AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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XEROX CREDIT CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 06-1024525
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 FIRST STAMFORD PLACE
P.O. BOX 10347
STAMFORD, CONNECTICUT 06904-2347
(203) 325-6600
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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MARTIN S. WAGNER
SECRETARY
C/O XEROX CORPORATION
P.O. BOX 1600
STAMFORD, CONNECTICUT 06904-1600
(203) 968-3000
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
JOHN W. WHITE
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the initial offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================
| | Proposed | Proposed |
Title of each | | maximum | maximum |
class of | Amount | offering | aggregate | Amount of
securities | to be | price per | offering | registration
to be registered | registered(1)(2) | unit(3) | price(1)(2)(3) | fee
- ---------------------|-------------------|-----------|----------------|-------------
<S> <C> <C> <C> <C>
Debt Securities ... | $2,000,000,000 | 100% | $2,000,000,000 | $606,061
====================================================================================
</TABLE>
(1) In U.S. dollars or equivalent thereof in foreign denominated currency or
units consisting of multiple currencies
(2) Or, if any securities are issued at original issue discount, such greater
amount as shall result in aggregate proceeds of $2,000,000,000 to the
registrant.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
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SUBJECT TO COMPLETION DATED JUNE 20, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus Dated June __, 1997)
U.S. $2,000,000,000
XEROX CREDIT CORPORATION
MEDIUM-TERM NOTES, SERIES F
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
Xerox Credit Corporation (the "Company") may offer from time to time its
Medium-Term Notes, Series F (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.
$2,000,000,000 or the equivalent in foreign currencies or currency units. Each
Note will mature nine months or more from the date of issue, as selected by the
purchaser and agreed to by the Company, 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 "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 and Certain Terms
Applicable to All 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 May 31, 1997 was
approximately $3,391,000,000.
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 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 AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC(1)(2) COMMISSIONS(2)(3) COMPANY(2)(3)(4)
<S> <C> <C> <C>
Per Note ..... 100.000% .125%-.750% U.S. 99.875%-99.250%
Total ........ U.S. $2,000,000,000 U.S. $2,500,000-U.S. $15,000,000 U.S. $1,997,500,000-U.S. $1,985,000,000
- ----------------------------------------------------------------------------------------------------------------
</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 Company 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 Company (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
Company. See "Plan of Distribution".
(4) Before deducting expenses payable by the Company estimated at $1,506,061,
including reimbursement of the Agents' expenses.
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The Notes are offered on a continuous basis by the Company through the Agents,
each of which has agreed to use its reasonable best efforts to solicit purchases
of the Notes. The Company reserves the right to appoint additional agents for
the purpose of soliciting offers to purchase theNotes and the Company 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. The Company reserves the
right to withdraw, cancel or modify the offer made hereby without notice. The
Company, 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 June __, 1997.
<PAGE>
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 Company 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 Company or the Company's management, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company 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 Company does 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 governed by and construed in accordance with the laws of
the State of New York. 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 exchange controls by either the
United States or foreign governments. Such risks generally depend on factors
over which the Company has 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.
S-2
<PAGE>
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
Company 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 will 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, most banks
currently do not 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 Company disclaims any
responsibility to advise prospective purchasers who are residents of countries
other than the United States with respect to any matters that may affect the
purchase, holding or receipt of payments of principal of (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
will be 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.
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 in unavailable due to the imposition of exchange
S-3
<PAGE>
controls or other circumstances beyond the Company'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 such 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, the
Company 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 the Company's control, or are no longer used in the
European Monetary System, then 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, then 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, then 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, then 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 Company) 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 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
S-4
<PAGE>
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 Company has
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 Company's medium-term note program are a
reflection of the Company'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.
INFORMATION CONCERNING XEROX CORPORATION
CAPITALIZATION
The following table sets forth the consolidated capitalization of Xerox
Corporation ("Xerox") as of March 31, 1997:
March 31, 1997
---------------
(Dollars in Millions)
Short-term debt and current portion of long-term debt .... $ 3,369
Long-term debt ........................................... 8,456
Deferred ESOP benefits ................................... (494)
Minorities' interests in equity of subsidiaries .......... 819
Mandatorily redeemable preferred stock ................... 637
Preferred stock .......................................... 718
Common shareholders' equity .............................. 4,311
-------
Total Capitalization ................................... $17,816
=======
FIVE YEAR OPERATING RESULTS
The following summary of consolidated operating results has been derived
from the audited consolidated financial statements of Xerox for the years ended
December 31, 1992 through 1996. The summary is qualified in its entirety by, and
should be read in conjunction with, the consolidated financial statements and
other information contained, and incorporated, in the Xerox Annual Report on
Form 10-K for the year ended December 31, 1996 (certain reclassifications have
been made to conform to the current year's presentation).
S-5
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1996 1995(1) 1994 1993(2) 1992(3)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues ...................................... $17,378 $16,588 $15,084 $14,229 $14,298
Income (Loss) from Continuing Operations ...... 1,206 1,174 794 (193) 562
Discontinued Operations ....................... -- (1,646) -- 67 (818)
Cumulative Effect of Changes in Accounting
Principles .................................. -- -- -- -- (764)
Net Income (Loss) ............................. 1,206 (472) 794 (126) (1,020)
</TABLE>
- ----------
(1) The results in 1995 include the effect of the $1,836 million before tax
($1,546 million after-tax) charge incurred in connection with the
discontinuance of the Insurance segment.
(2) The results in 1993 include the effect of the $1,373 million before-tax
($813 million after-tax) charge incurred in connection with the
restructuring provision and litigation settlements.
(3) The results in 1992 include the effect of the $936 million before-tax ($778
million after-tax) charge incurred in connection with the decision to
disengage from Xerox' Insurance and Other Financial Services ("IOFS")
businesses.
RECENT OPERATING RESULTS
The following is a summary of unaudited consolidated operating results of
Xerox for the three-month periods ended March 31, 1997 and March 31, 1996.
Three Months Ended March 31,
----------------------------
1997 1996
--------- ---------
(Dollars in Millions)
Total Revenues .................................. $4,022 $3,928
Net Income ...................................... $ 270 $ 237
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. $2,000,000,000 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 2, 1995, between the Company and
State Street Bank and Trust Company, as trustee (the "Trustee") (as may be
amended, supplemented or modified from time to time, the "Indenture"), which
Indenture is described more fully under "Description of the Debt Securities" in
the accompanying Prospectus. The Company may, however, subject to the approval
of the Board of Directors of the Company, increase the foregoing limit if it
determines in the future that it wishes 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 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 Company, and may be subject to
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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.
The Notes will constitute unsecured and unsubordinated indebtedness of the
Company. See "Description of the Debt Securities--General" in the Prospectus.
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 Company 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. 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 t o 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;
(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 Iess than the principal amount thereof
will become due and payable and (b) any 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 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
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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 Company; (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 semiannually,
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 of
(and premium, if any) and interest, if any, on the Notes will be paid by the
Company 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 Company'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 Company 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 Company has initially appointed State Street
Bank and Trust Company, N.A. as Paying Agent. The Company will notify the
Holders of the 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 Company 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.
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
Company (the "Exchange Rate Agent"), which shall initially be State Street Bank
and Trust Company, 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 the
Company (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 the Company is receiving U.S. dollars in lieu of the Specified Currency and
will require the smallest number of U.S. dollars when the Company is paying U.S.
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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 on the display "page" within the Reuters or Telerate
Monitor Foreign Exchange Service, as may be agreed to by the Company 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 the Company 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 the Company's control, in which case the Company will be
entitled to make payments as described under "Foreign Currency Risks--Payment
Currency" below.
In the event of an official redenomination of a Specified Currency, the
obligations of the Company 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 "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 Company on the applicable record date; 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 (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 the United States if payable in a Specified Currency other than
U.S. dollars) upon surrender of the Notes at the Corporate Trust Division of
State Street Bank and Trust Company, 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 Company 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.
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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 the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of Notes
purchased in any transaction. Interest rates, interest rate formulas and other
variable terms of the Notes are subject to change by the Company 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 the Company.
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 on 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 on each April 15 and
October 15, or quarterly on 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.
Unless otherwise specified in the applicable Pricing Supplement, any
payment of principal (and premium, if any) or interest required to be made on a
Fixed Rate Note on a day which is not a Business Day need not be made on such
day, but may be made on the next succeeding Business Day with the same force and
effect as if made on such day, and no additional interest shall accrue as a
result of such delayed payment.
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 or more 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
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other Base Rate or formula 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 Iess 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 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
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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 (as defined below).
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
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 any Interest Determination Date
will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day and (ii) the Business Day preceding the applicable Interest Payment
Date or Maturity, as the case may be.
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Unless otherwise specified in the applicable Pricing Supplement, State
Street Bank and Trust Company 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.
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 specified in the applicable Pricing Supplement,
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
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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
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", 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".
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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:
D X 360
Money Market Yield = --------------- 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 inH. 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 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.
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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 interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in
the LIBOR Notes and in the 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 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
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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.
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
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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 U.S.$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 Company 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 Company are not quoting 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.
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 Company 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
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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 "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 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
will be payable by the Company 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 Company 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 the Company 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 the Company 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 the Company 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.
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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 Indenture 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
Company 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 the Company has such option with
respect to any Note, the following procedures shall apply, unless modified as
set forth in the applicable Pricing Supplement.
The Company 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 the Company 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 the Company 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 the Maturity Date of such Note
(each such period, a "Subsequent Interest Period"), including the date or dates
on which or the period or periods during which and 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, the Company 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
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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 the Company 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 the Company 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
the Company 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 to such Optional Reset Date of written notice to the 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 Company
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 the Company 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. The Company may at such time or
times as set forth in the applicable Pricing Supplement 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 the Company 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 the Company to extend the Prior Maturity Date, (ii) the new Maturity
Date, (iii) in the case of a Fixed Rate Note, the interest rate to be applicable
to the Extension Period or, in the case of a Floating Rate Note, the Spread
and/or Spread Multiplier to be 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, the Company 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,
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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 the Company 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 the Company 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 designated by the Company 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 Company 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. Unless
otherwise specified in the applicable Pricing Supplement, the Company may redeem
any of the Notes that are redeemable 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 Company 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 Company 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,
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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.
REPURCHASE
The Company may at any time and from time to time purchase Notes at any
price in the open market or otherwise. Notes so purchased by the Company 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. 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 Company 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.
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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 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 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. Neither the Company, the
Trustee, any Paying Agent nor 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 Company expects that the Depositary for Book-Entry Notes or its
nominee, upon receipt of any payment of principal, premium or interest, 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 Company also expects that payments by participants to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers 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
Company within 90 days, the Company will issue Certificated Notes in exchange
for the Global Security representing such Book-Entry Notes. In addition, the
Company 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 the Company 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 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 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 Company. 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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UNITED STATES TAXATION
In the opinion of Ivins, Phillips & Barker, Chartered, special tax counsel
to Xerox and the Company, the following summary correctly describes the material
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.
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.
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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 relevant
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.
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,
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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 includable 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 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.
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Indexed Notes
The specific treatment of any Indexed Notes issued will be discussed in the
applicable Pricing Supplement 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 Issue Discount Notes"). It is based in
part upon income tax regulations (the "OlD 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.
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 includable 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
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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 the Company 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 the Company, 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.
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
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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 includable 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.
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.
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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 the issuer or extension of
the maturity of a Note is treated as an exchange of the Note for a new Note,
then a United States person who is a Holder of the 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 the Note and the Holder's adjusted tax basis in the 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 of 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 the issuer or its agent (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 total combined voting power of all classes
of stock of the issuer entitled to vote, (ii) such Holder is not a controlled
foreign corporation for United States tax purposes that is related to the 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 the 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.
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
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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.
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 the issuer or any agent thereof (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
neither the issuer nor 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 applicable 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 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
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controlled foreign corporation for United States tax purposes). 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. Principal and interest so 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.
On February 29, 1988, September 27, 1990 and April 15, 1996, the United
States Treasury Department issued proposed regulations concerning the
application of information reporting requirements and the backup withholding tax
to non-United States persons. If adopted in their current form, these proposed
regulations would not materially affect the application of the rules discussed
above. It is impossible to predict whether or in what form the proposed
regulations will become final and what the scope or effective date of any such
final regulations might be.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company 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 Company 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 the Company 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 such 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, the Company 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. The Company 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 the Company, no commission will be
payable and no discount will be granted. The Company has agreed to reimburse the
Agents for certain of the Agents' expenses, and the Company contemplates that it
will enter into similar arrangements with any additional agents that it
subsequently appoints.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes 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 the Company, may be deemed to be an "underwriter"
within the meaning of the Act. The Company has agreed
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to indemnify each Agent (and will agree to indemnify each additional agent that
it subsequently appoints) against certain liabilities, including liabilities
under the Act, 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 willbe 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 credited by the Agents in
connection with the offering. The Agents also may impose a penalty 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
the Company 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 the
Company and its affiliates.
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SUBJECT TO COMPLETION DATED JUNE 20, 1997
PROSPECTUS
XEROX CREDIT CORPORATION
DEBT SECURITIES
Xerox Credit Corporation (the "Company") intends from time to time to
issue debt securities (the "Debt Securities") from which the Company will
receive proceeds of up to an aggregate of $2,000,000,000 (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. 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 Company, 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 are 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 are not guaranteed, are unsecured and will rank pari
passu with all other unsecured and unsubordinated debt of the Company.
The Company 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 Company 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 JUNE , 1997.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS
TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
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 and other information with the Securities and Exchange
Commission (the "Commission"). Such reports 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 and
other information regarding registrants that file electronically with the
Commission at http://www.sec.gov. Such reports 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. This Prospectus does not
contain all the information set forth in the Registration Statement and Exhibits
thereto which the Company has filed with the Commission under the Securities Act
of 1933 and to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents filed
with the Commission (File No. 1-8133) pursuant to the Exchange Act:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1996; and
(2) Quarterly Report on Form 10-Q for the quarterly period ended March 31,
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 ss.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 offering 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.
THE COMPANY
Xerox Credit Corporation, a Delaware corporation (together with its
subsidiaries herein called the "Company" unless the context otherwise requires),
was organized on June 23, 1980. All of the Company's outstanding capital stock
is owned by Xerox Financial Services, Inc. ("XFSI"), a holding company, which is
wholly owned by Xerox Corporation (Xerox Corporation together with its
consolidated subsidiaries herein called "Xerox" unless the context otherwise
requires). The Company's principal executive offices are located at 100 First
Stamford Place, P.O. Box 10347, Stamford, Connecticut 06904-2347 and its
telephone number is (203) 325-6600.
The Company is engaged in financing long-term accounts receivable arising
out of equipment sales by Xerox to its Document Processing customers throughout
the United States. Contract terms on these
2
<PAGE>
accounts receivable range primarily from two to five years. In 1990 the Company
discontinued its real-estate development and related real-estate financing
businesses and its third-party financing and leasing businesses.
Pursuant to a Support Agreement between Xerox and the Company (the "Support
Agreement"), Xerox has agreed to retain ownership of 100% of the voting capital
stock of the Company and make periodic payments to the Company to the extent
necessary to insure that its annual pre-tax earnings available for fixed charges
equal at least 1.25 times its fixed charges. The Support Agreement specifically
provides that Xerox is not directly or indirectly guaranteeing any indebtedness,
liability or obligation of the Company. The Support Agreement may not be
terminated or modified while any Notes are outstanding. The calculation of
annual earnings available for fixed charges under the Support Agreement differs
from the calculation of the ratio of earnings to fixed charges in the table
below, which has been calculated in accordance with the Regulations of the
Commission. Under the Support Agreement, the results of discontinued operations
are included whereas under such Regulations such results are excluded.
RATIO OF EARNINGS TO FIXED CHARGES OF THE COMPANY
The following table shows the ratio of earnings to fixed charges for the
periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS 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) ....... 1.60 1.62 1.60 1.54 1.73 1.74 1.75
- ----------
<FN>
(1) The ratio of earnings to fixed charges has been computed by dividing total
earnings available for fixed charges by total fixed charges. Debt has been
assigned to discontinued operations based on the net assets of the
discontinued operations and debt to equity ratios that existed at the time
the assets were acquired. Beginning in 1995, the amount of interest expense
that would have been allocated to discontinued operations is insignificant
and is now being reported within continuing operations and therefore
included in the fixed charges. Discontinued operations consist of the
Company's real estate development and related financing operations and its
third-party financing and leasing businesses.
</FN>
</TABLE>
INFORMATION CONCERNING XEROX
Xerox is The Document Company and a leader in the global document market,
providing document solutions that enhance productivity. 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 ("Rank Xerox") in which Xerox has an 80 percent financial
interest and The Rank Group Plc ("Rank Group") has a 20 percent financial
interest. In Japan and other areas of the Pacific Rim, Australia and New
Zealand, Document Processing products are distributed by Fuji Xerox Co. Ltd., an
unconsolidated joint venture, which is equally owned by Fuji Photo Film Company,
Ltd. of Japan and Rank Xerox.
On February 28, 1995, Xerox paid 620 million pounds sterling (or $972
million) to increase its financial interest in Rank Xerox to 80 percent from 67
percent. On June 13, 1997, Xerox and Rank Group entered into an agreement
pursuant to which Xerox has agreed to acquire Rank Group's remaining 20 percent
financial interest in Rank Xerox for 940 million pounds sterling (or
approximately $1.5 billion) in cash, of which 500 million pounds sterling (or
approximately $811 million) will be payable at closing. The remaining 440
million pounds sterling (or approximately $714 million) will be payable in two
equal installments. The first installment will be payable on or about the first
anniversary of the closing, and the second installment will be payable on or
about the second anniversary of the closing. In addition to the foregoing
purchase price, Xerox has agreed to pay an additional amount of up to 60 million
pounds sterling (or approximately $97 million) in the year 2000 based upon
achievement of significant Rank Xerox earnings growth targets by the year 1999.
It is anticipated that the transaction will close on or about June 30, 1997,
subject to approval by Rank Group shareholders and customary closing conditions.
Upon completion of the acquisition, Rank Xerox will be renamed "Xerox Limited".
3
<PAGE>
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 the
Company 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.
In 1993, Xerox announced a worldwide Document Processing restructuring
program to significantly reduce its cost base and to improve productivity. The
activities associated with this program have reduced employment by 14,000. Xerox
has achieved the restructuring program objectives with pre-tax cost reductions
of approximately $350 million in 1994, $650 million in 1995 and $770 million in
1996. A portion of the savings has been reinvested to reengineer business
processes, support the expansion in growth markets and mitigate pricing
pressures.
RATIO OF EARNINGS TO FIXED CHARGES OF XEROX
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS 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 3.10 3.71 3.54 3.23 0.66 2.34
- ----------
<FN>
(1) The ratio of earnings to fixed charges has been computed based on Xerox'
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 Xerox' Insurance
and Other Financial Services businesses and its real-estate development and
third-party financing businesses.
(2) Xerox' ratio of earnings to fixed charges includes the effect of Xerox'
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.
</FN>
</TABLE>
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 Company and will be used for general corporate purposes. 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.
DESCRIPTION OF THE DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general provision may apply to the Debt Securities so offered will be described
in the Prospectus Supplement
4
<PAGE>
relating to such Debt Securities. 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 will be issued in one or more series under an indenture
dated as of October 2, 1995, between the Company and State Street Bank and Trust
Company, 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 or incorporated herein by reference. 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 the Company. No such transaction is contemplated. See "The
Company" on pages 2 and 3 of this Prospectus concerning Xerox' obligation to
retain ownership of 100% of the voting capital stock of the Company and to make
support payments to the Company under certain circumstances.
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 Company.
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 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 right on
the part of the holders of such Debt Securities to require the repurchase
thereof by the Company; and (20) any additional terms (which terms shall not be
inconsistent with the provisions of the Indenture).
5
<PAGE>
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 exchangeable 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 Company 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.
The Debt Securities are unsecured and will rank pari passu with all other
unsecured and unsubordinated debt of the Company.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued in fully registered form without coupons 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 Company to be maintained in
the Borough of Manhattan, The City of New York or at 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)
GLOBAL SECURITIES
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 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 Company anticipates 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
6
<PAGE>
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 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 of, 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. Neither the Company, the Trustee for such
Debt Securities, any paying agent (a "Paying Agent"), nor 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 Company expects 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 Company also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name". Such payments will be
the responsibility of such participants.
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 Company within 90 days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security or Securities
representing such series of Debt Securities. In addition, the Company 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 individual Debt Securities of such series in
exchange for the Global Security or Securities representing such series of Debt
Securities. Further, if the Company 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 the
Company, the Trustee, and the Depositary for such Global Security, receive
individual 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
individual 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
7
<PAGE>
name. Individual Debt Securities of such series so issued will be issued in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples thereof.
COVENANTS
Limitations on Liens. So long as any of the Debt Securities are
outstanding, the Company will not create or suffer to exist, or permit any of
its 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 Subsidiaries to assign, any right to receive income, in each case to
secure any Debt without making effective provision whereby the Debt Securities
(together with, if the Company shall so determine, any other Debt of the Company
or such Subsidiary then existing or thereafter created which is not subordinate
to the Debt Securities) shall be equally and ratably secured with the
indebtedness or obligations secured by such security; provided, however, that
the Company or its Subsidiaries may create or suffer to exist any lien, security
interest, charge, encumbrance or preferential arrangement of any kind upon any
of the properties or assets of the Company or its 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 in the ordinary course of
business to enable the Company or any of its 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 Subsidiaries in an aggregate amount not to exceed the greater of
(a) 15% of the Consolidated Net Worth of Xerox or (b) the minimum amount
which, if subtracted from such Consolidated Net Worth, would reduce such
Consolidated Net Worth below $3.2 billion and with respect to which the
Company or such Subsidiary shall in good faith be prosecuting an appeal or
proceeding 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 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 Subsidiary
created 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) liens incurred (no matter when created) in connection with
the Company or any Subsidiary engaging in leveraged or single investor
lease transactions, provided that the instrument creating or evidencing any
borrowings secured by such lien shall provide that such borrowings are
payable solely out of the income and proceeds of the property subject to
such lien and are not a corporate obligation of the Company or any such
Subsidiary; (10) the replacement, extension or renewal of any of the
foregoing; and (11) liens on any assets of the Company or any Subsidiary of
up to $500,000,000 incurred in connection with the sale or assignment of
assets of the Company or such Subsidiary for cash where the proceeds are
applied to repayment of Debt of the Company or such Subsidiary and/or
invested by the Company or such Subsidiary as
8
<PAGE>
assets which would be reflected as receivables on the balance sheet of the
Company or such Subsidiary. (Section 5.06)
"Consolidated Net Worth" means, at any time, as to a given entity, 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, and (iv) any
net unrealized appreciation of equity investments; and, in the case of Xerox,
(a) there shall be added thereto the sum of (x) minorities' interests in equity
of subsidiaries and (y) $600,000,000 and (b) there shall be subtracted therefrom
the amount of treasury stock.
"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
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to insure a creditor against loss in respect
of, obligations of others of the kinds referred to in clause (i) or (ii), 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 statutes, under plans covered by
Title IV thereof.
"Subsidiary" means 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 the Company and which is organized and existing under the laws of any
State of the United States or the District of Columbia.
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 Xerox or a corporation all of the voting capital stock of
which is directly or indirectly owned by Xerox, is organized in the United
States, and expressly assumes the due and punctual payment of the principal of
and interest on all the Debt Securities and the performance of every covenant of
the Indenture on the part of the Company 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 happened
and be continuing. 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 10.2)
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 issued thereunder 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 may declare
the principal amount (or a portion thereof in the case of certain Debt
Securities issued with an original issue discount) of all the Debt Securities of
such series to be immediately due and payable. (Section 7.02)
Events of Default in respect of any series are defined in the Indenture as
being: default for 30 days in payment of any interest instalment when due;
default in payment of principal of or premium, if any, (including accrued
original issue discount, in the case of certain Debt Securities issued with the
original issue discount) on, or any sinking fund payment or analogous obligation
with respect to, Debt Securities of such series when due; default for 90 days
after notice to the Company by the Trustee or by the Holders of at least 25% in
principal amount of the outstanding Debt Securities of such series in
performance of any covenant in the Indenture in respect of such series; and
certain events of bankruptcy, insolvency and reorganization and any other Event
of Default provided for with respect to such series. (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, give to the Holders of
such series 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
9
<PAGE>
interest on, or any sinking fund instaIment or analogous obligation with respect
to, any of the Debt Securities of such series, 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. 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.
The Indenture provides that the Holders of a majority in principal amount
of the outstanding Debt Securities of any series 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 such series. (Section 7.11)
The Indenture contains provisions entitling the Trustee, subject to the
duty of the Trustee during an Event of Default in respect to any series of Debt
Securities to act with the required standard of care, to be indemnified by the
Holders of the Debt Securities of such series before proceeding to exercise any
right or power under the Indenture at the request of Securityholders of such
series. (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 may, on behalf of the Holders of all
Debt Securities of such series, 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 any
interest on, or any sinking fund instalment or analogous obligation with respect
to, any of the Debt Securities of such series 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 Company 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)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company 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 Company 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, 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 Company 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 Company shall also pay or cause to be paid all other sums
payable under the Indenture by the Company 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)
10
<PAGE>
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, if
any, for whose payment such money has been deposited with the Trustee. (Section
11.02)
CONCERNING THE TRUSTEE
The Company may from time to time maintain credit facilities, and have
other customary banking relationships, with State Street Bank and Trust Company,
the Trustee under the Indenture.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities 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 the Company 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, the Company will authorize
underwriters to solicit offers by certain institutions to purchase Debt
Securities from the Company 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 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 Debt 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 the Company
or by agents designated by the Company 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, as amended (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 the Company 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 Company 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 the Company to indemnification or contribution by
the Company in respect of certain civil liabilities, including liabilities under
the Act, and may be customers of, engage in transactions with or perform
services for the Company 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.
11
<PAGE>
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.
LEGAL OPINIONS
The validity of the Debt Securities to be offered hereby will be passed
upon for the Company by Martin S. Wagner, Esq., Associate General Counsel,
Corporate, Finance and Ventures of Xerox Corporation and 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, incorporated by reference herein and elsewhere
in the Registration Statement, have been incorporated by reference herein and 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.
12
<PAGE>
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 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 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
PAGE
----
PROSPECTUS SUPPLEMENT
Risk Factors ......................................................... S-2
Information Concerning Xerox ......................................... S-5
Description of Notes ................................................. S-6
Important Currency Exchange
Information ......................................................... S-24
United States Taxation ............................................... S-25
Plan of Distribution ................................................. S-33
PROSPECTUS
Available Information ................................................ 2
Incorporation of Certain Documents
by Reference ........................................................ 2
The Company .......................................................... 2
Ratio of Earnings to Fixed Charges of
the Company ......................................................... 3
Information Concerning Xerox ......................................... 3
Ratio of Earnings to Fixed Charges of
Xerox ............................................................... 4
Use of Proceeds ...................................................... 4
Description of the Debt Securities ................................... 4
Plan of Distribution ................................................. 11
Legal Opinions ....................................................... 12
Experts .............................................................. 12
U.S. $2,000,000,000
XEROX CREDIT
CORPORATION
MEDIUM-TERM NOTES, SERIES F
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
PROSPECTUS SUPPLEMENT
DATED JUNE , 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
The following statement sets forth the expenses, other than underwriting
discounts and commissions, to be borne by the Company in connection with the
distribution of the Debt Securities:
Securities and Exchange Commission Registration Fee ........ $606,061
Printing and Engraving ..................................... 50,000
Fees of Legal Counsel to Agents ............................ 35,000
Fees of Company's Independent Auditors ..................... 55,000
Blue Sky Fees and Expenses (including legal fees and
disbursements) ............................................ 15,000
Trustee Fees and Expenses (including counsel fees) ......... 60,000
Listing Fees ............................................... 0
Rating Agency Fees ......................................... 685,000
Miscellaneous Expenses ..................................... 0
----------
Total .................................................. $1,506,061
==========
- ----------
* The foregoing expenses, other than the Securities and Exchange Commission
Registration Fee, are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 145 of the General Corporation Law of
Delaware.
ITEM 16. EXHIBITS.
(1)(a) --Form of Underwriting Agreement, incorporated by reference to
Exhibit (1)(a) to Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-3, Registration No.
33-43470.
(1)(b) --Form of Selling Agency Agreement, incorporated by reference to
Exhibit (1)(b) to Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-3, Registration No.
33-43470. The form of Selling Agency Agreement is hereby
amended, effective June 20, 1997, by replacing an agent, and
replacing all references to "U.S. $525,000,000" and "Series B"
notes with "U.S. $2,000,000,000" and "Series F" notes,
respectively.
(4)(a) --Form of Indenture, incorporated by reference to Exhibit (4)(a)
to the Company's Registration Statement on Form S-3,
Registration No. 33-61481.
(4)(b) --Form of Debt Security, incorporated by reference to Exhibit
(4)(b) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997, by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
(4)(c) --Form of Debt Security, incorporated by reference to Exhibit
(4)(c) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997, by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
(4)(d) --Form of Debt Security, incorporated by reference to Exhibit
(4)(d) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997, by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
II-1
<PAGE>
(4)(e) --Form of Debt Security, incorporated by reference to Exhibit
(4)(e) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997, by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
(4)(f) --Form of Debt Security, incorporated by reference to Exhibit
(4)(f) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997 by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
(4)(g) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated September
29, 1983. The Form of Debt Security is hereby modified,
effective as of June 20, 1997, by replacing all references to
Chemical Bank with State Street Bank and Trust Company.
(4)(h) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated March 13,
1984. The Form of Debt Security is hereby modified, effective as
of June 20, 1997, by replacing all references to Chemical Bank
with State Street Bank and Trust Company.
(4)(i) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated May 2,
1985. The Form of Debt Security is hereby modified, effective as
of June 20, 1997, by replacing all references to The Bank of New
York with State Street Bank and Trust Company.
(4)(j) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated January
27, 1987. The Form of Debt Security is hereby modified,
effective as of June 20, 1997, by replacing all references to
The Bank of New York with State Street Bank and Trust Company.
(4)(k) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated July 27,
1993. The Form of Debt Security is hereby amended, effective
June 20, 1997, by replacing an agent, and replacing all
references to "Citibank, N.A. ", "U.S. $650,000,000" and "Series
C" notes with "State Street Bank and Trust Company ", "U.S.
$2,000,000,000" and "Series F" notes, respectively.
(4)(l) --Additional Forms of Debt Securities incorporated by reference
to the Company's subsequently filed reports on Form 8-K.
(5)(a) --Opinion of Martin S. Wagner, Esq., as to legality of the Debt
Securities.
(b) --Opinion of Ivins, Phillips & Barker, Chartered, special tax
counsel to the Company, as to material tax consequences.
(12)(a) --Computation of ratio of earnings to fixed charges of the
Company.
(b) --Computation of ratio of earnings to fixed charges of Xerox.
(23)(a) --Consent of Independent Auditors (see page II-5).
(b) --Consent of Martin S. Wagner, Esq. (see Exhibit 5(a)).
(c) --Consent of Ivins, Phillips & Barker, Chartered, special tax
counsel to the Company (see Exhibit 5(b)).
(24)(a) --Certified Resolution.
(b) --Power of Attorney.
(25) --Statement of Eligibility under the Trust Indenture Act of 1939
on Form T-1 of State Street Bank and Trust Company to act as
Trustee under the Indenture.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales of the
securities registered hereby are being made, a post-effective amendment to
this registration statement (i) to include any prospectus required by
section 10(a)(3) of the Securities Act of 1933 (the "Act"); (ii) to reflect
in the prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement;
notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and (iii) to include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that paragraphs (i) and (ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Company
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Act,
each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(6) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF STAMFORD, STATE OF CONNECTICUT, ON THE 20TH DAY OF
JUNE, 1997.
XEROX CREDIT CORPORATION
(REGISTRANT)
By: Eunice M. Filter*
(PRESIDENT AND CHIEF EXECUTIVE
OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON JUNE 20, 1997.
SIGNATURE TITLE
--------- -----
PRINCIPAL EXECUTIVE OFFICER:
EUNICE M. FILTER* President, Chief Executive Officer
and Director
PRINCIPAL FINANCIAL OFFICER:
GEORGE R. ROTH* Vice President, Treasurer and
Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
DANIEL S. MARCHIBRODA* Controller
DIRECTORS:
DONALD R. ALTIERI*
DAVID R. McLELLAN*
BARRY D. ROMERIL*
STUART B. ROSS*
*By: MARTIN S. WAGNER
(MARTIN S. WAGNER,
ATTORNEY-IN-FACT)
II-4
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Xerox Credit Corporation:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the Prospectus.
KPMG PEAT MARWICK LLP
Stamford, Connecticut
June 20, 1997
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
(1)(a) --Form of Underwriting Agreement, incorporated by reference to
Exhibit (1)(a) to Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-3, Registration No.
33-43470.
(1)(b) --Form of Selling Agency Agreement, incorporated by reference to
Exhibit (1)(b) to Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-3, Registration No.
33-43470. The form of Selling Agency Agreement is hereby
amended, effective June 20, 1997, by replacing an agent, and
replacing all references to "U.S. $525,000,000" and "Series B"
notes with "U.S. $2,000,000,000" and "Series F" notes,
respectively.
(4)(a) --Form of Indenture, incorporated by reference to Exhibit (4)(a)
to the Company's Registration Statement on Form S-3,
Registration No. 33-61481.
(4)(b) --Form of Debt Security, incorporated by reference to Exhibit
(4)(b) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997, by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
(4)(c) --Form of Debt Security, incorporated by reference to Exhibit
(4)(c) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997, by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
(4)(d) --Form of Debt Security, incorporated by reference to Exhibit
(4)(d) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997, by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
(4)(e) --Form of Debt Security, incorporated by reference to Exhibit
(4)(e) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997, by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
(4)(f) --Form of Debt Security, incorporated by reference to Exhibit
(4)(f) to the Company's Registration Statement on Form S-3,
Registration No. 2-72851. The Form of Debt Security is hereby
modified, effective as of June 20, 1997 by replacing all
references to Chemical Bank with State Street Bank and Trust
Company.
(4)(g) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated September
29, 1983. The Form of Debt Security is hereby modified,
effective as of June 20, 1997, by replacing all references to
Chemical Bank with State Street Bank and Trust Company.
(4)(h) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated March 13,
1984. The Form of Debt Security is hereby modified, effective as
of June 20, 1997, by replacing all references to Chemical Bank
with State Street Bank and Trust Company.
(4)(i) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated May 2,
1985. The Form of Debt Security is hereby modified, effective as
of June 20, 1997, by replacing all references to The Bank of New
York with State Street Bank and Trust Company.
<PAGE>
(4)(j) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated January
27, 1987. The Form of Debt Security is hereby modified,
effective as of June 20, 1997, by replacing all references to
The Bank of New York with State Street Bank and Trust Company.
(4)(k) --Form of Debt Security, incorporated by reference to Exhibit
(4) to the Company's Current Report on Form 8-K dated July 27,
1993. The Form of Debt Security is hereby amended, effective
June 20, 1997, by replacing an agent, and replacing all
references to "Citibank, N.A. ", "U.S. $650,000,000" and "Series
C" notes with "State Street Bank and Trust Company ", "U.S.
$2,000,000,000" and "Series F" notes, respectively.
(4)(l) --Additional Forms of Debt Securities incorporated by reference
to the Company's subsequently filed reports on Form 8-K.
(5)(a) --Opinion of Martin S. Wagner, Esq., as to legality of the Debt
Securities.
(b) --Opinion of Ivins, Phillips & Barker, Chartered, special tax
counsel to the Company, as to material tax consequences.
(12)(a) --Computation of ratio of earnings to fixed charges of the
Company.
(b) --Computation of ratio of earnings to fixed charges of Xerox.
(23)(a) --Consent of Independent Auditors (see page II-5).
(b) --Consent of Martin S. Wagner, Esq. (see Exhibit 5(a)).
(c) --Consent of Ivins, Phillips & Barker, Chartered, special tax
counsel to the Company (see Exhibit 5(b)).
(24)(a) --Certified Resolution.
(b) --Power of Attorney.
(25) --Statement of Eligibility under the Trust Indenture Act of 1939
on Form T-1 of State Street Bank and Trust Company to act as
Trustee under the Indenture.
EXHIBIT 5(A)
Xerox Corporation
P.O. Box 1600
Stamford, Connecticut 06904-1600
203-968-3000
Office of General Counsel
Martin S. Wagner
Associate General Counsel,
Corporate, Finance and Ventures
June 20, 1997
Xerox Credit Corporation
100 First Stamford Place
P.O. Box 10347
Stamford, CT 06904-2347
Gentlemen:
As Associate General Counsel, Corporate, Finance and Ventures of Xerox
Corporation, I am familiar with the Registration Statement on Form S-3 filed
under the Securities Act of 1933, as amended ("Registration Statement"),
relating to the proposed offering and sale from time to time by Xerox Credit
Corporation, a Delaware corporation (the "Company"), of debt securities ("Debt
Securities") from which the Company may receive an aggregate of up to
$2,000,000,000 of proceeds and which will be offered on terms to be determined
at the time of sale. In rendering the opinions set forth herein, either I or
other attorneys in the Office of General Counsel of Xerox Corporation who report
either directly or indirectly to me have examined the Indenture dated as of
October 2, 1995, between the Company and State Street Bank and Trust Company, as
Trustee (the "Indenture"), under which the Debt Securities are to be issued, the
Company's certificate of incorporation and by-laws, each as amended to date,
certain minutes of meetings of the Board of Directors of the Company and such
other documents and matters of law as have been considered necessary or
desirable of rendering the opinions set forth herein.
Based upon the foregoing, it is my opinion that:
1. The Company has been duly incorporated and is validly existing in good
standing under the laws of Delaware.
2. The Debt Securities, when duly authorized by appropriate corporate action
and duly executed and authenticated, and when issued and delivered against
payment therefor as described in the Registration Statement and a
Prospectus Supplement, will be legally issued and validly and legally
binding obligations of the Company and such Debt Securities will be
entitled to the benefits of the Indenture under which they are issued.
I consent to the reference to my name under the caption "Legal Opinions" in the
Prospectus contained in the Registration Statement and to the filing of this
letter as an exhibit to the Registration Statement.
Very truly yours,
MARTIN S. WAGNER
Associate General Counsel,
Corporate, Finance and Ventures
EXHIBIT 5(B)
June 20, 1997
Xerox Credit Corporation
100 First Stamford Place
P.O. Box 10347
Stamford, CT 06904-2347
Gentlemen:
We have acted as special tax counsel for Xerox Credit Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing under the Securities Act of 1933, as amended, of the Registration
Statement on Form S-3 (the "Registration Statement") relating to the proposed
offering and sale from time to time by the Company of debt securities ("Debt
Securities") from which the Company may receive up to an aggregate of
$2,000,000,000 of proceeds and which will be issued under an indenture dated as
of October 2, 1995, between the Company and State Street Bank and Trust Company,
as trustee (the "Indenture"), included as an exhibit to the Registration
Statement or incorporated by reference therein.
It is our opinion that if the offer and sale of the Debt Securities is
conducted in the manner described in the Prospectus (the "Prospectus") and the
Prospectus Supplement (the "Prospectus Supplement") filed as part of the
Registration Statement and if the terms of Debt Securities are as contemplated
by the Prospectus and Prospectus Supplement, then the statements under the
caption "United States Taxation" in the Prospectus Supplement (the "Tax
Section") correctly describe certain United States Federal income tax
consequences resulting from the purchase, ownership and disposition of Debt
Securities by an initial holder thereof subject to United States income
taxation. As described in the Tax Section, United States Federal income tax
consequences with respect to Debt Securities having certain terms will be set
forth in the pricing supplement to the Prospectus Supplement relating to the
offer and sale of such Debt Securities.
We do not purport to be expert in, or to express any opinion concerning,
the laws of any jurisdiction other than the Federal laws of the United States.
We hereby consent to the reference to us and to the use of our name under
the caption "Legal Opinions" in the Prospectus and the caption "United States
Taxation" in the Prospectus Supplement, and to the filing of a copy of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
IVINS, PHILLIPS & BARKER, CHARTERED
EXHIBIT 12(A)
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES OF THE COMPANY
(IN MILLIONS)
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes .................. $ 32 $ 32 $123 $119 $147 $154 $158
---- ---- ---- ---- ---- ---- ----
Fixed Charges:
Interest expense(2)
Xerox debt ................................ 2 1 5 6 5 4 2
Other debt ................................ 51 51 199 213 197 205 210
---- ---- ---- ---- ---- ---- ----
Total fixed charges ..................... 53 52 204 219 202 209 212
---- ---- ---- ---- ---- ---- ----
Earnings available for fixed charges ........ $ 85 $ 84 $327 $338 $349 $363 $370
==== ==== ==== ==== ==== ==== ====
Ratio of earnings to fixed charges(1) ....... 1.60 1.62 1.60 1.54 1.73 1.74 1.75
- ----------
<FN>
(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 by total fixed charges.
(2) Debt has been assigned to discontinued operations based on the net assets
of the discontinued operations and debt to equity ratios that existed at
the time the assets were acquired. Beginning in 1995, the amount of
interest expense that would have been allocated to discontinued operations
is insignificant and is now being reported within continuing operations and
therefore included in the fixed charges. Discontinued operations consist of
the Company's real estate development and related financing operations and
its third-party financing and leasing businesses.
</FN>
</TABLE>
EXHIBIT 12(B)
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES OF XEROX
(IN MILLIONS)
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------------
1997 1996 1996 1995 1994 1993* 1992
---- ---- ---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest expense ................... $ 135 $ 148 $ 592 $ 603 $ 520 $ 540 $ 627
Rental expense ..................... 34 35 140 142 170 180 187
Preferred stock dividend
of subsidiary ..................... 6 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total fixed charges before
capitalized interest ............ 175 183 732 745 690 720 814
Capitalized interest ............... -- -- -- -- 2 5 17
------- ------- ------- ------- ------- ------- -------
Total fixed charges .............. $ 175 $ 183 $ 732 $ 745 $ 692 $ 725 $ 831
======= ======= ======= ======= ======= ======= =======
Earnings available for fixed charges:
Earnings** ......................... $ 450 $ 404 $ 2,067 $ 1,980 $ 1,602 $ (193) $ 1,183
Less undistributed income in
minority owned companies .......... (23) (20) (84) (90) (54) (51) (52)
Add fixed charges before
capitalized interest .............. 175 183 732 745 690 720 814
------- ------- ------- ------- ------- ------- -------
Total earnings available for fixed
charges ............................ $ 602 $ 567 $ 2,715 $ 2,635 $ 2,238 $ 476 $ 1,945
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed
charges(1)(2) ...................... 3.44 3.10 3.71 3.54 3.23 0.66 2.34
- ----------
<FN>
(1) The ratio of earnings to fixed charges has been computed based on Xerox'
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 Xerox' Insurance and Other
Financial Services businesses and itsreal-estate development and
third-party financing businesses.
(2) Xerox' ratio of earnings to fixed charges includes the effect of Xerox'
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
companies.
* 1993 earnings were inadequate to cover fixed charges. The coverage
deficiency was $249 million.
** Sum of "Income (Loss) before Income Taxes, Equity Income and Minorities'
Interests" and "Equity in Net Income of Unconsolidated Affiliates."
</FN>
</TABLE>
EXHIBIT 24(A)
CERTIFICATE
I, Martin S. Wagner, Secretary of Xerox Credit Corporation, a Delaware
corporation (the "Company"), DO HEREBY CERTIFY that Exhibit A is a true and
correct copy of a resolution duly adopted by a unanimous written consent of the
Board of Directors of the Company dated as of June 12, 1996, and that such
resolution has not been modified, rescinded or revoked and is at present in full
force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 20th
day of June, 1997.
/s/ MARTIN S. WAGNER
--------------------------
MARTIN S. WAGNER
SECRETARY
----------
EXHIBIT A
RESOLVED: That each officer and director of the Company who may be required
to execute the Registration Statements or any amendment thereto (whether on
behalf of the Company or as an officer or director thereof) be and hereby is
authorized to execute a power of attorney appointing E.M. Filter, G.R. Roth and
M.S. Wagner, and each of them, as true and lawful attorneys and agents, to
execute in his or her name, place and stead (in any such capacity) the
Registration Statements and any and all amendments thereto, and any and all
documents in connection therewith, and to file the same, in electronic or paper
form, with the SEC, each of said attorneys and agents to have power to act with
or without the other and to have the full power and authority to do and perform
in the name and on behalf of each of said officers and directors, or both, as
the case may be, every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as any such officer or
director could do in person.
EXHIBIT 24(B)
POWER OF ATTORNEY
Xerox Credit Corporation (the "Company") and each person whose signature
appears below authorize each of E. M. Filter, G. R. Roth and M. S. Wagner (each
an "appointee") to file, either in paper or electronic form, from time to time
one or more registration statements and amendments thereto (including
post-effective amendments), under the Securities Act of 1933, as amended, for
the purpose of registering the offering and sale of an unlimited amount of debt
securities of the Company, which registration statements and amendments shall
contain such information and exhibits as any such appointee deems advisable.
Each such person hereby appoints each appointee as attorneys-in-fact, with full
power to act alone, to execute any such registration statements and any and all
amendments thereto and any and all other documents in connection therewith, in
the name of and on behalf of the Company and each such person, individually and
in each capacity stated below, including the power to enter electronically such
company identification numbers and passwords as may be required to effect such
filing as described under the rules and regulations of the Securities and
Exchange Commission (the "SEC"), and to file, either in paper or electronic
form, with the SEC a form of this Power of Attorney. Each such person
individually and in such capacities stated below hereby grants to said
attorneys-in-fact, and each of them, full power and authority to do and perform
each and every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned could do personally or in the capacities as aforesaid.
XEROX CREDIT CORPORATION
By /s/ EUNICE M. FILTER
--------------------------------------
EUNICE M. FILTER
President and Chief Executive Officer
<TABLE>
<CAPTION>
Dated: as of June 17, 1997
<S> <C>
President and Chief Executive Officer and Director
/s/ EUNICE M. FILTER (Principal Executive Officer)
- ------------------------------
(EUNICE M. FILTER)
Vice President, Treasurer and Chief Financial Officer
/s/ GEORGE R. ROTH (Principal Financial Officer)
- ------------------------------
(GEORGE R. ROTH)
/s/ DANIEL S. MARCHIBRODA Controller (Principal Accounting Officer)
- ------------------------------
(DANIEL S. MARCHIBRODA)
/s/ DONALD R. ALTIERI Director
- ------------------------------
(DONALD R. ALTIERI)
/s/ DAVID R. MCLELLAN Director
- ------------------------------
(DAVID R. MCLELLAN)
/s/ BARRY D. ROMERIL Director
- ------------------------------
(BARRY D. ROMERIL)
/s/ STUART B. ROSS Director
- ------------------------------
(STUART B. ROSS)
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
-------------------------------------------------
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
--------------------------------- -----------------
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
225 Franklin Street, Boston, Massachusetts 02110
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
--------------------------------------------------------
(Name, address and telephone number of agent for service)
---------------------
XEROX CREDIT CORPORATION
-------------------------------------------------
(Exact name of obligor as specified in its charter)
DELAWARE 06-1024525
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 FIRST STAMFORD PLACE
P.O. BOX 10347
STAMFORD, CONNECTICUT 06904-2347
(203) 968-3000
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
DEBT SECURITIES
------------------------------
(Title of indenture securities)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT
IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of Massachusetts,
100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C., Federal
Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation.
(See notes on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as Exhibit 1
to Amendment No. 1 to the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business was
necessary or issued is on file with the Securities and Exchange Commission
as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration Statement
of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as Exhibit 3
to Amendment No. 1 to the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the Statement
of Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Eastern Edison Company (File No. 33-37823) and is
incorporated herein by reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION
321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known on the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 18th day of June, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ ERIC J. DONAGHEY
-----------------------------------
Eric J. Donaghey
Assistant Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by Xerox Credit
Corporation of its debt securities, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ ERIC J. DONAGHEY
-----------------------------------
Eric J. Donaghey
Assistant Vice President
Dated: June 18, 1997
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
Thousands of
ASSETS Dollars
------------
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ..... 1,665,142
Interest-bearing balances .............................. 8,193,292
Securities .................................................. 10,238,113
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank and
its Edge subsidiary ........................................ 5,853,144
Loans and lease financing receivables:
Loans and leases, net of unearned income ..... 4,936,454
Allowance for loan and lease losses .......... 70,307
Allocated transfer risk reserve .............. 0
Loans and leases, net of unearned income
and allowances ......................................... 4,866,147
Assets held in trading accounts .............................. 957,478
Premises and fixed assets ................................... 380,117
Other real estate owned ...................................... 884
Investments in unconsolidated subsidiaries ................... 25,835
Customers' liability to this bank on acceptances outstanding . 45,548
Intangible assets ............................................ 158,080
Other assets ................................................. 1,066,957
----------
Total assets ................................................. 33,450,737
==========
LIABILITIES
Deposits:
In domestic offices .................................... 8,270,845
Noninterest-bearing ................. 6,318,360
Interest-bearing .................... 1,952,485
In foreign offices and Edge subsidiary ................ 12,760,086
Noninterest-bearing ................. 53,052
Interest-bearing .................... 12,707,034
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ........................ 8,216,641
Demand notes issued to the U.S. Treasury and
Trading Liabilities ........................................ 926,821
Other borrowed money ........................................ 671,164
Subordinated notes and debentures ........................... 0
Bank's liability on acceptances executed and outstanding .... 46,137
Other liabilities ........................................... 745,529
Total liabilities ........................................... 31,637,223
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............... 0
Common stock ................................................ 29,931
Surplus ..................................................... 360,717
Undivided profits and capital reserves/Net unrealized holding
gains (losses) ............................................. 1,426,881
Cumulative foreign currency translation adjustments ......... (4,015)
Total equity capital ........................................ 1,813,514
----------
Total liabilities and equity capital ........................ 33,450,737
==========
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
