidiary Issuer, involving the
transfer, assignment or charging for fair value of lease, trade and/or finance
receivables and whether or not involving the issue of securities) where payments
of principal and interest thereunder are derived principally either directly or
after conversion through one or more interest rate and/or currency swap
agreements from moneys receivable (for a fair value) under or in connection with
such lease, trade and/or finance receivables and where the proceeds of such
financing are applied in repayment of debt and/or invested in assets.
ASSIGNMENT
The Indenture provides that for so long as any of the Debt Securities of a
Subsidiary Issuer are outstanding, such Subsidiary Issuer may assign its
obligations under any series of Debt Securities to any other subsidiary of the
Company (the "Subsidiary Assignee") and such Subsidiary Assignee shall be
treated as the successor to such Subsidiary Issuer with respect to such series
of Debt Securities; provided, that the conditions set forth under
"Consolidation, Merger or Sale of Assets of Xerox Overseas" or "Consolidation,
Merger or Sale of Assets of Xerox Capital" above, as applicable, that would
apply to the merger of such Subsidiary Issuer into such Subsidiary Assignee are
satisfied.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein in
respect of any series of Debt Securities of an Issuer or any Guarantees thereof
shall have happened and be continuing, either the Trustee or the Holders of not
less than 25% in principal amount of the outstanding Debt Securities of such
series of such Issuer may declare the principal amount (or a portion thereof in
the case of certain Debt Securities of such Issuer issued with an original issue
discount) of all the Debt Securities of such series of such Issuer to be
immediately due and payable. (Section 7.02)
Events of Default in respect of any series of Debt Securities of an Issuer
or any Guarantees thereof are defined in the Indenture as being: default for 30
days in payment of any interest installment when due; default in payment of
principal of or premium, if any, (including accrued original issue discount, in
the case of certain Debt Securities of such Issuer issued with original issue
discount) on, or any sinking fund installment or analogous obligation with
respect to, Debt Securities of such series of such Issuer when due; default for
90 days after notice to such Issuer or the Guarantor by the Trustee or by the
holders of at least 25% in principal amount of the outstanding Debt Securities
of such series of such Issuer in performance of any covenant in such Indenture
in respect of the Debt Securities of such series of such Issuer; certain events
of bankruptcy, insolvency and reorganization involving such Issuer or the
Guarantor; and any other Event of Default provided for with respect to the Debt
Securities of such series of such Issuer. (Section 7.01)
The TIA provides that the Trustee will, within 90 days after the occurrence
of a default in respect of any series of Debt Securities of an Issuer or any
Guarantees thereof, give to the Holders of such series of such Issuer notice of
all uncured and unwaived defaults known to it; provided that, except in the case
of default in the payment of principal of, premium, if any, or interest, if any,
on, or any sinking fund installment or analogous obligation with respect to, any
of the Debt Securities of such series of such Issuer, the Trustee will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the Holders of such series of
such Issuer. The term "default" for the purpose of this provision means any
event which is, or after notice or lapse of time or both would become, an Event
of Default with respect to Debt Securities of such series of such Issuer or any
Guarantees thereof.
The Indenture provides that the Holders of a majority in principal amount
of the outstanding Debt Securities of any series of an Issuer may, subject to
certain limitations, direct the time, method and place of conducting proceedings
for remedies available to the Trustee, or exercising any trust or power
conferred on the Trustee, in respect of the Debt Securities of such series of
such Issuer. (Section 7.11)
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The Indenture contains provisions entitling the Trustee, subject to the
duty of the Trustee during an Event of Default in respect of any series of Debt
Securities of an Issuer or any Guarantees thereof to act with the required
standard of care, to be indemnified by the Holders of the Debt Securities of
such series of such Issuer before proceeding to exercise any right or power
under such Indenture at the request of Holders of the Debt Securities of such
series of such Issuer. (Section 8.01)
The Indenture includes covenants that the Company will file annually with
the Trustee a certificate of no default, or specifying any default that exists.
(Section 5.04)
In certain cases, the Holders of a majority in principal amount of the
outstanding Debt Securities of a series of an Issuer may, on behalf of the
Holders of all Debt Securities of such series of such Issuer, waive any past
default or Event of Default, or compliance with certain provisions of the
Indenture, except for defaults not theretofore cured in the payment of the
principal of, premium, if any, or interest on, or any sinking fund instalment or
analogous obligation with respect to, any of the Debt Securities of such series
of such Issuer and compliance with certain covenants. (Sections 5.07, 7.02 and
7.12)
The Indenture provides that for purposes of calculating the principal
amount of Debt Securities of any series denominated in a foreign currency or in
units based on or relating to currencies thereunder, such principal amount shall
be deemed to be that amount of United States dollars that could be obtained for
such principal amount on the basis of a spot rate of exchange, specified to the
Trustee by the applicable Issuer in an Officers' Certificate, for such currency
or currency units into United States dollars as of the date of any such
calculation. (Section 1.15)
ASSUMPTION BY THE COMPANY
The Company may, at its option, assume the obligations of any Subsidiary
Issuer as obligor under any series of Debt Securities, provided, that (a) the
Company shall expressly assume such obligations in an assumption agreement or
supplemental indenture duly executed and delivered to the Trustee in form
reasonably satisfactory to the Trustee and (b) immediately after giving effect
to such assumption, no Event of Default, and no event which, after notice or
lapse of time, or both, would become an Event of Default, shall have occurred
and be continuing. Upon any such assumption, the Company shall succeed to, and
be substituted for, and may exercise every right and power of, the applicable
Subsidiary Issuer under such series of Debt Securities and the Indenture with
the same effect as if the Company had been the Issuer thereof, and the
applicable Subsidiary Issuer shall be released from its liability as obligor
under such series of Debt Securities. (Section 10.05)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the applicable Issuer, the
Guarantor and the Trustee, with the consent of the Holders of at least a
majority in principal amount of the outstanding Debt Securities of the affected
series, to execute supplemental indentures adding any provisions to or changing
or eliminating any of the provisions of the Indenture or modifying the rights of
the holders of Debt Securities of such series, except that no such supplemental
indenture may, without the consent of the Holders of all of the affected Debt
Securities, among other things, change the maturity of any Debt Securities, or
the currency in which such Debt Securities are payable, reduce the principal
amount thereof or any premium thereon, reduce the rate or extend the time of
payment of interest thereon, change the method of computing the amount of
principal thereof on any date or reduce the aforesaid percentage of Debt
Securities, the consent of the holders of which is required for any such
supplemental indenture. (Section 9.02)
SATISFACTION AND DISCHARGE OF THE INDENTURES; DEFEASANCE
The Indenture shall generally cease to be of any further effect with
respect to a series of Debt Securities if (a) the applicable Issuer or the
Guarantor has delivered to the Trustee for cancellation all such Debt Securities
of such series (with certain limited exceptions) or (b) all such Debt Securities
of such series not theretofore delivered to the Trustee for cancellation shall
have become due and payable,
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or are by their terms to become due and payable within one year or are to be
called for redemption within one year, and the applicable Issuer or the
Guarantor shall have deposited with the Trustee as trust funds the entire amount
sufficient to pay at maturity or upon redemption all such Debt Securities of
such series (and if, in either case, the applicable Issuer or the Guarantor
shall also pay or cause to be paid all other sums payable under the Indenture by
such Issuer or Guarantor in respect of all such Debt Securities of such series
and deliver to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent in the Indenture have been complied
with). (Section 11.01)
The Trustee shall hold in trust all money deposited with it as described
above and shall apply the deposited money, in accordance with the provisions of
the Debt Securities of the defeased series and the Indenture, to the payment,
either directly or through any Paying Agent, as the Trustee may determine, to
the Persons entitled thereto, of principal, premium, if any, and interest for
whose payment such money has been deposited with the Trustee. (Section 11.02)
CONCERNING THE TRUSTEE
The Issuers may from time to time maintain credit facilities, and have
other customary banking relationships with Citibank, N.A., the Trustee under the
Indenture.
SUBMISSION TO JURISDICTION AND SERVICE OF PROCESS
Each Subsidiary Issuer submits for the exclusive benefit of the Holders of
its Debt Securities to the non-exclusive jurisdiction of any United States
Federal or New York State court sitting in New York City, the Borough of
Manhattan solely for the purpose of any legal action or proceeding brought to
enforce rights under its Debt Securities and the Indenture. As long as any of
its Debt Securities remains outstanding (unless all payments are then being made
by the Guarantor), each Subsidiary Issuer shall either have an authorized agent
or maintain an office in New York State upon whom process may be served in any
such legal action or proceeding. Service of process upon any Subsidiary Issuer
at its office or upon its agent with written notice of such service mailed or
delivered to such Subsidiary Issuer shall to the fullest extent permitted by
applicable law be deemed in every respect effective service of process upon such
Subsidiary Issuer in any such legal action or proceeding. Each Subsidiary Issuer
hereby appoints the Company, Xerox Square, 100 Clinton Avenue South, Rochester,
New York, 14644, U.S.A., Attention: General Counsel, as its agent in New York
State for such purpose, and the Company accepts such appointment. Each
Subsidiary Issuer covenants and agrees that service of process in any legal
action or proceeding may be made upon it at its office, or upon its agent in New
York State. Each Subsidiary Issuer irrevocably waives (and irrevocably agrees
not to raise) any objection which it may now have or hereafter to the laying of
venue of any such actions or proceedings in any such court referred to in this
paragraph and any claim that any such actions or proceedings have been brought
in an inconvenient forum and further irrevocably agrees that a judgment in any
action or proceeding brought in any court referred to in this paragraph shall be
conclusive and binding upon it and may be enforced in the courts of any other
jurisdiction.
GOVERNING LAW
The Indenture, the Debt Securities and the Guarantees shall be construed in
accordance with and governed by the laws of the State of New York, without
giving effect to the principles thereof relating to conflicts of law (other than
Section 5-1401 of the General Obligations Law of the State of New York, and any
successor statute or statutes); provided, however, that all matters governing
the authorization and execution of the Indenture and the Debt Securities of each
Subsidiary Issuer shall be construed in accordance with and governed by the laws
of the jurisdiction of organization of such Subsidiary Issuer.
LIMITATIONS AFFECTING SECURITY HOLDERS
Neither the law of England and Wales nor the organizational documents of
any Subsidiary Issuer imposes any restriction on the ability of non-United
Kingdom Holders to hold or vote the Debt Securities.
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PLAN OF DISTRIBUTION
Each Issuer may sell the Debt Securities being offered hereby in any one or
more of the following ways: (1) directly to investors, (2) to investors through
agents, (3) to broker-dealers as principals, (4) through underwriting syndicates
led by one or more managing underwriters as such Issuer may select from time to
time, or (5) through one or more underwriters acting alone.
If an underwriter or underwriters are utilized in the sale, the specific
managing underwriter or underwriters with respect to the offer and sale of the
Offered Debt Securities are set forth on the cover of the Prospectus Supplement
relating to such Offered Debt Securities and the members of the underwriting
syndicate, if any, are named in such Prospectus Supplement.
Sales of the Offered Debt Securities by underwriters may be in negotiated
transactions, at a fixed offering price or at various prices determined at the
time of sale. The Prospectus Supplement describes the method of reoffering by
the underwriters. The Prospectus Supplement also describes the discounts and
commissions to be allowed or paid to the underwriters, if any, all other items
constituting underwriting compensation, the discounts and commissions to be
allowed or paid to dealers, if any, and the exchanges, if any, on which the Debt
Securities offered thereby will be listed.
If so indicated in the Prospectus Supplement, each Issuer will authorize
underwriters to solicit offers by certain institutions to purchase Debt
Securities from such Issuer at the price set forth in the Prospectus Supplement
pursuant to Delayed Delivery Contracts providing for payment and delivery at a
future date.
If any Debt Securities are sold pursuant to an Underwriting Agreement, the
several underwriters will agree, subject to the terms and conditions set forth
therein, unless the Prospectus Supplement provides otherwise, to purchase all
the Debt Securities offered by the accompanying Prospectus Supplement if any of
such securities are purchased and, in the event of default by any underwriter,
in certain circumstances, the purchase commitments may be increased or the
Underwriting Agreement may be terminated.
Offers to purchase Debt Securities may be solicited directly by any of the
Issuers or by agents designated by any such Issuer from time to time. Any such
agent, who may be deemed to be an underwriter as the term is defined in the
Securities Act of 1933 (the "Act"), involved in the offer or sale of the Offered
Debt Securities in respect of which this Prospectus is delivered will be named,
and any commissions payable by any of the Issuers to such agent set forth, in a
Prospectus Supplement. Unless otherwise indicated in such Prospectus Supplement,
any such agent will be acting on a best efforts basis.
If a broker-dealer is utilized in the sale of the Offered Debt Securities
in respect of which this Prospectus is delivered, the Issuers will sell such
Offered Debt Securities to the dealer, as principal. The dealer may then resell
such Offered Debt Securities to the public at varying prices to be determined by
such dealer at the time of resale.
Agents, broker-dealers or underwriters may be entitled under agreements
which may be entered into with an Issuer to indemnification or contribution by
such Issuer in respect of certain civil liabilities, including liabilities under
the Act, and may be customers of, engage in transactions with or perform
services for such Issuer in the ordinary course of business.
The place and time of delivery for the Offered Debt Securities in respect
of which this Prospectus is delivered are set forth in the accompanying
Prospectus Supplement.
The Offered Debt Securities may or may not be listed on a national
securities exchange. No assurances can be given that there will be a market for
the Offered Debt Securities.
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LEGAL OPINIONS
The validity of the Debt Securities and the Guarantees to be offered by the
Company will be passed upon for the Company by Martin S. Wagner, Esq., Associate
General Counsel, Corporate, Finance and Ventures of the Company. The due
authorization, execution and delivery of the Debt Securities to be offered by
the Subsidiary Issuers will be passed upon for such Subsidiary Issuers by Carole
Shephard, Esq., the Company Secretary of Rank Xerox Limited and a Solicitor in
England. Certain other legal matters in connection with the offerings
contemplated herein will be passed upon for the Company and the Subsidiary
Issuers by Martin S. Wagner, Esq., Associate General Counsel, Corporate, Finance
and Ventures of the Company. Certain legal matters in connection with the
offerings contemplated herein will be passed upon for the underwriters, agents
or dealers, as the case may be, by Cravath, Swaine & Moore, Worldwide Plaza, 825
Eighth Avenue, New York, New York. Certain United States Federal income tax
consequences resulting from the purchase, ownership or disposition of the Debt
Securities will be passed upon for the Company by Ivins, Phillips & Barker,
Chartered, 1700 Pennsylvania Avenue, N.W., 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 set forth
therein 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.
16
<PAGE> 53
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SUBSIDIARY ISSUER OR ANY OF THE AGENTS. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT (INCLUDING THE ACCOMPANYING PRICING
SUPPLEMENT) AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR ANY SUBSIDIARY ISSUER SINCE THE DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT (INCLUDING THE ACCOMPANYING
PRICING SUPPLEMENT) AND THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT (INCLUDING
THE ACCOMPANYING PRICING SUPPLEMENT) AND THE PROSPECTUS DO 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 ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Risk Factors............................ S-2
Description of Notes.................... S-6
Important Currency Exchange
Information........................... S-25
United States Taxation.................. S-26
Plan of Distribution.................... S-35
PROSPECTUS
Available Information................... 2
Incorporation of Certain Documents by
Reference............................. 2
The Company............................. 3
Xerox Overseas.......................... 3
Xerox Capital........................... 4
Use of Proceeds......................... 5
Ratio of Earnings to Fixed Charges...... 5
Description of the Debt Securities...... 6
Plan of Distribution.................... 15
Legal Opinions.......................... 16
Experts................................. 16
</TABLE>
===============================================================================
===============================================================================
U.S. $2,250,000,000
XEROX CORPORATION
XEROX OVERSEAS HOLDINGS PLC
IRREVOCABLY AND UNCONDITIONALLY GUARANTEED BY
XEROX CORPORATION
RANK XEROX CAPITAL
(EUROPE) PLC
IRREVOCABLY AND UNCONDITIONALLY GUARANTEED BY
XEROX CORPORATION
MEDIUM-TERM NOTES,
SERIES E
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
-----------------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
DATED OCTOBER 21, 1997
===============================================================================
