<PAGE>


                                                                 Exhibit 4(g)(1)

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

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

                                XEROX CORPORATION

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

                                    INDENTURE

                          DATED AS OF NOVEMBER 27, 2001

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

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

                                   AS TRUSTEE

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

           7 1/2% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES DUE 2021

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

<PAGE>


                                    TIE-SHEET

     of provisions of Trust Indenture Act of 1939 with Indenture dated as of
November 27, 2001 between Xerox Corporation and Wells Fargo Bank Minnesota,
National Association, as Trustee:

                                                                     INDENTURE
ACT SECTION                                                           SECTION

310(a)(1)..............................................................6.09
     (a)(2) ...........................................................6.09
310(a)(3)...............................................................N/A
     (a)(4).............................................................N/A
310(a)(5)........................................................6.10, 6.11
310(b)..................................................................N/A
310(c).................................................................6.13
311(a) and (b)......................................................... N/A
311(c)........................................................4.01, 4.02(a)
312(a).................................................................4.02
312(b) and (c).........................................................4.04
313(a).................................................................4.04
313(b)(1)..............................................................4.04
313(b)(2)..............................................................4.04
313(c).................................................................4.04
313(d).................................................................4.04
314(a).................................................................4.03
314(b)..................................................................N/A
314(c)(1) and (2)......................................................6.07
314(c)(3)...............................................................N/A
314(d) .................................................................N/A
314(e).................................................................6.07
314(f) .................................................................N/A
315(a)(c) and (d)......................................................6.01
315(b).................................................................5.08
315(e) ................................................................5.09
316(a)(1) .............................................................5.07
316(a)(2) ..............................................................N/A
316(a) last sentence ..................................................2.09
316(b).................................................................9.02
317(a).................................................................5.05
317(b).................................................................6.05
318(a)................................................................13.08

-----------------------
                  THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED.

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                                TABLE OF CONTENTS

                                                                           Page
                                                                           ----

                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.01.  Definitions..............................................     1

                                   ARTICLE II
                                   SECURITIES

SECTION 2.01.   Forms Generally.........................................    10
SECTION 2.02.   Execution and Authentication............................    10
SECTION 2.03.   Form and Payment and Delivery...........................    10
SECTION 2.04.   Legends.................................................    10
SECTION 2.05.   Global Security.........................................    11
SECTION 2.06.   Interest................................................    12
SECTION 2.07.   Transfer and Exchange...................................    13
SECTION 2.08.   Replacement Securities..................................    14
SECTION 2.09.   Temporary Securities....................................    14
SECTION 2.10.   Cancellation............................................    15
SECTION 2.11.   Defaulted Interest......................................    15
SECTION 2.12.   CUSIP Numbers...........................................    16

                                   ARTICLE III
                       PARTICULAR COVENANTS OF THE COMPANY

SECTION 3.01.    Payment and Delivery of Amounts due....................    16
SECTION 3.02.    Offices for Notices and Payments, etc..................    16
SECTION 3.03.    Appointments to Fill Vacancies in Trustee's Office.....    17
SECTION 3.04.    Provision as to Paying Agent...........................    17
SECTION 3.05.    Certificate to Trustee.................................    18
SECTION 3.06.    Compliance with Consolidation Provisions...............    18
SECTION 3.07.    Limitation on Dividends................................    18
SECTION 3.08.    Covenants as to Xerox Capital and Xerox Funding........    19
SECTION 3.09.    Payment of Expenses....................................    20
SECTION 3.10.    Payment Upon Resignation or Removal....................    21

                                   ARTICLE IV
                SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY
                                 AND THE TRUSTEE

SECTION 4.01.   Lists of Securityholders................................    21
SECTION 4.02.   Reports by the Trustee..................................    21
SECTION 4.03.   Periodic Reports to Trustee.............................    21

                                    ARTICLE V
                 REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON
                                EVENT OF DEFAULT

SECTION 5.01.   Events of Default.......................................    22
SECTION 5.02.   Payment of Securities on Default; Suit Therefor.........    24
SECTION 5.03.   Application of Moneys Collected by Trustee..............    26

<PAGE>

SECTION 5.04.   Proceedings by Securityholders..........................    26
SECTION 5.05.   Proceedings by Trustee..................................    27
SECTION 5.06.   Remedies Cumulative and Continuing......................    27
SECTION 5.07.   Direction of Proceedings and Waiver of Defaults
                   by Majority of Securityholders.......................    28
SECTION 5.08.   Notice of Defaults......................................    29
SECTION 5.09.   Undertaking to Pay Costs................................    29

                                   ARTICLE VI
                            CONCERNING THE TRUSTEE

SECTION 6.01.   Duties and Responsibilities of Trustee..................    29
SECTION 6.02.   Reliance on Documents, Opinions, etc....................    30
SECTION 6.03.   No Responsibility for Recitals, etc.....................    31
SECTION 6.04.   Trustee, Authenticating Agent, Paying Agents,
                   Transfer Agents or Registrar May Own Securities......    32
SECTION 6.05.   Moneys to be Held in Trust..............................    32
SECTION 6.06.   Compensation and Expenses of Trustee....................    32
SECTION 6.07.   Officers' Certificate as Evidence.......................    33
SECTION 6.08.   Conflicting Interest of Trustee.........................    33
SECTION 6.09.   Eligibility of Trustee..................................    33
SECTION 6.10.   Resignation or Removal of Trustee.......................    34
SECTION 6.11.   Acceptance by Successor Trustee.........................    35
SECTION 6.12.   Succession by Merger, etc...............................    35
SECTION 6.13.   Limitation on Rights of Trustee as a Creditor...........    36
SECTION 6.14.   Authenticating Agents...................................    36
SECTION 6.15.   Appointment of Conversion Agent.........................    37

                                   ARTICLE VII
                         CONCERNING THE SECURITYHOLDERS

SECTION 7.01.   Action by Securityholders...............................    37
SECTION 7.02.   Proof of Execution by Securityholders...................    38
SECTION 7.03.   Who Are Deemed Absolute Owners..........................    38
SECTION 7.04.   Securities Owned by Company Deemed Not Outstanding......    39
SECTION 7.05.   Revocation of Consents; Future Holders Bound............    39

                                  ARTICLE VIII
                            SECURITYHOLDERS' MEETINGS

SECTION 8.01.   Purposes of Meetings....................................    39
SECTION 8.02.   Call of Meetings by Trustee.............................    40
SECTION 8.03.   Call of Meetings by Company or Securityholders..........    40
SECTION 8.04.   Qualifications for Voting...............................    40
SECTION 8.05.   Regulations.............................................    40
SECTION 8.06.   Voting..................................................    41

                                   ARTICLE IX
                                   AMENDMENTS

SECTION 9.01.   Without Consent of Securityholders......................    41
SECTION 9.02.   With Consent of Securityholders.........................    43
SECTION 9.03.   Compliance with Trust Indenture Act; Effect of
                   Supplemental Indentures..............................    44
SECTION 9.04.   Notation on Securities..................................    44
SECTION 9.05.   Evidence of Compliance of Supplemental Indenture to be
                   Furnished Trustee....................................    44

<PAGE>

                                    ARTICLE X
               CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

SECTION 10.01.  Company May Consolidate, etc., on Certain Terms.........    45
SECTION 10.02.  Successor Corporation to be Substituted for Company.....    45
SECTION 10.03.  Opinion of Counsel to be Given Trustee..................    46

                                   ARTICLE XI
                  SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 11.01.  Discharge of Indenture..................................    46
SECTION 11.02.  Deposited Moneys to be Held in Trust by Trustee.........    47
SECTION 11.03.  Paying Agent to Repay Moneys Held.......................    47
SECTION 11.04.  Return of Unclaimed Moneys..............................    47
SECTION 11.05.  Defeasance Upon Deposit of Moneys or U.S. Government
                   Obligations..........................................    47

                                   ARTICLE XII
      IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

SECTION 12.01.  Indenture and Securities Solely Corporate Obligations.      48

                                  ARTICLE XIII
                            MISCELLANEOUS PROVISIONS

SECTION 13.01.  Successors..............................................    49
SECTION 13.02.  Official Acts by Successor Corporation..................    49
SECTION 13.03.  Surrender of Company Powers.............................    49
SECTION 13.04.  Addresses for Notices, etc..............................    49
SECTION 13.05.  Governing Law...........................................    50
SECTION 13.06.  Evidence of Compliance with Conditions Precedent........    50
SECTION 13.07.  Business Days...........................................    50
SECTION 13.08.  Trust Indenture Act to Control..........................    50
SECTION 13.09.  Table of Contents, Headings, etc........................    50
SECTION 13.10.  Execution in Counterparts...............................    51
SECTION 13.11.  Separability............................................    51
SECTION 13.12.  Assignment..............................................    51
SECTION 13.13.  Acknowledgement of Rights...............................    51

                                   ARTICLE XIV
                                   REDEMPTION

SECTION 14.01.  Optional Redemption by Company..........................    52
SECTION 14.02.  No Sinking Fund.........................................    52
SECTION 14.03.  Notice of Redemption; Selection of Securities...........    52
SECTION 14.04.  Payment of Securities Called for Redemption.............    53
SECTION 14.05.  Conversion Arrangement on Call for Redemption...........    53

                                   ARTICLE XV
                                    PURCHASE

SECTION 15.01.  Purchase of Securities at Option of the Holder..........    54
SECTION 15.02.  Purchase of Securities at Option of the Holder upon a
                   Change inControl.....................................    60
SECTION 15.03.  Effect of Purchase Notice or Change in Control
                   Purchase Notice......................................    68

<PAGE>

SECTION 15.04.  Deposit of Purchase Price or Change in Control
                   Purchase Price.......................................    69
SECTION 15.05.  Securities Purchased in Part............................    70
SECTION 15.06.  Covenant to Comply With Securities Laws Upon
                   Purchase of Securities...............................    70
SECTION 15.07.  Repayment to the Company................................    70

                                   ARTICLE XVI
                                   CONVERSION

SECTION 16.01.  Conversion Privilege....................................    70
SECTION 16.02.  Conversion Procedure....................................    71
SECTION 16.03.  Fractional Shares.......................................    73
SECTION 16.04.  Taxes on Conversion.....................................    73
SECTION 16.05.  Company to Provide Stock................................    73
SECTION 16.06.  Adjustment for Change In Capital Stock..................    74
SECTION 16.07.  Adjustment for Rights Issue.............................    74
SECTION 16.08.  Adjustment for Other Distributions......................    76
SECTION 16.09.  Adjustment for Self Tender Offer........................    80
SECTION 16.10.  When Adjustment May Be Deferred.........................    80
SECTION 16.11.  When No Adjustment Required.............................    80
SECTION 16.12.  Notice of Adjustment....................................    81
SECTION 16.13.  Voluntary Increase......................................    81
SECTION 16.14.  Notice of Certain Transactions..........................    81
SECTION 16.15.  Reorganization of Company; Special Distributions........    82
SECTION 16.16.  Company Determination Final.............................    82
SECTION 16.17.  Trustee's Adjustment Disclaimer.........................    82
SECTION 16.18.  Simultaneous Adjustments................................    83
SECTION 16.19.  Successive Adjustments..................................    83
SECTION 16.20.  Rights Issued in Respect of Common Stock Issued
                   Upon Conversion......................................    83

                                  ARTICLE XVII
                           SUBORDINATION OF SECURITIES

SECTION 17.01.  Agreement to Subordinate................................    83
SECTION 17.02.  Default on Senior Indebtedness..........................    84
SECTION 17.03.  Liquidation; Dissolution; Bankruptcy....................    84
SECTION 17.04.  Subrogation.............................................    85
SECTION 17.05.  Trustee to Effectuate Subordination.....................    86
SECTION 17.06.  Notice by the Company...................................    86
SECTION 17.07.  Rights of the Trustee; Holders of Senior Indebtedness...    87
SECTION 17.08.  Subordination May Not Be Impaired.......................    87

EXHIBIT A.....FORM OF SECURITY

<PAGE>

          THIS INDENTURE, dated as of November 27, 2001, between XEROX
CORPORATION, a New York corporation (hereinafter sometimes called the
"Company"), and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national
banking association, as trustee (hereinafter sometimes called the "Trustee"),

                           W I T N E S S E T H :

          In consideration of the premises, and the purchase of the Securities
by the holders thereof, the Company covenants and agrees with the Trustee for
the equal and proportionate benefit of the respective holders from time to time
of the Securities, as follows:

                                    ARTICLE I

                                   DEFINITIONS

          SECTION 1.01 Definitions.

          The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture shall have the respective meanings specified in this Section
1.01. All other terms used in this Indenture which are defined in the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which are by
reference therein defined in the Securities Act, shall (except as herein
otherwise expressly provided or unless the context otherwise requires) have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture as originally executed.
The following terms have the meanings given to them in the Declaration: (i)
Administrative Trustees; (ii) Business Day; (iii) Clearing Agency; (iv) Delaware
Trustee; (v) Direct Action; (vi) Distributions; (vii) Property Trustee; (viii)
Purchase Agreement; (ix) Special Event; (x) Tax Event; (xi) Trust Preferred
Securities; (xii) Trust Securities Guarantee; (xiii) Xerox Funding Debentures;
and (xiv) Xerox Funding Indenture. All accounting terms used herein and not
expressly defined shall have the meanings assigned to such terms in accordance
with generally accepted accounting principles and the term "generally accepted
accounting principles" means such accounting principles as are generally
accepted at the time of any computation. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision. Headings are
used for convenience of reference only and do not affect interpretation. The
singular includes the plural and vice versa.

          "Additional Interest" shall have the meaning set forth in Section
2.06(c).

          "Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding the power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person, and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.

          "Associate" shall have the meaning set forth in Section 15.02(a).

          "Average Sale Price" shall have the meaning set forth in

<PAGE>

Section 16.07.

          "Authenticating Agent" shall mean any agent or agents of the Trustee
which at the time shall be appointed and acting pursuant to Section 6.14.

          "Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.

          "Board of Directors" shall mean either the Board of Directors of the
Company or any duly authorized committee of that board.

          "Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

          "Capital Stock" for any corporation means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that
corporation.

          "Change in Control" shall have the meaning set forth in Section
15.02(a).

          "Change in Control Purchase Date" shall have the meaning set forth in
Section 15.02(a).

          "Change in Control Purchase Notice" shall have the meaning set forth
in Section 15.02(f).

          "Change in Control Purchase Price" shall have the meaning set forth in
Section 15.02(a).

          "Commission" shall mean the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.

          "Common Stock" shall mean the Common Stock, par value $1.00 per share,
of the Company or any other class of stock resulting from changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value

          "Company" shall mean Xerox Corporation, a New York corporation, and,
subject to the provisions of Article X, shall include its successors and
assigns.

          "Company Change in Control Notice" shall have the meaning set forth in
Section 15.02(e).

          "Company Notice" shall have the meaning set forth in Section 15.01(e).

          "Company Notice Date" shall have the meaning set forth in Section
15.01(e).

<PAGE>

          "Company Request" or "Company Order" shall mean a written request or
order signed in the name of the Company by the Chairman, the Chief Executive
Officer, the President, a Vice Chairman, the Chief Financial Officer, a Vice
President, the Controller, an Assistant Controller, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.

          "Conversion Agent" shall have the meaning set forth in Section 6.15.

          "Conversion Date" shall have the meaning set forth in Section 16.02.

          "Conversion Price" shall have the meaning set forth in Section 16.01.

          "Conversion Rate" shall have the meaning set forth in Section 16.01.

          "Coupon Rate" shall have the meaning set forth in Section 2.06(a).

          "Custodian" shall mean any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.

          "Declaration" means the Amended and Restated Declaration of Trust of
Xerox Capital, dated as of the Issue Date.

          "Debenture Guarantee" means the Debenture Guarantee Agreement, dated
as of November 27, 2001, between the Company and the guarantee trustee thereto.

          "Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.

          "Defaulted Interest" shall have the meaning set forth in Section 2.11.

          "Defeasance Agent" has the meaning set forth in Section 11.05 hereof.

          "Definitive Securities" shall mean those securities issued in fully
registered certificated form not otherwise in global form.

          "Depositary" shall mean, with respect to Securities of any series, for
which the Company shall determine that such Securities will be issued as a
Global Security, The Depository Trust Company, New York, New York, another
clearing agency, or any successor registered as a clearing agency under the
Exchange Act or other applicable statute or regulation, which, in each case,
shall be designated by the Company pursuant to Section 2.05(d).

          "Discharged" has the meaning set forth in Section 11.05 hereof.

          "Event of Default" shall mean any event specified in

<PAGE>

Section 5.01, continued for the period of time, if any, and after the giving of
the notice, if any, therein designated.

          "Ex-Dividend Date" shall have the meaning set forth in Section 16.08.

          "Ex-Dividend Measurement Period" shall have the meaning set forth in
Section 16.08.

          "Ex-Dividend Time" shall have the meaning set forth in Section 16.07.

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

          "Exchange Event" means the exchange by Xerox Funding of the Securities
for Xerox Funding Debentures and the distribution of the Securities to the
holders of such Xerox Funding Debentures pro rata in accordance with the LLC
Agreement and the Xerox Funding Indenture.

          "Expiration Time" shall have the meaning set forth in Section 16.09.

          "Extraordinary Cash Dividend" shall have the meaning set forth in
Section 16.08.

          "Global Security" means, with respect to the Securities, a Security
executed by the Company and delivered by the Trustee to the Depositary or
pursuant to the Depositary's instruction, all in accordance with the Indenture,
which shall be registered in the name of the Depositary or its nominee.

          "group" shall have meaning set forth in Section 15.02.

          "Guarantees" means the Debenture Guarantee and the Trust Securities
Guarantee.

          "Indenture" shall mean this instrument as originally executed or, if
amended as herein provided, as so amended.

          "Initial Optional Redemption Date" means December 4, 2004.

          "Interest" shall include all interest payable on or in respect of the
Securities, including Additional Interest payable pursuant to Section 2.06(c).

          "Interest Payment Date" shall have the meaning set forth in Section
2.06.

          "Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.

          "Issue Date" means November 27, 2001.

          "LLC Agreement" means the limited liability company agreement of Xerox
Funding, dated as of November 19, 2001, by the Company as sole member.

<PAGE>

          "Market Price" shall have the meaning set forth in Section 15.01.

          "Maturity Date" means November 27, 2021.

          "Non Book-Entry Xerox Funding Debentures" shall have the meaning set
forth in Section 2.05.

          "Non-public Consideration" shall have the meaning set forth in Section
16.08(d).

          "Officers" shall mean any of the Chairman, a Vice Chairman, the Chief
Executive Officer, the President, the Chief Financial Officer, a Vice President,
the Controller, an Assistant Controller, the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of the Company.

          "Officers' Certificate" shall mean a certificate signed by two
Officers and delivered to the Trustee.

          "Opinion of Counsel" shall mean a written opinion of counsel, who may
be an employee of the Company, and who shall be reasonably acceptable to the
Trustee.

          "Other Debentures" means all junior subordinated debentures issued by
the Company from time to time and sold to finance subsidiaries to be established
by the Company (if any), in each case similar to the Trust.

          "Other Guarantees" means all guarantees now or in the future issued by
the Company in respect of any preferred or preference stock of any affiliate of
the Company, including its guarantees of the preferred securities of Xerox
Capital Trust I.

          The term "outstanding" when used with reference to Securities, shall,
subject to the provisions of Section 7.04, mean, as of any particular time, all
Securities authenticated and delivered by the Trustee or the Authenticating
Agent under this Indenture, except

          (a) Securities theretofore cancelled by the Trustee or the
Authenticating Agent or delivered to the Trustee for cancellation;

          (b) Securities, or portions thereof, for the payment or redemption of
which moneys in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or shall have been set
aside and segregated in trust by the Company (if the Company shall act as its
own paying agent); provided that, if such Securities, or portions thereof, are
to be redeemed prior to maturity thereof, notice of such redemption shall have
been given as in Article XIV provided or provision satisfactory to the Trustee
shall have been made for giving such notice; and

          (c) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered pursuant to the terms of
Section 2.08 unless proof satisfactory to the Company and the Trustee is
presented that any such Securities are held by bona fide holders in due course.

<PAGE>

          "Paying Agent" has the meaning set forth in Section 3.04.

          "Person" shall mean any individual, corporation, estate, partnership,
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

          "Pledge Agreement" means the pledge agreement, dated November 27,
2001, between Xerox Funding and Wells Fargo Bank Minnesota, National
Association, as pledge trustee.

          "Pledged Account" has the meaning set forth in the Pledge Agreement.

          "Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt and as that evidenced by
such particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.08 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.

          "Principal Office of the Trustee", or other similar term, shall mean
the principal corporate trust office of the Trustee at which, at any particular
time, its corporate trust business shall be administered, which office at the
date hereof is located at Sixth and Marquette, MAC N9303-120, Minneapolis,
Minnesota 55479, Attention: Corporate Trust Services, except where such office
is required to be located in the State of New York, then such term shall mean
the office or agency of the Trustee in the Borough of Manhattan, The City of New
York, which office at the date hereof is located at c/o The Depository Trust
Company, 1st Floor - TADS Department, 55 Water Street, New York, New York 10041.

          "Purchase Date" shall have the meaning set forth in Section 15.01(a).

          "Purchase Notice" shall have the meaning set forth in Section
15.01(a).

          "Purchase Price" shall have the meaning set forth in Section 15.01(a).

          "Purchased Shares" shall have the meaning set forth in Section 16.09.

          "Redemption Price" means the Regular Redemption Price and the Special
Redemption Price, as applicable.

          "Regular Redemption Price" means an amount equal to 100% of the
principal amount of the Debentures called for redemption, plus accrued and
unpaid interest to but excluding the date of redemption.

          "Relevant Cash Dividends" shall have the meaning set forth in Section
16.08.

          "Responsible Officer", when used with respect to the Trustee, shall
mean the chairman or any vice chairman of the board of directors, the chairman
or any vice chairman of the executive committee of

<PAGE>

the board of directors, the chairman of the trust committee, the president, any
vice president, the cashier, any assistant cashier, the secretary, any assistant
secretary, the treasurer, any assistant treasurer or senior trust officer, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.

          "Restricted Security" shall mean Securities that bear or are required
to bear the Securities Act legends set forth in Exhibit A hereto.

          "Rights" shall have the meaning set forth in Section 16.20.

          "Rights Agreement" shall have the meaning set forth in Section 16.20.

          "Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or under any similar rule or regulation hereafter
adopted by the Commission.

          "Sale Price" of any security on any date means the closing per share
sale price (or, if no closing sale price is reported, the average of the bid and
ask prices or, if more than one in either case, the average of the average bid
and the average ask prices) on such date as reported in the composite
transactions for the principal United States securities exchange on which the
security is traded. In the absence of such quotation, the Company shall be
entitled to determine the Sale Price on the basis of such quotations as it
considers appropriate.

          "Securities" means the securities issued hereunder.

          "Securities Act" shall mean the Securities Act of 1933, as amended.

          "Securityholder", "Holder of Securities", "Holder", or other similar
terms, shall mean any person in whose name at the time a particular Security is
registered on the register kept by the Company or the Trustee for that purpose
in accordance with the terms hereof; provided, however, that, in determining
whether the holders of the requisite percentage of principal amount of the
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Company or any Affiliate of the Company (other than Xerox
Funding or Xerox Capital); and provided, further, that, in determining whether
the holders of the requisite principal amount of Securities have voted on any
matter provided for in this Indenture, then for purpose of such determination
only (and not for any other purpose hereunder), if the Securities or the Xerox
Funding Debentures are held by the Property Trustee, the term "Holders" shall
mean the holders of the Trust Securities, acting at the direction of the
beneficial owners thereof, and, after a Trust Dissolution Event, if the
Securities are held by Xerox Funding, the term "Holders" shall mean the holders
of the Xerox Funding Debentures, acting at the direction of the beneficial
owners thereof.

          "Security Register" shall mean (i) prior to an Exchange Event, the
List of Holders provided to the Trustee pursuant to Section 4.01,

<PAGE>

and (ii) following an Exchange Event, any security register maintained by a
security registrar for the Securities appointed by the Company following the
execution of a supplemental indenture providing for transfer procedures as
provided for in Section 2.07(a).

          "Senior Indebtedness" shall mean, with respect to an obligor, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed, and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement on any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons for the payment of which
such obligor is responsible or liable as obligor, guarantor or otherwise and
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness that is by its terms subordinated to or ranks pari passu with
the Securities, and (2) any indebtedness between and among the Company and its
subsidiaries, including all other debt securities or guarantees in respect of
those debt securities, issued to (a) Xerox Capital Trust I, (b) any other trust
or trustee of that trust and (c) any other trust, or a trustee of that trust,
partnership or other entity affiliated with the Company that is a financing
vehicle of the Company (a "financing entity") in connection with the issuance by
such financing entity of trust preferred securities or other securities that
rank pari passu with or junior in right of payment to the Trust Preferred
Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness
and be entitled to the benefits of the subordination provisions irrespective of
any amendment, modification or waiver of any term of such Senior Indebtedness.

          "Special Redemption Price" means, with respect to the Securities, the
following percentages of the principal amounts of such Securities called for
redemption, plus accrued and unpaid interest, if any, to but excluding the date
of redemption if redeemed during the periods set forth below:

        Period                             Percentage
        ------                             ----------
        From December 4, 2004 to
             November 26, 2005                103.75%
        From November 27, 2005 to
             November 26, 2006                102.50%
        From November 27, 2006 to
             November 26, 2007                101.25%
        After November 26, 2007               100.00%

          "Subsidiary" shall mean with respect to any Person, (i) any
corporation at least a majority of whose outstanding voting stock is owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries, or
by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture, limited liability company or similar entity, at

<PAGE>

least a majority of whose outstanding partnership, membership or similar
interests shall at the time be owned by such Person, or by one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii)
any limited partnership of which such Person or any of its Subsidiaries is a
general partner. For the purposes of this definition, "voting stock" means
shares, interests, participations or other equivalents in the equity interest
(however designated) in such Person having ordinary voting power for the
election of a majority of the directors (or the equivalent) of such Person,
other than shares, interests, participations or other equivalents having such
power only by reason of the occurrence of a contingency.

          "Time of Determination" shall have the meaning set forth in Section
16.07.

          "Trading Day" means a day during which trading in securities generally
occurs on the New York Stock Exchange ("NYSE") or, if the Common Stock is not
listed on the NYSE, on the principal United States securities exchange on which
the Common Stock is then listed or quoted.

          "Trust Indenture Act" shall mean the Trust Indenture Act of 1939 as in
force at the date of execution of this Indenture, except as provided in Section
9.03.

          "Trust Securities" shall mean the Trust Preferred Securities and the
Common Securities, collectively.

          "Trustee" shall mean the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder The term "Trustee"
as used with respect to a particular series of the Securities shall mean the
trustee with respect to that series.

          "U.S. Government Obligations" shall mean securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.

          "Xerox Capital" shall mean Xerox Capital Trust II, a Delaware business
trust.

          "Xerox Funding" shall mean Xerox Funding LLC II, a Delaware limited
liability company.

                                   ARTICLE II

<PAGE>

                                   SECURITIES

          SECTION 2.01. Forms Generally.

          The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, the terms of which are incorporated
in and made a part of this Indenture. The Securities may have notations, legends
or endorsements required by law, stock exchange rule, agreements to which the
Company is subject or usage. Each Security shall be dated the date of its
authentication. The Securities shall be issued in denominations of $50 and
integral multiples thereof.

          SECTION 2.02. Execution and Authentication.

          One Officer shall sign the Securities for the Company by manual or
facsimile signature in the manner set forth in Exhibit A. If an Officer whose
signature is on a Security no longer holds that office at the time the Security
is authenticated, the Security shall nevertheless be valid. A Security shall not
be valid until authenticated by the manual signature of an authorized officer of
the Trustee. The signature of the Trustee shall be conclusive evidence that the
Security has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Securities shall be
substantially as set forth in Exhibit A hereto. The Trustee shall, upon a
Company Order, authenticate for original issue up to, and the aggregate
principal amount of Securities outstanding at any time may not exceed the sum of
$1,067,010,400 aggregate principal amount of the Securities, except as provided
in Sections 2.07, 2.08, 2.09 and 14.05.

          SECTION 2.03. Form and Payment and Delivery.

          Except as provided in Section 2.05, the Securities shall be issued in
fully registered certificated form without interest coupons. Amounts due on or
in respect of the Securities issued in certificated form will be payable or
deliverable, the transfer of such Securities will be registrable and such
Securities will be exchangeable for Securities bearing identical terms and
provisions at the office or agency of the Company maintained for such purpose
under Section 3.02; provided, however, that payment of interest with respect to
the Securities may be made at the option of the Company (i) by check mailed to
the holder at such address as shall appear in the Security Register or (ii) by
transfer to an account maintained by the Person entitled thereto, provided that
proper transfer instructions have been received in writing by the relevant
record date. Notwithstanding the foregoing, so long as the holder of any
Securities is the Property Trustee, the payment or delivery of amounts due on or
in respect of such Securities held by the Property Trustee will be made at such
place and to such account as may be designated by the Property Trustee.

          SECTION 2.04. Legends.

          (a) Except as otherwise determined by the Company in accordance with
applicable law, each Security shall bear the applicable legends relating to
restrictions on transfer pursuant to the securities laws in substantially the
form set forth on Exhibit A hereto.

          SECTION 2.05. Global Security.

<PAGE>

          (a) In connection with an Exchange Event,

                    (i) if any Xerox Funding Debentures are held in book-entry
          form (or, if all the Xerox Funding Debentures are then held by the
          Property Trustee, if any Trust Preferred Securities are held in
          book-entry form), the related certificates evidencing such securities
          shall be presented to the Trustee (if an arrangement with the
          Depositary has been maintained) by any holder thereof in exchange for
          one or more Global Securities (as may be required pursuant to Section
          2.07) in an aggregate principal amount equal to the aggregate
          principal amount of all outstanding Xerox Funding Debentures, to be
          registered in the name of the Depositary, or its nominee, and
          delivered by the Trustee to the Depositary for crediting to the
          accounts of its participants pursuant to the instructions of such
          holder; the Company, upon any such presentation, shall execute one or
          more Global Securities in such aggregate principal amount and deliver
          the same to the Trustee for authentication and delivery in accordance
          with this Indenture; and payments on the Securities issued as a Global
          Security will be made to the Depositary; and

                    (ii) if any Xerox Funding Debentures are held in
          certificated form (or, if all the Xerox Funding Debentures are then
          held by the Property Trustee, if any Trust Preferred Securities are
          held in certificated form), the related Definitive Securities may be
          presented to the Trustee by any holder and any Xerox Funding Debenture
          certificate which represents Xerox Funding Debentures other than Xerox
          Funding Debentures in book-entry form ("Non Book-Entry Xerox Funding
          Debentures") will be deemed to represent beneficial interests in
          Securities presented to the Trustee by such holder having an aggregate
          principal amount equal to the aggregate principal amount of the Non
          Book-Entry Xerox Funding Debentures until such Xerox Funding Debenture
          certificates are presented to the Security Registrar for transfer or
          reissuance, at which time such Xerox Funding Debenture certificates
          will be cancelled and a Security, registered in the name of the holder
          of the Xerox Funding Debenture certificate or the transferee of the
          holder of such Xerox Funding Debenture certificate, as the case may
          be, with an aggregate principal amount equal to the aggregate
          principal amount of the Xerox Funding Debenture certificate cancelled,
          will be executed by the Company and delivered to the Trustee for
          authentication and delivery in accordance with the Indenture. Upon the
          issuance of such Securities, Securities with an equivalent aggregate
          principal amount that were presented to the Trustee will be deemed to
          have been cancelled.

          (b) The Global Securities shall represent the aggregate amount of
outstanding Securities from time to time endorsed thereon; provided, that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges, conversions,
purchases and redemptions. Any endorsement of a Global Security to reflect the
amount of any increase or decrease in the amount of outstanding Securities
represented thereby shall be made by the Trustee, in accordance with
instructions given by the Company as required by this Section 2.05.

          (c) The Global Securities may be transferred, in whole but not in
part, only to the Depositary, another nominee of the Depositary, or to a
successor Depositary selected or approved by the Company or to a nominee of

<PAGE>

such successor Depositary.

          (d) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or the Depositary has ceased to be
a clearing agency registered under the Exchange Act, and a successor Depositary
is not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such condition, as the case may be, the Company will
execute, and the Trustee, upon written notice from the Company, will
authenticate and make available for delivery the Definitive Securities, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Security in exchange for such Global Security. If
there is an Event of Default, the Depositary shall have the right to exchange
the Global Securities for Definitive Securities. In addition, the Company may at
any time determine that the Securities shall no longer be represented by a
Global Security. In the event of such an Event of Default or such a
determination, the Company shall execute, and subject to Section 2.07, the
Trustee, upon receipt of an Officers' Certificate evidencing such determination
by the Company, will authenticate and make available for delivery the Definitive
Securities, in authorized denominations, and in an aggregate principal amount
equal to the principal amount of the Global Security in exchange for such Global
Security. Upon the exchange of the Global Security for such Definitive
Securities, in authorized denominations, the Global Security shall be cancelled
by the Trustee. Such Definitive Securities issued in exchange for the Global
Security shall be registered in such names and in such authorized denominations
as the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall deliver
such Definitive Securities to the Depositary for delivery to the Persons in
whose names such Definitive Securities are so registered.

          SECTION 2.06. Interest.

          (a) Each Security will bear interest at the rate of 7 1/2% per annum
(the "Coupon Rate") from the most recent date to which interest has been paid or
duly provided for or, if no interest has been paid or duly provided for, from
the Issue Date, until the principal thereof becomes due and payable, and at the
rate of 7 1/2% per annum on any overdue principal (and premium, if any) and (to
the extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest, compounded quarterly, payable quarterly in
arrears on February 27, May 27, August 27 and November 27 of each year (each, an
"Interest Payment Date") commencing on February 27, 2002, to the Person in whose
name such Security or any predecessor Security is registered, at the close of
business on the regular record date for such interest installment, which shall
be the Business Day or, if none of the Trust Preferred Securities, the Xerox
Funding Debentures or the Securities are represented by a global certificate,
the 15th calendar day, immediately preceding the relevant Interest Payment Date.
The amount of interest payable on any Interest Payment Date, the applicable
redemption date, the applicable Purchase Date, the Change in Control Purchase
Date or the Maturity Date shall include interest accrued from and including the
Issue Date or the last Interest Payment Date to which interest has been paid to
but excluding such Interest Payment Date, such redemption date, such Purchase
Date, such Change in Control Purchase Date or the Maturity Date, as applicable.

          (b) Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months and, for any period of less than a

<PAGE>

full calendar month, the number of days lapsed in such month.

          (c) During such time as Xerox Funding or Xerox Capital is the holder
of any Securities, the Company shall pay any additional interest on the
Securities in an amount sufficient so that the net amounts received and retained
by the holder of the Securities after paying any taxes, duties, assessments or
governmental charges of whatever nature, other than withholding taxes, imposed
by the United States, or any other taxing authority will be equal to the amounts
the holder of the Securities would have received had no such taxes, duties,
assessments or other governmental charges been imposed ("Additional Interest").

          (d) Notwithstanding Section 2.06(c) above, none of the Company, Xerox
Funding or Xerox Capital will be responsible for, nor will the Company, Xerox
Funding or Xerox Capital be required to compensate holders of or investors in
the Trust Preferred Securities (or Xerox Funding Debentures that may be
distributed by Xerox Capital) for, any withholding taxes that are imposed on
interest payments on the Securities or the Xerox Funding Debentures or on
distributions with respect to the Trust Preferred Securities.

          (e) Notwithstanding anything to the contrary herein, for any date on
which a payment on the Securities is due and payable, to the extent the
corresponding payment on or in respect of the Xerox Funding Debentures is made
or otherwise duly provided for on such date from proceeds from the Pledged
Account in accordance with Section 5 of the Pledge Agreement, for all purposes
of this Indenture, such payment on the Securities shall be deemed to have been
paid in full on such date.

          SECTION 2.07. Transfer and Exchange.

          (a) Transfer Restrictions. The Securities may not be transferred
except in compliance with the legend contained in Exhibit A unless otherwise
determined by the Company in accordance with applicable law. Upon any exchange
of the Securities following a Exchange Event, the Company and the Trustee shall
enter into a supplemental indenture pursuant to Section 9.01 to provide for the
transfer restrictions and procedures with respect to the Securities
substantially similar to those contained in the Xerox Funding Indenture and the
Declaration to the extent applicable in the circumstances existing at such time.

          (b) General Provisions Relating to Transfers and Exchanges. Upon
surrender for registration of transfer of any Security at the office or agency
of the Company maintained for the purpose pursuant to Section 3.02, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of the same
series, of any authorized denominations and of a like aggregate principal amount
and such method shall be the only method of effecting a transfer of a Security.

          At the option of the holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
a like aggregate principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the holder making the exchange is entitled to
receive.

<PAGE>

          Every Security presented or surrendered for registration of transfer
or exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
holder thereof or his attorney duly authorized in writing. All Definitive
Securities and Global Securities issued upon any registration of transfer or
exchange of Definitive Securities or Global Securities shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Definitive Securities or Global Securities
surrendered upon such registration of transfer or exchange.

          No service charge shall be made to a holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith.

          The Company shall not be required to (i) issue, register the transfer
of or exchange Securities during a period beginning at the opening of business
15 days before the day of mailing of a notice of redemption or any notice of
selection of Securities for redemption under Article XIV hereof and ending at
the close of business on the day of such mailing; or (ii) register the transfer
of or exchange any Security so selected for redemption in whole or in part,
except the unpaid portion of any Security being redeemed in part.

          SECTION 2.08. Replacement Securities.

          If any mutilated Security is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's requirements
for replacements of Securities are met. An indemnity bond must be supplied by
the holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any agent thereof or any authenticating agent
from any loss that any of them may suffer if a Security is replaced. The Company
or the Trustee may charge for its expenses in replacing a Security.

          Every replacement Security is an obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Securities duly issued hereunder.

          SECTION 2.09. Temporary Securities.

          Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.

          If temporary Securities are issued, the Company shall cause definitive
Securities to be prepared without unreasonable delay. The

<PAGE>

definitive Securities shall be printed, lithographed or engraved, or provided by
any combination thereof, or in any other manner as the Company may elect to the
extent (if such definitive Securities are listed thereon) permitted by the rules
and regulations of any applicable securities exchange. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency maintained by the Company for such purpose pursuant to Section 3.02
hereof, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, in exchange therefor the same
aggregate principal amount of definitive Securities of authorized denominations.
Until so exchanged, the temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as definitive Securities.

          SECTION 2.10. Cancellation.

          The Company at any time may deliver Securities to the Trustee for
cancellation. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall retain or dispose of cancelled Securities in accordance
with its normal practices (subject to the record retention requirement of the
Exchange Act). The Company may not issue new Securities to replace Securities
that have been redeemed or paid or that have been delivered to the Trustee for
cancellation.

          SECTION 2.11. Defaulted Interest.

          Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the holder on the
relevant regular record date by virtue of having been such holder; and such
Defaulted Interest shall be paid by the Company, at its election, as provided in
clause (a) or clause (b) below:

          (a) The Company may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their respective
Predecessor Securities) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be fixed in
the following manner: the Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each such Security and the
date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment of such
Defaulted Interest which shall not be more than 15 nor less than 10 days prior
to the date of the proposed payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such special record date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed, first
class postage prepaid, to each Securityholder at his or her address as it
appears in the Security Register, not less than 10 days prior to such special
record date. Notice of

<PAGE>

the proposed payment of such Defaulted Interest and the special record date
therefor having been mailed as aforesaid, such Defaulted Interest shall be paid
to the Persons in whose names such Securities (or their respective Predecessor
Securities) are registered on such special record date and shall be no longer
payable pursuant to the following clause (b).

          (b) The Company may make payment of any Defaulted Interest on any
Securities in any other lawful manner not inconsistent with the requirements of
any securities exchange on which such Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.

          SECTION 2.12. CUSIP Numbers.

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

                                   ARTICLE III

                       PARTICULAR COVENANTS OF THE COMPANY

          SECTION 3.01. Payment and Delivery of Amounts due.

          The Company covenants and agrees for the benefit of the holders of the
Securities that it will duly and punctually pay, deliver or cause to be paid or
delivered all amounts due on or in respect of the Securities at the place, at
the respective times and in the manner provided herein. Except as provided in
Section 2.03, each installment of interest on the Securities may be paid by
mailing checks for such interest payable to the order of the holder of Security
entitled thereto as they appear in the Security Register.

          SECTION 3.02. Offices for Notices and Payments, etc.

          So long as any of the Securities remain outstanding, the Company will
maintain in the Borough of Manhattan, The City of New York, an office or agency
where the Securities may be presented for payment, an office or agency where the
Securities may be presented for registration of transfer, for exchange, purchase
and conversion as in this Indenture provided and an office or agency where
notices and demands to or upon the Company in respect of the Securities or of
this Indenture may be served. The Company will give to the Trustee written
notice of the location of any such office or agency and of any change of
location thereof. Until otherwise designated from time to time by the Company in
a notice to the Trustee, any such office or agency for all of the above purposes
shall be the Principal Office of the Trustee. In case the Company shall fail to
maintain any such office or agency in the

<PAGE>

Borough of Manhattan, The City of New York, or shall fail to give such notice of
the location or of any change in the location thereof, presentations and demands
may be made and notices may be served at the Principal Office of the Trustee.

          In addition to any such office or agency, the Company may from time to
time designate one or more offices or agencies outside the Borough of Manhattan,
The City of New York, where the Securities may be presented for payment,
registration of transfer and for exchange, purchase and conversion in the manner
provided in this Indenture, and the Company may from time to time rescind such
designation, as the Company may deem desirable or expedient; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain any such office or agency in the Borough of
Manhattan, The City of New York, for the purposes above mentioned. The Company
will give to the Trustee prompt written notice of any such designation or
rescission thereof.

          SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office.

          The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.

          SECTION 3.04. Provision as to Paying Agent.

          (a) If the Company shall appoint a paying agent other than the Trustee
with respect to the Securities, it will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provision of this Section 3.04,

                    (1) that it will hold all sums held by it as such agent for
          the payment of the principal of and premium, if any, or interest on
          the Securities (whether such sums have been paid to it by the Company
          or by any other obligor on the Securities of such series) in trust for
          the benefit of the holders of the Securities;

                    (2) that it will give the Trustee notice of any failure by
          the Company (or by any other obligor on the Securities) to make any
          payment of the principal of and premium or interest on the Securities
          when the same shall be due and payable; and

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

          (b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of and premium, if any, or interest on the
Securities, set aside, segregate and hold in trust for the benefit of the
holders of the Securities a sum sufficient to pay such principal, premium or
interest so becoming due and will notify the Trustee of any failure to take such
action and of any failure by the Company (or by any other obligor under the
Securities) to make any payment of the principal of and premium, if any, or
interest on the Securities when the same shall become due and payable.

          (c) Anything in this Section 3.04 to the contrary

<PAGE>

notwithstanding, the Company may, at any time, for the purpose of obtaining a
satisfaction and discharge with respect to the Securities hereunder, or for any
other reason, pay or cause to be paid to the Trustee all sums held in trust for
any such series by the Trustee or any paying agent hereunder, as required by
this Section 3.04, such sums to be held by the Trustee upon the trusts herein
contained.

          (d) Anything in this Section 3.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.04 is subject to
Sections 11.03 and 11.04.

          (e) The Company appoints the Trustee as the initial paying agent (the
"Paying Agent").

          SECTION 3.05. Certificate to Trustee.

          The Company will deliver to the Trustee on or before 120 days after
the end of each fiscal year of the Company, commencing with the first fiscal
year ending after the date hereof, so long as Securities are outstanding
hereunder, an Officers' Certificate, one of the signers of which shall be the
principal executive, principal financial or principal accounting officer of the
Company stating that in the course of the performance by the signers of their
duties as officers of the Company they would normally have knowledge of any
default by the Company in the performance of any covenants contained herein,
stating whether or not they have knowledge of any such default and, if so,
specifying each such default of which the signers have knowledge and the nature
thereof.

          SECTION 3.06. Compliance with Consolidation Provisions.

          The Company will not, while any of the Securities remain outstanding,
consolidate with, or merge into, or merge into itself, or sell, lease or convey
all or substantially all of its property to any other Person unless the
provisions of Article X hereof are complied with.

          SECTION 3.07. Limitation on Dividends.

          The Company will not (i) declare or pay any dividend on, or make any
distribution relating to, or redeem, purchase, acquire, or make a liquidation
payment relating to, any of the Company's Capital Stock (which includes common
and preferred stock) or (ii) make any payment of principal, interest or premium,
if any, on or repay or repurchase or redeem any debt securities of the Company
(including any Other Debentures) that rank pari passu with or junior in right of
payment to the Securities or (iii) make any guarantee payments with respect to
any guarantee by the Company of any securities of any Subsidiary of the Company
(including any Other Guarantees) if such guarantee ranks pari passu or junior in
right of payment to the Securities (other than (a) dividends or distributions in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, Common Stock; (b) any declaration of a dividend in connection with the
implementation of a stockholder rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto; (c) payments or deliveries of any consideration under the
Guarantees; (d) the purchase of fractional interests in shares of the Company's
Capital Stock resulting from a reclassification of such Capital Stock, (e) as a
result of an exchange or conversion of any class or series of the Company's

<PAGE>

Capital Stock for another class or series of the Company's Capital Stock; (f)
the purchase of fractional interests in shares of the Company's Capital Stock
pursuant to the conversion or exchange provisions of such Capital Stock or the
security being converted or exchanged; (g) any declaration or payment of a
dividend on the Company's Series B Convertible Preferred Stock as required under
the Company's Restated Certificate of Incorporation, in connection with the
operation of the Company's Employee Stock Ownership Plan ("Plan") and (h) the
conversion, repurchase or redemption of or other acquisitions of shares of the
Company's Capital Stock (including Series B Preferred Stock) in connection with
any employee benefit plans or employee stock option plans or any other
contractual obligation of the Company, other than a contractual obligation
ranking pari passu with or junior to the Securities), if at such time (1) there
shall have occurred and be continuing an event of default under the Declaration,
(2) there shall have occurred and be continuing an Event of Default under this
Indenture or an Event of Default (as such term is defined under the Xerox
Funding Indenture) under the Xerox Funding Indenture, (3) there shall have
occurred and be continuing a payment default under the Declaration, this
Indenture or the Xerox Funding Indenture, or (4) the Company shall be in default
with respect to its payment of any obligations under the Guarantees.

          SECTION 3.08. Covenants as to Xerox Capital and Xerox Funding.

          For so long as the Securities remain outstanding, the Company agrees
(i) to maintain directly or indirectly 100% ownership of Xerox Funding's common
securities, unless a successor of the Company succeeds to its ownership of such
common securities, (ii) to maintain directly or indirectly 100% ownership of
Xerox Capital's common securities, unless a permitted successor of the Company
succeeds to its ownership of such common securities; (iii) not to voluntarily
terminate, wind-up or liquidate Xerox Funding, except as permitted under the LLC
Agreement after November 27, 2004 following the exchange of Xerox Funding
Debentures for the Securities; (iv) to use its reasonable efforts to cause Xerox
Funding to not be (x) an investment company required to register under the
Investment Company Act, or (y) classified as an association or a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes, (v) to use its reasonable efforts to cause Xerox Capital to: (x)
remain a statutory business trust, except in connection with the distribution of
Xerox Funding Debentures to the holders of Trust Securities in liquidation of
Xerox Capital, the redemption of all the Trust Securities, or mergers,
consolidations or amalgamations, each as permitted by the Declaration; (y) not
be an investment company required to register under the Investment Company Act;
and (z) otherwise continue to be classified as a grantor trust for United States
federal income tax purposes; (vi) to maintain the reservation for issuance of
the number of shares of Common Stock that would be required from time to time
upon the conversion of all the Securities then outstanding, (vii) to deliver
shares of Common Stock upon an election by a Holder to convert such Securities
into or for Common Stock, and (viii) to honor all obligations relating to the
conversion, purchase or exchange of the Securities into or for Common Stock.

          SECTION 3.09. Payment of Expenses.

          In connection with the offering, sale and issuance of the Securities
to Xerox Funding, the issuance of the Xerox Funding Debentures to Xerox Capital
and in connection with the sale of the Trust Securities by Xerox Capital, the
Company, in its capacity as borrower with respect to the

<PAGE>

Securities, shall:

          (a) pay all costs and expenses relating to the offering, sale and
issuance of the Securities, including commissions to the initial purchasers
payable pursuant to the Purchase Agreement and compensation of the Trustee in
accordance with the provisions of Section 6.06;

          (b) pay all costs and expenses of Xerox Capital (including, but not
limited to, costs and expenses relating to the organization of Xerox Capital,
the offering, sale and issuance of the Trust Securities (including commissions
to the initial purchasers in connection therewith), the fees and expenses of the
Property Trustee and the Delaware Trustee, the costs and expenses relating to
the operation of Xerox Capital, including without limitation, costs and expenses
of accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of assets of Xerox Capital;

          (c) pay all costs and expenses of Xerox Funding (including, but not
limited to, costs and expenses relating to the organization of Xerox Funding,
the offering, sale and issuance of the Xerox Funding Debentures, the fees and
expenses of the trustee under the Xerox Funding Indenture, the costs and
expenses relating to the operation of Xerox Funding, including without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of assets of Xerox Funding;

          (d) be primarily and fully liable for any indemnification obligations
arising with respect to the Declaration and the Xerox Funding Indenture;

          (e) pay any and all taxes (other than United States withholding taxes
attributable to Xerox Capital, Xerox Funding and their respective assets) and
all liabilities, costs and expenses with respect to such taxes of Xerox Capital
and Xerox Funding; and

          (f) pay all other fees, expenses, debts and obligations (other than
the payment or delivery of principal of, premium, if any, or interest on the
Trust Securities or the Xerox Funding Debentures) related to Xerox Capital and
Xerox Funding.

          SECTION 3.10. Payment Upon Resignation or Removal.

          Upon termination of this Indenture or the removal or resignation of
the Trustee, unless otherwise stated, the Company shall pay to the Trustee all
amounts accrued and owing to the date of such termination, removal or
resignation. Upon termination of the Declaration or the removal or resignation
of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to
Section 5.7 of the Declaration, the Company shall pay to the Delaware Trustee or
the Property Trustee, as the case may be, all amounts accrued and owing to the
date of such termination, removal or resignation

<PAGE>

                                   ARTICLE IV

                    SECURITYHOLDERS' LISTS AND REPORTS BY THE
                             COMPANY AND THE TRUSTEE

          SECTION 4.01. Lists of Securityholders.

          (a) The Company shall provide the Trustee, unless the Trustee or one
of its Affiliates is registrar for the Securities (i) within 14 days after each
record date for payment of distributions on the Securities, a list, in such form
as the Trustee may reasonably require, of the names and addresses of the
Securityholders ("List of Holders") as of such record date, provided that the
Company shall not be obligated to provide such List of Holders at any time the
List of Holders does not differ from the most recent List of Holders given to
the Trustee by the Company, and (ii) at any other time, within 30 days of
receipt by the Company of a written request for a List of Holders as of a date
no more than 14 days before such List of Holders is given to the Trustee. The
Trustee shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as paying agent for the Securities (if acting in such capacity),
provided that the Trustee may destroy any List of Holders previously given to it
on receipt of a new List of Holders. (b) The Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.

          SECTION 4.02. Reports by the Trustee.

          Within 60 days after December 15 of each year, commencing December 15,
2002, the Trustee shall provide to the Securityholders such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Property
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.

          SECTION 4.03. Periodic Reports to Trustee.

          The Company shall provide to the Trustee such documents, reports and
information as are required by Section 314 (if any) and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314(a)(4) of the Trust Indenture
Act, such compliance certificate to be delivered annually on or before 120 days
after the end of each fiscal year of the Company.

                                    ARTICLE V

                   REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                               ON EVENT OF DEFAULT

          SECTION 5.01. Events of Default.

          One or more of the following events of default shall constitute an
Event of Default hereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):

          (a) default in the payment of any interest upon any

<PAGE>

Security when it becomes due and payable, and continuance of such default for a
period of 30 days, to the extent the corresponding interest payment on the Xerox
Funding Debentures for the related interest payment date is not made or
otherwise duly provided for from proceeds from the Pledged Account in accordance
with Section 5 of the Pledge Agreement; or

          (b) default in the payment of all or any part of the principal of (or
premium, if any), Redemption Price, Purchase Price or Change in Control Purchase
Price on any Security as and when the same shall become due and payable either
at maturity, upon redemption, upon purchase, by declaration of acceleration of
maturity or otherwise, to the extent the corresponding payment on the Xerox
Funding Debentures for the related date of such payment is not made or otherwise
duly provided for from proceeds from the Pledged Account in accordance with
Section 5 of the Pledge Agreement; or

          (c) the Company fails either to deliver shares of Common Stock (or to
pay cash in lieu of fractional shares) or other consideration in accordance with
the terms hereof when such Common Stock (or cash in lieu of fractional shares)
or other consideration is required to be delivered, whether upon conversion or
purchase, and such failure is not remedied for a period of 10 Business Days, to
the extent that the corresponding cash payment on the Xerox Funding Debentures
for the related date of such payment is not made or otherwise duly provided for
from proceeds from the Pledged Account in accordance with Section 5 of the
Pledge Agreement; or

          (d) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with), and continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or

          (e) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company, Xerox Funding (so long as it
holds any of the Securities) or Xerox Capital (so long as the Trust Securities
are outstanding) in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company, Xerox Funding or Xerox Capital, as the case may be, or
for any substantial part of their property, or ordering the winding-up or
liquidation of their affairs and such decree or order shall remain unstayed and
in effect for a period of 90 consecutive days;

          (f) the Company, Xerox Funding (so long as it holds any of the
Securities) or Xerox Capital (so long as the Trust Securities are outstanding)
shall commence a voluntary case under any applicable bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect, shall consent to
the entry of an order for relief in an involuntary case under any such law, or
shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of the Company, Xerox Funding or Xerox Capital, as the case may be, or
of any substantial part of their property, or shall make any general assignment
for the benefit of creditors,

<PAGE>

or shall fail generally to pay their debts as they become due; or

          (g) the occurrence and continuance of an Event of Default under the
Xerox Funding Indenture.

          If an Event of Default with respect to Securities at the time
outstanding occurs and is continuing, then in the cases specified in (e) and (f)
above, the principal amount of all Securities automatically shall become
immediately due and payable; in every other case specified above, the Trustee or
the holders of not less than 25% in aggregate principal amount of the Securities
then outstanding may declare the principal amount of all Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the holders of the outstanding Securities), and upon any
such declaration the same shall become immediately due and payable.

          The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, (i)
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
(A) all matured installments of interest upon all the Securities and the
principal of and premium, if any, on any and all Securities which shall have
become due otherwise than by acceleration (with interest upon such principal and
premium, if any, and, to the extent that payment of such interest is enforceable
under applicable law, on overdue installments of interest, at the same rate as
the rate of interest specified in the Securities to the date of such payment or
deposit) and (B) such amount as shall be sufficient to cover reasonable
compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Trustee and each predecessor Trustee except as a
result of gross negligence or bad faith, and (ii) any and all Events of Default
under the Indenture, other than the non-payment of the principal of the
Securities which shall have become due solely by such declaration of
acceleration, shall have been cured, waived or otherwise remedied as provided
herein, then, in every such case, the holders of a majority in aggregate
principal amount of the Securities then outstanding, by written notice to the
Company and to the Trustee, may rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent
thereon.

          In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the holders of the Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the
Securities shall continue as though no such proceeding had been taken.

          SECTION 5.02. Payment of Securities on Default; Suit Therefor.

          The Company covenants that (a) in case default shall be made in the
payment of any installment of interest upon any of the Securities as and when
the same shall become due and payable, and such default shall

<PAGE>

have continued for a period of 30 days, to the extent the corresponding interest
payment on the Xerox Funding Debentures for the related interest payment date is
not made or otherwise duly provided for from proceeds from the Pledged Account
in accordance with Section 5 of the Pledge Agreement, (b) in case default shall
be made in the payment of the principal of or premium, if any, Redemption Price,
Purchase Price or Change in Control Purchase Price on any of the Securities as
and when the same shall have become due and payable, whether at maturity of the
Securities or upon redemption, purchase or by declaration or otherwise, to the
extent the corresponding payment on the Xerox Funding Debentures for the related
date of such payment is not made or otherwise duly provided for from proceeds
from the Pledged Account in accordance with Section 5 of the Pledge Agreement or
(c) in case default shall be made in the delivery of shares of Common Stock (or
to pay cash in lieu of fractional shares) or other consideration in accordance
with the terms hereof when such Common Stock (or cash in lieu of fractional
shares) or other consideration is required to be delivered, whether upon
conversion or purchase, and such failure is not remedied for a period of 10
Business Days, to the extent that the corresponding cash payment on the Xerox
Funding Debentures for the related date of such payment is not made or otherwise
duly provided for from proceeds from the Pledged Account in accordance with
Section 5 of the Pledge Agreement, then, upon demand of the Trustee, the Company
will pay or deliver to the Trustee, for the benefit of the holders of the
Securities, the whole amount that then shall have become due and payable or
deliverable on all such Securities including the Redemption Price, Purchase
Price or Change in Control Purchase Price, with interest upon such overdue
amounts, if any, and (to the extent that payment of such interest is enforceable
under applicable law and, if the Securities are held by Xerox Funding or Xerox
Capital, without duplication of any other amounts paid by Xerox Funding or Xerox
Capital in respect thereof) upon the overdue installments of interest at the
rate borne by the Securities; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its gross negligence or bad faith.

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

          In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Securities under
Title 11, United States Code, or any other applicable law, or in case a receiver
or trustee shall have been appointed for the property of the Company or such
other obligor, or in the case of any other similar judicial proceedings relative
to the Company or other obligor upon the Securities, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 5.02,
shall be entitled and

<PAGE>

empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal and interest owing and unpaid
in respect of the Securities and, in case of any judicial proceedings, to file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee, except as a result of gross negligence or bad faith) and of
the Securityholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Securities, or to the creditors or property of the
Company or such other obligor, unless prohibited by applicable law and
regulations, to vote on behalf of the holders of the Securities in any election
of a trustee or a standby trustee in arrangement, reorganization, liquidation or
other bankruptcy or insolvency proceedings or person performing similar
functions in comparable proceedings, and to collect and receive any moneys or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of its charges and expenses; and any receiver, assignee
or trustee in bankruptcy or reorganization is hereby authorized by each of the
Securityholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee such amounts as shall be sufficient to
cover reasonable compensation to the Trustee, each predecessor Trustee and their
respective agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of gross negligence or bad faith

          Nothing herein contained shall be construed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any holder thereof or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.

          All rights of action and of asserting claims under this Indenture, or
under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities, or the production thereof on any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable benefit of the holders of the
Securities.

          In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Securities, and it shall not be necessary to make any holders of the
Securities parties to any such proceedings.

          SECTION 5.03. Application of Moneys Collected by Trustee.

          Any moneys and properties collected by the Trustee shall be applied in
the order following, at the date or dates fixed by the Trustee for the
distribution of such moneys and properties, upon presentation of the Securities
in respect of which moneys have been collected, and stamping thereon the
payment, if only partially paid, and upon surrender thereof if fully paid:

<PAGE>

          First: To the payment of costs and expenses of collection applicable
to the Securities and reasonable compensation to the Trustee, its agents,
attorneys and counsel, and of all other expenses and liabilities incurred, and
all advances made, by the Trustee except as a result of its gross negligence or
bad faith;

          Second: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article XVII;

          Third: To the payment or delivery of the amounts then due and unpaid
upon Securities for principal of (and premium, if any), Redemption Price,
Purchase Price or Change in Control Purchase Price and interest on the
Securities, in respect of which or for the benefit of which money has been
collected, ratably, without preference of priority of any kind, according to the
amounts due on such Securities; and

          Fourth: To the Company.

          SECTION 5.04. Proceedings by Securityholders.

          No holder of any Security shall have any right by virtue of or by
availing of any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof with respect to the
Securities specifying such Event of Default, as hereinbefore provided, and
unless also the holders of not less than 25% in aggregate principal amount of
the Securities then outstanding shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable security or
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity shall have failed to institute any
such action, suit or proceeding, it being understood and intended, and being
expressly covenanted by the taker and holder of every Security with every other
taker and holder and the Trustee, that no one or more holders of Securities
shall have any right in any manner whatever by virtue of or by availing itself
of any provision of this Indenture to affect, disturb or prejudice the rights of
any other holder of Securities, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Securities.

          Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Security to receive payment of the principal of
(premium, if any) and interest on such Security, on or after the same shall have
become due and payable, or to institute suit for the enforcement of any such
payment, shall not be impaired or affected without the consent of such holder
and by accepting a Security hereunder it is expressly understood, intended and
covenanted by the taker and holder of every Security with every other such taker
and holder and the Trustee, that no one or more holders of Securities shall have
any right in any manner whatsoever by virtue or by availing of any provision of
this Indenture to affect, disturb or prejudice the rights of the holders of any
other

<PAGE>

Securities, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities. For the protection and enforcement of the provisions of
this Section, each and every Securityholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.

          The Company and the Trustee acknowledge that so long as Xerox Funding
Debentures or the Securities are held by the Property Trustee, pursuant to the
Declaration, the holders of Trust Preferred Securities are entitled, in the
circumstances and subject to the limitations set forth therein, to commence a
Direct Action with respect to any Event of Default under this Indenture and the
Securities; provided, further, that, the Company and the Trustee acknowledge
that, so long as the Securities are held solely by Xerox Funding (and no Trust
Securities are outstanding), pursuant to the Xerox Funding Indenture, the
holders of the Xerox Funding Debentures are entitled, in the circumstances and
subject to the limitations set forth therein, to commence a Direct Action with
respect to any Event of Default under this Indenture and the Securities.

          SECTION 5.05. Proceedings by Trustee.

          In case an Event of Default occurs with respect to Securities and is
continuing, the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.

          SECTION 5.06. Remedies Cumulative and Continuing.

          All powers and remedies given by this Article V to the Trustee or to
the Securityholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any other powers and remedies available to the Trustee or
the holders of the Securities, by judicial proceedings or otherwise, to enforce
the performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to the Securities, and no delay
or omission of the Trustee or of any holder of any of the Securities to exercise
any right or power accruing upon any Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.04, every power and remedy given by this Article V or by
law to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.

          SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders.

          The holders of a majority in aggregate principal amount of the
Securities at the time outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee;

<PAGE>

provided, however, that (subject to the provisions of Section 6.01) the Trustee
shall have the right to decline to follow any such direction if the Trustee
shall determine that the action so directed would be unjustly prejudicial to the
holders not taking part in such direction or if the Trustee being advised by
counsel determines that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith by its board of directors or trustees,
executive committee, or a trust committee of directors or trustees and/or
Responsible Officers shall determine that the action or proceedings so directed
would involve the Trustee in personal liability. Prior to any declaration
accelerating the maturity of the Securities, the holders of a majority in
aggregate principal amount of the Securities at the time outstanding may on
behalf of the holders of all of the Securities waive any past default or Event
of Default and its consequences except a default (a) in the payment of principal
of or premium, if any, Redemption Price, Purchase Price, Change in Control
Purchase Price or interest on any of the Securities or delivery of Common Stock
or other consideration upon conversion or purchase or (b) in respect of
covenants or provisions hereof which cannot be modified or amended without the
consent of the holder of each Security affected; provided, however, that (i) if
the Xerox Funding Debentures or the Securities are held by the Property Trustee,
such waiver or modification or amendment shall not be effective until the
holders of a majority in aggregate liquidation amount of Trust Securities shall
have consented to such waiver or modification or amendment or if the consent of
the holder of each affected Security is required, such waiver shall not be
effective until each holder of the Trust Securities shall have consented to such
waiver and (ii) if the Securities are held solely by Xerox Funding and no Trust
Securities are outstanding, such waiver or modification or amendment shall not
be effective until the holders of a majority in aggregate principal amount of
Xerox Funding Debentures shall have consented to such waiver, modification or
amendment or if the consent of the holder of each affected Security is required,
such waiver, modification or amendment shall not be effective until each holder
of the Xerox Funding Debentures shall have consented to such waiver,
modification or amendment. Upon any such waiver, the default covered thereby
shall be deemed to be cured for all purposes of this Indenture and the Company,
the Trustee and the holders of the Securities shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon. Whenever
any default or Event of Default hereunder shall have been waived as permitted by
this Section 5.07, said default or Event of Default shall for all purposes of
the Securities and this Indenture be deemed to have been cured and to be not
continuing.

          SECTION 5.08. Notice of Defaults.

          The Trustee shall, within 90 days after the occurrence of a default
with respect to the Securities mail to all Securityholders, as the names and
addresses of such holders appear upon the Security Register, notice of all
defaults known to the Trustee, unless such defaults shall have been cured before
the giving of such notice (the term "defaults" for the purpose of this Section
5.08 being hereby defined to be the events specified in clauses (a), (b), (c),
(d), (e) and (f) of Section 5.01, not including periods of grace, if any,
provided for therein, and irrespective of the giving of written notice specified
in clause (d) of Section 5.01); and provided that, except in the case of default
in the payment or delivery of any amounts due and payable on any of the
Securities, the Trustee shall be protected in withholding such notice if and so
long as the board of

<PAGE>

directors, the executive committee, or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Securityholders; and
provided further, that in the case of any default of the character specified in
Section 5.01(d) no such notice to Securityholders shall be given until at least
45 days after the occurrence thereof but shall be given within 60 days after
such occurrence.

          SECTION 5.09. Undertaking to Pay Costs.

          All parties to this Indenture agree, and each holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section 5.09 shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in aggregate principal
amount of the Securities outstanding, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Security against the Company on or after the
same shall have become due and payable.

                                   ARTICLE VI

                             CONCERNING THE TRUSTEE

          SECTION 6.01. Duties and Responsibilities of Trustee.

          With respect to the holders of the Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture. In case an Event of Default has occurred (which has not been cured or
waived) the Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.

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

          (a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred

                    (1) the duties and obligations of the Trustee shall be
          determined solely by the express provisions of this Indenture, and the
          Trustee shall not be liable except for the performance of such duties
          and obligations as are specifically set forth in this Indenture, and
          no implied covenants or obligations shall be read into this Indenture
          against the Trustee; and

<PAGE>

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

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

          (c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith, in accordance with the direction of
the Securityholders pursuant to Section 5.07, relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.

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

          SECTION 6.02. Reliance on Documents, Opinions, etc.

          Except as otherwise provided in Section 6.01:

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

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

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

          (d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and

<PAGE>

liabilities which may be incurred therein or thereby;

          (e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the occurrence of an
Event of Default (that has not been cured or waived), to exercise such of the
rights and powers vested in it by this Indenture, and to use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs;

          (f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
coupon or other paper or document, unless requested in writing to do so by the
holders of a majority in aggregate principal amount of the outstanding
Securities; provided, however, that if the payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms of
this Indenture, the Trustee may require reasonable indemnity against such
expense or liability as a condition to so proceeding; and

          (g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents (including
any Authenticating Agent) or attorneys, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed by it with due care.

          SECTION 6.03. No Responsibility for Recitals, etc.

          The recitals contained herein and in the Securities (except in the
certificate of authentication of the Trustee or the Authenticating Agent) shall
be taken as the statements of the Company and the Trustee and the Authenticating
Agent assume no responsibility for the correctness of the same. The Trustee and
the Authenticating Agent make no representations as to the validity or
sufficiency of this Indenture or of the Securities. The Trustee and the
Authenticating Agent shall not be accountable for the use or application by the
Company of any Securities or the proceeds of any Securities authenticated and
delivered by the Trustee or the Authenticating Agent in conformity with the
provisions of this Indenture.

          SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer
Agents or Registrar May Own Securities.

          The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Security registrar, in its individual or any other
capacity, may become the owner or pledgee of Securities with the same rights it
would have if it were not Trustee, Authenticating Agent, paying agent, transfer
agent or Security registrar.

          SECTION 6.05. Moneys to be Held in Trust.

          Subject to the provisions of Section 11.04, all moneys

<PAGE>

received by the Trustee or any paying agent shall, until used or applied as
herein provided, be held in trust for the purpose for which they were received,
but need not be segregated from other funds except to the extent required by
law. The Trustee and any paying agent shall be under no liability for interest
on any money received by it hereunder except as otherwise agreed in writing with
the Company. So long as no Event of Default shall have occurred and be
continuing, all interest allowed on any such moneys shall be paid from time to
time upon the written order of the Company, signed by the Chairman of the Board
of Directors, the President or a Vice President or the Treasurer or an Assistant
Treasurer of the Company.

          SECTION 6.06. Compensation and Expenses of Trustee.

          The Company, as borrower, covenants and agrees to pay to the Trustee
from time to time, and the Trustee shall be entitled to, such compensation as
shall be agreed to in writing between the Company and the Trustee (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust), and the Company will pay or reimburse the Trustee
upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Company also covenants to indemnify each of the
Trustee or any predecessor Trustee (and its officers, agents, directors and
employees) for, and to hold it harmless against, any and all loss, damage,
claim, liability or expense including taxes (other than taxes based on the
income of the Trustee) incurred without gross negligence or bad faith on the
part of the Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability in the premises. The obligations of the
Company under this Section 6.06 to compensate and indemnify the Trustee and to
pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder. Such additional indebtedness shall
be secured by a lien prior to that of the Securities upon all property and funds
held or collected by the Trustee as such, except funds held in trust for the
benefit of the holders of particular Securities.

          Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(e) or Section
5.01(f), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.

          The provisions of this Section shall survive the termination of this
Indenture and the resignation or removal of the Trustee.

          SECTION 6.07. Officers' Certificate as Evidence.

          Except as otherwise provided in Sections 6.01 and 6.02, whenever in
the administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof is herein specifically prescribed)

<PAGE>

may, in the absence of gross negligence or bad faith on the part of the Trustee,
be deemed to be conclusively proved and established by an Officers' Certificate
delivered to the Trustee, and such certificate, in the absence of negligence or
bad faith on the part of the Trustee, shall be full warrant to the Trustee for
any action taken or omitted by it under the provisions of this Indenture upon
the faith thereof.

          SECTION 6.08. Conflicting Interest of Trustee.

          If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act. The Declaration and Indenture shall be deemed to be
specifically described in this Indenture for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.

          SECTION 6.09. Eligibility of Trustee.

          The Trustee hereunder shall at all times be a corporation organized
and doing business under the laws of the United States of America or any state
or territory thereof or of the District of Columbia or a corporation or other
Person permitted to act as trustee by the Commission authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000) and subject to supervision or
examination by federal, state, territorial, or District of Columbia authority.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 6.09 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. The
Company may not, nor may any Person directly or indirectly controlling,
controlled by, or under common control with the Company, serve as Trustee. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 6.09, the Trustee shall resign immediately in the
manner and with the effect specified in Section 6.10.

          SECTION 6.10. Resignation or Removal of Trustee.

          (a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice of such resignation to the Company
and by mailing notice thereof to the holders of the Securities at their
addresses as they shall appear on the Security Register. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee or
trustees by written instrument, in duplicate, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor trustee. If
no successor trustee shall have been so appointed and have accepted appointment
within 60 days after the mailing of such notice of resignation to the
Securityholders, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Securityholder
who has been a bona fide holder of a Security for at least six months may,
subject to the provisions of Section 5.09, on behalf of himself and all others
similarly situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor trustee.

<PAGE>

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

                    (1) the Trustee shall fail to comply with the provisions of
          Section 6.08 after written request therefor by the Company or by any
          Securityholder who has been a bona fide holder of a Security or
          Securities for at least six months, or

                    (2) the Trustee shall cease to be eligible in accordance
          with the provisions of Section 6.09 and shall fail to resign after
          written request therefor by the Company or by any such Securityholder,
          or

                    (3) the Trustee shall become incapable of acting, or shall
          be adjudged a bankrupt or insolvent, or a receiver of the Trustee or
          of its property shall be appointed, or any public officer shall take
          charge or control of the Trustee or of its property or affairs for the
          purpose of rehabilitation, conservation or liquidation, then, in any
          such case, the Company may remove the Trustee and appoint a successor
          trustee by written instrument, in duplicate, one copy of which
          instrument shall be delivered to the Trustee so removed and one copy
          to the successor trustee, or, subject to the provisions of Section
          5.09, any Securityholder who has been a bona fide holder of a Security
          for at least six months may, on behalf of himself and all others
          similarly situated, petition any court of competent jurisdiction for
          the removal of the Trustee and the appointment of a successor trustee.
          Such court may thereupon, after such notice, if any, as it may deem
          proper and prescribe, remove the Trustee and appoint a successor
          trustee.

          (c) The holders of a majority in aggregate principal amount of the
Securities at the time outstanding may at any time remove the Trustee and
nominate a successor trustee, which shall be deemed appointed as successor
trustee unless within 10 days after such nomination the Company objects thereto
or if no successor trustee shall have been so appointed and shall have accepted
appointment within 30 days after such removal, in which case the Trustee so
removed or any Securityholder, upon the terms and conditions and otherwise as in
subsection (a) of this Section 6.10 provided, may petition any court of
competent jurisdiction for an appointment of a successor trustee.

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

          SECTION 6.11. Acceptance by Successor Trustee.

          Any successor trustee appointed as provided in Section 6.10 shall
execute, acknowledge and deliver to the Company and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as trustee herein; but,
nevertheless, on the written request of the Company or of the successor trustee,
the trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of Section 6.06, execute and

<PAGE>

deliver an instrument transferring to such successor trustee all the rights and
powers of the trustee so ceasing to act and shall duly assign, transfer and
deliver to such successor trustee all property and money held by such retiring
trustee thereunder. Upon request of any such successor trustee, the Company
shall execute any and all instruments in writing for more fully and certainly
vesting in and confirming to such successor trustee all such rights and powers.
Any trustee ceasing to act shall, nevertheless, retain a lien upon all property
or funds held or collected by such trustee to secure any amounts then due it
pursuant to the provisions of Section 6.06.

          No successor trustee shall accept appointment as provided in this
Section 6.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.

          Upon acceptance of appointment by a successor trustee as provided in
this Section 6.11, the Company shall mail notice of the succession of such
trustee hereunder to the holders of Securities at their addresses as they shall
appear on the Security Register. If the Company fails to mail such notice within
10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.

          SECTION 6.12. Succession by Merger, etc.

          Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto.

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

          SECTION 6.13. Limitation on Rights of Trustee as a Creditor.

          The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act. A Trustee who has resigned or been removed shall be subject
to Section 311(a) of the Trust Indenture Act to the extent included therein.

<PAGE>

          SECTION 6.14. Authenticating Agents.

          There may be one or more Authenticating Agents appointed by the
Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Securities issued
upon exchange or transfer thereof as fully to all intents and purposes as though
any such Authenticating Agent had been expressly authorized to authenticate and
deliver Securities; provided, that the Trustee shall have no liability to the
Company for any acts or omissions of the Authenticating Agent with respect to
the authentication and delivery of Securities.

          Any such Authenticating Agent shall at all times be a corporation
organized and doing business under the laws of the United States or of any state
or territory thereof or of the District of Columbia authorized under such laws
to act as Authenticating Agent, having a combined capital and surplus of at
least $5,000,000 and being subject to supervision or examination by federal,
state, territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually pursuant to law or the
requirements of such authority, then for the purposes of this Section 6.14 the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect herein specified in this Section. Any
corporation into which any Authenticating Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
consolidation or conversion to which any Authenticating Agent shall be a party,
or any corporation succeeding to all or substantially all of the corporate trust
business of any Authenticating Agent, shall be the successor of such
Authenticating Agent hereunder, if such successor corporation is otherwise
eligible under this Section 6.14 without the execution or filing of any paper or
any further act on the part of them parties hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section 6.14, the
Trustee may, and upon the request of the Company shall, promptly appoint a
successor Authenticating Agent eligible under this Section 6.14, shall give
written notice of such appointment to the Company and shall mail notice of such
appointment to all Securityholders as the names and addresses of such holders
appear on the Security Register. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent herein.

          The Company, as borrower, agrees to pay to any Authenticating Agent
from time to time reasonable compensation for its services. Any Authenticating
Agent shall have no responsibility or liability for any action taken by it as
such in accordance with the directions of the Trustee.

          SECTION 6.15. Appointment of Conversion Agent.

<PAGE>

          The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented for conversion
(the "Conversion Agent"). The Company may appoint the Conversion Agent and may
appoint one or more additional conversion agents in such other locations as it
shall determine. The term "Conversion Agent" includes any additional conversion
agent. The Company may change any Conversion Agent without prior notice to any
holder. The Conversion Agent shall be permitted to resign as Conversion Agent
upon 30 days' written notice to the Company. Upon such resignation, the Company
shall notify the holders of the name and address of any Conversion Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Conversion Agent, the Trustee or any Affiliate thereof designated by
the Trustee which meets the requirements of Section 6.09 hereof shall act as
such. The Company or any of its Affiliates may act as Conversion Agent.

          The Trust initially appoints Wells Fargo Bank Minnesota, National
Association as Conversion Agent for the Securities.

                                   ARTICLE VII

                         CONCERNING THE SECURITYHOLDERS

          SECTION 7.01. Action by Securityholders.

          Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Securities may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the holders of such specified percentage have
joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, or (b) by the record of such holders of
Securities voting in favor thereof at any meeting of such Securityholders duly
called and held in accordance with the provisions of Article VIII, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of such Securityholders.

          If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Securityholders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or other
action or to revoke any such action, but the Company shall have no obligation to
do so. If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other action or revocation may be given
before or after the record date, but only the Securityholders of record at the
close of business on the record date shall be deemed to be Securityholders for
the purposes of determining whether Securityholders of the requisite proportion
of outstanding Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other
action, and for that purpose the outstanding Securities shall be computed as of
the record date; provided, however, that no such authorization, agreement or
consent by such Securityholders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than six months after the record date.

<PAGE>

          SECTION 7.02. Proof of Execution by Securityholders.

          Subject to the provisions of Section 6.01, 6.02 and 8.05, proof of the
execution of any instrument by a Securityholder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The ownership of Securities shall be proved by the Security
Register or by a certificate of the Security registrar. The Trustee may require
such additional proof of any matter referred to in this Section as it shall deem
necessary.

          The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.

          SECTION 7.03. Who Are Deemed Absolute Owners.

          Prior to due presentment for registration of transfer of any Security,
the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Security registrar may deem the person in whose name such
Security shall be registered upon the Security Register to be, and may treat him
as, the absolute owner of such Security (whether or not such Security shall be
overdue) for the purpose of receiving payment of or on account of the principal
of and premium, if any Redemption Price, Purchase Price and Change in Control
Purchase Price and (subject to Section 2.06) interest on such Security and for
all other purposes; and neither the Company nor the Trustee nor any
Authenticating Agent nor any paying agent nor any transfer agent nor any
Security registrar shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being or upon his order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Security.

          SECTION 7.04. Securities Owned by Company Deemed Not Outstanding.

          In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Indenture, Securities which are owned by the Company or any
other obligor on the Securities or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company (other than Xerox Funding and Xerox Capital) or any other obligor on the
Securities shall be disregarded and deemed not to be outstanding for the purpose
of any such determination; provided that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, consent or
waiver, only Securities which the Trustee actually knows are so owned shall be
so disregarded. Securities so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 7.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Securities and that the pledgee is not the Company or any such other
obligor or person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee.

          SECTION 7.05. Revocation of Consents; Future Holders

<PAGE>

Bound.

          At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Securities specified in this
Indenture in connection with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor),
subject to Section 7.01, the serial number of which is shown by the evidence to
be included in the Securities the holders of which have consented to such action
may, by filing written notice with the Trustee at its principal office and upon
proof of holding as provided in Section 7.02, revoke such action so far as
concerns such Security (or so far as concerns the principal amount represented
by any exchanged or substituted Security). Except as aforesaid any such action
taken by the holder of any Security shall be conclusive and binding upon such
holder and upon all future holders and owners of such Security, and of any
Security issued in exchange or substitution therefor, irrespective of whether or
not any notation in regard thereto is made upon such Security or any Security
issued in exchange or substitution therefor.

                                  ARTICLE VIII

                            SECURITYHOLDERS' MEETINGS

          SECTION 8.01. Purposes of Meetings.

          A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article VIII for any of the following
purposes:

          (a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by Securityholders pursuant to any of the provisions of Article V;

          (b) to remove the Trustee and nominate a successor trustee pursuant to
the provisions of Article VI;

          (c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.02; or

          (d) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of such Securities under
any other provision of this Indenture or under applicable law.

          SECTION 8.02. Call of Meetings by Trustee.

          The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 8.01, to be held at such time and at such place
in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of the Securityholders, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be mailed to holders of Securities at their
addresses as they shall appear on the Securities Register. Such notice shall be
mailed not less than 20 nor

<PAGE>

more than 180 days prior to the date fixed for the meeting.

          SECTION 8.03. Call of Meetings by Company or Securityholders.

          In case at any time the Company pursuant to a resolution of the Board
of Directors, or the holders of at least 10% in aggregate principal amount of
the Securities then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Securityholders may determine the time and the
place in said Borough of Manhattan for such meeting and may call such meeting to
take any action authorized in Section 8.01, by mailing notice thereof as
provided in Section 8.02.

          SECTION 8.04. Qualifications for Voting.

          To be entitled to vote at any meeting of Securityholders a person
shall (a) be a holder of one or more Securities or (b) a person appointed by an
instrument in writing as proxy by a holder of one or more Securities. The only
persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.

          SECTION 8.05. Regulations.

          Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.

          The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.

          Subject to the provisions of Section 8.04, at any meeting each holder
of Securities or proxy therefor shall be entitled to one vote for each $50
principal amount of Securities held or represented by him; provided, however,
that no vote shall be cast or counted at any meeting in respect of any Security
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Securities held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Securityholders. Any
meeting of Securityholders duly called pursuant to the provisions of Section
8.02 or 8.03 may be adjourned from time to time by a majority of those present,
whether or not constituting a quorum, and the meeting may be held as so
adjourned without further notice.

<PAGE>

          SECTION 8.06. Voting.

          The vote upon any resolution submitted to any meeting of holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of such holders or of their representatives by proxy and the serial
number or numbers of the Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.02. The record shall show the serial numbers of the
Securities voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.

          Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

                                   ARTICLE IX

                                   AMENDMENTS

          SECTION 9.01. Without Consent of Securityholders.

          The Company and the Trustee may from time to time and at any time
amend the Indenture, without the consent of the Securityholders, for one or more
of the following purposes:

          (a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation of
the covenants, agreements and obligations of the Company pursuant to Article X
hereof;

          (b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the Securityholders as the
Board of Directors and the Trustee shall consider to be for the protection of
the Securityholders, and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement of all or
any of the remedies provided in this Indenture as herein set forth; provided,
however, that in respect of any such additional covenant, restriction or
condition such amendment may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;

          (c) to provide for the issuance under this Indenture of Securities in
coupon form (including Securities registrable as to principal

<PAGE>

only) and to provide for exchangeability of such Securities with the Securities
issued hereunder in fully registered form and to make all appropriate changes
for such purpose;

          (d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture; provided that any such action shall not materially
adversely affect the interests of the holders of the Securities;

          (e) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the Securities;

          (f) to make provision for transfer procedures, certification, book-
entry provisions, the form of restricted securities legends, if any, to be
placed on Securities, minimum denominations and all other matters required
pursuant to Section 2.07 or otherwise necessary, desirable or appropriate in
connection with the issuance of Securities to holders of Xerox Funding
Debentures in the event of a distribution of Securities by Xerox Funding
following an Exchange Event;

          (g) to qualify or maintain qualification of this Indenture under the
Trust Indenture Act; or

          (h) to make any change that does not adversely affect the rights of
any Securityholder in any material respect.

          The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture to effect such amendment, to make any
further appropriate agreements and stipulations which may be therein contained
and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise

          Any amendment to the Indenture authorized by the provisions of this
Section 9.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Securities at the time outstanding, notwithstanding
any of the provisions of Section 9.02.

          SECTION 9.02. With Consent of Securityholders.

          With the consent (evidenced as provided in Section 7.01) of the
holders of a majority in aggregate principal amount of the Securities at the
time outstanding, the Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time amend the Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the holders of the Securities; provided, however, that no such amendment or
modification shall without the consent of the holders of each Security then
outstanding and affected thereby (i) change the Maturity Date of any Security,
or reduce the rate or extend the time of payment of interest thereon, or reduce
the principal amount thereof, reduce the Redemption Price, Purchase Price or
Change in Control Purchase Price, make any change that adversely affects the
right to convert any Security, make any change that

<PAGE>

adversely affects the right to require the Company to purchase the Securities in
accordance with the terms thereof and of this Indenture, modify the provisions
of this Indenture relating to the subordination of the Securities or the right
to commence a Direct Action in a manner adverse to the Securityholders, or make
the principal thereof or any interest or premium thereon payable in any coin or
currency other than that provided in the Securities, or impair or affect the
right of any Securityholder to institute suit for payment thereof, or (ii)
reduce the aforesaid percentage of Securities the holders of which are required
to consent to any such modification or amendment to the Indenture or waive
compliance by the Company or Xerox Funding, as the case may be, with any
covenant or waive any past default, provided, however, that (i) if the
Securities are held solely by Xerox Funding and no Trust Securities are
outstanding, such amendment or modification shall not be effective until the
holders of a majority in principal amount of Xerox Funding Debentures shall have
consented to such amendment or modification; provided, further, that if the
consent of the holder of each outstanding Security is required, such amendment
or modification shall not be effective until each holder of the Xerox Funding
Debentures shall have consented to such amendment or modification and (ii) if
the Xerox Funding Debentures are held solely by the Property Trustee, such
amendment or modification shall not be effective until the holders of a majority
in liquidation amount of Trust Securities shall have consented to such amendment
or modification; provided, further, that if the consent of the holder of each
outstanding Security is required, such amendment or modification shall not be
effective until each holder of the Trust Securities shall have consented to such
amendment or modification.

          Upon the request of the Company accompanied by a copy of a resolution
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any supplemental indenture affecting such
amendment, and upon the filing with the Trustee of evidence of the consent of
Securityholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.

          Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Security Register. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.

          It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

          SECTION 9.03. Compliance with Trust Indenture Act; Effect of
Supplemental Indentures.

          Any supplemental indenture executed pursuant to the provisions of this
Article IX shall comply with the Trust Indenture Act. Upon

<PAGE>

the execution of any supplemental indenture pursuant to the provisions of this
Article IX, this Indenture shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Securities shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.

          SECTION 9.04. Notation on Securities.

          Securities authenticated and delivered after the execution of any
supplemental indenture affecting such series pursuant to the provisions of this
Article IX may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company or the Trustee shall
so determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared and executed by the
Company, authenticated by the Trustee or the Authenticating Agent and delivered
in exchange for the Securities then outstanding.

          SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be
Furnished Trustee.

          The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant hereto complies with
the requirements of this Article IX.

          The Trustee may receive an Opinion of Counsel as conclusive evidence
that any supplemental indenture executed pursuant to this Article is authorized
or permitted by, and conforms to, the terms of this Article and that it is
proper for the Trustee under the provisions of this Article to join in the
execution thereof.

                                    ARTICLE X

                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

          SECTION 10.01. Company May Consolidate, etc., on Certain Terms.

          Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Company with or into any other Person
(whether or not affiliated with the Company, as the case may be), or successive
consolidations or mergers in which the Company, or its successor or successors,
as the case may be, shall be a party or parties, or shall prevent any sale,
conveyance, transfer or lease of all or substantially all of the property of the
Company, or its successor or successors, as the case may be, as an entirety, or
substantially as an entirety, to any other Person (whether or not affiliated
with the Company, or its successor or successors, as the case may be) authorized
to acquire and operate the same; provided, that (a) the Company is the surviving
Person, or the Person formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale, conveyance,transfer or lease
of

<PAGE>

property is made is a Person organized and existing under the laws of the United
States or any State thereof or the District of Columbia, and (b) upon any such
consolidation, merger, sale, conveyance, transfer or lease, the due and punctual
payment or delivery of all amounts due on the Securities according to their
tenor and the due and punctual performance and observance of all the
obligations, covenants and conditions of this Indenture and the Guarantees to be
kept or performed by the Company shall be expressly assumed, by supplemental
indenture (which shall conform to the provisions of the Trust Indenture Act, as
then in effect) satisfactory in form to the Trustee executed and delivered to
the Trustee by the Person formed by such consolidation, or into which the
Company, shall have been merged, or by the Person which shall have acquired such
property, as the case may be, and (c) after giving effect to such consolidation,
merger, sale, conveyance, transfer or lease, no Default or Event of Default
shall have occurred and be continuing.

          SECTION 10.02. Successor Corporation to be Substituted for Company.

          In case of any such consolidation, merger, conveyance or transfer and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the due and punctual payment or delivery of all amounts due on all of the
Securities and the due and punctual performance and observance of all of the
obligations, covenants and conditions of this Indenture to be performed or
observed by the Company, such successor Person shall succeed to and be
substituted for the Company, with the same effect as if it had been named herein
as the party of the first part, and the Company thereupon shall be relieved of
any further liability or obligation hereunder or upon the Securities. Such
successor Person thereupon may cause to be signed, and may issue either in its
own name or in the name of Xerox Corporation, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee or the Authenticating Agent; and, upon the order of
such successor Person instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee or the
Authenticating Agent shall authenticate and deliver any Securities which
previously shall have been signed and delivered by the officers of the Company
to the Trustee or the Authenticating Agent for authentication, and any
Securities which such successor Person thereafter shall cause to be signed and
delivered to the Trustee or the Authenticating Agent for that purpose. All the
Securities so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Securities theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Indentures had
been issued at the date of the execution hereof.

          SECTION 10.03. Opinion of Counsel to be Given Trustee.

          The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Opinion of Counsel as conclusive evidence that any consolidation,
merger, sale, conveyance, transfer or lease, and any assumption, permitted or
required by the terms of this Article X complies with the provisions of this
Article X.

                                   ARTICLE XI

                     SATISFACTION AND DISCHARGE OF INDENTURE

<PAGE>

          SECTION 11.01. Discharge of Indenture.

          When (a) the Company shall deliver to the Trustee for cancellation all
Securities theretofore authenticated (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.08) and not theretofore cancelled, or (b) all the
Securities not theretofore cancelled or 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 under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit or cause to be deposited with the
Trustee, in trust, money, U.S. Government Obligations or a combination thereof
sufficient to pay on the Maturity Date or upon redemption all of the Securities
(other than any Securities which shall have been destroyed, lost or stolen and
which shall have been replaced as provided in Section 2.08) not theretofore
cancelled or delivered to the Trustee for cancellation, including principal and
premium, if any, Redemption Price or Purchase Price and interest due or to
become due to the Maturity Date or redemption date, as the case may be, but
excluding, however, the amount of any moneys for the payment of principal of or
premium, if any, Redemption Price or Purchase Price or interest on the
Securities (1) theretofore repaid to the Company in accordance with the
provisions of Section 11.04, or (2) paid to any State or to the District of
Columbia pursuant to its unclaimed property or similar laws, and if in either
case the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then this Indenture shall cease to be of further
effect except for the provisions of Sections 2.02, 2.07, 2.08, 3.01, 3.02, 3.04,
6.06, 6.10, 11.04 and 15.01 hereof, and Article XVI which shall survive until
such Securities shall mature and be paid. Thereafter, Sections 6.06, 6.10 and
11.04, and Article XVI shall survive, and the Trustee, on demand of the Company
accompanied by any Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture, the Company, however, hereby
agreeing to reimburse the Trustee for any costs or expenses thereafter
reasonably and properly incurred by the Trustee in connection with this
Indenture or the Securities.

          SECTION 11.02. Deposited Moneys to be Held in Trust by Trustee.

          Subject to the provisions of Section 11.04, all moneys and U.S.
Government Obligations deposited with the Trustee pursuant to Section 11.01
shall be held in trust and applied by it to the payment, either directly or
through any paying agent (including the Company if acting as its own paying
agent), to the holders of the particular Securities for the payment of which
such moneys or U.S. Government Obligations have been deposited with the Trustee,
of all sums due and to become due thereon for principal, premium, if any,
Redemption Price and Purchase Price, and interest.

          SECTION 11.03. Paying Agent to Repay Moneys Held.

          Upon the satisfaction and discharge of this Indenture all moneys then
held by any paying agent of the Securities (other than the Trustee) shall, upon
written demand of the Company, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all

<PAGE>

further liability with respect to such moneys.

          SECTION 11.04. Return of Unclaimed Moneys.

          Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of or premium, if any, Redemption Price or Purchase
Price or interest on Securities and not applied but remaining unclaimed by the
holders of Securities for two years after the date upon which the principal of
or premium, if any, Redemption Price or Purchase Price or interest on such
Securities, as the case may be, shall have become due and payable, shall be
repaid to the Company by the Trustee or such paying agent on Company Request;
and the holder of any of the Securities shall thereafter look only to the
Company for any payment which such holder may be entitled to collect and all
liability of the Trustee or such paying agent with respect to such moneys shall
thereupon cease.

          SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S. Government
Obligations.

          (a) The Company shall be deemed to have been Discharged (as defined
below) from its respective obligations with respect to the Securities upon
satisfaction of the applicable conditions set forth below with respect to such
Securities:

                    (i) The Company shall have deposited or caused to be
          deposited irrevocably with the Trustee or the Defeasance Agent as
          trust funds in trust, specifically pledged as security for, and
          dedicated solely to, the benefit of the holders of the Securities of
          such series (A) money in an amount, or (B) U.S. Government Obligations
          which through the payment of interest and principal in respect thereof
          in accordance with their terms will provide, not later than one day
          before the due date of any payment, money in an amount, or (C) a
          combination of (A) and (B), sufficient, in the opinion (with respect
          to (B) and (C)) of a nationally recognized firm of independent public
          accountants expressed in a written certification thereof delivered to
          the Trustee and the Defeasance Agent, if any, to pay and discharge
          each installment of principal of, and interest and premium, if any,
          Redemption Price and Purchase Price on, the outstanding Securities on
          the dates such amounts are due;

                    (ii) no Event of Default or event which with notice or lapse
          of time would become an Event of Default with respect to the
          Securities shall have occurred and be continuing on the date of such
          deposit; and

                    (iii) the Company shall have delivered to the Trustee and
          the Defeasance Agent, if any, an Opinion of Counsel to the effect that
          holders of the Securities of such series will not recognize income,
          gain or loss for United States federal income tax purposes as a result
          of the exercise of the option under this Section 11.05 and will be
          subject to United States federal income tax on the same amount and in
          the same manner and at the same times as would have been the case if
          such option had not been exercised.

          (b) "Discharged" means that the Company shall be deemed to have paid
and discharged the entire indebtedness represented by, and obligations under,
the Securities and to have satisfied all the obligations

<PAGE>

under this Indenture relating to the Securities (and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same), except
(A) the rights of holders of Securities of such series to receive, from the
trust fund described in clause (1) above, payment of all amounts due and payable
on such Securities when such payments are due; (B) the Company's obligations
with respect to such Securities under Sections 2.07, 2.08, 3.02, 3.04, 5.03,
11.04 and 15.01 and Article XVI hereof; and (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder.

          (c) "Defeasance Agent" means another financial institution which is
eligible to act as Trustee hereunder and which assumes all of the obligations of
the Trustee necessary to enable the Trustee to act hereunder. In the event such
a Defeasance Agent is appointed pursuant to this section, the following
conditions shall apply:

                    (i) The Trustee shall have approval rights over the document
          appointing such Defeasance Agent and the document setting forth such
          Defeasance Agent's rights and responsibilities;

                    (ii) The Defeasance Agent shall provide verification to the
          Trustee acknowledging receipt of sufficient money and/or U.S.
          Government Obligations to meet the applicable conditions set forth in
          this Section 11.05.

                                   ARTICLE XII

                    IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
                             OFFICERS AND DIRECTORS

          SECTION 12.01. Indenture and Securities Solely Corporate Obligations.

          No recourse for the payment of the principal of or premium, if any,
Purchase Price, Redemption Price, Change in Control Purchase Price or interest
on any Security, or for any claim based thereon or otherwise in respect thereof,
and no recourse under or upon any obligation, covenant or agreement of the
Company in this Indenture, or in any Security, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor Person to the Company, either directly or through
the Company or any successor Person to the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Securities.

                                  ARTICLE XIII

                            MISCELLANEOUS PROVISIONS

          SECTION 13.01. Successors.

          All the covenants, stipulations, promises and agreements of the
Company contained in this Indenture shall bind the Company's successors and
assigns whether so expressed or not.

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          SECTION 13.02. Official Acts by Successor Corporation.

          Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any corporation that shall at the time be
the lawful sole successor of the Company.

          SECTION 13.03. Surrender of Company Powers.

          The Company by instrument in writing executed by authority of 2/3
(two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company, and thereupon such power so
surrendered shall terminate both as to the Company, as the case may be, and as
to any successor Person.

          SECTION 13.04. Addresses for Notices, etc.

          Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Securities on the Company may be given or served by being deposited postage
prepaid by registered or certified mail in a post office letter box addressed
(until another address is filed by the Company with the Trustee for the purpose)
to the Company, 800 Long Ridge Road, P.O. Box 1600, Stamford, CT 06904-1600,
Attention: Vice President, Treasurer and Secretary. Any notice, direction,
request or demand by any Securityholder to or upon the Trustee shall be deemed
to have been sufficiently given or made, for all purposes, if given or made in
writing at the office of the Trustee, Sixth and Marquette, MAC N9303-120,
Minneapolis, Minnesota 55479, Attention: Corporate Trust Services (unless
another address is provided by the Trustee to the Company for the purpose). Any
notice or communication to a Holder shall be mailed by first class mail to his
or her address shown on the register kept by the Registrar. Failure to mail a
notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders.

          SECTION 13.05. Governing Law.

          This Indenture and each Security shall be deemed to be a contract made
under the laws of the State of New York, and for all purposes shall be governed
by and construed in accordance with the laws of said State, without regard to
conflicts of laws principles thereof.

          SECTION 13.06. Evidence of Compliance with Conditions Precedent.

          Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.

          Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or

<PAGE>

covenant provided for in this Indenture (except pursuant to Section 3.05) shall
include (1) a statement that the person making such certificate or opinion has
read such covenant or condition; (2) a brief statement as to the nature and
scope of the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; (3) a statement that, in the
opinion of such person, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and (4) a statement as to whether
or not, in the opinion of such person, such condition or covenant has been
complied with.

          SECTION 13.07. Business Days.

          In any case where the date of payment of principal of or premium, if
any, or interest on the Securities will not be a Business Day, the payment of
such principal of or premium, if any, Purchase Price, Redemption Price or Change
in Control Purchase Price or interest on the Securities need not be made on such
date but may be made on the next succeeding Business Day (except that if such
next succeeding Business Day falls in a subsequent calendar year, such payment
shall be made on the Business Day next preceding such date of payment), with the
same force and effect as if made on such date payment was originally payable,
and no interest shall accrue for the period from and after such date.

          SECTION 13.08. Trust Indenture Act to Control.

          If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

          SECTION 13.09. Table of Contents, Headings, etc.

          The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.

          SECTION 13.10. Execution in Counterparts.

          This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.

          SECTION 13.11. Separability.

          In case any one or more of the provisions contained in this Indenture
or in the Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Securities,
but this Indenture and the Securities shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.

          SECTION 13.12. Assignment.

          The Company will have the right at all times to assign any

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of its respective rights or obligations under this Indenture to a direct or
indirect wholly owned Subsidiary of the Company, provided that, in the event of
any such assignment, the Company will remain primarily liable for all its
obligations. Subject to the foregoing, the Indenture is binding upon and inures
to the benefit of the parties thereto and their respective successors and
assigns. This Indenture may not otherwise be assigned by the parties thereto.

          SECTION 13.13. Acknowledgement of Rights.

          The Company acknowledges that, with respect to any Securities held by
Xerox Funding so long as the Xerox Funding Debentures are held by Xerox Capital
or a trustee of such trust, if the Property Trustee of Xerox Capital fails to
enforce its rights under the Xerox Funding Indenture to cause Xerox Funding as
the holder of the Securities held as the assets of Xerox Funding any holder of
Trust Preferred Securities may institute legal proceedings directly against the
Company to enforce such Property Trustee's rights under the Xerox Funding
Indenture without first instituting any legal proceedings against such Property
Trustee or any other person or entity. Notwithstanding the foregoing, if an
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Company to pay principal of or premium, if any, Purchase
Price, Redemption Price or Change in Control Purchase Price or interest on the
Securities when due, the Company acknowledges that a holder of Trust Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or premium, if any, Purchase Price, Redemption
Price or Change in Control Purchase Price or interest on the Securities having a
principal amount equal to the aggregate liquidation amount of the Trust
Preferred Securities of such holder on or after the respective due date
specified in the Securities.

          Furthermore, the Company acknowledges that, so long as the Securities
are held by Xerox Funding and no Trust Securities are outstanding, the holders
of the Xerox Funding Debentures shall have the right to enforce Xerox Funding's
rights as the holder of Securities under this Indenture. Any holder of Xerox
Funding Debentures may institute legal proceedings directly against the Company
to enforce such holder's rights under this Indenture without first instituting
any legal proceedings against Xerox Funding or any other person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
or deliver any amounts on the Securities when due, the Company acknowledges that
a holder of Xerox Funding Debentures may directly institute a proceeding for
enforcement of payment or delivery to such holder of such amounts on the
Securities having a principal amount equal to the aggregate principal amount of
the Xerox Funding Debentures of such holder on or after the respective due date
specified in the Securities.

                                   ARTICLE XIV

                                   REDEMPTION

          SECTION 14.01. Optional Redemption by Company.

          Subject to the provisions of this Article XIV, the Company may at its
option (i) on and after the Initial Optional Redemption Date, redeem the
Securities in whole or in part, at the applicable Special Redemption Price and
(ii) if a Special Event shall occur and be continuing,

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redeem the Securities in whole (but not in part) at any time prior to the
Initial Optional Redemption Date and within 90 days of the occurrence of such
Special Event, at the Regular Redemption Price.

          If the Securities are only partially redeemed pursuant to this Section
14.01, the Securities will be redeemed pro rata or by lot or by any other method
utilized by the Trustee; provided, that if at the time of redemption the
Securities are registered as a Global Security, the Depositary shall determine,
in accordance with its procedures, the principal amount of such Securities held
for the account of its participants to be prepaid. The applicable Redemption
Price shall be paid prior to 12:00 noon, New York time, on the date of such
redemption or at such earlier time as the Company determines, provided that the
Company shall deposit with the Trustee an amount sufficient to pay the
applicable Redemption Price by 10:00 a.m., New York time, on the date such
Redemption Price is to be paid.

          SECTION 14.02. No Sinking Fund.

          The Securities are not entitled to the benefit of any sinking fund.

          SECTION 14.03. Notice of Redemption; Selection of Securities.

          In the event the Company shall desire to exercise the right to redeem
all, or, as the case may be, any part of the Securities in accordance with their
terms, it shall fix a date for redemption and shall mail a notice of such
redemption at least 30 and not more than 60 days prior to the date fixed for
redemption to the holders of Securities so to be redeemed as a whole or in part
at their last addresses as the same appear on the Security Register. Such
mailing shall be by first class mail. The notice if mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.

          Each such notice of redemption shall specify the CUSIP number of the
Securities to be redeemed, the date fixed for redemption, the Redemption Price
at which the Securities are to be redeemed (or the method by which such
Redemption Price is to be calculated), the place or places of payment, that
payment will be made upon presentation and surrender of the Securities, that
interest accrued to but excluding the date fixed for redemption will be paid as
specified in said notice, and that on and after said date interest thereon or on
the portions thereof to be redeemed will cease to accrue. If less than all the
Securities are to be redeemed, the notice of redemption shall specify the
numbers of the Securities to be redeemed. In case any Security is to be redeemed
in part only, the notice of redemption shall state the portion of the principal
amount thereof to be redeemed and shall state that on and after the date fixed
for redemption, upon surrender of such Security, a new Security or Securities in
principal amount equal to the unpaid portion thereof will be issued.

          By 10:00 a.m. New York time on the redemption date specified in the
notice of redemption given as provided in this Section, the Company will deposit
with the Trustee or with one or more paying agents an

<PAGE>

amount of money sufficient to redeem on the redemption date all the Securities
so called for redemption.

          The Company will give the Trustee notice not less than 45 days prior
to the redemption date (unless a shorter time shall be satisfactory to the
Trustee) as to the aggregate principal amount of Securities to be redeemed and
the Trustee shall select, in such manner as in its sole discretion it shall deem
appropriate and fair, the Securities or portions thereof (in integral multiples
of $50, except as otherwise set forth in the applicable form of Security) to be
redeemed.

          SECTION 14.04. Payment of Securities Called for Redemption.

          If notice of redemption has been given as provided in Section 14.03,
the Securities or portions of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Redemption Price (subject to the rights
of holders of Securities on the close of business on a regular record date in
respect of an Interest Payment Date occurring on or prior to the redemption
date), and on and after said date (unless the Company shall default in the
payment of such Securities at the applicable Redemption Price) interest on the
Securities or portions of Securities so called for redemption shall cease to
accrue. On presentation and surrender of such Securities at a place of payment
specified in said notice, the said Securities or the specified portions thereof
shall be redeemed by the Company at the applicable Redemption Price (subject to
the rights of holders of Securities on the close of business on a regular record
date in respect of an Interest Payment Date occurring on or prior to the
redemption date).

          Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and make available for delivery
to the holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations, in principal amount equal to the
remaining portion of the Security so presented.

          SECTION 14.05. Conversion Arrangement on Call for Redemption. In
connection with any redemption of Securities, the Company may arrange for the
purchase and conversion of any Securities called for redemption by an agreement
with one or more investment banking institutions or other purchasers to purchase
such Securities by paying to the Trustee in trust for the Securityholders, on or
prior to 10:00 a.m. New York City time on the applicable date fixed for
redemption, an amount that, together with any amounts deposited with the Trustee
by the Company for the redemption of such Securities, is not less than the
Redemption Price of such Securities. Notwithstanding anything to the contrary
contained in this Article XIV, the obligation of the Company to pay the
Redemption Prices of such Securities shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such purchasers. If such an
agreement is entered into, any Securities not duly surrendered for conversion by
the holders thereof may, at the option of the Company, be deemed, to the fullest
extent permitted by law, acquired by such purchasers from such holders and
(notwithstanding anything to the contrary contained in Article XVI) surrendered
by such purchasers for conversion, all as of immediately prior to the close of
business on the second Business Day prior to the date fixed for redemption,
subject to payment of the above amount as aforesaid. The Trustee shall hold and
pay to the holders whose Securities are selected for redemption any such amount
paid to it for purchase and conversion in the same manner as it would moneys

<PAGE>

deposited with it by the Company for the redemption of Securities. Without the
Trustee's prior written consent, no arrangement between the Company and such
purchasers for the purchase and conversion of any Securities shall increase or
otherwise affect any of the powers, duties, responsibilities or obligations of
the Trustee as set forth in this Indenture, and the Company agrees to indemnify
the Trustee from, and hold it harmless against, any loss, liability or expense
arising out of or in connection with any such arrangement for the purchase and
conversion of any Securities between the Company and such purchasers, including
the costs and expenses incurred by the Trustee in the defense of any claim or
liability arising out of or in connection with the exercise or performance of
any of its powers, duties, responsibilities or obligations under this Indenture.

                                   ARTICLE XV

                                    PURCHASE

          SECTION 15.01. Purchase of Securities at Option of the Holder.

          (a) General. Securities shall be purchased by the Company on December
4, 2004, November 27, 2006, November 27, 2008, November 27, 2011 and November
27, 2016 (each, a "Purchase Date"), at the purchase price of $50 per Security,
plus accrued and unpaid interest thereon to but excluding the date of purchase
(the "Purchase Price"), at the option of the holder thereof, upon: (i) delivery
to the Paying Agent, by the holder of a written notice of purchase (a "Purchase
Notice") at any time from the opening of business on the date that is at least
20 Business Days prior to a Purchase Date until the close of business on the
second Business Day immediately preceding such Purchase Date stating:

                              (A) the certificate number and CUSIP number of the
                    Securities which the Holder will deliver to be purchased,

                              (B) the portion of the aggregate principal amount
                    of the Securities which the holder will deliver to be
                    purchased, which portion must be a minimum principal amount
                    of $50 or any integral multiple thereof,

                              (C) that such Securities shall be purchased as of
                    the Purchase Date pursuant to the terms and conditions
                    specified herein, and

                              (D) with respect to a purchase on any Purchase
                    Date, in the event the Company elects, pursuant to Section
                    15.01(b), to pay the Purchase Price as of such Purchase
                    Date, in whole or in part, in shares of Common Stock but
                    such portion of the Purchase Price shall ultimately be
                    payable to such holder entirely in cash because any of the
                    conditions to payment of the Purchase Price (or a portion
                    thereof) in Common Stock is not satisfied prior to the close
                    of business on the Business Day immediately preceding such
                    Purchase Date, as set forth in Section 15.01(d), whether
                    such Holder elects (i) to withdraw such Purchase Notice as
                    to some or all of the Securities to which such Purchase
                    Notice relates (stating the principal amount and certificate
                    numbers of the Securities as to which such withdrawal shall
                    relate), or (ii) to receive cash in respect of the entire
                    Purchase Price for all

<PAGE>

                    Securities (or portions thereof) to which such Purchase
                    Notice relates; and

                    (ii) delivery of such Security to the Paying Agent prior to,
          on or after the Purchase Date (together with all necessary
          endorsements) at the offices of the Paying Agent, such delivery being
          a condition to receipt by the holder of the Purchase Price therefor;
          provided, however, that such Purchase Price shall be so paid pursuant
          to this Section 15.01 only if the Security so delivered to the Paying
          Agent shall conform in all respects to the description thereof in the
          related Purchase Notice, as determined by the Company and such
          Purchase Notice shall not be validly withdrawn by the holder.

          If a holder, in such holder's Purchase Notice and in any written
notice of withdrawal delivered by such holder pursuant to the terms of Section
15.03, fails to indicate such holder's choice with respect to the election set
forth in clause (D) of Section 15.01(a)(i), such Holder shall be deemed to have
elected to receive cash in respect of the Purchase Price for all Securities
subject to such Purchase Notice in the circumstances set forth in such clause
(D).

          The Company shall purchase from the holder thereof, pursuant to this
Section 15.01, a portion of a Security if the principal amount of such portion
is $50 or any integral multiple of $50. Provisions of this Indenture that apply
to the purchase of all of a Security also apply to the purchase of such portion
of such Security.

          Any purchase by the Company contemplated pursuant to the provisions of
this Section 15.01 shall be consummated by the delivery of the consideration to
be received by the holder promptly following the later of the Purchase Date and
the time of delivery of the Security.

          Notwithstanding anything herein to the contrary, any holder delivering
to the Paying Agent the Purchase Notice contemplated by this Section 15.01(a)
shall have the right to withdraw such Purchase Notice at any time prior to the
close of business on the Purchase Date by delivery of a written notice of
withdrawal to the Paying Agent in accordance with Section 15.03.

          The Paying Agent shall promptly notify the Company of the receipt by
it of any Purchase Notice or written notice of withdrawal thereof.

          (b) Company's Right to Elect Manner of Payment of Purchase Price. The
Securities to be purchased pursuant to Section 15.01(a) may be paid for, at the
election of the Company, in U.S. legal tender ("cash") or Common Stock, or in
any combination of cash and Common Stock, subject to the conditions set forth in
Sections 15.01(c) and (d). For any repurchase pursuant to this Section 15.01 on
any Purchase Date, the Company shall designate, in the Company Notice delivered
pursuant to Section 15.01(e), whether the Company will purchase the Securities
for cash or Common Stock, or, if a combination thereof, the percentages of the
Purchase Price of Securities in respect of which it will pay in cash or Common
Stock; provided that the Company will pay cash for fractional interests in
Common Stock. For purposes of determining the existence of potential fractional
interests, all Securities subject to purchase by the Company held by a Holder
shall be considered together (no matter how many separate certificates are to be
presented). Each holder whose Securities are purchased pursuant to this

<PAGE>

Section 15.01 shall receive the same percentage of cash or Common Stock in
payment of the Purchase Price for such Securities, except (i) as provided in
Section 15.01(d) with regard to the payment of cash in lieu of fractional shares
of Common Stock and (ii) in the event that the Company is unable to purchase the
Securities of a holder or holders for Common Stock because any of the conditions
specified in Section 15.01(d) have not been satisfied, the Company may purchase
the Securities of such holder or holders for cash. The Company may not change
its election with respect to the consideration (or components or percentages of
components thereof) to be paid once the Company has given its Company Notice to
Securityholders except pursuant to Section 15.01(d) in the event of a failure to
satisfy, prior to the close of business on the Purchase Date, any condition to
the payment of the Purchase Price, in whole or in part, in Common Stock.

          At least three Business Days before the Company Notice Date, the
Company shall deliver an Officers' Certificate to the Trustee specifying:

                    (i) the manner of payment selected by the Company,

                    (ii) the information requi red by Section 15.01(e),

                    (iii) if the Company elects to pay the Purchase Price, or a
          specified percentage thereof, in Common Stock, that the conditions to
          such manner of payment set forth in Section 15.01(d) have been or will
          be complied with, and

                    (iv) whether the Company desires the Trustee to give the
          Company Notice required by Section 15.01(e).

          (c) Purchase with Cash. On each Purchase Date, at the option of the
Company, the Purchase Price of Securities in respect of which a Purchase Notice
pursuant to Section 15.01(a) has been given, or a specified percentage thereof,
may be paid by the Company with cash equal to the aggregate Purchase Price of
such Securities.

          (d) Payment by Issuance of Common Stock. On each Purchase Date, at the
option of the Company, the Purchase Price of Securities in respect of which a
Purchase Notice pursuant to Section 15.01(a) has been given, or a specified
percentage thereof, may be paid by the Company by the issuance of a number of
shares of Common Stock equal to the quotient obtained by dividing (i) the amount
of cash to which the Securityholders would have been entitled had the Company
elected to pay all or such specified percentage, as the case may be, of the
Purchase Price of such Securities in cash by (ii) 95% of the Market Price of a
share of Common Stock, subject to the next succeeding paragraph.

          The Company will not issue a fractional share of Common Stock in
payment of the Purchase Price. Instead the Company will pay cash for the current
market value of the fractional share. The current market value of a fraction of
a share shall be determined by multiplying 95% of the Market Price by such
fraction and rounding the product to the nearest whole cent. It is understood
that if a holder elects to have more than one Security purchased, the number of
shares of Common Stock shall be based on the aggregate amount of Securities to
be purchased.

          Upon a payment by Common Stock pursuant to the terms

<PAGE>

hereof, that portion of accrued interest attributable to the period from the
Issue Date to the Purchase Date with respect to the purchased Security shall not
be cancelled, extinguished or forfeited but rather shall be deemed paid in full
to the holder through the delivery of the Common Stock in exchange for the
Security being purchased pursuant to the terms hereof, and the fair market value
of such Common Stock (together with any cash payments in lieu of fractional
shares of Common Stock) shall be treated as issued, to the extent thereof, first
in exchange for the unpaid interest accrued through the Purchase Date, and the
balance, if any, of the fair market value of such shares of Common Stock shall
be treated as issued in exchange for the principal amount of the Security being
purchased pursuant to the provisions hereof.

          The Company's right to exercise its election to purchase the
Securities pursuant to Section 15.01 through the issuance of shares of Common
Stock shall be conditioned upon:

                    (i) the Company's not having given its Company Notice of an
          election to pay entirely in cash and its giving of timely Company
          Notice of election to purchase all or a specified percentage of the
          Securities with Common Stock as provided herein;

                    (ii) the shares of Common Stock having been admitted for
          listing or admitted for listing subject to notice of issuance on the
          principal United States securities exchange on which the Common Stock
          is then listed or, if the Common Stock is not then listed on a
          national or regional securities exchange, as quoted on the National
          Association of Securities Dealers Automated Quotation System;

                    (iii) any necessary qualification or registration under
          applicable state securities laws or the availability of an exemption
          from such qualification and registration; and

                    (iv) the receipt by the Trustee of an Officers' Certificate
          and an Opinion of Counsel each stating that (A) the terms of the
          issuance of the Common Stock are in conformity with this Indenture and
          (B) the shares of Common Stock to be issued by the Company in payment
          of the Purchase Price in respect of Securities have been duly
          authorized and, when issued and delivered pursuant to the terms of
          this Indenture in payment of the Purchase Price in respect of the
          Securities, will be validly issued, fully paid and non-assessable and,
          to the best of such counsel's knowledge, free from preemptive rights,
          and, in the case of such Officers' Certificate, stating that
          conditions (i), (ii) and (iii) above and the condition set forth in
          the second sentence of the immediately succeeding paragraph have been
          satisfied.

          Such Officers' Certificate shall also set forth the number of shares
of Common Stock to be issued for each $50 principal amount of Securities and the
Sale Price of a share of Common Stock on each Trading Day during the period for
which the Market Price is calculated. The Company may pay the Purchase Price (or
any portion thereof) in Common Stock only if the information necessary to
calculate the Market Price is published in a daily newspaper of national
circulation or by other appropriate means. If the foregoing conditions are not
satisfied with respect to a holder or holders prior to the close of business on
the Purchase Date and the Company has

<PAGE>

elected to purchase the Securities pursuant to this Section 15.01 through the
issuance of shares of Common Stock, the Company shall pay the entire Purchase
Price of the Securities of such holder or holders in cash.

          The "Market Price" of the Common Stock means the average of the Sale
Prices of the Common Stock for the five-trading-day period ending on the third
Business Day prior to the applicable Purchase Date (if the third Business Day
prior to the applicable Purchase Date is a Trading Day or, if not, then on the
last Trading Day immediately prior thereto), appropriately adjusted to take into
account the occurrence, during the period commencing on the first of such
Trading Days during such five Trading Day period and ending on such Purchase
Date, of any event described in Section 16.06, 16.07, 16.08 or 16.09; subject,
however, to the conditions set forth in Sections 16.10 and 16.11.

          (e) Notice of Election. The Company's notice of election to purchase
with cash or Common Stock or any combination thereof (the "Company Notice")
shall be sent to the holders (and to beneficial owners as required by applicable
law) not less than 20 Business Days prior to the applicable Purchase Date or 30
Business Days prior to the applicable Change in Control Purchase Date (the
"Company Notice Date"). Any such Company Notice shall state the manner of
payment elected and shall contain the following information:

          In the event the Company has elected to pay the Purchase Price (or a
specified percentage thereof) with Common Stock, the Company Notice shall:

                    (A) state that each holder will receive Common Stock based
          on 95% of the Market Price determined as of a specified date prior to
          the Purchase Date equal to such specified percentage of the Purchase
          Price of the Securities held by such holder (except any cash amount to
          be paid in lieu of fractional shares);

                    (B) set forth the method of calculating the Market Price of
          the Common Stock; and

                    (C) state that because the Market Price of Common Stock will
          be determined prior to the Purchase Date, holders will bear the market
          risk with respect to the value of the Common Stock to be received from
          the date such Market Price is determined to the Purchase Date.

          In any case, each Company Notice shall include a form of Purchase
Notice to be completed by a Securityholder and shall state:

                    (i) the Purchase Price and the Conversion Rate (and any
          adjustments thereto pursuant to Article XVI) with respect to the
          Securities as of the Purchase Date;

                    (ii) the name and address of the Paying Agent and the
          Conversion Agent;

                    (iii) that Securities as to which a Purchase Notice has been
          given may be converted pursuant to Article XVI hereof only if the
          applicable Purchase Notice has been withdrawn in accordance with the
          terms of this Indenture;

<PAGE>

                    (iv) that Securities must be surrendered to the Paying Agent
          to collect payment of the Purchase Price;

                    (v) that the Purchase Price for any Security as to which a
          Purchase Notice has been given and not withdrawn will be paid promptly
          following the later of the Purchase Date and the time of surrender of
          such Security as described in (iv);

                    (vi) the procedures the holder must follow to exercise
          rights under Section 15.01 and a brief description of those rights;

                    (vii) briefly, the conversion rights of the Securities and
          the last date upon which the holder can exercise the conversion
          rights;

                    (viii) the procedures for withdrawing a Purchase Notice
          (including, without limitation, for a conditional withdrawal pursuant
          to the terms of Section 15.01(a)(i)(D) or Section 15.03);

                    (ix) that, unless the Company defaults in making payment of
          such Purchase Price, interest on Securities surrendered for purchase
          will cease to accrue on and after the Purchase Date; and

                    (x) the CUSIP number of the Securities.

          At the Company's request, the Trustee shall give such Company Notice
in the Company's name and at the Company's expense, provided that the Company
makes such request at least 15 days (unless a shorter period shall be acceptable
to the Trustee) prior to the date such Company Notice must be mailed; and
provided, further, that, in all cases, the text of such Company Notice shall be
prepared by the Company.

          Upon determination of the actual number of shares of Common Stock to
be issued for each $50 principal amount of Securities, the Company shall publish
such determination on the Company's web site or by other appropriate means.

          (f) Covenants of the Company. All shares of Common Stock delivered
upon purchase of the Securities shall be newly issued shares or treasury shares,
shall be duly authorized, validly issued, fully paid and nonassessable and shall
be free from preemptive rights and free of any lien or adverse claim and subject
to no restriction on transfer other than those that may be applicable at that
time to the Trust Securities.

          (g) Procedure upon Purchase. The Company shall deposit cash (in
respect of a cash purchase under Section 15.01(c) or for fractional interests,
as applicable) or shares of Common Stock, or a combination thereof, as
applicable, at the time and in the manner as provided in Section 15.06,
sufficient to pay the aggregate Purchase Price of all Securities to be purchased
pursuant to this Section 15.01. As soon as practicable after the Purchase Date,
the Company shall deliver to each holder entitled to receive Common Stock
through the Paying Agent, a certificate (or other evidence of ownership) for the
number of full shares of Common Stock issuable in payment of the Purchase Price
and cash in lieu of any fractional interests. The person in whose name the
certificate for Common Stock is registered shall be treated as a holder of
record of shares of Common Stock on the Business Day following the Purchase
Date. No payment or adjustment will be made for dividends on the Common Stock
the record date for which occurred on or prior

<PAGE>

to the Purchase Date.

          (h) Taxes. If a holder of a Security is paid in Common Stock, the
Company shall pay any documentary, stamp or similar issue or transfer tax due on
such issue of shares of Common Stock. However, the holder shall pay any such tax
which is due if the Holder requests the shares of Common Stock to be issued in a
name other than the holder's name. The Paying Agent may refuse to deliver the
certificates representing the Common Stock being issued in a name other than the
holder's name until the Paying Agent receives a sum sufficient to pay any tax
which will be due because the shares of Common Stock are to be issued in a name
other than the holder's name. Nothing herein shall preclude any income tax
withholding required by law or regulations being deducted by the Company.

          SECTION 15.02. Purchase of Securities at Option of the Holder upon a
Change in Control.

          (a) If on or prior to December 4, 2004 there shall have occurred a
Change in Control, each holder of Securities may require the Company to purchase
all or a portion of such Securities, at the option of the holder thereof, at a
price equal to the principal amount of such Securities, plus accrued and unpaid
interest to but excluding the date of such purchase (the "Change in Control
Purchase Price"), on a date that is no later than 45 Business Days after the
occurrence of the applicable Change in Control (the "Change in Control Purchase
Date"), subject to satisfaction by or on behalf of the holder of the
requirements set forth in Sections 15.02(b) and 15.02(c).

          A "Change in Control" shall be deemed to have occurred at such time as
either of the following events shall occur:

                    (i) Any "person", including its Affiliates and Associates
          (other than the Company, its Subsidiaries or the Company's or its
          Subsidiaries' employee benefit plans) or any "group" file a Schedule
          13D or Schedule TO (or any successor schedule, form or report)
          pursuant to the Exchange Act disclosing that such person (for the
          purposes of this Section 15.02 only, as the term "person" is used in
          Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), or group
          has become the beneficial owner of 50% or more, in the aggregate, of
          the combined voting power of the (x) Capital Stock then outstanding or
          (y) other Capital Stock into which the Common Stock is reclassified or
          changed, having ordinary power to elect directors or has the power,
          directly or indirectly, to elect managers, trustees, or a majority of
          the members of the Company's Board of Directors; provided, however,
          that a person shall not be deemed the beneficial owner of, or to own
          beneficially, (A) any securities tendered pursuant to a tender or
          exchange offer made by or on behalf of such person or any of such
          person's Affiliates or Associates until such tendered securities are
          accepted for purchase or exchange thereunder, or (B) any securities if
          such beneficial ownership (1) arises solely as a result of a revocable
          proxy delivered in response to a proxy or consent solicitation made
          pursuant to the applicable rules and regulations under the Exchange
          Act or an exemption therefrom, and (2) is not also then reportable on
          Schedule 13D (or any successor schedule) under the Exchange Act;

                    (ii) There shall be consummated any share exchange,
          consolidation or merger of the Company pursuant to which the Common

<PAGE>

          Stock would be converted into cash, securities or other property, or
          the Company sells, assigns, conveys, transfers, leases or otherwise
          disposes of all or substantially all of its assets, in each case other
          than pursuant to a share exchange, consolidation or merger of the
          Company in which the holders of the Common Stock immediately prior to
          the share exchange, consolidation or merger have, directly or
          indirectly, at least a majority of the total voting power in the
          aggregate of all classes of Capital Stock of the continuing or
          surviving corporation immediately after the share exchange,
          consolidation or merger; or

                    (iii) The Company is dissolved or liquidated.

          "Associate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.

          The terms "person" and "group" shall have the meanings given to them
for purposes of Sections 13(d) and 14(d) of the Exchange Act and the term
"group" shall include any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act or any successor provision.

          The term "beneficial owner" shall be determined in accordance with
Rule 13d-3 under the Exchange Act as in effect on November 27, 2001.

          The number of shares of Common Stock outstanding will be deemed to
include, in addition to all outstanding shares of Common Stock and unissued
shares of such Common Stock deemed to be held by the "group" or other person
with respect to which the Change in Control determination is being made, all
unissued shares of Common Stock deemed to be held by all other persons.

          (b) Company's Right to Elect Manner of Payment of Change in Control
Purchase Price. The Securities to be purchased pursuant to Section 15.02(a) may
be paid for, at the election of the Company, in cash or Common Stock, or in any
combination of cash and Common Stock, subject to the conditions set forth in
Sections 15.02(c) and (d). For any repurchase pursuant to this Section 15.02 on
any Change in Control Purchase Date, the Company shall designate, in the Company
Change in Control Notice delivered pursuant to Section 15.02(e), whether the
Company will purchase the Securities for cash or Common Stock, or, if a
combination thereof, the percentages of the Change in Control Purchase Price of
Securities in respect of which it will pay in cash or Common Stock; provided
that the Company will pay cash for fractional interests in Common Stock. For
purposes of determining the existence of potential fractional interests, all
Securities subject to purchase by the Company held by a holder shall be
considered together (no matter how many separate certificates are to be
presented). Each holder whose Securities are purchased pursuant to this Section
15.02 shall receive the same percentage of cash or Common Stock in payment of
the Change in Control Purchase Price for such Securities, except (i) as provided
in Section 15.02(d) with regard to the payment of cash in lieu of fractional
shares of Common Stock and (ii) in the event that the Company is unable to
purchase the Securities of a holder or holders for Common Stock because any of
the conditions specified in Section 15.02(d) have not been satisfied, the
Company may purchase the Securities of such holder or holders for cash. The
Company may not change its election with respect to the consideration (or

<PAGE>

components or percentages of components thereof) to be paid once the Company has
given its Company Notice to Securityholders except pursuant to Section 15.02(d)
in the event of a failure to satisfy, prior to the close of business on the
Change in Control Purchase Date, any condition to the payment of the Change in
Control Purchase Price, in whole or in part, in Common Stock.

          At least three Business Days before the Company Change in Control
Notice Date, the Company shall deliver an Officers' Certificate to the Trustee
specifying:

                    (i) the manner of payment selected by the Company,

                    (ii) the information required by Section 15.02(e),

                    (iii) if the Company elects to pay the Change in Control
          Purchase Price, or a specified percentage thereof, in Common Stock,
          that the conditions to such manner of payment set forth in Section
          15.02(d) have been or will be complied with, and

                    (iv) whether the Company desires the Trustee to give the
          Company Change in Control Notice required by Section 15.02(e)

          (c) Purchase with Cash. On each Change in Control Purchase Date, at
the option of the Company, the Change in Control Purchase Price of Securities in
respect of which a Change in Control Purchase Notice pursuant to Section
15.02(a) has been given, or a specified percentage thereof, may be paid by the
Company with cash equal to the aggregate Change in Control Purchase Price of
such Securities.

          (d) Payment by Issuance of Common Stock. On each Change in Control
Purchase Date, at the option of the Company, the Change in Control Purchase
Price of Securities in respect of which a Change in Control Purchase Notice
pursuant to Section 15.02(f) has been given, or a specified percentage thereof,
may be paid by the Company by the issuance of a number of shares of Common Stock
equal to the quotient obtained by dividing (i) the amount of cash to which the
Securityholders would have been entitled had the Company elected to pay all or
such specified percentage, as the case may be, of the Change in Control Purchase
Price of such Securities in cash by (ii) 95% of the Market Price of a share of
Common Stock, subject to the next succeeding paragraph.

          The Company will not issue a fractional share of Common Stock in
payment of the Change in Control Purchase Price. Instead the Company will pay
cash for the current market value of the fractional share. The current market
value of a fraction of a share shall be determined by multiplying the 95% of the
Market Price by such fraction and rounding the product to the nearest whole
cent. It is understood that if a holder elects to have more than one Security
purchased, the number of shares of Common Stock shall be based on the aggregate
amount of Securities to be purchased.

          Upon a payment by Common Stock pursuant to the terms hereof, that
portion of accrued interest attributable to the period from the Issue Date to
the Change in Control Purchase Date with respect to the purchased Security shall
not be cancelled, extinguished or forfeited but rather shall be deemed paid in
full to the Holder through the delivery of the Common Stock in exchange for the
Security being purchased pursuant to the terms hereof, and the fair market value
of such Common Stock (together with

<PAGE>

any cash payments in lieu of fractional shares of Common Stock) shall be treated
as issued, to the extent thereof, first in exchange for the unpaid interest
accrued through the Change in Control Purchase Date, and the balance, if any, of
the fair market value of such shares of Common Stock shall be treated as issued
in exchange for the principal amount of the Security being purchased pursuant to
the provisions hereof.

the Securities pursuant to Section 15.02 through the issuance of shares of
Common Stock shall be conditioned upon:

                    (i) the Company's not having given its Company Change in
          Control Notice of an election to pay entirely in cash and its giving
          of timely Company Notice of election to purchase all or a specified
          percentage of the Securities with Common Stock as provided herein;

                    (ii) the shares of Common Stock having been admitted for
          listing or admitted for listing subject to notice of issuance on the
          principal United States securities exchange on which the Common Stock
          is then listed or, if the Common Stock is not then listed on a
          national or regional securities exchange, as quoted on the National
          Association of Securities Dealers Automated Quotation System;

                    (iii) the registration of such shares of Common Stock under
          the Securities Act or the Exchange Act, if required, (it being
          understood that no such registration shall be required on or after the
          Resale Restriction Termination Date (as defined in the Declaration));

                    (iv) any necessary qualification or registration under
          applicable state securities laws or the availability of an exemption
          from such qualification and registration ; and

                    (v) the receipt by the Trustee of an Officers' Certificate
          and an Opinion of Counsel each stating that (A) the terms of the
          issuance of the Common Stock are in conformity with this Indenture and
          (B) the shares of Common Stock to be issued by the Company in payment
          of the Change in Control Purchase Price in respect of Securities have
          been duly authorized and, when issued and delivered pursuant to the
          terms of this Indenture in payment of the Change in Control Purchase
          Price in respect of the Securities, will be validly issued, fully paid
          and non-assessable and, to the best of such counsel's knowledge, free
          from preemptive rights, and, in the case of such Officers'
          Certificate, stating that conditions (i), (ii) and (iii) above and the
          condition set forth in the second succeeding sentence have been
          satisfied and, in the case of such Opinion of Counsel, stating that
          conditions (ii) and (iii) above have been satisfied.

          Such Officers' Certificate shall also set forth the number of shares
of Common Stock to be issued for each $50 principal amount of Securities and the
Sale Price of a share of Common Stock on each Trading Day during the period for
which the Market Price is calculated. The Company may pay the Change in Control
Purchase Price (or any portion thereof) in Common Stock only if the information
necessary to calculate the Market Price is published in a daily newspaper of
national circulation or by other appropriate means. If the foregoing conditions
are not satisfied with respect to a Holder or Holders prior to the close of
business on the Change in

<PAGE>

Control Purchase Date and the Company has elected to purchase the Securities
pursuant to this Section 15.02 through the issuance of shares of Common Stock,
the Company shall pay the entire Change in Control Purchase Price of the
Securities of such holder or holders in cash.

          (e) Notices. Within 30 Business Days after the occurrence of a Change
in Control, the Company shall mail a written notice of such Change in Control
(the "Company Change in Control Notice") by first-class mail to the Trustee and
to each Holder (and to beneficial owners as required by applicable law). Any
such Company Change in Control Notice shall state the manner of payment elected
and shall contain the following information:

          In the event the Company has elected to pay the Change in Control
Purchase Price (or a specified percentage thereof) with Common Stock, the
Company Change in Control Notice shall:

                    (A) state that each holder will receive Common Stock based
          upon 95% of the Market Price determined as of a specified date prior
          to the Change in Control Purchase Date equal to such specified
          percentage of the Change in Control Purchase Price of the Securities
          held by such Holder (except any cash amount to be paid in lieu of
          fractional shares);

                    (B) set forth the method of calculating the Market Price of
          the Common Stock; and

                    (C) state that because the Market Price of Common Stock will
          be determined prior to the Change in Control Purchase Date, holders
          will bear the market risk with respect to the value of the Common
          Stock to be received from the date such Market Price is determined to
          the Change in Control Purchase Date.

          In any case, such notice shall include a form of Change in Control
Purchase Notice to be completed by the Securityholder and shall state:

                    (1) briefly, the events causing a Change in Control and the
          date of such Change in Control;

                    (2) the date by which the Change in Control Purchase Notice
          pursuant to this Section 15.02 must be given;

                    (3) the Change in Control Purchase Price;

                    (4) the Change in Control Purchase Date;

                    (5) the name and address of the Paying Agent and the
          Conversion Agent;

                    (6) the Conversion Rate (including any adjustments thereto
          pursuant to Article XVI hereof);

                    (7) that Securities as to which a Change in Control Purchase
          Notice has been given by the holder may be converted pursuant to
          Article XVI hereof only if the Change in Control Purchase Notice has
          been withdrawn in accordance with the terms of this Indenture;

<PAGE>

                    (8) that Securities must be surrendered to the Paying Agent
          to collect payment of the Change in Control Purchase Price;

                    (9) that the Change in Control Purchase Price for any
          Security as to which a Change in Control Purchase Notice has been duly
          given and not withdrawn will be paid promptly following the later of
          the Change in Control Purchase Date and the time of surrender of such
          Security as described in (8);

                    (10) briefly, the procedures the Holder must follow to
          exercise rights under this Section 15.02;

                    (11) briefly, the conversion rights of the Securities and
          the last date upon which the Holder can exercise the conversion
          rights;

                    (12) the procedures for withdrawing a Change in Control
          Purchase Notice;

                    (13) that, unless the Company defaults in making payment of
          such Change in Control Purchase Price, interest on Securities
          surrendered for purchase will cease to accrue on and after the Change
          in Control Purchase Date; and

                    (14) the CUSIP number of the Securities.

          (f) Change in Control Purchase Notice. A Holder may exercise its
rights specified in Section 15.02(a) upon delivery of a written notice of
purchase (a "Change in Control Purchase Notice") to the Paying Agent at any time
prior to the close of business on the Business Day immediately preceding the
Change in Control Purchase Date, stating:

                    (1) the certificate number and CUSIP number of the
          Securities which the holder will deliver to be purchased;

                    (2) the portion of the aggregate principal amount of the
          Securities which the holder will deliver to be purchased, which
          portion must be $50 or an integral multiple thereof;

                    (3) that such Securities shall be purchased pursuant to the
          terms and conditions specified in this Section 15.02; and

                    (4) with respect to a purchase on any Change in Control
          Purchase Date, in the event the Company elects, pursuant to Section
          15.02(b), to pay the Change in Control Purchase Price as of such
          Change in Control Purchase Date, in whole or in part, in shares of
          Common Stock but such portion of the Change in Control Purchase Price
          shall ultimately be payable to such holder entirely in cash because
          any of the conditions to payment of the Change in Control Purchase
          Price (or a portion thereof) in Common Stock is not satisfied prior to
          the close of business on the Business Day immediately preceding such
          Change in Control Purchase Date, as set forth in Section 15.02(a),
          whether such holder elects (i) to withdraw such Change in Control
          Purchase Notice as to some or all of the Securities to which such
          Change in Control Purchase Notice relates (stating the principal
          amount and certificate numbers of the Securities as to which such
          withdrawal shall relate), or (ii) to receive cash in respect of the
          entire Change in Control Purchase

<PAGE>

          Price for all Securities (or portions thereof) to which such Change in
          Control Purchase Notice relates; and

          If a holder, in such holder's Change in Control Purchase Notice and in
any written notice of withdrawal delivered by such holder pursuant to the terms
of Section 15.03, fails to indicate such holder's choice with respect to the
election set forth in clause (4) of Section 15.02(f), such holder shall be
deemed to have elected to receive cash in respect of the Change in Control
Purchase Price for all Securities subject to such Change in Control Purchase
Notice in the circumstances set forth in such clause (4).

          The delivery of such Security to the Paying Agent prior to, on or
after the Change in Control Purchase Date (together with all necessary
endorsements) at the offices of the Paying Agent shall be a condition to the
receipt by the holder of the Change in Control Purchase Price therefor;
provided, however, that such Change in Control Purchase Price shall be so paid
pursuant to this Section 15.02 only if the Security so delivered to the Paying
Agent shall conform in all respects to the description thereof set forth in the
related Change in Control Purchase Notice and such Change in Control Purchase
Notice shall not be validly withdrawn by the holder.

          The Company shall purchase from the holder thereof, pursuant to this
Section 15.02, a portion of a Security if the principal amount of such portion
is $50 or an integral multiple of $50. Provisions of this Indenture that apply
to the purchase of all of a Security also apply to the purchase of such portion
of such Security.

          Any purchase by the Company contemplated pursuant to the provisions of
this Section 15.02 shall be consummated by the delivery of the consideration to
be received by the holder promptly following the later of the Change in Control
Purchase Date and the time of delivery of the Security to the Paying Agent in
accordance with this Section 15.02.

          Notwithstanding anything herein to the contrary, any holder delivering
to the Paying Agent the Change in Control Purchase Notice contemplated by this
Section 15.02 shall have the right to withdraw such Change in Control Purchase
Notice at any time prior to the close of business on the Change in Control
Purchase Date by delivery of a written notice of withdrawal to the Paying Agent
in accordance with Section 15.03.

          The Paying Agent shall promptly notify the Company of the receipt by
it of any Change in Control Purchase Notice or written withdrawal thereof.

          The Company shall not be required to comply with this Section 15.02 if
a third party mails a written notice of Change in Control in the manner, at the
times and otherwise in compliance with this Section 15.02 and repurchases all
Securities for which a Change in Control Purchase Notice shall be delivered and
not withdrawn.

          (g) Covenants of the Company. All shares of Common Stock delivered
upon purchase of the Securities shall be newly issued shares or treasury shares,
shall be duly authorized, validly issued, fully paid and nonassessable and shall
be free from preemptive rights and free of any lien or adverse claim and subject
to no restriction on transfer other than those that may be applicable at that
time to the Trust Securities.

<PAGE>

          (h) Procedure upon Purchase. The Company shall deposit cash (in
respect of a cash purchase under Section 15.02(c) or for fractional interests,
as applicable) or shares of Common Stock, or a combination thereof, as
applicable, at the time and in the manner as provided in Section 15.06,
sufficient to pay the aggregate Change in Control Purchase Price of all
Securities to be purchased pursuant to this Section 15.02. As soon as
practicable after the Change in Control Purchase Date, the Company shall deliver
to each holder entitled to receive Common Stock through the Paying Agent, a
certificate (or other evidence of ownership) for the number of full shares of
Common Stock issuable in payment of the Change in Control Purchase Price and
cash in lieu of any fractional interests. The person in whose name the
certificate for Common Stock is registered shall be treated as a holder of
record of shares of Common Stock on the Business Day following the Change in
Control Purchase Date. No payment or adjustment will be made for dividends on
the Common Stock the record date for which occurred on or prior to the Change in
Control Purchase Date.

          (i) Taxes. If a holder of a Security is paid in Common Stock, the
Company shall pay any documentary, stamp or similar issue or transfer tax due on
such issue of shares of Common Stock. However, the holder shall pay any such tax
which is due if the Holder requests the shares of Common Stock to be issued in a
name other than the holder's name. The Paying Agent may refuse to deliver the
certificates representing the Common Stock being issued in a name other than the
holder's name until the Paying Agent receives a sum sufficient to pay any tax
which will be due because the shares of Common Stock are to be issued in a name
other than the holder's name. Nothing herein shall preclude any income tax
withholding required by law or regulations being deducted by the Company.

          SECTION 15.03. Effect of Purchase Notice or Change in Control Purchase
Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in
Control Purchase Notice specified in Section 15.01(a) or Section 15.02(f), as
applicable, the holder of the Security in respect of which such Purchase Notice
or Change in Control Purchase Notice, as the case may be, was given shall
(unless such Purchase Notice or Change in Control Purchase Notice is withdrawn
as specified in the following two paragraphs) thereafter be entitled to receive
solely the Purchase Price or Change in Control Purchase Price, as the case may
be, with respect to such Security to the Purchase Date or Change in Control
Purchase Date, as the case may be. Such Purchase Price or Change in Control
Purchase Price shall be paid to such holder, subject to receipts of funds and/or
securities by the Paying Agent, promptly following the later of (x) the Purchase
Date or the Change in Control Purchase Date, as the case may be, with respect to
such Security (provided the conditions in Section 15.01(a) or Section 15.02(f),
as applicable, have been satisfied) and (y) the time of delivery of such
Security to the Paying Agent by the holder thereof in the manner required by
Section 15.01(a) or Section 15.02(f), as applicable. Securities in respect of
which a Purchase Notice or Change in Control Purchase Notice, as the case may
be, has been given by the holder thereof may not be converted pursuant to
Article XVI hereof on or after the date of the delivery of such Purchase Notice
or Change in Control Purchase Notice, as the case may be, unless such Purchase
Notice or Change in Control Purchase Notice, as the case may be, has first been
validly withdrawn as specified in the following two paragraphs.

          A Purchase Notice or Change in Control Purchase Notice, as the case
may be, may be withdrawn by means of a written notice of withdrawal

<PAGE>

delivered to the office of the Paying Agent in accordance with the Purchase
Notice or Change in Control Purchase Notice, as the case may be, at any time
prior to the close of business on the applicable Purchase Date or the Change in
Control Purchase Date, as the case may be, specifying:

          (A) the principal amount of the Security with respect to which such
notice of withdrawal is being submitted,

          (B) the certificate number and CUSIP number of the Security in respect
of which such notice of withdrawal is being submitted, and

          (C) the principal amount, if any, of such Security which remains
subject to the original Purchase Notice or Change in Control Purchase Notice, as
the case may be, and which has been or will be delivered for purchase by the
Company.

          A written notice of withdrawal of a Purchase Notice may be in the form
set forth in the preceding paragraph or may be in the form of (i) a conditional
withdrawal contained in a Purchase Notice pursuant to the terms of Section
15.01(a)(i)(D) or a Change in Control Purchase Notice pursuant to the terms of
Section 15.02 (f) (4) or (ii) a conditional withdrawal containing the
information set forth in Section 15.01(a)(i)(D) or 15.02(f)(4) and the preceding
paragraph and contained in a written notice of withdrawal delivered to the
Paying Agent as set forth in the preceding paragraph.

          There shall be no purchase of any Securities pursuant to Section 15.01
(other than through the issuance of Common Stock in payment of the Purchase
Price, including cash in lieu of fractional shares) or Section 15.02 (other than
through the issuance of Common Stock in payment of the Change in Control
Purchase Price, including cash in lieu of fractional shares) if there has
occurred (prior to, on or after, as the case may be, the giving, by the holders
of such Securities, of the required Purchase Notice or Change in Control
Purchase Notice, as the case may be) and is continuing an Event of Default
(other than a default in the payment of the Purchase Price or Change in Control
Purchase Price, as the case may be) or an event of default under the Trust
Securities, other than a default in the payment of the purchase price with
respect to such Trust Securities. The Paying Agent will promptly return to the
respective Holders thereof any Securities (x) with respect to which a Purchase
Notice or Change in Control Purchase Notice, as the case may be, has been
withdrawn in compliance with this Indenture, or (y) held by it during the
continuance of an Event of Default (other than a default in the payment of the
Purchase Price or Change in Control Purchase Price) in which case, upon such
return, the Purchase Notice or Change in Control Purchase Notice with respect
thereto shall be deemed to have been withdrawn.

          SECTION 15.04. Deposit of Purchase Price or Change in Control Purchase
Price. Prior to 10:00 a.m. New York City time on the Business Day preceding the
Purchase Date or the Change in Control Purchase Date, as the case may be, the
Company shall deposit with the Trustee or with the Paying Agent (or, if the
Company or a Subsidiary or an Affiliate thereof is acting as the Paying Agent,
shall segregate and hold in trust as provided herein) an amount of money (in
immediately available funds if deposited on such Business Day) or Common Stock,
if permitted hereunder, sufficient to pay the aggregate Purchase Price or Change
in Control Purchase Price, as the case may be, of all the Securities or portions
thereof which are to be purchased

<PAGE>

as of the Purchase Date or Change in Control Purchase Date, as the case may be.
After the Purchase Date or the Change in Control Purchase Date, interest shall
cease to accrue on such Security, whether or not such Security is delivered to
the Paying Agent.

          SECTION 15.05. Securities Purchased in Part. Any Security which is to
be purchased only in part shall be surrendered at the office of the Paying Agent
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the holder thereof or such holder's attorney duly
authorized in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the holder of such Security, without service charge,
a new Security or Securities, of any authorized denomination as requested by
such holder in aggregate principal amount equal to, and in exchange for, the
portion of the principal amount of the Security so surrendered which is not
purchased.

          SECTION 15.06. Covenant to Comply With Securities Laws Upon Purchase
of Securities. In connection with any offer to purchase or purchase of
Securities under Section 15.01 or 15.02 hereof (provided that such offer or
purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which
term, as used herein, includes any successor provision thereto) under the
Exchange Act at the time of such offer or purchase), the Company shall (i)
comply with Rule 13e-4 and Rule 14e-1 under the Exchange Act and any other then
applicable tender offer rules, (ii) file the related Schedule TO (or any
successor schedule, form or report) under the Exchange Act, and (iii) otherwise
comply with all federal and state securities laws so as to permit the rights and
obligations under Sections 15.01 and 15.02 to be exercised in the time and in
the manner specified in Sections 15.01 and 15.02; provided, that if any of such
laws or regulations conflict with the provisions of this Article XV, the
compliance by the Company with such laws and regulations shall not be deemed a
breach of the Company's obligations under this Article XV, provided, further,
that the foregoing shall not relieve the Company of its obligations to pay the
Purchase Price on the Purchase Date.

          SECTION 15.07. Repayment to the Company. The Trustee and the Paying
Agent shall return to the Company any cash or shares of Common Stock that remain
unclaimed as provided herein, together with interest or dividends, if any,
thereon, held by them for the payment of the Purchase Price or Change in Control
Purchase Price, as the case may be. To the extent that the aggregate amount of
cash or shares of Common Stock deposited by the Company exceeds the aggregate
Purchase Price or Change in Control Purchase Price, as the case may be, of the
Securities or portions thereof which the Company is obligated to purchase as of
the Purchase Date or Change in Control Purchase Date, as the case may be, then
promptly after the Business Day following the Purchase Date or Change in Control
Purchase Date, as the case may be, the Trustee shall return any such excess to
the Company together with interest or dividends, if any, thereon.

                                   ARTICLE XVI

                                   CONVERSION

          SECTION 16.01. Conversion Privilege. A holder of a Security may
convert such Security into Common Stock until the close of business on the
second Business Day immediately preceding Maturity Date, subject to the
provisions of this Article XVI. The number of shares of Common Stock issuable

<PAGE>

upon conversion of a Security per $50 of the principal amount thereof (the
"Conversion Rate") shall be initially 5.4795 shares of Common Stock, subject to
adjustment as set forth herein. The Conversion Price is, as of any date of
determination, for each $50 aggregate principal amount of Securities the
principal amount thereof divided by the Conversion Rate then in effect.

          A holder may convert a portion of the principal amount of a Security
if the portion is $50 or any integral multiple of $50 in excess thereof.
Provisions of this Indenture that apply to conversion of all of a Security also
apply to conversion of a portion of a Security.

          SECTION 16.02. Conversion Procedure. So long as any Trust Securities
are outstanding, in order to convert Securities into Common Stock, the Holder,
or its authorized agent, shall, upon receipt of notice from the conversion agent
under the Declaration of a notice of conversion thereunder, (i) elect to convert
an equivalent aggregate principal amount of the Securities then held by it into
shares of Common Stock by delivering to the Conversion Agent an irrevocable
Notice of Conversion setting forth the number of Securities to be converted and
the name or names in which the shares of Common Stock are to be issued and (ii)
deliver such Common Stock to the Property Trustee for distribution to the
holders of the Trust Securities so converted. Upon such delivery, the Conversion
Agent shall notify the trustee under the Xerox Funding Indenture of such
conversion whereupon an equivalent aggregate principal amount of Xerox Funding
Debentures shall be deemed to have been paid in full in accordance with the
provisions of the Xerox Funding Indenture.

          On and after the date on which Trust Securities are no longer
outstanding, if any Xerox Funding Debentures are outstanding, the Holder, or its
authorized agent, shall, upon receipt of notice from the conversion agent under
the Xerox Funding Indenture of a notice of conversion thereunder, (i) elect to
convert an equivalent aggregate principal amount of the Securities then held by
it into shares of Common Stock by delivering to the Conversion Agent an
irrevocable Notice of Conversion setting forth the number of Securities to be
converted and the name or names in which the shares of Common Stock are to be
issued and (ii) deliver such Common Stock to the trustee under the Xerox Funding
Indenture for distribution to the holders of the Xerox Funding Debentures so
converted.

          If any Trust Securities or Xerox Funding Debentures are outstanding,
the Holder agrees that it will not elect to convert any of its Securities other
than as provided above.

          On and after the date on which the Trust Securities and the Xerox
Funding Debentures are no longer outstanding, in order to convert Securities
into Common Stock, the Holder of such Securities shall submit to the Conversion
Agent an irrevocable Notice of Conversion to convert Securities on behalf of
such Holder, together, if the Securities are in certificated form, with such
certificates. The Notice of Conversion shall (i) set forth the number of
Securities to be converted and the name or names, if other than the Holder, in
which the shares of Common Stock are to be issued and (ii) direct the Conversion
Agent to immediately convert such Securities into Common Stock and, if
applicable, other securities, cash or property (at the Conversion Rate specified
in the preceding paragraph) and any cash in lieu of any fractional share
determined pursuant to Section 16.03.

<PAGE>

          The Company will not make, nor will it be required to make, any
payment, allowance or adjustment upon any conversion on account of any unpaid
interest, whether or not in arrears, accrued on the Securities surrendered for
conversion, or on account of any accrued and unpaid dividends on the shares of
Common Stock issued upon such conversion. Securities shall be deemed to have
been converted immediately prior to the close of business on the day on which an
irrevocable Notice of Conversion relating to such Securities is received by the
Conversion Agent in accordance with the foregoing provisions (the "Conversion
Date"). As promptly as practicable on or after the Conversion Date, the Company
shall issue and deliver (or cause the transfer agent for the Common Stock to
deliver) at the office of the Conversion Agent a certificate or certificates for
the number of full shares of Common Stock issuable upon such conversion,
together with the cash payment, if any, in lieu of any fraction of any share to
the Person or Persons entitled to receive the same, unless otherwise directed by
the Holder in the Notice of Conversion, and the Conversion Agent shall
distribute such certificate or certificates to such Person or Persons.

          The Person in whose name the certificate is registered shall be
treated as a stockholder of record as of the close of business on the Conversion
Date; provided, however, that no surrender of a Security on any date when the
stock transfer books of the Company shall be closed shall be effective to
constitute the Person or Persons entitled to receive the shares of Common Stock
upon such conversion as the record holder or holders of such shares of Common
Stock on such date, but such surrender shall be effective to constitute the
Person or Persons entitled to receive such shares of Common Stock as the record
holder or holders thereof for all purposes at the close of business on the next
succeeding day on which such stock transfer books are open; and such conversion
shall be at the Conversion Rate in effect on the date that such Security shall
have been surrendered for conversion, as if the stock transfer books of the
Company had not been closed. Upon conversion of a Security, such Person shall no
longer be a holder of such Security.

          Holders of any Security at the close of business on any record date
for any payment on such security will be entitled to receive the amount of such
payment notwithstanding such Security having been converted following such
record date but on or prior to such payment date.

          No payment or adjustment will be made for dividends on, or other
distributions with respect to, any Common Stock except as provided in this
Article XVI. On conversion of a Security, that portion of accrued interest
attributable to the period from the Issue Date of the Security through the
Conversion Date with respect to the converted Security shall not be cancelled,
extinguished or forfeited, but rather shall be deemed to be paid in full to the
holder thereof through delivery of the Common Stock (together with the cash
payment, if any, in lieu of fractional shares) in exchange for the Security
being converted pursuant to the provisions hereof; and the fair market value of
such shares of Common Stock (together with any such cash payment in lieu of
fractional shares) shall be treated as issued, to the extent thereof, first in
exchange for interest accrued through the Conversion Date, and the balance, if
any, of such fair market value of such Common Stock (and any such cash payment)
shall be treated as issued in exchange for the principal amount of the Security
being converted pursuant to the provisions hereof.

          If the holder converts more than one Security at the same

<PAGE>

time, the number of shares of Common Stock issuable upon the conversion shall be
based on the total principal amount of the Securities converted.

          If the last day on which a Security may be converted is a Legal
Holiday, the Security may be surrendered on the next succeeding Business Day
that is not a Legal Holiday; provided, however, the Security shall be deemed to
have been converted and surrendered as of such last day, notwithstanding the
occurrence of a Legal Holiday on such day.

          Upon surrender of a Security that is converted in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the holder, a
new Security in an authorized denomination equal in principal amount to the
unconverted portion of the Security surrendered.

          All shares of Common Stock delivered upon any conversion of any
Restricted Security shall bear a restrictive legend substantially in the form of
the legend required to be set forth on such Restricted Security and shall be
subject to the restrictions on transfer provided by such legend and in Section
2.07(a) hereof.

          SECTION 16.03. Fractional Shares. The Company will not issue a
fractional share of Common Stock upon conversion of a Security. Instead, the
Company will deliver cash for the current market value of the fractional share.
The current market value of a fractional share shall be determined, to the
nearest 1/1,000th of a share, by multiplying the Sale Price of the Common Stock,
on the last Trading Day prior to the Conversion Date, of a full share by the
fractional amount and rounding the product to the nearest whole cent.

          SECTION 16.04. Taxes on Conversion. If a holder converts a Security,
the Company shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Common Stock upon the conversion. However, the
holder shall pay any such tax which is due because the holder requests the
shares to be issued in a name other than the holder's name. The Conversion Agent
may refuse to deliver the certificates representing the Common Stock being
issued in a name other than the holder's name until the Conversion Agent
receives a sum sufficient to pay any tax which will be due because the shares
are to be issued in a name other than the holder's name. Nothing herein shall
preclude any tax withholding required by law or regulations by the Company.

          SECTION 16.05. Company to Provide Stock. The Company shall, prior to
issuance of any Securities under this Article XVI, and from time to time as may
be necessary, reserve out of its authorized but unissued Common Stock a
sufficient number of shares of Common Stock to permit the conversion of the
Securities.

          All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares or treasury shares, shall be duly and validly
issued and fully paid and nonassessable and shall be free from preemptive rights
and free of any lien or adverse claim.

          The Company will list or cause to have quoted such shares of Common
Stock on each national or regional securities exchange or such other market on
which the Common Stock is then listed or quoted.

          SECTION 16.06. Adjustment for Change In Capital Stock. If,

<PAGE>

after the Issue Date of the Securities, the Company:

          (a) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;

          (b) subdivides its outstanding shares of Common Stock into a greater
number of shares;

          (c) combines its outstanding shares of Common Stock into a smaller
number of shares;

          (d) pays a dividend or makes a distribution on its Common Stock in
shares of its Capital Stock (other than Common Stock referred to in (a) above or
rights, warrants or options referred to in Section 16.07); or

          (e) issues by reclassification of its Common Stock any shares of its
Capital Stock (other than rights, warrants or options referred to in Section
16.07),

then the Conversion Rate in effect immediately prior to such action shall be
adjusted so that the holder of a Security thereafter converted may receive the
number of shares of Capital Stock of the Company which such holder would have
owned immediately following such action if such Holder had converted the
Security immediately prior to such action.

          The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.

          If after an adjustment a holder of a Security upon conversion of such
Security may receive shares of two or more classes of Capital Stock of the
Company, the Conversion Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated by this Article XVI with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Article XVI.

          SECTION 16.07. Adjustment for Rights Issue.

          If after the Issue Date of the Securities, the Company distributes any
rights, warrants or options to all holders of its Common Stock entitling them,
for a period expiring within 60 days after the record date for such
distribution, to purchase shares of Common Stock at a price per share less than
the Sale Price of the Common Stock as of the Time of Determination, the
Conversion Rate shall be adjusted in accordance with the formula:

                       R'  =  R x          (O + N)
                                    ----------------------
                                      (O + [(N x P)/M)]

          where:

          R' = the adjusted Conversion Rate.

          R = the current Conversion Rate.

<PAGE>

          O = the number of shares of Common Stock outstanding on the record
date for the distribution to which this Section 16.07 is being applied.

          N = the number of additional shares of Common Stock offered pursuant
to the distribution.

          P = the purchase price per share of the additional shares.

          M = the Average Sale Price, minus, in the case of (i) a distribution
to which Section 16.06(d) applies or (ii) a distribution to which Section 16.08
applies, for which, in each case, (x) the record date shall occur on or before
the record date for the distribution to which this Section 16.07 applies and (y)
the Ex-Dividend Time shall occur on or after the date of the Time of
Determination for the distribution to which this Section 16.07 applies, the fair
market value (on the record date for the distribution to which this Section
16.07 applies) of:

          (a) the Capital Stock of the Company distributed in respect of each
share of Common Stock in such Section 16.06(d) distribution; and

          (b) the assets of the Company or debt securities or any rights,
warrants or options to purchase securities of the Company distributed in respect
of each share of Common Stock in such Section 16.08 distribution.

          The Board of Directors shall determine fair market values for the
purposes of this Section 16.07.

          The adjustment shall become effective immediately after the record
date for the determination of shareholders entitled to receive the rights,
warrants or options to which this Section 16.07 applies. If all of the shares of
Common Stock subject to such rights, warrants or options have not been issued
when such rights, warrants or options expire, then the Conversion Rate shall
promptly be readjusted to the Conversion Rate which would then be in effect had
the adjustment upon the issuance of such rights, warrants or options been made
on the basis of the actual number of shares of Common Stock issued upon the
exercise of such rights, warrants or options.

          No adjustment shall be made under this Section 16.07 if the
application of the formula stated above in this Section 16.07 would result in a
value of R' that is equal to or less than the value of R.

          "Average Sale Price" means the average of the Sale Prices of the
Common Stock for the shorter of:

                    (i) 30 consecutive Trading Days ending on the last full
Trading Day prior to the Time of Determination with respect to the rights,
warrants or options or distribution in respect of which the Average Sale Price
is being calculated, or

                    (ii) the period (x) commencing on the date next succeeding
the first public announcement of (a) the issuance of rights, warrants or options
or (b) the distribution, in each case, in respect of which the Average Sale
Price is being calculated and (y) proceeding through the last full Trading Day
prior to the Time of Determination with respect to the rights, warrants or
options or distribution in respect of which the Average Sale Price is being
calculated (excluding days within such period, if

<PAGE>

any, which are not Trading Days), or

                    (iii) the period, if any, (x) commencing on the date next
succeeding the Ex-Dividend Time with respect to the next preceding (a) issuance
of rights, warrants or options or (b) distribution, in each case, for which an
adjustment is required by the provisions of Section 16.06(d), 16.07 or 16.08 and
(y) proceeding through the last full Trading Day prior to the Time of
Determination with respect to the rights, warrants or options or distribution in
respect of which the Average Sale Price is being calculated (excluding days
within such period, if any, which are not Trading Days).

          In the event that the Ex-Dividend Time (or in the case of a
subdivision, combination or reclassification, the effective date with respect
thereto) with respect to a dividend, subdivision, combination or
reclassification to which Section 16.06(a), (b), (c) or (e) applies occurs
during the period applicable for calculating "Average Sale Price" pursuant to
the definition in the preceding sentence, "Average Sale Price" shall be
calculated for such period in a manner determined by the Board of Directors of
the Company to reflect the impact of such dividend, subdivision, combination or
reclassification on the Sale Price of the Common Stock during such period.

          "Time of Determination" means the time and date of the earlier of (i)
the determination of shareholders entitled to receive rights, warrants or
options or a distribution, in each case, to which Section 16.07 or 16.08 applies
and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of
"ex-dividend" trading for such rights, warrants or options or distribution on
the New York Stock Exchange or such other United States national or regional
exchange or market on which the Common Stock is then listed or quoted.

          SECTION 16.08. Adjustment for Other Distributions.

          (a) Subject to 16.08(c), if, after the Issue Date of the Securities,
the Company distributes to all holders of its Common Stock any of its assets
(including shares of capital stock of a Subsidiary other than those referred to
in Section 16.08(b) or equity securities of any other Person, but excluding
distributions of Capital Stock referred to in 16.06) or debt securities or any
rights, warrants or options to purchase securities of the Company (including
securities or cash, but excluding (x) distributions of Capital Stock referred to
in Section 16.06 and distributions of rights, warrants or options referred to in
Section 16.07 and (y) cash dividends or other cash distributions that are paid
out of consolidated current net earnings or earnings retained in the business as
shown on the books of the Company unless such cash dividends or other cash
distributions are Extraordinary Cash Dividends) the Conversion Rate shall be
adjusted, subject to the provisions of Section 16.08(c), in accordance with the
formula:

                                R'  =     R x M
                                       ---------
                                          M - F

where:

          R' = the adjusted Conversion Rate.

          R = the current Conversion Rate.

<PAGE>

          M = the Average Sale Price, minus, in the case of a distribution to
which Section 16.06(d) applies, for which (i) the record date shall occur on or
before the record date for the distribution to which this Section 16.08 applies
and (ii) the Ex-Dividend Time shall occur on or after the date of the Time of
Determination for the distribution to which this Section 16.08 applies, the fair
market value (on the record date for the distribution to which this Section
16.08 applies) of any Capital Stock of the Company distributed in respect of
each share of Common Stock in such Section 16.06(d) distribution.

         F = the fair market value (on the record date for the distribution to
which this Section 16.08 applies) of the assets, securities, rights, warrants or
options to be distributed in respect of each share of Common Stock in the
distribution to which this Section 16.08 is being applied (including, in the
case of cash dividends or other cash distributions giving rise to an adjustment,
all such cash distributed concurrently).

          The Board of Directors shall determine fair market values for the
purposes of this Section 16.08.

          The adjustment shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution
to which this Section 16.08 applies.

          For purposes of this Section 16.08, the term "Extraordinary Cash
Dividend" shall mean any cash dividend or distribution with respect to the
Common Stock the amount of which, together with the aggregate amount of cash
dividends on the Common Stock to be aggregated with such cash dividend in
accordance with the provisions of this paragraph, exceeds the threshold
percentage set forth in item (i) below. For purposes of item (i) below, the
"Ex-Dividend Measurement Period" with respect to a cash dividend on the Common
Stock shall mean the 365 consecutive day period ending on the date prior to the
Ex-Dividend Time with respect to such cash dividend, and the "Relevant Cash
Dividends" with respect to a cash dividend on the Common Stock shall mean the
cash dividends on the Common Stock with Ex-Dividend Times occurring in the
Ex-Dividend Measurement Period.

                    (i) If, upon the date prior to the Ex-Dividend Time with
          respect to a cash dividend on the Common Stock, the aggregate amount
          of such cash dividend together with the amounts of all Relevant Cash
          Dividends equals or exceeds on a per share basis 15% of the Sale Price
          of the Common Stock on the last Trading Day preceding the date of
          declaration by the Board of Directors of the cash dividend or
          distribution with respect to which this provision is being applied,
          then such cash dividend together with all Relevant Cash Dividends,
          shall be deemed to be an Extraordinary Cash Dividend and for purposes
          of applying the formula set forth above in this Section 16.08, the
          value of "F" shall be equal to (y) the aggregate amount of such cash
          dividend together with the amount of all Relevant Cash Dividends,
          minus (z) the aggregate amount of all Relevant Cash Dividends for
          which a prior adjustment in the Conversion Rate was previously made
          under this Section 16.08.

                    (ii) In making the determinations required by item (i)
          above, the amount of cash dividends paid on a per share basis and the
          amount of any Relevant Cash Dividends specified in item (i) above,
          shall

<PAGE>

          be appropriately adjusted to reflect the occurrence during such period
          of any event described in Section 16.06.

          (b) Subject to Section 16.08(c), if, after the Issue Date, the Company
pays a dividend or makes a distribution to all holders of its Common Stock
consisting of Capital Stock of any class or series, or similar equity interests,
of or relating to a Subsidiary or other business unit of the Company, the
Conversion Rate shall be adjusted in accordance with the formula:

                           R'  =  R x   (1 + F/M)

where:

          R' = the adjusted Conversion Rate.

          R = the current Conversion Rate.

     M = the average of the Sale Prices of the Common Stock for the 10 Trading
Days commencing on and including the fifth Trading Day after the date on which
"ex-dividend trading" commences for such dividend or distribution on The New
York Stock Exchange or such other national or regional exchange or market which
such securities are then listed or quoted (the "Ex-Dividend Date").

     F = the average of the Sale Prices of the securities distributed in respect
of each share of Common Stock for which this Section 16.08(b) applies for the 10
Trading Days commencing on and including the fifth Trading Day after the
Ex-Dividend Date.

          (c) In the event that, with respect to any distribution to which
Section 16.08(a) would otherwise apply, the difference between "M-F" is less
than $1.00 or "F" is equal to or greater than "M", then the adjustment provided
by Section 16.08(a) or 16.08(b) shall not be made and in lieu thereof the
provisions of Section 16.15 shall apply to such distribution.

          (d) If, after the Issue Date of the Securities, a Change in Control
occurs prior to November 27, 2004, in which:

                    (i) shareholders of the Company receive consideration per
          share of Common Stock that is greater than the Conversion Price,
          without giving effect to the adjustment described below, at the
          effective time of the Change in Control; and

                    (ii) at least 10%, but less than 75%, of the total
          consideration paid to shareholders of the Company consists of cash,
          cash equivalents, securities or other assets (other than
          publicly-traded securities) ("Non-public Consideration");

then the Conversion Rate shall be adjusted so that, upon conversion of
outstanding Securities after such Change in Control, in addition to the
securities, cash or other assets deliverable upon the conversion of the
Securities under this Section 16.08(e), each holder will receive, in respect of
each such Security so converted, a number of the acquiror's publicly traded
shares of common stock or other publicly traded securities delivered in
connection with the transaction resulting in a Change in Control in accordance
with the following formula:

<PAGE>

                                 P x (N/T)
                   -------------------------------------
                                     S
where:

P =  the present value of the aggregate interest payments that would have been
     payable on a Security from the Conversion Date of that Security through
     November 27, 2004, calculated using a discount rate equal to 2.00% plus the
     yield to maturity of U.S. Treasury securities having a maturity closest to,
     but not later than November 27, 2004.

N =  the value of the Non-public Consideration payable to the Company's
     shareholders at the effective time of the Change in Control, with the value
     of any assets or securities other than cash or a publicly-traded security
     being determined in good faith by the Board of Directors based upon an
     opinion as to that value obtained from an accounting, appraisal or
     investment banking firm of international standing.

T =  the total value of the Consideration (including Non-public Consideration)
     payable to the Company's shareholders at the effective time of the Change
     in Control, with the value of any assets or securities other than cash or
     publicly-traded security being determined as specified in "N" above.

S =  the Sale Price of a share of the acquiror's publicly-traded common stock or
     other publicly-traded securities delivered in connection with the Change in
     Control at the effective time of the Change of Control.

provided, that if the consideration per share of Common Stock received by
shareholders of the Company in respect of the Change in Control is greater than
the Conversion Rate at the effective time of such Change in Control and consists
of at least 75% Non-public Consideration or if the acquiror's common stock is
not publicly traded, then upon conversion of any outstanding Security that
remains outstanding after such Change in Control, in lieu of the foregoing
adjustment to the Conversion Price, such holder shall be entitled to receive, in
respect of each such Security converted, an additional amount as follows:

                                 P x (N/T)

          SECTION 16.09. Adjustment for Self Tender Offer.

          If, after the Issue Date of the Securities, the Company or any of its
Subsidiaries engages in a tender or exchange offer (other than an odd-lot tender
offer meeting the requirements of Exchange Act Rule 13e-4(h)(5)) for Common
Stock, and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders of consideration per share of
Common Stock having a fair market value that as of the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it may be amended) exceeds the Sale Price per share of Common
Stock as of the Trading Day next succeeding the Expiration Time, the Conversion
Rate shall be increased so that it shall equal the rate determined by (A)
multiplying the Conversion Rate in effect immediately prior to the Expiration
Time by (B) a fraction, the denominator of which shall be the number of shares
of Common Stock outstanding (including any tendered or exchanged shares) at the

<PAGE>

Expiration Time multiplied by the Sale Price per share of Common Stock as of the
Trading Day next succeeding the Expiration Time and the numerator of which shall
be the sum of (x) the fair market value of the aggregate consideration payable
to stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares of Common Stock validly
tendered or exchanged and not withdrawn as of the Expiration Time (the shares of
Common Stock deemed so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) at the Expiration Time and the
Sale Price per share of Common Stock as of the Trading Day next succeeding the
Expiration Time, such increase to become effective as of the opening of business
on the Trading Day next succeeding the Expiration Time. In the event that the
Company is obligated to purchase shares of Common Stock pursuant to any such
tender or exchange offer, but the Company is permanently prevented by applicable
law from effecting any such purchases or all such purchases are rescinded, the
Conversion Rate shall again be adjusted to be the Conversion Rate that would
then be in effect if such tender or exchange offer had not been made.

          The Board of Directors, whose determination in good faith shall be
conclusive, shall determine fair market values for the purposes of this Section
16.09.

          SECTION 16.10. When Adjustment May Be Deferred. No adjustment in the
Conversion Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Rate. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment.

          All calculations under this Article XVI shall be made to the nearest
cent or to the nearest 1/1,000th of a share, as the case may be.

          SECTION 16.11. When No Adjustment Required. No adjustment need be made
for a transaction referred to in Section 16.06, 16.07, 16.08, 16.09 or 16.15 if
Securityholders are to participate in the transaction, on a basis and with
notice that the Board of Directors determines to be fair and appropriate in
light of the basis and notice on which holders of Common Stock participate in
the transaction. Such participation by Securityholders may include participation
upon conversion provided that an adjustment shall be made at such time as the
Securityholders are no longer entitled to participate.

          No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.

          No adjustment need be made for a change in the par value or no par
value of the Common Stock.

          To the extent the Securities become convertible pursuant to this
Article XVI into cash, no adjustment need be made thereafter as to the cash.
Interest will not accrue on the cash.

          Notwithstanding any provision to the contrary in this Indenture, no
adjustment shall be made in the Conversion Rate to the extent, but only to the
extent, such adjustment results in the following quotient being less than the
par value of the Common Stock: (i) $50 (ii) the Conversion Rate as so adjusted.

<PAGE>

          No adjustment will be made pursuant to this Article XVI which would
result, through the application of two or more provisions hereof, in the
duplication of any adjustment.

          SECTION 16.12. Notice of Adjustment. Whenever the Conversion Rate is
adjusted, the Trustee shall, at the request and expense of the Company, promptly
mail to Securityholders a notice of the adjustment. The Company shall file with
the Trustee and the Conversion Agent such notice and a certificate from the
Company's independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct. Neither the Trustee nor any Conversion
Agent shall be under any duty or responsibility with respect to any such
certificate except to exhibit the same to any Holder desiring inspection
thereof.

          SECTION 16.13. Voluntary Increase. The Company from time to time may
increase the Conversion Rate by any amount for any period of time. Whenever the
Conversion Rate is increased, the Trustee shall, at the request and expense of
the Company, mail to Securityholders and file with the Trustee and the
Conversion Agent a notice of the increase. The Company shall mail the notice at
least 15 days before the date the increased Conversion Rate takes effect. The
notice shall state the increased Conversion Rate and the period it will be in
effect.

          A voluntary increase of the Conversion Rate does not change or adjust
the Conversion Rate otherwise in effect for purposes of Section 16.06, 16.07,
16.08 or 16.09.

          SECTION 16.14. Notice of Certain Transactions. If:

          (a) the Company takes any action that would require an adjustment in
the Conversion Rate pursuant to Section 16.06, 16.07, 16.08 or 16.09 (unless no
adjustment is to occur pursuant to Sections 16.10 or 16.11); or

          (b) the Company takes any action that would require a supplemental
indenture pursuant to Section 16.15; or

          (c) there is a liquidation or dissolution of the Company;

then the Trustee shall, at the request of the Company, mail to Securityholders
and file with the Trustee and the Conversion Agent a notice stating the proposed
record date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, binding share
exchange, transfer, liquidation or dissolution. The Company shall file and mail
the notice at least 15 days before such date. Failure to file or mail the notice
or any defect in it shall not affect the validity of the transaction.

          SECTION 16.15. Reorganization of Company; Special Distributions. (a)
If the Company is a party to a transaction subject to Section 10.01 (other than
a sale or lease of all or substantially all of the assets of the Company in a
transaction in which the holders of Common Stock immediately prior to such
transaction do not receive securities, cash, property or other assets of the
Company or any other person) or a merger or binding share exchange which
reclassifies or changes the outstanding Common

<PAGE>

Stock, the person obligated to deliver securities, cash or other assets upon
conversion of Securities shall enter into a supplemental indenture. If the
issuer of securities deliverable upon conversion of Securities is an Affiliate
of the successor Company, that issuer shall join in the supplemental indenture.

          (b) The supplemental indenture shall provide that the holder of a
Security may convert it into the kind and amount of securities, cash or other
assets which such holder would have received immediately after the
consolidation, merger, binding share exchange or transfer if such holder had
converted the Security immediately before the effective date of the transaction,
assuming (to the extent applicable) that such Holder (i) was not a constituent
person or an Affiliate of a constituent person to such transaction; (ii) made no
election with respect thereto; and (iii) was treated similarly to the plurality
of non-electing Holders. The supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Article XVI. The successor Company shall mail
to Securityholders anotice briefly describing the supplemental indenture.

          (c) If this Section 16.15 applies, neither Section 16.06 nor 16.07
applies.

          (d) If the Company makes a distribution to all holders of its Common
Stock of any of its assets, or debt securities or any rights, warrants or
options to purchase securities of the Company that, but for the provisions of
Section 16.08(c), would otherwise result in an adjustment in the Conversion Rate
pursuant to the provisions of Section 16.08, then, from and after the record
date for determining the holders of Common Stock entitled to receive the
distribution, a Holder of a Security that converts such Security in accordance
with the provisions of this Indenture shall upon such conversion be entitled to
receive, in addition to the shares of Common Stock into which the Security is
convertible, the kind and amount of securities, cash or other assets comprising
the distribution that such Holder would have received if such Holder had
converted the Security immediately prior to the record date for determining the
holders of Common Stock entitled to receive the distribution.

          SECTION 16.16. Company Determination Final. Any determination that the
Company or the Board of Directors makes pursuant to this Article XIV is
conclusive.

          SECTION 16.17. Trustee's Adjustment Disclaimer. The Trustee has no
duty to determine when an adjustment under this Article XVI should be made, how
it should be made or what it should be. The Trustee has no duty to determine
whether a supplemental indenture under Section 9.01 need be entered into or
whether any provisions of any supplemental indenture are correct. The Trustee
shall not be accountable for and makes no representation as to the validity or
value of any securities or assets issued upon conversion of Securities. The
Trustee shall not be responsible for the Company's failure to comply with this
Article XVI. Each Conversion Agent shall have the same protection under this
Section 16.17 as the Trustee.

          SECTION 16.18. Simultaneous Adjustments. In the event that this
Article XVI requires adjustments to the Conversion Rate under more than one of
Sections 16.06(d), 16.07 or 16.08, and the record dates for the distributions
giving rise to such adjustments shall occur on the same date,

<PAGE>

then such adjustments shall be made by applying, first, the provisions of
Section 16.06, second, the provisions of Section 16.08 and, third, the
provisions of Section 16.07.

          SECTION 16.19. Successive Adjustments. After an adjustment to the
Conversion Rate under this Article XVI, any subsequent event requiring an
adjustment under this Article XVI shall cause an adjustment to the Conversion
Rate as so adjusted.

          SECTION 16.20. Rights Issued in Respect of Common Stock Issued Upon
Conversion. Each share of Common Stock issued upon conversion of Securities
pursuant to this Article XVI shall be entitled to receive the appropriate number
of common stock or preferred stock purchase rights, as the case may be (the
"Rights"), if any, and the certificates representing the Common Stock issued
upon such conversion shall bear such legends, if any, in each case as may be
provided by the terms of any shareholder rights agreement adopted by the Company
and then in effect, as the same may be amended from time to time (in each case,
a "Rights Agreement"). Provided that such Rights Agreement requires that each
share of Common Stock issued upon conversion of Securities at any time prior to
the distribution of separate certificates representing the Rights be entitled to
receive such Rights, then, notwithstanding anything else to the contrary in this
Article XVI, there shall not be any adjustment to the conversion privilege or
Conversion Rate as a result of the issuance of Rights, the distribution of
separate certificates representing the Rights, the exercise or redemption of
such Rights in accordance with any such Rights Agreement, or the termination or
invalidation of such Rights.

                                  ARTICLE XVII

                           SUBORDINATION OF SECURITIES

          SECTION 17.01. Agreement to Subordinate.

          The Securities issued hereunder will be subordinate and junior in
right of payment to all Senior Indebtedness. No payment of principal (including
upon redemption), premium, if any, or interest on the Securities may be made at
any time when (i) any Senior Indebtedness is not paid when due, (ii) any
applicable grace period with respect to such default has ended and such default
has not been cured or waived or ceased to exist, or (iii) the maturity of any
Senior Indebtedness has been accelerated because of a default.

          No provision of this Article XVII shall prevent the occurrence of any
Default or Event of Default hereunder.

          SECTION 17.02. Default on Senior Indebtedness.

          In the event that, any payment shall be received by the Trustee when
such payment is prohibited by Section 17.01, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing, within 90 days of
such payment of the amounts then due and owing

<PAGE>

on such Senior Indebtedness and only the amounts specified in such notice to the
Trustee shall be paid to the holders of such Senior Indebtedness.

          SECTION 17.03. Liquidation; Dissolution; Bankruptcy.

          Upon any distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, all Senior Indebtedness must be paid in
full before the holders of the Securities are entitled to receive or retain any
payment in respect thereof; and upon any such dissolution or winding-up or
liquidation or reorganization or assignment, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the Securityholders or the Trustee would be
entitled to receive from the Company, except for the provisions of this Article
XVII, shall be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the Securityholders or by the Trustee under the Indenture if received by
them or it, directly to the holders of Senior Indebtedness of the Company (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay all such Senior Indebtedness in full, in money or money's
worth, after giving effect to any concurrent payment or distribution to or for
the holders of such Senior Indebtedness, before any payment or distribution is
made to the Securityholders or to the Trustee.

          In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all such Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of such Senior Indebtedness.

          For purposes of this Article XVII, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XVII with
respect to the Securities to the payment of Senior Indebtedness that may at the
time be outstanding, provided that (i) such Senior Indebtedness is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders,

<PAGE>

altered by such reorganization or readjustment. The consolidation of the Company
with, or the merger of the Company into, another Person or the liquidation or
dissolution of the Company following the sale, conveyance, transfer or lease of
its property as an entirety, or substantially as an entirety, to another Person
upon the terms and conditions provided for in Article X of this Indenture shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 17.03 if such other Person shall, as a part of such
consolidation, merger, sale, conveyance, transfer or lease, comply with the
conditions stated in Article X of this Indenture.

          SECTION 17.04. Subrogation.

          Subject to the payment in full of all Senior Indebtedness, the rights
of the Securityholders shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments or distributions of cash, property or
securities of the Company, as the case may be, applicable to such Senior
Indebtedness until the principal of (and premium, if any) and interest on the
Securities shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of such Senior Indebtedness of any
cash, property or securities to which the Securityholders or the Trustee would
be entitled except for the provisions of this Article XVII, and no payment over
pursuant to the provisions of this Article XVII to or for the benefit of the
holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness of
the Company, and the holders of the Securities, be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is understood that the
provisions of this Article XVII are and are intended solely for the purposes of
defining the relative rights of the holders of the Securities, on the one hand,
and the holders of such Senior Indebtedness on the other hand.

          Nothing contained in this Article XVII or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness of the Company, and the
holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Securities the principal of (and
premium, if any) and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the holders of the Securities and creditors
of the Company, as the case may be, other than the holders of Senior
Indebtedness of the Company, as the case may be, nor shall anything herein or
therein prevent the Trustee or the holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under the Indenture,
subject to the rights, if any, under this Article XVII of the holders of such
Senior Indebtedness in respect of cash, property or securities of the Company,
as the case may be, received upon the exercise of any such remedy.

          SECTION 17.05. Trustee to Effectuate Subordination.

          Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XVII and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.

<PAGE>

          SECTION 17.06. Notice by the Company.

          The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company that would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article XVII. Notwithstanding the provisions
of this Article XVII or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts that would prohibit
the making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article XVII, unless and until a
Responsible Officer of the Trustee assigned to the Principal Office of the
Trustee shall have received written notice thereof from the Company or a holder
or holders of Senior Indebtedness or from any trustee therefor; and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Article VI of this Indenture, shall be entitled in all respects to assume that
no such facts exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section 17.06 at least two Business
Days prior to the date (i) upon which by the terms hereof any money may become
payable for any purpose (including, without limitation, the payment of the
principal of (or premium, if any) or interest on any Security), or (ii) moneys
are deposited in trust pursuant to Article XI, then anything herein contained to
the contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.

          The Trustee, subject to the provisions of Article VI of this
Indenture, shall be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness of the Company (or a trustee or representative on behalf of such
holder), as the case may be, to establish that such notice has been given by a
holder of such Senior Indebtedness or a trustee or representative on behalf of
any such holder or holders. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of such Senior Indebtedness to participate in any payment or
distribution pursuant to this Article XVII, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of such Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article XVII, and, if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.

          Upon any payment or distribution of assets of the Company referred to
in this Article XVII, the Trustee and the Securityholders shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the
Securityholders, for the purpose of ascertaining the persons entitled to
participate in such payment or

<PAGE>

distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
XVII.

          SECTION 17.07. Rights of the Trustee; Holders of Senior Indebtedness.

          The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XVII in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.

          With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article XVII, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Article VI of this Indenture, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to
Securityholders, the Company or any other Person money or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Article XVII
or otherwise.

          Nothing in this Article XVII shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.

          SECTION 17.08. Subordination May Not Be Impaired.

          (a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof that any such holder may
have or otherwise be charged with.

          (b) Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Securityholders,
without incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XVII or the obligations
hereunder of the holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.

          Wells Fargo Bank Minnesota, National Association hereby

<PAGE>

accepts the trusts in this Indenture declared and provided, upon the terms and
conditions hereinabove set forth.

          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed by their respective officers thereunto duly authorized, as of
the day and year first above written.

                               XEROX CORPORATION


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


                               WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION,
                               as Trustee


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


                                                                       EXHIBIT A
                                                                       ---------

                               (FORM OF SECURITY)

          [IF THE SECURITY IS A GLOBAL SECURITY, INSERT: - THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

          UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN

<PAGE>

AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.


No.                                                         CUSIP No. 984121 BD4

                                XEROX CORPORATION

            71/2% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE DUE 2021

          Xerox Corporation, a New York corporation (the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to or registered assigns, the principal
sum of Dollars on November 27, 2021 (the "Maturity Date"), unless previously
paid, and to pay interest on the outstanding principal amount hereof from
November 27, 2001, or from the most recent interest payment date (each such
date, an "Interest Payment Date") to which interest has been paid or duly
provided for, quarterly in arrears on February 27, May 27, August 27 and
November 27 of each year, commencing February 27, 2002 at the rate of 7 1/2% per
annum until the principal hereof shall have become due and payable, and at the
rate of 7 1/2% per annum on any overdue principal and premium, if any, and
(without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
rate of 7 1/2% per annum compounded quarterly. The amount of interest payable on
any Interest Payment Date shall be computed on the basis of a 360-day year of
twelve 30-day months and, for any period less than a full calendar month, the
number of days elapsed in such month. In the event that any date on which the
principal of (or premium, if any), Purchase Price, Redemption Price, Change in
Control Purchase Price, or interest on this Security is payable is not a
Business Day, then the payment payable on such date will be made on the next
succeeding day that is a Business Day (except that if such next succeeding
Business Day falls in a subsequent calendar year, such payment shall be made on
the Business Day next preceding such date of payment), with the same force and
effect as if made on such date payment was originally payable, and no interest
shall accrue for the period from and after such date. The amount of interest
payable on any Interest Payment Date, the applicable redemption date, the
applicable Purchase Date, the Change in Control Purchase Date or the Maturity
Date shall include interest accrued from and including the Issue Date or the
last Interest Payment Date to which interest has been paid to but excluding such
Interest Payment Date, such redemption date, such Purchase Date, such Change in
Control Purchase Date, or the Maturity Date, as applicable.

          The interest installment so payable, and punctually paid or

<PAGE>

duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the person in whose name this Security (or one or more
Predecessor Securities, as defined in said Indenture) is registered at the close
of business on the regular record date for such interest installment, which
shall be the Business Day or, if none of the Trust Preferred Securities, Xerox
Funding Debentures or the Securities are represented by global certificates, the
15th calendar day, immediately preceding the relevant interest payment date. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the holders on such regular record date and may
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the holders of Securities not less than 10 days prior
to such special record date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture.

          The principal of (and premium, if any) Purchase Price, Redemption
Price, Change in Control Purchase Price and interest on this Security shall be
payable at the office or agency of the Trustee maintained for that purpose in
any coin or currency of the United States of America that at the time of payment
is legal tender for payment of public and private debts; provided, however,
that, payment of interest may be made at the option of the Company by (i) check
mailed to the holder at such address as shall appear in the Security Register or
(ii) by transfer to an account maintained by the Person entitled thereto,
provided that proper written transfer instructions have been received by the
relevant record date. Notwithstanding the foregoing, so long as the Holder of
this Security is the Property Trustee, the payment of the principal of (and
premium, if any) Purchase Price, Redemption Price, Change in Control Purchase
Price, and interest on this Security will be made at such place and to such
account as may be designated by the Property Trustee.

          The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her attorney-in-
fact for any and all such purposes. Each holder hereof, by his or her acceptance
hereof, hereby waives all notice of the acceptance of the subordination
provisions contained herein and in the Indenture by each holder of Senior
Indebtedness, whether now outstanding or hereafter incurred, and waives reliance
by each such holder upon said provisions.

          This Security shall not be entitled to any benefit under the Indenture
hereinafter referred to, or be valid or become obligatory for any purpose until
the Certificate of Authentication hereon shall have been signed by or on behalf
of the Trustee.

          The provisions of this Security are continued on the reverse side
hereof and such provisions shall for all purposes have the

<PAGE>

same effect as though fully set forth at this place.

          IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.


                                     XEROX CORPORATION


                                     By:
                                        Name:
                                        Title


Attest:


By:
   Name:
   Title:


                          CERTIFICATE OF AUTHENTICATION

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

Dated November 27, 2001

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee

By
        Authorized Officer


                          (FORM OF REVERSE OF SECURITY)

          This Security is one of the Securities of the Company (herein
sometimes referred to as the "Securities"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture, dated as of November
27, 2001 (the "Indenture"), duly executed and delivered between the Company and
Wells Fargo Bank Minnesota, National Association, as Trustee (the "Trustee"), to
which Indenture reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Securities.

          Subject to the provisions of Article XIV of the Indenture, the Company
may at its option (i) on and after the Initial Optional Redemption Date, redeem
the Securities in whole or in part, at the applicable

<PAGE>

Special Redemption Price and (ii) if a Special Event shall occur and be
continuing, redeem the Securities in whole (but not in part) at any time prior
to the Initial Optional Redemption Date and within 90 days of the occurrence of
such Special Event, at the Regular Redemption Price.

          If the Securities are only partially redeemed pursuant to Article XIV
of the Indenture, the Securities will be redeemed pro rata or by lot or by any
other method utilized by the Trustee; provided, that if at the time of
redemption the Securities are registered as a Global Security, the Depositary
shall determine, in accordance with its procedures, the principal amount of such
Securities held for the account of its participants to be redeemed. The
applicable Redemption Price shall be paid prior to 12:00 noon, New York time, on
the date of such redemption or at such earlier time as the Company determines,
provided that the Company shall deposit with the Trustee an amount sufficient to
pay the applicable Redemption Price by 10:00 a.m., New York time, on the date
such Redemption Price is to be paid.

          In the event of redemption of this Security in part only, a new
Security or Securities for the unpaid portion hereof will be issued in the name
of the holder hereof upon the cancellation hereof.

          The Securities are convertible into Common Stock of the Company and
subject to purchase at the option of the holders hereof as described in the
Indenture.

          In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.

          The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the Securities at the time outstanding, as defined in the Indenture,
to execute supplemental indentures for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of modifying in any manner the rights of the holders of the Securities;
provided, however, that no such supplemental indenture shall, without the
consent of each holder of Securities then outstanding and affected thereby, (i)
change the Maturity Date of any Security, or reduce the rate or extend the time
of payment of interest thereon, or reduce the principal amount thereof, reduce
the Redemption Price, Purchase Price or Change in Control Purchase Price, make
any change that adversely affects the right to convert any Security, make any
change that adversely affects the right to require the Company to purchase the
Securities in accordance with the terms thereof and of this Indenture, modify
the provision of this Indenture relating to the subordination of the Securities
or the right to commence a Direct Action, or (ii) reduce the aforesaid
percentage of Securities, the holders of which are required to consent to any
such supplemental indenture; provided, however, that (i) if the Securities are
held solely by Xerox Funding and no Trust Securities are outstanding, such
amendment or modification shall not be effective until the holders of a majority
in principal amount of Xerox Funding Debentures shall have consented to such
amendment or modification; provided, further, that if the consent of the holder
of each outstanding Security is required, such amendment or modification shall
not be effective until each holder of the Xerox Funding Debentures shall have
consented to such amendment or modification and (ii) if

<PAGE>

the Xerox Funding Debentures are held solely by the Property Trustee, such
amendment or modification shall not be effective until the holders of a majority
in liquidation amount of Trust Securities shall have consented to such amendment
or modification; provided, further, that if the consent of the holder of each
outstanding Security is required, such amendment or modification shall not be
effective until each holder of the Trust Securities shall have consented to such
amendment or modification. The Indenture also contains provisions permitting the
holders of a majority in aggregate principal amount of the Securities at the
time outstanding, on behalf of all of the holders of the Securities, to waive
any past default in the performance of any of the covenants contained in the
Indenture, or established pursuant to the Indenture, and its consequences,
except a default in the payment of the principal of or premium, if any,
Redemption Price, Purchase Price, Change in Control Purchase Price or interest
on any of the Securities or a default in respect of any covenant or provision
under which the Indenture cannot be modified or amended without the consent of
each holder of Securities then outstanding. Any such consent or waiver by the
holder of this Security (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future holders and owners
of this Security and of any Security issued in exchange herefor or in place
hereof (whether by registration of transfer or otherwise), irrespective of
whether or not any notation of such consent or waiver is made upon this
Security.

          No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Security at the time and place and at the rate and in the money
herein prescribed.

          The Company has agreed that it will not (i) declare or pay any
dividend on, or make any distribution relating to, or redeem, purchase, acquire,
or make a liquidation payment relating to, any of the Company's Capital Stock
(which includes common and preferred stock) or (ii) make any payment of
principal, interest or premium, if any, on or repay or repurchase or redeem any
debt securities of the Company (including any Other Debentures) that rank pari
passu with or junior in right of payment to the Securities or (iii) make any
guarantee payments with respect to any guarantee by the Company of any
securities of any Subsidiary of the Company (including any Other Guarantees) if
such guarantee ranks pari passu or junior in right of payment to the Securities
(other than (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock; (b) any declaration
of a dividend in connection with the implementation of a stockholder rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto; (c) payments or
deliveries of any consideration under the Guarantees; (d) the purchase of
fractional interests in shares of the Company's Capital Stock resulting from a
reclassification of such Capital Stock, (e) as a result of an exchange or
conversion of any class or series of the Company's Capital Stock for another
class or series of the Company's Capital Stock; (f) the purchase of fractional
interests in shares of the Company's Capital Stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged; (g) any declaration or payment of a dividend on the Company's Series
B Convertible Preferred Stock as required under the Company's Restated
Certificate of Incorporation, in connection with the operation of the Company's
Employee Stock Ownership Plan ("Plan") and (h) the conversion, repurchase or

<PAGE>

redemption of or other acquisitions of shares of the Company's Capital Stock
(including Series B Preferred Stock) in connection with any employee benefit
plans or employee stock option plans or any other contractual obligation of the
Company, other than a contractual obligation ranking pari passu with or junior
to the Securities, if at such time (1) there shall have occurred and be
continuing an event of default under the Declaration, (2) there shall have
occurred and be continuing an Event of Default under the Indenture or the Xerox
Funding Indenture, (3) there shall have occurred and be continuing a payment
default under the Declaration, the Indenture or the Xerox Funding Indenture, or
(4) the Company shall be in default with respect to its payment of any
obligations under the Guarantees.

          The Securities are issuable only in registered form without coupons in
denominations of $50.00 and any integral multiple thereof. As provided in the
Indenture and subject to the transfer restrictions limitations as may be
contained herein and therein from time to time, this Security is transferable by
the holder hereof on the Security Register of the Company, upon surrender of
this Security for registration of transfer at the office or agency of the
Company in the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Security
registrar duly executed by the holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of authorized denominations
and for the same aggregate principal amount and series will be issued to the
designated transferee or transferees. No service charge will be made for any
such transfer, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in relation thereto.

          Prior to due presentment for registration of transfer of this
Security, the Company, the Trustee, any authenticating agent, any paying agent,
any transfer agent and the registrar may deem and treat the holder hereof as the
absolute owner hereof (whether or not this Security shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than the Security Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and (subject to the
Indenture) interest due hereon and for all other purposes, and neither the
Company nor the Trustee nor any authenticating agent nor any paying agent nor
any transfer agent nor any registrar shall be affected by any notice to the
contrary.

          No recourse shall be had for the payment of the principal of or
premium, if any, or interest on this Security, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor Person, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.

          All terms used in this Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

          THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PROVISIONS THEREOF.