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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                                   (Mark One)

(X)   Annual Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the fiscal year ended: December 31, 2001

( )   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the transition period from:     to


1-4471 (Commission File Number)
-------------------------------

                                XEROX CORPORATION

             (Exact name of registrant as specified in its charter)

            New York                                   16-0468020
      (State of incorporation)             (I.R.S. Employer Identification No.)


                      P.O. Box 1600, Stamford, Connecticut
                    (Address of principal executive offices)

                                      06904
                                   (Zip Code)

       Registrant's telephone number, including area code: (203) 968-3000

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

                                                     Name of Each Exchange on
      Title of each Class                                Which Registered
      -------------------                            ------------------------

Common Stock, $1 par value                           New York Stock Exchange
                                                     Chicago Stock Exchange

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                      Yes:  (X)       No: ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )


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The aggregate market value of the voting stock of the registrant held by
non-affiliates as of May 31, 2002 was:  $6,525,261,445

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:

        Class                                Outstanding at May 31, 2002
        -----                                ---------------------------

        Common Stock, $1 par value..........     727,048,629 Shares

                       Documents Incorporated By Reference

Portions of the following documents are incorporated herein by reference:

                                                            Part of 10-K in
Document                                                   Which Incorporated
--------                                                   -------------------

Xerox Corporation 2001 Annual Report to Shareholders           I & II


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                           Forward Looking Statements

From time to time we and our representatives may provide information, whether
orally or in writing, including certain statements in this Annual Report on Form
10-K, which are forward-looking. These forward-looking statements and other
information are based on our beliefs as well as assumptions made by us based on
information currently available.

The words "anticipate," "believe," "estimate," "expect," "intend," "will," and
similar expressions, as they relate to us, are intended to identify
forward-looking statements. Such statements reflect our current views with
respect to future events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated or
expected. We do not intend to update these forward-looking statements.

We are making investors aware that such forward-looking statements, because they
relate to future events, are by their very nature subject to many important
factors which could cause actual results to differ materially from those
contained in the "forward-looking" statements. Such factors include, but are not
limited to, the following:

        Competition--We operate in an environment of significant competition,
        driven by rapid technological advances and the demands of customers to
        become more efficient. There are a number of companies worldwide with
        significant financial resources which compete with us to provide
        document processing products and services in each of the markets we
        serve, some of whom operate on a global basis. Our success in future
        performance is largely dependent upon our ability to compete
        successfully in the markets we currently serve and to expand into
        additional market segments.

        Transition to Digital--Presently, black and white light-lens copiers
        represent between 15%-20% of our revenues. This segment of the market is
        mature with anticipated declining industry revenues as the market
        transitions to digital technology. Some of our new digital products
        replace or compete with our current light-lens equipment. Changes in the
        mix of products from light-lens to digital, and the pace of that change
        as well as competitive developments could cause actual results to vary
        from those expected.

        Expansion of Color--Color printing and copying represents an important
        and growing segment of the market. Printing from computers has both
        facilitated and increased the demand for color. A significant part of
        our strategy and ultimate success in this changing market is our ability
        to develop and market technology that produces color prints and copies
        quickly, easily and at reduced cost. Our continuing success in this
        strategy depends on our ability to make the investments and commit the
        necessary resources in this highly competitive market as well as the
        pace of color adoption by our prospective customers.

        Pricing--Our success is dependent upon our ability to obtain adequate
        pricing for our products and services which provide a reasonable return
        to our shareholders. Depending on competitive market factors, future
        prices we obtain for our products and services may vary from historical
        levels. In addition, pricing actions to offset the effect of currency
        devaluations may not prove sufficient to offset further devaluations or
        may not hold in the face of customer resistance and/or competition.

        Customer Financing Activities--On average, we have historically financed
        approximately 80 percent of our equipment sales. To fund these
        arrangements, we have accessed the credit markets and used cash
        generated from operations. The long-term viability and profitability of
        our customer financing activities is dependent on our ability to borrow
        and the cost of borrowing in these markets. This ability and cost, in
        turn, is dependent on our credit ratings. We are currently funding our
        customer financing activity from cash generated from operations as well
        as from cash on hand, unregistered capital markets offerings and
        securitizations. There is no assurance that we will be able to continue
        to fund our customer financing activity at present levels. We continue
        to negotiate and implement third-party vendor financing programs and
        possible monetizations of portions of our existing finance receivable
        portfolios, and we continue to actively pursue alternative forms of
        financing including securitizations and secured borrowings. These
        initiatives are expected to significantly improve our liquidity going
        forward. Our ability to continue to offer customer financing and be
        successful in the placement of equipment with customers is largely
        dependent upon successful implementation of our third party financing
        initiatives.

        Productivity--Our ability to sustain and improve profit margins is
        largely dependent on our ability to maintain an efficient,
        cost-effective operation. Productivity improvements through process
        re-engineering,

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        design efficiency and supplier and manufacturing cost improvements are
        required to offset labor cost inflation, potential materials cost
        increases and competitive price pressures.

        International Operations--We derive approximately 40 percent of our
        revenue from operations outside the United States. In addition, we
        manufacture or acquire many of our products and/or their components
        outside the United States. Our future revenue, cost and results from
        operations could be affected by a number of factors, including changes
        in foreign currency exchange rates, changes in economic conditions from
        country to country, changes in a country's political conditions, trade
        protection measures, licensing requirements and local tax issues. Our
        ability to enter into new foreign exchange contracts to manage foreign
        exchange risk is currently severely limited given our below investment
        grade credit ratings, and we anticipate increased volatility in our
        results of operations due to changes in foreign exchange rates.

        New Products/Research and Development--The process of developing new
        high technology products and solutions is inherently complex and
        uncertain. It requires accurate anticipation of customers' changing
        needs and emerging technological trends. We must then make long-term
        investments and commit significant resources before knowing whether
        these investments will eventually result in products that achieve
        customer acceptance and generate the revenues required to provide
        anticipated returns from these investments.

        Revenue Trends--Our ability to return to and maintain a consistent trend
        of revenue growth over the intermediate to longer term is largely
        dependent upon expansion of our worldwide equipment placements as well
        as sales of services and supplies occurring after the initial equipment
        placement (post sale revenue) in the key growth markets of color and
        multifunction devices. Revenue growth will be further enhanced through
        our consulting services in the areas of document content and knowledge
        management. The ability to achieve growth in our equipment placements is
        subject to the successful implementation of our initiatives to provide
        advanced systems, industry-oriented global solutions and services for
        major customers, improved direct sales productivity and expansion of our
        indirect distribution channels in the face of global competition and
        pricing pressures. The ability to grow our customers' usage of our
        products may continue to be adversely impacted by the movement towards
        distributed printing and electronic substitutes. Our inability to return
        to and maintain a consistent trend of revenue growth could have a
        material adverse affect on the trend of our operating results.

        Liquidity--The adequacy of our continuing liquidity depends on our
        ability to successfully generate positive cash flow from an appropriate
        combination of operating improvements, financing from third parties,
        access to capital markets and additional asset sales including sales or
        securitizations of our receivables portfolios. We believe our liquidity
        is sufficient to meet current and anticipated needs, including all
        scheduled debt maturities; however, our ability to maintain positive
        liquidity is highly dependent on achieving our expected operating
        results, including capturing the benefits from restructuring activities,
        and completing several vendor financing and other initiatives that are
        discussed below. There is no assurance that these initiatives will be
        successful. Failure to successfully complete these initiatives could
        have a material adverse effect on our liquidity and our operations, and
        could require us to consider further measures, including deferring
        planned capital expenditures, modifying current restructuring plans,
        reducing discretionary spending and selling additional assets.

        We have successfully completed the renegotiation of our $7 billion
        Revolving Credit Agreement (the "Old Revolver"). Of the original $7
        billion in loans outstanding under the Old Revolver, $2.8 billion has
        been repaid and the remaining $4.2 billion has been refinanced under the
        terms of a new Amended and Restated Credit Agreement (the "New Credit
        Facility"), which is more fully discussed elsewhere in this Annual
        Report on Form 10-K. The New Credit Facility requires certain principal
        amortizations as well as prepayments in the case of certain events. A
        full discussion of all of these terms and the final maturity dates of
        the various loans is included in the Capital Resources and Liquidity
        section of this Annual Report on Form 10K. The New Credit Facility
        contains affirmative and negative covenants including limitations on
        issuance of debt and preferred stock; certain fundamental changes;
        investments and acquisitions; mergers; certain transactions with
        affiliates; creation of liens; asset transfers; hedging transactions;
        payment of dividends; inter-company loans and certain restricted
        payments; and a requirement to transfer excess foreign cash, as defined,
        and excess cash of Xerox Credit Corporation to Xerox Corporation in
        certain circumstances. It also contains additional financial covenants,
        including minimum EBITDA, maximum leverage (total adjusted debt divided
        by EBIDTA, as defined) and, maximum capital expenditures limits.

        Any failure to be in compliance with any material provision of the New
        Credit Facility could have a material adverse effect on our liquidity
        and operations.

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                                     PART I


Item 1.   Business

Overview

Xerox Corporation (Xerox or the Company) is The Document Company and a leader in
the global document market, selling equipment and providing document solutions
including hardware, services and software that enhance our customers' work
processes and business results. References herein to "we," "us" or "our" refer
to Xerox and consolidated subsidiaries unless the context specifically states or
implies otherwise. Xerox and its affiliates operate in over 130 countries
worldwide. We distribute our products in the Western Hemisphere through
divisions and wholly-owned subsidiaries. In Europe, Africa, the Middle East,
India and parts of Asia, we distribute through Xerox Limited and related
companies (collectively Xerox Limited). Xerox had approximately 78,900 employees
at December 31, 2001.

Our activities encompass developing, manufacturing, marketing, servicing and
financing a complete range of document processing products, solutions and
services designed to make organizations around the world more productive. We
believe that the document is a tool for productivity, and that documents--both
electronic and paper--are at the heart of most business processes. Documents are
the means for storing, managing and sharing business knowledge. Document
technology is key to improving productivity through information sharing and
knowledge management and we believe no one knows the document--paper to
electronic and electronic to paper-- better than we do.

Fuji Xerox Co., Limited is an unconsolidated entity in which Xerox Limited
currently owns 25 percent and which Fuji Photo Film Co., Ltd. (FujiFilm) owns 75
percent. These ownership interests reflect the March 2001 sale of half our
original ownership interest in Fuji Xerox to FujiFilm for $1,283 million in
cash. Fuji Xerox develops, manufactures and distributes document processing
products in Japan, China, Hong Kong and other areas of the Pacific Rim,
Australia and New Zealand. Approximately 80 percent of these sales are in Japan,
13 percent in the rest of the region and approximately 7 percent are sales
directly to us. We retain significant rights as a minority shareholder. All
product and technology agreements between us continue, ensuring that the two
companies retain uninterrupted access to each other's portfolio of patents,
technology and products.

Core Strategy

Our goal is to develop document technologies, systems, solutions and services
that improve our customers' work processes and business results. The success of
our strategy rests on our ability to understand our customers' needs, provide
document management services and outsourcing capabilities and deliver
synergistic value propositions among our core businesses.

In our Production and Office businesses we provide advanced document systems
that seamlessly link into enterprise electronic workflow, enhancing business
performance. We created the production print-on-demand industry in 1990 with our
DocuTech Production Publisher. As our customers increasingly utilize color
documents, we continue to lead the transition to color which began with the
DocuColor 40 in 1996, expanded in 2000 with our DocuColor 2000 series of digital
color presses, and continues with initial customer engagement and the ongoing
development of the DocuColor iGen3, for which we have in excess of 100
reservation orders and expect to launch in the second half of 2002. In the
Office, we were the first to introduce digital copiers and networked
multi-function devices for the office with the 1997 launch of our Document
Centre family. With this product family, we have established a leadership
position in the connected multifunction market. We expect to launch the next
generation Document Centre family of products in June 2002 which is expected to
deliver improved functionality and quality at reduced cost. Our January 2000
acquisition of the Color Printing and Imaging Division of Tektronix, Inc.
(CPID), with its line of Phaser solid ink and laser color printers, has moved us
to a strong number two market share position in the fast-growing networked
office color printing market. This acquisition has also increased our reseller
and dealer distribution network and provided us with scalable solid ink
technology.

We further add value to our systems by developing specific solutions to improve
our customers' business processes. We work with our customers to build
tailor-made solutions that harness our technology to improve their critical
business processes. In the Production segment, these solutions include printing
books, pamphlets, parts catalogues and other mission-critical documents
"just-in-time." We customize document production to enable "one-to-one"
marketing by providing variable print solutions that enable the printing of
personalized documents in both color and black and white. In the Office, we
offer innovative services such as office document assessments (ODA), which

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help customers identify cost savings and workflow improvements through more
efficient document processes and improved equipment utilization. We have
recently extended document access for mobile workers through partnerships with
Research in Motion (RIM) and Electronics For Imaging (EFI) to deliver solutions
that combine Xerox mDoc 3.0 software with BlackBerry TM wireless e-mail and the
Printme solution. These solutions allow workers to send documents through mobile
devices directly to public or networked office printers, without drivers, cables
or complex setups.

In both our Production and Office businesses we offer services consisting of
consulting, implementation and ongoing management services that build on our
success in document outsourcing by applying advances in imaging technology,
document, content and knowledge management to improve enterprise work practices.
Examples of these offerings include the re-design of document intensive work
processes and the management of in-house document technology in our hosted
sites. In 2001, we opened our online "interactive digital repository" and
imaging facility, which is capable of converting and managing massive amounts of
business critical information and providing online access to data previously
available only in paper and various electronic formats.

Building on our core businesses, our strategy has three overlapping phases. The
first phase involves our Turnaround Program, which is intended to help ensure
liquidity and stabilize the business. The second phase is to return to
sustainable profitability and the third phase is to leverage growth
opportunities predominantly in our core businesses.

Turnaround

During 2000, the significant business challenges that we began to experience in
the second half of 1999 continued to adversely affect our financial performance.
To counter these challenges, we implemented actions beginning in mid-2000 to
stabilize our sales force and minimize further disruption to our operations. In
October 2000, we announced a Turnaround Program designed to help ensure adequate
liquidity, re-establish profitability and build a solid foundation for future
growth. The Turnaround Program encompassed four major components: (i) asset
sales of $2-$4 billion; (ii) accelerated cost reductions designed to reduce
costs by at least $1 billion annually; (iii) the transition of equipment
financing to third party vendors and (iv) a focus on our core business of
providing document processing systems, solutions and services to our customers.
By the end of 2001, we had made significant progress executing this program and
achieving these goals.


By year-end 2001, we had completed asset sales of $2.3 billion, comprised of the
March 2001 sale of half our ownership interest in Fuji Xerox Co., Ltd. (Fuji
Xerox) to Fuji Photo Film Co., Ltd. (FujiFilm) for $1,283 million, the December
2000 sale of our China Operations to Fuji Xerox for $550 million, the April 2001
sale of our Nordic leasing businesses to Resonia AB for approximately $370
million, and in the fourth quarter 2001 the first in a series of asset sales to
transfer our office product manufacturing operations to Flextronics for
approximately $118 million. We believe the asset sale component of our
Turnaround Program has been largely completed.


We also intensified cost reductions to improve our competitiveness. During 2001,
we implemented work force resizing and cost reduction actions that we believe
will result in approximately $1.1 billion in annualized savings. These savings
are expected to result from reducing layers of management, consolidating
operations where prudent, reducing administrative and general spending,
capturing service productivity savings from our digital products and tightly
managing discretionary spending. We are reducing costs in our Office segment by
moving to lower cost indirect sales and service channels and by outsourcing our
office products manufacturing. Our worldwide employment declined by
approximately 13,600 to 78,900 at December 31, 2001. In our ongoing efforts to
reduce our cost base, we will continue to implement restructuring actions and
incur substantial restructuring charges throughout 2002; although less than the
amounts recorded in 2001.

Our transition to third party financing will significantly improve our liquidity
while ensuring equipment financing is still provided to our customers. In 2001,
we entered into framework agreements with General Electric Capital, Corporation
(GE Capital) for them to manage our customer administrative functions and become
the primary equipment financing provider for Xerox customers in the U.S.,
Canada, France and Germany. On May 1, 2002, Xerox Capital Services, LLC (XCS),
our U.S. venture with GE Capital Vendor Financial Services, became operational.
XCS manages our customer administration and leasing activities in the U.S.,
including various financing programs, credit approval, order processing, billing
and collections. We are currently in the process of completing the negotiation
of definitive agreements with GE Capital for the implementation of the Canadian
joint venture which is expected in the second half of 2002. These agreements are
subject to the completion of due diligence on GE's part as well as the
fulfillment of various regulatory requirements.

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Ongoing funding for new leases by GE Capital and its affiliates in both the U.S.
and Canada is expected to be in place later this year upon development and
completion of systems and process modifications. In Europe, a number of
initiatives are under way and have been implemented. In Germany, we received a
$77 million loan in May 2002 secured by certain finance receivables, as we
continue to complete our vendor financing transition this year. In France we are
completing due diligence, fulfilling regulatory requirements, consulting with
local works councils and expect to complete the agreement with GE Capital in the
third quarter 2002. We have fully transitioned our leasing businesses in the
Nordic countries, the Netherlands and Italy. Our Nordic leasing business was
sold to Resonia AB in April 2001. In the first quarter 2002, we formed a joint
venture with De Lage Landen International BV (DLL) in which they provide funding
and manage equipment financing for our customers in the Netherlands. In May
2002, we sold our equipment financing operations in Italy for approximately $207
million in cash plus the assumption of $20 million of debt. We have made
significant progress in our Developing Markets Operations (DMO), beginning in
April 2002, with Banco Itau S.A. in Brazil and collectively with the Capita
Corporation de Mexico S.A. de C.V., Organizacion Auxiliar Del Credito and
Arrendadora Capita Corporation, S.A. de C.V. in Mexico becoming the primary
equipment financing providers in their respective countries. By the end of 2002,
we expect that approximately two-thirds of all new financed lease originations
will be funded by third parties, through a combination of structures including
direct financing, finance receivable securitizations and ongoing secured
borrowings.

In addition to the vendor financing agreements, in 2001 and through the first
half of 2002, we borrowed approximately $3.1 billion in the U.S., Canada and
U.K. from GE Capital through the securitization of certain existing lease
contracts. We and GE Capital are parties to a loan agreement dated November 2001
which provides for a series of secured loans in the U.S. up to an aggregate of
$2.6 billion. Through June 2002, approximately $1.9 billion of loans have been
funded under this GE Capital agreement including a $499 million loan which
closed on May 12.

In line with our strategy to focus on our core business, we announced the
disengagement from our worldwide SOHO business in June 2001. By the end of the
year, we had sold the remaining equipment inventory and in the fourth quarter
achieved profitability in this business through the sale of supplies to our
current base of SOHO customers. We expect this profitable supplies revenue
stream to decline over time as the equipment is eventually replaced.

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Return to Sustainable Profitability

In 2002, we expect to return to sustainable profitability, reflecting continued
cost based improvements and the initial benefits of new product platform
launches in the second half of the year. During 2002, we expect to further
improve our cost base by leveraging more cost-effective distribution channels
which include the expansion of our low cost, higher efficiency teleweb channel
and increased use of remote diagnostics to service equipment. As we enter 2003,
we expect to realize additional benefits both from our office products
manufacturing agreement with Flextronics and our U.S. venture with GE Capital.
In addition we expect improved R&D efficiencies from our relationship with Fuji
Xerox. We have product and technology agreements with Fuji Xerox which, ensures
that the two companies retain uninterrupted access to each other's portfolio of
patents, technology and products. DMO restructuring actions impacting
profitability are expected to take place in 2002 and as such, overall
profitability in the segment is not expected until 2003.

Leverage Future Growth Opportunities

We continue to be a leader in providing world-class document technology to our
customers. We are also taking significant steps to satisfy our customers'
increasing demand for more advanced systems and services with solutions such as
internet driven distributed digital printing and custom publishing, and on
demand printing and publishing. We believe our products are geared to match the
needs of the rapidly growing document related markets. The primary drivers of
this growth are increased competitiveness of our offerings in the core
businesses coupled with an aggressive leadership position in key high growth
market segments. Key among these growth segments are: 1) color in all areas from
networked printers and multifunction devices for the office to our

production color product line that we expect will increasingly transition pages
from traditional offset devices; 2) office multifunction devices where we are
the leader in connected devices which result in higher page volumes, and 3)
value added services which enable us to build on our existing customer
relationships in outsourcing to capture market growth opportunities. Our
technology and experience with documents and process management provide us with
a solid foundation to offer document, content and knowledge management services.

Business Segments

Our financial results by business segment for 2001, 2000 and 1999, presented in
Note 10 to the consolidated financial statements of the Company's 2001 Annual
Report to Shareholders, are hereby incorporated by reference.

Market Overview

The document industry is undergoing a fundamental transformation, with the
continued transition from analog and offset to digital technology, the
management of publishing and printing jobs over the Internet, the use of
variable data to create customized documents, an increasing reliance on
outsourcing, the transition to color and the increase in mobile workers
utilizing hand-held devices. Documents are increasingly created and stored in
digital electronic form while the Internet is increasing the amount of
information that can be accessed in the form of electronic documents. We believe
that all of these trends play to the strengths of our products, technology and
services, and that such trends represent opportunities for future growth.

We estimate the global document related markets that we serve, excluding Japan
and the Pacific Rim countries served by Fuji Xerox, were approximately $103
billion in 2000 and will grow to about $134 billion in 2004 reflecting a
compound annual growth rate of approximately 7 percent.

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Revenues for our major segments for the three years ended December 31, 2001,
after giving affect to the restatement discussed elsewhere in this Annual Report
on Form 10-K, were as follows:

Year ended December 31 ($ in millions)        2001       2000*     1999*
                                             -------    -------   -------
Production                                   $ 5,899    $ 6,332   $ 6,933
Office                                         6,926      7,060     6,853
Developing Markets                             2,027      2,619     2,450
SOHO                                             407        599       575
Other                                          1,749      2,141     2,184
                                             -------    -------   -------
Total                                        $17,008    $18,751   $18,995
                                             =======    =======   =======

Memo: Color                                   $2,762     $2,612    $1,619
                                              ======     ======    ======
* As Restated

Production Market

Through our direct sales and service organizations around the world, we provide
systems and services to Fortune 1,000, graphic arts, government, education and
public sector customers. Our products in this market include monochrome
production publishing (DocuTech family), production printing (DocuPrint family),
production light-lens devices at speeds over 90 pages per minute and color
publishing and printing devices at speeds over 30 pages per minute. Our products
are also focused on the graphic arts market.

We estimate that production market was approximately $36 billion in 2000 and is
expected to grow to about $41 billion in 2004, reflecting a compound annual
growth rate of 3 percent. Within this segment, we are the strong market leader
in the monochrome production market, which is growing at about one percent per
year. The total color market is expected to grow at a 9 percent compound annual
rate; digital color, which represents our offerings and where we are the market
leader, is expected to grow much faster at about 30 percent per year reflecting
the transition from offset to digital offerings. Our strategy is to drive the
"New Business of Printing" by introducing innovative production systems and
solutions to expand our leadership position and focus on the higher growth
digital color opportunities. The "New Business of Printing" is characterized by
fast turnaround times, precise quantities, personalization and customization and
is built on the solid foundation of the digital production print on demand
market, which we created in 1990 with the introduction of our first DocuTech
Production Publisher. We provide content creation and management, production and
fulfillment solutions and services to improve our customers' work processes and
business results. As examples, we believe utilizing our digital technology to
personalize marketing communications can improve response rates from 2 to 30
percent and printing on demand can eliminate inventory and warehousing costs. We
believe our new DocuColor iGen3, the next generation of color technology, which
will begin installations in the second half of 2002, will expand the digital
color print on demand market due to its speed, image quality, personalization
and cost advantages.

To capture the growth opportunities in the production market, we have identified
color and services as two corporate strategic growth platforms. During 2001 we
stabilized our share as the market leader in the monochrome production market,
even gaining share in the second half of the year in the high end production
segment with continued success from our advanced family of DocuTech systems and
solutions. We conceded some share in the low end "light" production segment
(91-120 pages per minute) as competitors introduced digital offerings. While we
maintained our leadership position in color, there was some market share erosion
in the second half 2001 following the introduction of a competitive product.

Black and White Production Publishing (DocuTech)

Since we launched the era of production publishing with the introduction of our
DocuTech Production Publishing family in 1990, we have installed more than
30,000 DocuTech systems worldwide.

Digital production publishing technology continues to replace traditional
short-run offset printing as customers seek

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improved productivity and cost savings, faster turnaround of document
preparation, and the ability to print and customize documents "on demand." We
offer the widest range of hardware and solutions available in the marketplace,
from dial-up lines through the Internet to state-of-the-art networks, and we are
committed to expanding these print on demand solutions as new technology and
applications are developed.

The DocuTech family of digital production publishers scans hard copy and
converts it into digital documents, or accepts digital documents directly from
networked personal computers or workstations. DocuTech prints high-resolution
(600 dots per inch) pages at speeds ranging from 65 to 180 impressions per
minute and is supported by a full line of accessory products and options. We are
the only manufacturer in the market who offers a complete family of production
publishing systems from 65 to 180 impressions per minute.

In 2001, we introduced a new streamlined version of DigiPath Production Software
to offer an easy, low-cost way for print providers to enter the market. DigiPath
is a major productivity tool, which allows a printer's customers to use the
Internet to streamline print job submission combined with industry leading scan
and document preparation technology for subsequent archiving, preparation,
proofing, and reprinting. In 2002, we launched the new common "DocuSP"
controller technology which, for the first time, provides a consistent way to
prepare and process print jobs in color and black-and-white from DocuTech to
DocuColor high-end systems.

Black and White Production Printing (DocuPrint)

We pioneered and continue to be a worldwide leader in computer laser printing,
which combines computer, laser, communications and xerographic technologies. We
market a broad line of robust printers with speeds from 75 pages per minute up
to the industry's fastest cut-sheet printer at 180 pages per minute, and
continuous-feed production printers at speeds up to 1,000 images per minute.
Many of these printers have simultaneous interfaces that can be connected to
multiple host computers as well as local area networks. Our goal is to integrate
office, production and data-center computer printing into a single, seamless,
user-friendly family of production class printers.

In 2001, we extended the functionality of our DocuPrint products with the EPS
family. EPS brings a common controller to both the production publishing and the
transaction printing worlds. This enables our customers to use the benchmark
workflows we have created for each of these markets on one device, significantly
reducing the costs for new installations as well as protecting previously
purchased Xerox investments.

Also in 2001, we expanded our continuous feed offerings with new continuous feed
high-end printing systems and additional solutions and services. The
introduction of the DocuPrint 350 CF, 500 CF, 700 CFD, and 1000 CFD products
will provide additional opportunities for us in the continuous feed printing
market and protect our transaction printing family of products. Breakthrough
technology in our highlight color printers including the DocuPrint 4850 and
DocuPrint 92C allows printing in an industry exclusive single pass of
black-and-white plus one customer-changeable color (as well as shades, tints,
textures and mixtures of each) at production speeds up to 90 pages per minute.

Production Color Printing

Digital color is one of the fastest growing segments of the Production market
with an expected estimated compound annual growth rate of about 30 percent. In
June 2000, we launched the DocuColor 2000 Series developed to provide
high-volume on-demand printing, personalized printing, printing and publishing
for e-commerce and Internet delivery. Both the DocuColor 2045, which prints at
45 pages per minute, and the DocuColor 2060, which prints at 60 pages per
minute, establish an industry standard by producing near-offset quality,
full-color prints at an unprecedented operating cost of less than 10 cents per
page, depending on monthly volumes. More than 5,000 DocuColor 2000 series units
have been installed since launch, which has exceeded our expectations, although
placements beginning in the second half of 2001 reflected the adverse impact of
the weaker economic environment and introduction of competitive devices.

In September 2001 at Print 01, a major industry trade show, we demonstrated the
DocuColor iGen3, an advanced next-generation digital printing press designed to
expand the digital color print on demand market. The DocuColor iGen3 consists of
modular components, which work together as a sophisticated print shop. Utilizing
patented imaging technology which produces photographic quality output
indistinguishable from offset, this breakthrough technology will produce over
100 pages per minute at an operating cost of about 5 cents per page. Customer
acceptance testing began at the end of 2001 and we began reservation orders in
April 2002. By the end of May we
                                     10


<PAGE>


had received in excess of 100 reservation orders for the DocuColor iGen3, which
has a base list price of over $500,000. We expect to install a modest number of
units beginning in the second half of 2002 with 300-400 installs expected in
2003.

Production Light-Lens Copying

Revenues from black and white light-lens production copiers (over 90 pages per
minute) continued to decline as expected, due to increasing price pressures and
as customers transitioned to new digital products.

Office Market

We estimate that the office market was approximately $53 billion in 2000 and is
expected to remain essentially flat through 2004. The Office market includes
global, national and mid-size commercial customers as well as government,
education and other public sector customers. Office systems and services
encompass monochrome devices at speeds up to 90 pages per minute, including our
family of Document Centre digital multi-function products, color laser, solid
ink and monochrome laser desktop printers, digital copiers, light-lens copiers
and facsimile products. Page volume in the office market is expected to decline
slightly as high growth in color pages (from a very small base) is offset by
modest black and white page volume declines. We are targeting the fast-growing
color segment of the office market driving the market to color printing and
copying by making color as easy, fast and affordable as black and white. In
addition, we are driving the migration from single function machines to
multi-function devices that copy, print, scan and fax by ensuring that
multi-function is more cost-effective, while still continuing to offer single
function devices as well.

Our strategy in the office is to be the primary choice for workgroups, providing
the best connected and stand-alone solutions and making color as easy to use as
black and white. We have established a leadership position in color and
connected multi-function markets, which are the highest growth segments in the
office market, with each growing at a compound rate of approximately 15 percent.
To extend document access for mobile workers, we have partnered with RIM and EFI
to deliver solutions that combine Xerox mDoc 3.0 software with BlackBerryTM
wireless e-mail and the Printme solution. These solutions include the ability to
personalize e-mail attachments such as forms and contracts and also allow users
to e-mail, fax or print these documents on the go. The broad portfolio of
service offerings also includes the Office Document Assessment (ODA), asset
management and support. An ODA is used to analyze a business' workflow and
document needs and then identify the most efficient, productive mix of office
equipment and software for that business, therefore helping to reduce the
customer's document related costs. To improve our cost structure, as part of our
Turnaround Program, we have outsourced office product manufacturing to
Flextronics and are moving more of our sales and service from direct to lower
cost indirect channels, thus improving efficiency and reducing costs. We
distribute our office products through a variety of direct sales and indirect
channels of distribution which include sales agents and concessionaires,
resellers, internet sales and telebusiness offerings.

Black and White Digital Multifunction Products

Our Document Centre family of modular black and white digital multi-function
products at speeds ranging from 20 to 90 pages per minute offer copy, print,
scan and fax capabilities in one device. This product family was first
introduced in 1997 and has been continually upgraded including two new models in
the Document Centre 400 series in 2001. We believe the network and fax options
have compelling economics versus the alternative of purchasing comparable
printers and faxes since the print engine, output mechanics and most of the
software required are part of the base digital copier. Independent laboratory
studies have indicated that our product line far exceeds the competition in
effective network print speed, regardless of the advertised speed. In addition,
all of our Document Centre products have IP (Internet Protocol) addresses, which
permit them to be accessed via the Internet from anywhere in the world. The
success of the Document Centre 480 (75 pages per minute) and 490 (85 pages per
minute) was evidenced by significant market share gains in the 70 to 90 pages
per minute segment in 2001. The Document Centre 490, launched in North America
in September 2001, also began to effectively counteract the impact of
competitive product entries in the light production market discussed above. The
Document Centre 490 was launched in Europe in February 2002. We expect to launch
the next generation Document Centre family of products in June 2002 which will
deliver improved functionality and quality at reduced cost.

The proportion of Document Centre devices installed with network connectivity
remained at over 50 percent during
                                       11


<PAGE>

2001. We believe that further enabling network connectivity and training our
customers to optimize the power of these products could ultimately lead to as
much as 25 percent incremental page growth on our equipment, which would likely
have beneficial impacts on our sales of services and supplies.

A second family of products, the WorkCentre Pro is aimed at lower volume cost
conscious customers. The line is anchored with the successful WorkCentre Pro 412
product introduced in September 2001.

Color Copying and Printing

The use of color originals in the office is increasing and pages are expected to
grow by about 20 percent through 2004. Color is expected to represent about 4
percent of total office pages and approximately 15 percent of office revenue by
2004.

Our strong number two market share position in the networked office-color
printer market reflects the January 2000 acquisition of CPID. This division
manufactures and markets Phaser workgroup color printers, that use either color
laser or solid ink printing technology, and a complete line of ink and related
supplies. In 2001, we introduced the Phaser 860 solid ink color printer and the
Phaser 2135 and 7700 laser color printers, all of which use single pass color
technology and are the fastest in their class. In May 2002 we introduced the
Phaser 6200 color laser and 8200 solid ink printers, which are designed to fuel
the migration to color in the office by offering cost and print quality
advantages that make it practical to replace black-and-white printers. The
Phaser products have continued to win awards including the Excellence in Imaging
Award at the 2002 Digital Focus Media event, which is among the industry's most
prestigious awards in the field of digital imaging. The CPID acquisition also
increased our reseller and dealer distribution network and provided us with
scalable solid ink technology, which is up to four times less expensive to
manufacture.

In 1999 we introduced the Document Color Centre Series 50, the first
color-enabled Document Centre that produces 12.5 full-color pages and 50
black-and-white pages per minute and includes a Xerox network controller built
into every machine. Sales of this product have been successful as the Document
Centre Color Series 50 combines the advantages of a relatively low equipment
price and the production of color pages at operating costs significantly lower
than other color copier/printers in this class. In addition, it is unlike other
color products in that the operating cost of producing black and white prints is
similar to that of monochrome digital products.

We expect to launch a new office color product platform in the second half of
2002.

Light-lens Copying

Light-lens copier revenues continue to decline reflecting customer transition to
new digital black-and-white products and increasing price pressures. We believe
that the trend over the past few years will continue and that light-lens product
revenues will represent a declining share of total revenues.

Black and White Laser Printers

Our DocuPrint family of monochrome network laser printers was originally
launched in 1997 and currently includes models at speeds ranging from 8 to 45
pages per minute. These laser printers complete our product line and are faster,
more advanced and less expensive than competitive models, offering "copier-like"
features such as multiple-set printing, stapling and collating. The CPID
acquisition accelerated our objective of increasing the number of resellers who
also market our black and white laser printers.

Developing Markets Organization (DMO)

DMO includes operations in Latin America, the Middle East, India, Eurasia,
Russia, and Africa. Over 120 countries are included in DMO, with Brazil
representing almost half the DMO revenue. The DMO operations are managed
separately as a segment due to the political and economic volatility and unique
nature of their markets. In 2002, we expect to continue to significantly
restructure our Latin American operations and expect to substantially reduce
losses. We expect DMO to return to profitability in 2003.

                                       12


<PAGE>

Small Office/Home Office SOHO Market

In line with our strategy to focus on our core business, we announced the
disengagement from our worldwide SOHO business in June 2001. By the end of the
year, we had sold the remaining equipment inventory and achieved profitability
in this business through the sale of supplies to our current base of SOHO
customers. We expect this profitable supplies revenue stream to decline over
time as the equipment is eventually replaced.

Other Products

We also sell cut-sheet paper to our customers for use in their document
processing products. The market for cut-sheet paper is highly competitive and
revenues are significantly affected by pricing. Our strategy is to charge a
premium over mill wholesale prices which is adequate to cover our costs and
value added as a distributor. In June 2000, we entered into an agreement to sell
our US and Canadian commodity paper operations, including their customer list,
for $40 million. We also entered into an exclusive license agreement for the
Xerox brand name. In accordance with the agreement, we are entitled to earn
commissions on any Xerox originated sales of commodity paper as an agent for
Georgia Pacific.

We also offer other document processing products, including devices designed to
reproduce large engineering and architectural drawings up to 3 feet by 4 feet in
size, which are developed and sold through Xerox Engineering Systems (XES).

Our consulting services revenue is included in the Other segment.

                                       13


<PAGE>

Competitive Advantages

Research and Development

Investment in research and development (R&D) is critical to drive future growth,
and we have directed our investments to the fast growing color, services and
solutions segments of the market. Our goal is to continue to create innovative
technologies that will expand current and future markets. Our research
scientists regularly meet with customers and have dialogues with our business
divisions to ensure they understand customer requirements and are focused on
products and solutions that can be commercialized.

In 2001, R&D expense was $997 million compared with $1,064 million in 2000 and
$1,020 million in 1999. 2001 R&D spending was focused primarily on those
programs related to the development of high-end business applications, as well
as those that may extend our color capabilities. The decline in spending from
2000 primarily reflects our June 2001 decision to exit the SOHO business.
DocuColor iGen3, an advanced next-generation digital printing press which was
marketed to customers beginning in late 2001 and produces photographic quality
indistinguishable from offset, is an example of the type of breakthrough
technologies developed by Xerox that we expect will drive our future growth.
Xerox R&D is strategically coordinated with Fuji Xerox, which invested $548
million in R&D in 2001 for a combined total for the two companies of $1,545
million. Xerox focuses its expenditures on the Production segment with Fuji
Xerox focusing on the Office segment. As we continue to optimize synergies in
R&D, we expect to realize further productivity benefits. During 2001, we were
awarded over 900 patents including digital color imaging, intelligent machine
control and document management software.

To drive future growth, we have maintained our R&D spending at 5-6 percent of
revenue. We continue to invest in technological development to maintain our
premier position in the rapidly changing document processing market with a
heightened focus on efficiency and time to market.

Marketing and Distribution

Our document processing products are principally sold directly to customers by
our worldwide sales force totaling approximately 11,000 employees, and through a
network of independent agents, dealers, value-added resellers and systems
integrators. We are expanding our use of cost-effective indirect distribution
channels for basic offerings, and utilizing our direct sales force for our
customers' more advanced technology, solutions and services requirements.

We market our Phaser line of color and monochrome laser-class and solid ink
printers through office information technology industry resellers, who access
our products through distributors such as Ingram Micro, Tech Data, CHS and
Computer 2000. These distributors supply our products to a broad range of
information technology and information systems-oriented resellers such as
dealers, direct marketers, VARs, systems integrators, government resellers,
corporate resellers, and e-commerce business-oriented resellers, such as CDW.
This group of resellers in turn, markets, sells, installs, and in some cases
helps support our products to end-user customers. We also sell directly to some
of these resellers, rather than through distributors. As a result of the
acquisition of CPID we have significantly increased the number of active
resellers and nearly doubled the channel activity on Xerox-branded network
printers. In addition, new initiatives are being implemented to add channel
capacity through direct-to-customer e-commerce and direct-to-customer selling
using our direct sales force in select large accounts.

We are increasing our use of partners to improve our market coverage. In 2001 we
announced an alliance with Imation to market our DocuColor 2000 series to
commercial printers. In 2001, we extended our information technology contract
with Electronic Data Systems Corp. (EDS) to develop a formal alliance program
designed to create and market integrated offerings combining our next-generation
digital products and services with EDS' corporate IT infrastructure services.

In 2001, spending on advertising was modest as we focused on stabilizing the
business. In 2002, we are investing heavily in marketing, led by a new
advertising campaign launched at the 2002 Winter Olympics. Our brand is a
valuable resource and continues to be valued in the top 10 percent of all brands
worldwide.

                                       14


<PAGE>

Service

As of year-end 2001, we had a worldwide service force of approximately 19,000
employees and a network of independent service agents. We are expanding our use
of cost-effective remote service technology for basic offerings, while
continuing to focus our own direct service force on production products and
serving customers in need of more advanced value added services. We believe that
our service force represents a significant competitive advantage in that the
service force is continually trained on our new products and their diagnostic
equipment is state-of-the-art. Twenty-four-hours-a-day, seven-days-a-week
service is available in major metropolitan areas around the world. As a result,
we are able to guarantee a consistent and superior level of service worldwide.

Customer Satisfaction

Our most important priority is customer satisfaction. Our research shows that
the cost of selling a replacement product to a satisfied customer is far less
than selling to a "new" customer. We regularly survey customers on their
satisfaction, measure the results, analyze the root causes of dissatisfaction,
and take steps to correct any problems. Our products, technology, services and
solutions are designed with one goal in mind, which is to make our customers'
businesses more productive.

International Operations

Our international operations represent approximately 40 percent of total
revenues in 2001. Our largest interest outside the United States is Xerox
Limited which operates predominately in Europe. Latin American operations are
conducted through subsidiaries or distributors in over 35 countries. Fuji Xerox
develops, manufactures and distributes document processing products in Japan and
other areas of the Pacific Rim, Australia, New Zealand and China.

Our financial results by geographical area for 2001, 2000 and 1999, which are
included in Note 10 of the Company's 2001 Annual Report to Shareholders are
hereby incorporated by reference.


I
tem 2.  Properties

We own a total of ten principal manufacturing and engineering facilities and
lease two additional facilities. The domestic facilities are located in
California, New York, Oklahoma, and Oregon and the international facilities are
located in Brazil, Canada, UK, Ireland, the Netherlands, and India. We also have
four principal research facilities; two are owned facilities in New York and
Canada, and two are leased facilities in California and France.

In 2001 and the first half of 2002 as part of our outsourcing initiatives, we
sold and subleased to Flextronics certain of our manufacturing locations in
Mexico, Malaysia, Canada, Venray, the Netherlands and Brazil. Also, as we
implemented our Turnaround Program, several properties have become surplus and
appropriate reserves have been established. The majority of the surplus
properties are leases that we are obligated to maintain through required
contract periods. We have disposed or subleased certain of these properties and
are aggressively pursuing the successful disposition and subleasing of all
remaining surplus properties.

In addition, we have numerous facilities, which encompass general offices, sales
offices, service locations and distribution centers. The principal owned
facilities are located in the United States, France, Ireland, and Mexico. The
principal leased facilities are located in the United States, Brazil, Canada,
UK, Mexico, France, Germany and Italy.

Our Connecticut based corporate headquarters facility is leased; however, we own
the related land. We also lease a portion of a training facility, located in
Virginia, which we previously owned.

It is our opinion, that our properties have been well maintained, are in sound
operating condition and contain all the necessary equipment and facilities to
perform our functions.

                                       15


<PAGE>


Item 3.  Legal Proceedings

The information set forth under Note 16 "Litigation and Regulatory Matters" of
the Company's 2001 Annual Report to Shareholders is hereby incorporated by
reference.


Item 4.  Submission of Matters to a Vote of Security Holders

      None.



                                     PART II


Item 5. Market for the Registrant's Common Equity and Related Stockholder
        Matters

      Market Information, Holders and Dividends

The information set forth under the following captions of the Company's 2001
Annual Report to Shareholders is hereby incorporated by reference:

             Caption

      Stock Listed and Traded
      Xerox Common Stock Prices and Dividends
      Five Years in Review - Common Shareholders of Record at Year-End

      Recent Sales of Unregistered Securities

During the quarter ended December 31, 2001, Registrant issued the following
securities in transactions which were not registered under the Securities Act of
1933, as amended (the Act):

1.      Xerox Common Stock

        (a)     Securities Sold: On October 1, 2001, Registrant issued 11,442
                shares of Common Stock, par value $1 per share.

        (b)     No underwriters participated. The shares were issued to each of
                the non-employee Directors of Registrant: A.A. Johnson, V.E.
                Jordan, Jr., Y. Kobayashi, H. Kopper, R.S. Larsen, G.J.
                Mitchell, N.J. Nicholas, Jr., J.E. Pepper, M.R. Seger and T.C.
                Theobald.

        (c)     The shares were issued at a deemed purchase price of $7.75 per
                share (aggregate price $88,625), based upon the market value on
                the date of issuance, in payment of the quarterly Directors'
                fees pursuant to Registrant's Restricted Stock Plan for
                Directors.

        (d)     Exemption from registration under the Act was claimed based upon
                Section 4(2) as a sale by an issuer not involving a public
                offering.

2.      7 1/2 % Convertible Trust Preferred Securities

        (a)     Securities Sold: On November 27, 2001, Xerox Capital Trust II a
                wholly-owned subsidiary of the Registrant, issued and sold
                20,700,000 7 1/2 % Convertible Trust Preferred Securities
                (liquidation amount $50 per trust preferred security). The trust
                preferred securities are convertible into shares of Xerox Common
                Stock, par value $1 per share.

                                       16


<PAGE>

        (b)     The trust preferred securities were sold to Deutsche Banc Alex.
                Brown; Merrill Lynch & Co. and Salomon Smith Barney, as initial
                purchasers.

        (c)     An aggregate of 20,700,000 trust preferred securities were
                issued and sold at a price of $50 cash per trust preferred
                security. The aggregate offering price was $1,035,000,000. The
                aggregate fees and expenses paid were $31,050,000.

        (d)     Exemption from registration under the Act was claimed based upon
                Rule 144A.

        (e)     Each trust preferred security is convertible into 5.4795 shares
                of Xerox Common Stock, par value $1 per share, subject to
                adjustment.


Item 6.  Selected Financial Data

The following selected financial data for the five years ended December 31,
2001, as set forth and included under the caption "Five Years in Review," of the
Xerox Corporation 2001 Annual Report to Shareholders, is incorporated by
reference in this Form 10-K Annual Report.

         Revenues
         Income (loss) from continuing operations
         Per-Share Data - Earnings (loss) from continuing operations
         Total assets
         Long-term debt
         Preferred stock
         Per Share Data - Dividends declared


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

The information set forth under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" of the Company's 2001
Annual Report to Shareholders is hereby incorporated by reference.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The information set forth under the caption "Risk Management," of the Xerox
Corporation 2001 Annual Report to Shareholders is hereby incorporated by
reference.


Item 8.  Financial Statements and Supplementary Data

The consolidated financial statements, together with the reports thereon of
PricewaterhouseCoopers LLP, dated June 26, 2002, included in the Xerox
Corporation 2001 Annual Report to Shareholders, are incorporated by reference in
this Form 10-K Annual Report. With the exception of the aforementioned
information and the information incorporated in Items 5, 6, 7, 7A and 8, the
Xerox Corporation 2001 Annual Report to Shareholders is not to be deemed filed
as part of this Form 10-K Annual Report.

The quarterly financial data included under the caption "Quarterly Results of
Operations (Unaudited)" of the Xerox Corporation 2001 Annual Report to
Shareholders is incorporated by reference in this Form 10-K Annual Report.

The financial statement schedule required herein is filed as referenced in Item
14 of this Form 10-K Annual Report.


Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

On October 4, 2001, we ended the engagement of KPMG LLP and retained
PricewaterhouseCoopers LLP as our independent auditors. At that time, we filed a
Current Report on Form 8-K dated September 28, 2001. The text of the Form 8-K
Report that we filed is as follows:

                                       17


<PAGE>

"On October 4, 2001, Xerox Corporation ("Company") determined to change the
Company's independent accountants, and, accordingly, ended the engagement of
KPMG LLP ("KPMG") in that role and retained PricewaterhouseCoopers LLP as its
independent accountants for the fiscal year ending December 31, 2001. The Audit
Committee of the Board of Directors (the "Audit Committee") and the Board of
Directors of the Company approved the decision to change independent
accountants.

The reports of KPMG on the financial statements of the Company for each of the
fiscal years ended December 31, 2000 and December 31, 1999 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. Except to the extent
discussed below, for the fiscal years ended December 31, 2000 and December 31,
1999 and through the date of this report, there were no disagreements with KPMG
on any matter of accounting principles or practices, financial statement
disclosure or audit scope or procedure which, if not resolved to the
satisfaction of KPMG, would have caused it to make reference to the subject
matter of such disagreement in its reports on the financial statements for such
fiscal years. Nor, except to the extent discussed below, were there any
reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K for
the fiscal years ended December 31, 2000 and December 31, 1999 and through the
date of this report. With respect to the matters discussed below, the Audit
Committee discussed them with KPMG and authorized KPMG to respond fully to
inquiries of PricewaterhouseCoopers LLP concerning them.

In March 2001, KPMG informed management and the Audit Committee that it wished
to expand significantly the scope of its audit work in connection with the audit
of the Company's 2000 financial statements. KPMG proposed that certain
additional procedures be performed, including that the Audit Committee appoint
Special Counsel to conduct an inquiry into certain issues, which procedures were
performed in March, April and May 2001.

While the expanded procedures were being performed, KPMG informed the Audit
Committee and management that KPMG was unwilling to rely on representations by
two employees in one of the Company's geographic operating units. Management
removed those employees from responsibility in connection with the Company's
system of financial reporting.

As a result of observations during its 2000 audit, and other information
discussed with the Audit Committee, KPMG reported certain material weaknesses in
the Company's internal control systems and made recommendations concerning
certain components of the Company's business:

      -  KPMG emphasized the importance for internal control of the tone set by
         the Company's top management. KPMG noted that, as a result of its audit
         and information reported by Special Counsel, it believed there was
         evidence that management was not successful in setting the appropriate
         tone with respect to financial reporting. It recommended that the
         Company take steps to remediate appropriately those issues. Certain
         personnel changes have been made based in part on KPMG views offered to
         the Audit Committee and management.

      -  Customer Business Operations (CBO) in the Company's North American
         Solutions Group. KPMG noted issues with regard to CBO's ability to bill
         customers accurately for services, and noted that difficulties in that
         area had resulted in unfavorable billing adjustments during 2000.
         Although KPMG recognized that the Company had initiated several steps
         to address this issue, it concluded that it remained unclear when those
         changes would result in sustained improvement in reducing non-cash
         resolution adjustments of billing differences. It acknowledged that
         this weakness did not suggest that the net trade receivable account
         balance is unreasonably stated at December 31, 2000, but that proper
         reporting required extensive evaluation of billing adjustments during
         the fourth quarter. KPMG suggested various business and operational
         changes to address this issue.

      -  Communication of Accounting and Control Policies. KPMG noted that
         policy documents need to be updated, among other things to address
         issues identified by the Company's worldwide audit function. Special
         Counsel and KPMG, recommended that the Company also provide increased
         formal training to ensure that its personnel understand the accounting
         and control guidance in its policies.

      -  Consolidation and Corporate-Level Entries. KPMG observed that the
         Company's quarterly consolidation process is manually intensive,
         requiring numerous adjustments at corporate financial reporting levels.
         It recommended that the Company's Consolidated Financial Information
         System be augmented to enhance the monitoring and review of
         corporate-level and manual entries, and further that the Company ensure
         adequate segregation of duties in the preparation and approval of such
         entries.

      -  Appropriateness of the Concessionaire  Business Model in Latin American
         Countries. KPMG noted that during 2000, analysis by the Company's
         worldwide audit function indicated that certain issues existed with
         respect to this business model, including that certain
         concessionaires may lack economic substance independent of the
         Company, and that certain business practices involving
         concessionaires resulted in allowances with respect to receivables
         in 2000. KPMG suggested periodic assessment of the financial position
         of prospective and existing concessionaires, and that the Company
         monitor its business relationship with them to ensure that they are
         substantive independent distributors of the Company's products.

                                       18


<PAGE>

In addition to those items, KPMG noted that organizational changes, including
the Company's turnaround program and associated reductions in headcount, had and
would continue to stress the Company's internal control structure. KPMG
recommended that the Company take steps to ensure that issues likely to impact
the control environment receive appropriate management attention. KPMG also
recommended improved balance sheet account reconciliation and analysis on a
global basis, in particular with respect to intercompany balances.

The foregoing matters were considered by KPMG in connection with their 2000
audit and did not result in any adverse opinion or disclaimer of opinion or any
qualification or modification as to uncertainty, audit scope or accounting
principles. KPMG's auditor's report dated May 30, 2001 contained a separate
paragraph stating that the Company's 1999 and 1998 consolidated financial
statements had been restated.

The Company commenced actions in fiscal 2000 and expanded actions in fiscal 2001
which, collectively, it believes have addressed the above-discussed matters.

The Company has provided KPMG a copy of this Report and requested KPMG to
furnish it with a letter addressed to the Securities and Exchange Commission
stating whether it agrees with the statements made herein. A copy of such
letter, dated October 4, 2001, is filed as an Exhibit to the Company's Form
8-K."

                                       19


<PAGE>


                                    PART III

The information contained in Exhibit 99.2 to this Annual Report on Form 10-K is
hereby incorporated herein in response to this part.

Executive Officers of Xerox

The following is a list of the executive officers of Xerox, their current ages,
their present positions and the year appointed to their present positions. Anne
M. Mulcahy, Chairman of the Board and CEO and Thomas J. Dolan, Senior Vice
President, are sister and brother. There are no other family relationships
between any of the executive officers named.

Each officer is elected to hold office until the meeting of the Board of
Directors held on the day of the next annual meeting of shareholders, subject to
the provisions of the By-Laws.


<TABLE>
<CAPTION>
                                                                                Year
                                                                              Appointed
                                                                             to Present     Officer
             Name              Age            Present Postion                 Position       Since
             ----              ---            ---------------                 --------       -----
<S>                            <C>      <C>                                   <C>           <C>
Anne M. Mulcahy*               49       Chairman of the Board and               2002         1992
                                        Chief Executive Officer

Carlos Pascual                 56       Executive Vice President                2000         1994
                                        President, Developing Markets
                                        Operations

Lawrence A. Zimmerman          59       Senior Vice President and               2002         2002
                                        Chief Financial Officer

Ursula M. Burns                43       Senior Vice President                   2001         1997
                                        President Document Systems
                                        and Solutions Group

Thomas J. Dolan                57       Senior Vice President                   2001         1997
                                        President, Xerox Global Services

James A. Firestone             47       Senior Vice President                   2001         1998
                                        President, Corporate Operations
                                        Group

Herve J. Gallaire              57       Senior Vice President                   2001         1997
                                        President, Xerox Innovation Group
                                        and Chief Technology Officer

Gilbert J. Hatch               52       Senior Vice President                   1999         1997
                                        President, Office Systems Group

Michael C. MacDonald           47       Senior Vice President                   2000         1997
                                        President, North American
                                        Solutions Group
</TABLE>


* Member of Xerox Board of Directors.

                                       20


<PAGE>



Executive Officers of Xerox, Continued


<TABLE>
<CAPTION>
                                                                                Year
                                                                              Appointed
                                                                             to Present     Officer
             Name              Age           Present Position                 Position       Since
             ----              ---           ----------------                 --------       -----
<S>                            <C>      <C>                                   <C>           <C>

Hector J. Motroni              58       Senior Vice President and               1999          1994
                                        Chief Staff Officer

Christina E. Clayton           54       Vice President and                      2000          2000
                                        General Counsel

Jean-Noel Machon               49       Vice President                          2000          2000
                                        President, European Solutions
                                        Group

James J. Miller                50       Vice President                          2001          2000
                                        President, Office Printing
                                        Business

Gregory B. Tayler              44       Vice President and Treasurer            2001          2000

Leslie F. Varon                45       Vice President and Secretary            2001          2001

Gary R. Kabureck               48       Assistant Controller and                2001          2000
                                        Chief Accounting Officer
</TABLE>


Each officer named above, with the exception of Lawrence A. Zimmerman and James
A. Firestone, has been an officer or an executive of Xerox or its subsidiaries
for at least the past five years.

Prior to joining Xerox in 2002, Mr. Zimmerman had been with System Software
Associates, Inc. where he was Executive Vice President and Chief Financial
Officer from 1998 - 1999. Prior to that he retired from International Business
Machines Corporation (IBM) where he was Senior Finance Executive for IBM's
Server Division from 1996 - 1998, Vice President of Finance for Europe, Middle
East and Africa Operations from 1994 - 1996 and IBM Corporate Controller from
1991 - 1994. He held various other positions at IBM from 1967 - 1991.

Prior to joining Xerox in 1998, Mr. Firestone had been with IBM where he was
General Manager, Consumer Division from 1995 to 1998. He was President, Consumer
Services at Ameritech Corporation from 1993 to 1995. Prior to this he was with
American Express Company where he was President, Travelers Cheques in 1993,
Executive Vice President, Small Business and Corporate Services from 1989 to
1993, President, Travel Related Services-Japan from 1984 to 1989, Vice
President, Finance and Planning, Travel Related Services-Japan from 1982 to 1984
and he held various other positions at American Express in Japan and at their
headquarters from 1978 to 1982.

                                       21


<PAGE>


                                     PART IV


Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a)      (1) Index to Financial Statements and financial statement schedules,
         filed as part of this report:


            Report of Independent Accountants

            Consolidated Statements of Operations for each of the years in the
            three-year period ended December 31, 2001

            Consolidated Balance Sheets as of December 31, 2001 and 2000

            Consolidated Statements of Cash Flows for each of the years in the
            three-year period ended December 31, 2001

            Consolidated Statements of Common Shareholders' Equity for each of
            the years in the three-year period ended December 31, 2001


            Notes to Consolidated Financial Statements

         Financial Statement Schedule

            II--Valuation and qualifying accounts

            All other schedules are omitted as they are not applicable, or the
            information required is included in the financial statements or
            notes thereto.

         (2) Supplementary Data:

            Quarterly Results of Operations

            Five Years in Review

            Commercial and Industrial (Article 5) Schedule

         (3) The exhibits filed herewith or incorporated herein by reference are
         set forth in the Index of Exhibits included herein.

      (b)   Current Reports on Form 8-K dated October 2, 2001, October 3, 2001,
            October 12, 2001, November 16, 2001, November 19, 2001, November 20,
            2001, November 27, 2001, December 20, 2001 and December 27, 2001
            reporting Item 5 "Other Events" and a Current Report on Form 8-K
            dated September 28, 2001 (filed October 5, 2001) reporting Item 4
            "Changes in Registrant's Certifying Accountant" and Item 5 "Other
            Events" were filed during the last quarter of the period covered by
            this Report.

      (c)   The management contracts or compensatory plans or arrangements
            listed in the Index of Exhibits that are applicable to the executive
            officers named in the Summary Compensation Table which appears in
            Registrant's 2002 Proxy Statement are preceded by an asterisk (*).

      (d)   Financial statements required by Regulation S-X which are excluded
            from the annual report to shareholders by Rule 14a-3(b), including
            (1) separate financial statements of subsidiaries not consolidated
            and fifty-percent-or-less-owned persons, (2) separate financial
            statements of affiliates whose securities are pledged as collateral;
            and (3) schedules.

                                       22


<PAGE>


 
                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        XEROX CORPORATION

                                        By:  /S/ Anne M. Mulcahy
                                           ---------------------
                                             Chairman of the Board and
                                             Chief Executive Officer

June 28, 2002



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.

June 28, 2002

Signature                        Title
---------                        -----

Principal Executive Officer:

/S/ Anne M. Mulcahy              Chairman of the Board, Chief Executive Officer
-------------------------------  and Director
    Anne M. Mulcahy


Principal Financial Officer:

/S/ Lawrence A. Zimmerman        Senior Vice President and Chief Financial
------------------------------   Officer
    Lawrence A. Zimmerman


Principal Accounting Officer:

/S/ Gary R. Kabureck             Assistant Controller and Chief Accounting
-------------------------------  Officer
    Gary R. Kabureck

                                       23


<PAGE>


/S/ Antonia Ax:son Johnson       Director
-------------------------------
    Antonia Ax:son Johnson


/S/ Vernon E. Jordan, Jr.        Director
-------------------------------
    Vernon E. Jordan, Jr.


/S/ Yotaro Kobayashi             Director
-------------------------------
    Yotaro Kobayashi


/S/ Hilmar Kopper                Director
-------------------------------
    Hilmar Kopper


/S/ Ralph S. Larsen              Director
-------------------------------
    Ralph S. Larsen


/S/ George J. Mitchell           Director
-------------------------------
    George J. Mitchell


/S/ N. J. Nicholas, Jr.          Director
-------------------------------
    N. J. Nicholas, Jr.


/S/ John E. Pepper               Director
-------------------------------
    John E. Pepper


/S/ Martha R. Seger              Director
-------------------------------
    Martha R. Seger


/S/ Thomas C. Theobald           Director
-------------------------------
    Thomas C. Theobald


                                       24


<PAGE>


        Report of Independent Accountants on Financial Statement Schedule

     To the Board of Directors of Xerox Corporation

     Our audit of the consolidated financial statements referred to in our
     report dated June 26, 2002, appearing in the 2001 Annual Report to
     Shareholders of Xerox Corporation (which report and consolidated financial
     statements are incorporated by reference in this Annual Report on Form
     10-K) also included an audit of the financial statement schedule listed in

     Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement
     schedule presents fairly, in all material respects, the information set
     forth therein when read in conjunction with the related consolidated
     financial statements.

     As discussed in Note 2, the Company has restated its consolidated financial
     statements for the years ended December 31, 2000 and 1999, previously
     audited by other independent accountants.


     /s/ PricewaterhouseCoopers LLP

     PricewaterhouseCoopers LLP
     Stamford, Connecticut
     June 26, 2002



                                       25


<PAGE>

SCHEDULE II

                        Valuation and Qualifying Accounts
                   Year ended December 31, 2001, 2000 and 1999


<TABLE>
<CAPTION>
                                                                                 Additions
                                                              Additions         charged to
                                            Balance at        charged to       other income        Deductions         Balance
                                             beginning         bad debt          statement       and other, net       at end
(in millions)                                of period       provision (1)      accounts(1)     of recoveries (2)    of period
------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>              <C>               <C>              <C>                  <C>
2001
Allowance for Losses on:
   Accounts Receivable                         $289               $154              $30               $167             $306
   Finance Receivables                          345                284               38                299              368
                                               ----------------------------------------------------------------------------

                                               $634               $438              $68               $466             $674
                                               ============================================================================

2000*
Allowance for Losses on:
   Accounts Receivable                         $148               $299              $58               $216             $289
   Finance Receivables                          331                174               82                242              345
                                               ----------------------------------------------------------------------------
                                               $479               $473             $140               $458             $634
                                               ============================================================================

1999*
Allowance for Losses on:
   Accounts Receivable                         $105               $202              $16               $175             $148
   Finance Receivables                          328                184               48                229              331
                                               ----------------------------------------------------------------------------
                                               $433               $386              $64               $404             $479
                                               ============================================================================
</TABLE>


*  As Restated

(1) Bad debt provisions relate to estimated losses due to credit and similar
    uncollectibility issues. Other provisions relate to reserves necessary to
    reflect other customer events of non payments such as customer
    accommodations and contract terminations due to certain contractual clauses
    for governmental customers.

(2)  Primarily write-offs, but also includes reclassifications from other
     balance sheet accounts and the impact of foreign currency translation
     adjustment.

                                       26


<PAGE>

                                INDEX OF EXHIBITS

Document and Location

(3) (a) Restated Certificate of Incorporation of Registrant filed by the
    Department of State of New York on October 29, 1996, as amended by
    Certificate of Amendment of the Certificate of Incorporation of Registrant
    filed by the Department of State of New York on May 21, 1999.

    Incorporated by reference to Exhibit 3(a) to Amendment No. 5 to Registrant's
    Form 8-A Registration Statement dated February 8, 2000.

    (b) By-Laws of Registrant, as amended through January 1, 2002.

(4) (a)(1) Indenture dated as of December 1, 1991, between Registrant and
    Citibank, N.A., as trustee, relating to unlimited amounts of debt securities
    which may be issued from time to time by Registrant when and as authorized
    by or pursuant to a resolution of Registrant's Board of Directors (the
    "December 1991 Indenture").

    Incorporated by reference to Exhibit 4(a) to Registration Nos. 33-44597,
    33-49177 and 33-54629.

        (2) Instrument of Resignation, Appointment and Acceptance dated as of
    February 1, 2001, among Registrant, Citibank, N.A., as resigning trustee,
    and Wilmington Trust Company, as successor trustee, relating to the December
    1991 Indenture.

    Incorporated by reference to Exhibit 4 (a)(2) to Registrant's Annual Report
    on Form 10-K for the fiscal year ended December 31, 2000 filed on June 7,
    2001.

    (b)(1) Indenture dated as of September 20, 1996, between Registrant and
    Citibank, N.A., as trustee, relating to unlimited amounts of debt securities
    which may be issued from time to time by Registrant when and as authorized
    by or pursuant to a resolution of Registrant's Board of Directors (the
    "September 1996 Indenture").

    Incorporated by reference to Exhibit 4(a) to Registration Statement
    No. 333-13179.

        (2) Instrument of Resignation, Appointment and Acceptance dated as of
    February 1, 2001, among Registrant, Citibank, N.A., as resigning trustee,
    and Wilmington Trust Company, as successor trustee, relating to the
    September 1996 Indenture.

    Incorporated by reference to Exhibit 4 (b)(2) to Registrant's Annual Report
    on Form 10-K for the fiscal year ended December 31, 2000 filed on June 7,
    2001.

    (c)(1) Indenture dated as of January 29, 1997, between Registrant and Bank
    One, National Association (as successor by merger with The First National
    Bank of Chicago) ("Bank One"), as trustee (the "January 1997 Indenture"),
    relating to Registrant's Junior Subordinated Deferrable Interest Debentures
    ("Junior Subordinated Debentures").

    Incorporated by reference to Exhibit 4.1 to Registration Statement
    No. 333-24193.

        (2) Form of Certificate of Exchange relating to Junior Subordinated
    Debentures.

    Incorporated by reference to Exhibit A to Exhibit 4.1 to Registration
    Statement No. 333-24193.

        (3) Certificate of Trust of Xerox Capital Trust I executed as of
    January 23, 1997.

    Incorporated by reference to Exhibit 4.3 to Registration Statement
    No. 333-24193.

        (4) Amended and Restated Declaration of Trust of Xerox Capital Trust I
    dated as of January 29, 1997.

    Incorporated by reference to Exhibit 4.4 to Registration Statement
    No. 333-24193.

        (5) Form of Exchange Capital Security Certificate for Xerox Capital
    Trust I.

    Incorporated by reference to Exhibit A-1 to Exhibit 4.4 to Registration
    Statement No. 333-24193.

                                       27


<PAGE>

        (6) Series A Capital Securities Guarantee Agreement of Registrant dated
    as of January 29, 1997, relating to Series A Capital Securities of Xerox
    Capital Trust I.

    Incorporated by reference to Exhibit 4.6 to Registration Statement
    No. 333-24193.

        (7) Registration Rights Agreement dated January 29, 1997, among
    Registrant, Xerox Capital Trust I and the initial purchasers named therein.

    Incorporated by reference to Exhibit 4.7 to Registration Statement
    No. 333-24193.

        (8) Instrument of Resignation, Appointment and Acceptance dated as of
    November 30, 2001, among Registrant, Bank One as resigning trustee, and
    Wells Fargo Bank Minnesota, National Association ("Wells Fargo"), as
    successor Trustee, relating to the January 1997 Indenture.

    (d) (1) Indenture dated as of October 1, 1997, among Registrant, Xerox
    Overseas Holding Limited (formerly Xerox Overseas Holding PLC), Xerox
    Capital (Europe) plc (formerly Rank Xerox Capital (Europe) plc) and
    Citibank, N.A., as trustee, relating to unlimited amounts of debt securities
    which may be issued from time to time by Registrant and unlimited amounts of
    guaranteed debt securities which may be issued from time to time by the
    other issuers when and as authorized by or pursuant to a resolution or
    resolutions of the Board of Directors of Registrant or the other issuers, as
    applicable (the "October 1997 Indenture").

    Incorporated by reference to Exhibit 4(b) to Registration Statement
    Nos. 333-34333, 333-34333-01 and 333-34333-02.

        (2) Instrument of Resignation, Appointment and Acceptance dated as of
    February 1, 2001, among Registrant, the other issuers under the October 1997
    Indenture, Citibank, N.A., as resigning trustee, and Wilmington Trust
    Company, as successor trustee, relating to the October 1997 Indenture.

    Incorporated by reference to Exhibit 4 (d)(2) to Registrant's Annual Report
    on Form 10-K for the fiscal year ended December 31, 2000 filed on June 7,
    2001.

    (e) (1) Indenture dated as of April 21, 1998, between Registrant and Bank
    One, as trustee, relating to $1,012,198,000 principal amount at maturity of
    Registrant's Convertible Subordinated Debentures due 2018 (the "April 1998
    Indenture").

    Incorporated by reference to Exhibit 4(b) to Registration Statement
    No. 333-59355.

        (2) Instrument of Resignation, Appointment and Acceptance dated as of
    July 26, 2001, among Registrant, Bank One as resigning trustee, and Wells
    Fargo, as successor Trustee, relating to the April 1998 Indenture (the
    "April 1998 Indenture Trustee Assignment").

        (3) Amendment to Instrument of Resignation, Appointment and Acceptance
    dated as of October 22, 2001, among Registrant, Bank One as resigning
    trustee, and Wells Fargo, as successor Trustee, relating to the April 1998
    Indenture Trustee Assignment.

    (f) Indenture, dated as of July 1, 2001, between Xerox Equipment Lease Owner
    Trust 2001-1 ("Trust") and U.S. Bank National Association, as trustee,
    relating to $513,000,000 Floating Rate Asset Backed Notes issued by the
    Trust .

    (g) (1) Indenture, dated as of November 27, 2001, between Registrant and
    Wells Fargo, as trustee, relating to Registrant's 7-1/2% Convertible Junior
    Subordinated Debentures Due 2021.

        (2) Indenture, dated as of November 27, 2001, between Xerox Funding LLC
    II and Wells Fargo, as trustee, relating to Xerox Funding LLC II's 7-1/2%
    Convertible Junior Subordinated Debentures Due 2021.

        (3) Amended and Restated Declaration of Trust of Xerox Capital Trust II,
    dated as of November 27, 2001, by Registrant, as sponsor, Wells Fargo, as
    property trustee, Wilmington Trust Company, as Delaware trustee, and the
    administrative trustees named therein, relating to Xerox Capital Trust II's
    7-1/2% Convertible Trust Preferred Securities and 7-1/2% Convertible Common
    Securities.

        (4) Pledge Agreement, made as of November 27, 2001, by Xerox Funding LLC
    II in favor of Wells Fargo, as trustee and for

                                       28


<PAGE>

    the holders of Xerox Funding LLC II's 7-1/2% Convertible Junior
    Subordinated Debentures Due 2021.

    (h) (1) Indenture,  dated as of January 17, 2002, between Registrant and
    Wells Fargo, as trustee,  relating to Registrant's  9-3/4% Senior Notes due
    2009 (Denominated in U.S. Dollars) (the "January 17, 2002 U.S. Dollar
    Indenture").

        (2) Indenture, dated as of January 17, 2002, between Registrant and
    Wells Fargo, as trustee, relating to Registrant's 9-3/4% Senior Notes due
    2009 (Denominated in Euros) (the "January 17, 2002 Euro Indenture").

        (3) Registration Rights Agreement, dated as of January 17, 2002, among
    Registrant and the initial purchasers named therein, relating to
    Registrant's $600,000,000 9-3/4% Senior Notes due 2009.

        (4) Registration Rights Agreement, dated as of January 17, 2002, among
    Registrant and the initial purchasers named therein, relating to
    Registrant's (euro)225,000,000 9-3/4% Senior Notes due 2009.

        (5) First Supplemental  Indenture dated as of June 21, 2002 between
    Registrant and Wells Fargo, as trustee,  to the January 17,
    2002 U.S. Dollar Indenture.

    Incorporated by reference to Exhibit (4)(h)(5) to Registrant's Current
    Report on Form 8-K dated June 21, 2002.

        (6) First Supplemental Indenture dated as of June 21, 2002 between
    Registrant and Wells Fargo, as trustee, to the January 17, 2002 Euro
    Indenture.

    Incorporated by reference to Exhibit (4)(h)(6) to Registrant's Current
    Report on Form 8-K dated June 21, 2002.

    (i) Indenture dated as of October 2, 1995, between Xerox Credit Corporation
    ("XCC") and State Street Bank and Trust Company ("State Street"), as
    trustee, relating to unlimited amounts of debt securities which may be
    issued from time to time by XCC when and as authorized by XCC's Board of
    Directors or Executive Committee of the Board of Directors.

    Incorporated by reference to Exhibit 4(a) to XCC's Registration Statement
    Nos. 33-61481 and 333-29677.

    (j) (1) Indenture dated as of April 1, 1999, between XCC and Citibank, N.A.,
    relating to unlimited amounts of debt securities which may be issued from
    time to time by XCC when and as authorized by XCC's Board of Directors or
    Executive Committee of the Board of Directors (the "April 1999 XCC
    Indenture").

    Incorporated by reference to Exhibit 4(a) to XCC's Registration Statement
    No. 33-61481.

        (2) Instrument of Resignation, Appointment and Acceptance dated as of
    February 1, 2001, among XCC, Citibank, N.A., as resigning trustee, and
    Wilmington Trust Company, as successor trustee, relating to the April 1999
    XCC Indenture.

     Incorporated by reference to Exhibit 4 (h)(2) to Registrant's Annual Report
    on Form 10-K for the fiscal year ended December 31, 2000 filed on June 7,
    2001.

    (k) $7,000,000,000 Revolving Credit Agreement, dated October 22, 1997, among
    Registrant, XCC and certain Overseas Borrowers, as Borrowers, various
    lenders and Morgan Guaranty Trust Company of New York, The Chase Manhattan
    Bank, Citibank, N.A. and Bank One, as Agents.

    Incorporated by reference to Exhibit 4(h) to Registrant's Quarterly Report
    on Form 10-Q for the quarter ended September 30, 2000.

    (l) (1) Amended and Restated  Revolving Credit Agreement,  dated as of
    June 21, 2002, among Registrant and Overseas  Borrowers,  as Borrowers,
    various Lenders and Bank One, N.A., JPMorgan Chase Bank, and Citibank, N.A.
    as Agents (the "Amended Credit Agreement").

    Incorporated by reference to Exhibit 4(l)(1) to Registrant's Current Report
    on Form 8-K dated June 21, 2002.

         (2) Guarantee and Security Agreement dated as of June 21, 2002 among
    Registrant, the Subsidiary Guarantors and Bank One, N.A., as Agent, relating
    to the Amended Credit Agreement.

    Incorporated by reference to Exhibit 4 (l) (2) to Registrant's Current
    Report on Form 8-K dated June 21, 2002.

                                       29


<PAGE>

         (3) Canadian  Guarantee and Security  Agreement  dated as of June 21,
    2002 among Xerox Canada Capital Ltd., the Guarantors and Bank One, N.A.,
    Canada Branch , as Agent, relating to the Amended Credit Agreement.

    Incorporated by reference to Exhibit 4 (l) (3) to Registrant's Current
    Report on Form 8-K dated June 21, 2002.

         (4) Deed of Guarantee and Indemnity Made June 21, 2002 between Bank
    One, N.A., as Agent, and Xerox Overseas Holdings Limited and Xerox UK
    Holdings Limited, as Guarantors, relating to Obligations of Xerox Capital
    (Europe) plc and the Amended Credit Agreement.

    Incorporated by reference to Exhibit 4 (l) (4) to Registrant's Current
    Report on Form 8-K dated June 21, 2002.

         (5) Debenture  dated June 21, 2002 between Xerox Capital  (Europe) plc
    and Bank One,  N.A., as Agent,  relating to the Amended Credit Agreement.

    Incorporated by reference to Exhibit 4 (l) (5) to Registrant's Current
    Report on Form 8-K dated June 21, 2002.

         (6) Mortgage, Assignment of Leases and Rents, Security Agreement,
    Financing Statement and Fixture Filing dated as of June 21, 2002 by Xerox
    Corporation, as Mortgagor, to Bank One, N.A., as Agent for the Lenders, the
    Mortgagee, relating to property in the County of Monroe, State of New York
    and the Amended Credit Agreement.

    Incorporated by reference to Exhibit 4 (l) (6) to Registrant's Current
    Report on Form 8-K dated June 21, 2002.

    (m) Master Demand Note dated November 20, 2001 between Registrant and Xerox
    Credit Corporation.

    (n) Instruments with respect to long-term debt where the total amount of
    securities authorized thereunder does not exceed 10% of the total assets of
    Registrant and its subsidiaries on a consolidated basis have not been filed.
    Registrant agrees to furnish to the Commission a copy of each such
    instrument upon request.

    (10) The management contracts or compensatory plans or arrangements listed
    below that are applicable to the executive officers named in the Summary
    Compensation Table which appears in Registrant's 2002 Proxy Statement are
    preceded by an asterisk (*).

    *(a) Registrant's Form of Salary Continuance Agreement.

    *(b) Registrant's 1991 Long-Term Incentive Plan, as amended through
    October 9, 2000.

    Incorporated by reference to Exhibit 10 (b) to Registrant's Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 filed on June 7, 2001.

    (c) Registrant's 1996 Non-Employee Director Stock Option Plan, as amended
    through May 20, 1999.

    Incorporated by reference to Registrant's Notice of the 1999 Annual Meeting
    of Shareholders and Proxy Statement pursuant to Regulation 14A.

    *(d) Description of Registrant's Annual Performance Incentive Plan.

    *(e) 1997 Restatement of Registrant's Unfunded Retirement Income Guarantee
    Plan, as amended through October 9, 2000.

    Incorporated by reference to Exhibit 10 (e) to Registrant's Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 filed on June 7, 2001.

    *(f) 1997 Restatement of Registrant's Unfunded Supplemental Retirement Plan,
    as amended through October 9, 2000

    Incorporated by reference to Exhibit 10 (f) to Registrant's Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 filed on June 7, 2001.

    (g) Executive Performance Incentive Plan.

                                       30


<PAGE>

    (h) 1996 Amendment and Restatement of Registrant's Restricted Stock Plan
    for Directors.

    *(i) Form of severance agreement entered into with various executive
    officers, effective October 15, 2000

    Incorporated by reference to Exhibit 10 (i)(2) to Registrant's Annual Report
    on Form 10-K for the fiscal year ended December 31, 2000 filed on June 7,
    2001.

    *(j) Registrant's Contributory Life Insurance Program, as amended as of
    January 1, 1999.

    Incorporated by reference to Exhibit 10(j) to Registrant's Annual Report on
    Form 10-K for the year ended December 31, 1999.

    (k) Registrant's Deferred Compensation Plan for Directors, 1997 Amendment
    and Restatement, as amended through October 9, 2000.

    Incorporated by reference to Exhibit 10 (k) to Registrant's Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 filed on June 7, 2001.

    *(l) Registrant's Deferred Compensation Plan for Executives, 1997 Amendment
    and Restatement, as amended through October 9, 2000.

    Incorporated by reference to Exhibit 10 (l) to Registrant's Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 filed on June 7, 2001.

    *(m) letter Agreement dated June 4, 1997 between Registrant and G. Richard
    Thoman,  former President and Chief Executive Officer of Registrant.

    Incorporated by reference to Exhibit 10(m) to Registrant's Quarterly Report
    on Form 10-Q for the Quarter Ended June 30, 1997.

    *(n) Registrant's 1998 Employee Stock Option Plan, as amended through
    October 9, 2000.

    Incorporated by reference to Exhibit 10 (n) to Registrant's Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 filed on June 7, 2001.

    *(o) Registrant's CEO Challenge Bonus Program.

    Incorporated by reference to Exhibit 10 (o) to Registrant's Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 filed on June 7, 2001.

    *(p)  Separation  Agreement  dated May 11, 2000 between  Registrant and
    G. Richard  Thoman,  former  President and Chief  Executive Officer of
    Registrant.

    Incorporated by reference to Exhibit 10 (p) to Registrant's Quarterly Report
    on Form 10-Q for the Quarter Ended June 30, 2000.

    *(q) Letter Agreement dated December 4, 2000 between Registrant and
    William F. Buehler, Vice Chairman of Registrant.

    Incorporated by reference to Exhibit 10 (p) to Registrant's Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 filed on June 7, 2001.

    (r) (1) Separation  Agreement  dated October 3, 2001 between  Registrant
    and Barry D. Romeril,  Vice Chairman and Chief  Financial
    Officer of Registrant.

    (2) Form of Release between Registrant and Barry D. Romeril, Vice Chairman
    and Chief Financial Officer of Registrant.

    (s) Letter Agreement dated April 2, 2001 between Registrant and Carlos
    Pascual, Executive Vice President of Registrant.

                                       31


<PAGE>

    Incorporated by reference to Exhibit 10 (s) to Registrant's Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 filed on June 7, 2001.

    (t) (1) Master Supply Agreement, dated as of November 30, 2001, between
    Registrant and Flextronics International Ltd. **

    (12) Computation of Ratio of Earnings to Fixed charges.

    (13) Registrant's 2001 Annual Report to Shareholders.

    (21) Subsidiaries of Registrant.

    (23) Consent of PricewaterhouseCoopers LLP.

    (99.1) Order under Section 36 of the Securities Exchange Act of 1934
    Granting Exemptions from Certain Provisions of the Act and Rules Thereunder,
    dated April 11, 2002 (Release No. 45730).

    Incorporated by reference to Exhibit 99.2 to Registrant's Current Report on
    Form 8-K dated April 11, 2002.

    (99.2) Directors and Officers Information

    **  Pursuant to the Freedom of Information Act, the confidential portion of
        this material has been omitted and filed separately with the Securities
        and Exchange Commission.

                                       32




<PAGE>


                                                                    Exhibit 3(b)

                                     BY-LAWS

                                       of

                                XEROX CORPORATION

                                 January 1, 2002


                                    ARTICLE I

                            MEETINGS OF STOCKHOLDERS

     SECTION 1. Annual Meetings: A meeting of shareholders entitled to vote
shall be held for the election of Directors and the transaction of other
business each year in such month and on such day (except a Saturday, Sunday, or
holiday) as determined by the Board of Directors.

     SECTION 2. Special Meetings:  Special Meetings of the shareholders
may be called at any time by the Chairman of the Board or the Board of
Directors.

     SECTION 3. Place of Meetings: Meetings of shareholders shall be held at the
principal office of the Company or at such other place, within or without the
State of New York, as may be fixed by the Board of Directors.

     SECTION 4. Notice of Meetings:

     (a) Notice of each meeting of shareholders shall be in writing and shall
state the place, date and hour of the meeting. Notice of a Special Meeting shall
state the purpose or purposes for which it is being called and shall also
indicate that it is being issued by or at the direction of the person or persons
calling the meeting. If, at any meeting, action is proposed to be taken which
would, if taken, entitle shareholders, fulfilling the requirements of Section
623 of the Business
 Corporation Law to receive payment for their shares, the
notice of such meeting shall include a statement of that purpose and to that
effect.

     (b) A copy of the notice of any meeting shall be given, personally or by
mail, not less than ten nor more than sixty days before the date of the meeting,
to each shareholder entitled to vote at such meeting. If mailed, such notice is
given when deposited in the United States mail, with postage thereon prepaid,
directed to the shareholder at his or her address as it appears on the record of
shareholders, or, if he or she shall have filed with the Secretary a written
request that notices to him or her be mailed to some other address, then
directed to him or her at such other address.

     (c) Notice of meeting need not be given to any shareholder who submits a
signed waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of any shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack of notice of
such meeting, shall constitute a waiver of notice by him or her.

     SECTION 5. Quorum and Adjourned Meetings:

     (a) At any Annual or Special Meeting the holders of a majority of the votes
of shares entitled to vote thereat, present in person or by proxy, shall
constitute a quorum for the transaction of any business, provided that when a
specified item of business is required to be voted on by a


<PAGE>

class or series, voting as a class, the holders of a majority of the votes of
shares of such class or series shall constitute a quorum for the transaction of
such specified item of business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any shareholders.

     (b) Despite the absence of a quorum, the shareholders present may adjourn
the meeting to another time and place, and it shall not be necessary to give any
notice of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken. At the
adjourned meeting any business may be transacted that might have been transacted
on the original date of the meeting. If after the adjournment, however, the
Board of Directors fixes a new record date for the adjourned meeting, a notice
of the adjourned meeting shall be given to each shareholder on the new record
date entitled to notice under Section 4 of this Article I of the By-Laws.

     SECTION 6. Nominations and Business at Meetings:

     At any annual meeting of shareholders, only persons who are nominated or
business which is proposed in accordance with the procedures set forth in this
Section 6 shall be eligible for election as Directors or considered for action
by shareholders. Nominations of persons for election to the Board of Directors
of the Company may be made or business proposed at a meeting of shareholders (i)
by or at the direction of the Board of Directors or (ii) by any shareholder of
the Company entitled to vote at the meeting who complies with the notice and
other procedures set forth in this Section 6. Such nominations or business
proposals, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company and such business proposals must, under applicable law, be a
proper matter for shareholder action. To be timely, a shareholder's notice shall
be delivered to or mailed and received at the principal executive offices of the
Company not less than 120 days nor more than 150 days in advance of the date
which is the anniversary of the date the Company's proxy statement was released
to security holders in connection with the previous year's annual meeting;
provided, that, if the Company did not hold such previous year's annual meeting
or if the anniversary date of the current year's annual meeting has been changed
by more than 30 days from the date of the previous year's annual meeting, then
such shareholder's notice shall be so delivered or mailed and received within a
reasonable time before the Company begins to print and mail its proxy statement.

     Such shareholder's notice shall set forth (a) as to each person whom such
shareholder proposes to nominate for election or reelection as a Director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected); (b) as to any
other business that the shareholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the annual
meeting, the reasons for conducting such business at the annual meeting and any
material interest in such business of such person on whose behalf such proposal
is made; and (c) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (i) the name
and address of such shareholder, as they appear on the Company's books and (ii)
the class and number of shares of the Company which are beneficially owned by
such shareholder. No person shall be eligible for election as a Director of the
Company and no business shall be conducted at the annual meeting of shareholders
unless nominated or proposed in accordance with the procedures set forth in this
Section 6. The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination or proposal was not made in accordance
with the provisions of this Section 6 and, if he or she should so determine, he
or she shall so declare to the meeting and the defective nomination or proposal
shall be disregarded.


<PAGE>

     SECTION 7.  Organization: At every meeting of the shareholders, the
Chairman of the Board, or in his or her absence an Executive Vice President
designated by the Chairman of the Board, or in the absence of such officers, a
person selected by the meeting, shall act as chairman of the meeting. The
Secretary or, in his or her absence, an Assistant Secretary shall act as
secretary of the meeting, and in the absence of both the Secretary and an
Assistant Secretary, a person selected by the meeting shall act as secretary of
the meeting.

     SECTION 8.  Voting:

     (a) Whenever any corporate action, other than the election of Directors, is
to be taken by vote of the shareholders, it shall, except as otherwise required
by law or by the Certificate of Incorporation be authorized by a majority of the
votes cast in favor of or against such action at a meeting of shareholders by
the holders of shares entitled to vote thereon. An abstention shall not
constitute a vote cast.

     (b) Directors shall, except as otherwise required by law, be elected by a
plurality of the votes cast at a meeting of shareholders by holders of shares
entitled to vote in the election.

     SECTION 9.  Qualification of Voters:

     (a) Every shareholder of record of Common Stock and Series B Convertible
Preferred Stock of the Company shall be entitled at every meeting of such
shareholders to one vote for every share of Common Stock and Series B
Convertible Preferred Stock, respectively, standing in his or her name on the
record of shareholders.

     (b) Shares of stock belonging to the Company and shares held by another
domestic or foreign corporation of any type or kind, if a majority of the shares
entitled to vote in the election of directors of such other corporation is held
by the Company, shall not be shares entitled to vote or to be counted in
determining the total number of outstanding shares.

     (c) Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him or her,
either in person or by proxy, without transfer of such shares into his or her
name. Shares held by a trustee may be voted by him or her, either in person or
by proxy, only after the shares have been transferred into his or her name as
trustee or into the name of his or her nominee.

     (d) Shares standing in the name of another domestic or foreign corporation
of any type or kind may be voted by such officer, agent or proxy as the By-Laws
of such corporation may provide, or in the absence of such provision, as the
Board of Directors of such corporation may provide.

     SECTION 10. Proxies:

     (a) Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting may authorize another person or
persons to act for him or her by proxy.

     (b) No proxy shall be valid after the expiration of eleven months from the
date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the shareholder executing it, except as otherwise
provided by law.

     (c) The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or an Assistant
Secretary.


<PAGE>

     (d) Without limiting the manner in which a shareholder may authorize
another person or persons to act for him or her as proxy pursuant to paragraph
(a) of this Section, the following shall constitute a valid means by which a
shareholder may grant such authority:

         (1)  A shareholder may execute a writing authorizing another person or
     persons to act for him or her as proxy. Execution may be accomplished by
     the shareholder or the shareholder's authorized officer, director, employee
     or agent signing such writing or causing his or her signature to be affixed
     to such writing by any reasonable means including, but not limited to, by
     facsimile signature.

         (2)  A shareholder may authorize another person or persons to act for
     the shareholder as proxy by transmitting or authorizing the transmission of
     a telegram, cablegram or other means of electronic transmission to the
     person who will be the holder of the proxy or to a proxy solicitation firm,
     proxy support service organization or like agent duly authorized by the
     person who will be the holder of the proxy to receive such transmission,
     provided that such telegram, cablegram or other means of electronic
     transmission must either set forth or be submitted with information from
     which it can be reasonably determined that the telegram, cablegram or other
     electronic transmission was authorized by the shareholder. If it is
     determined that such telegrams, cablegrams or other electronic
     transmissions are valid, the inspectors shall specify the nature of the
     information upon which they relied.

     (e) Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission created pursuant to paragraph (d) of this Section
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile, telecommunication or other
reproduction shall be a complete reproduction of the entire original writing or
transmission.

     SECTION 11. Inspectors of Election:

     (a) The Board of Directors, in advance of any shareholders' meeting, shall
appoint one or more inspectors to act at the meeting or any adjournment thereof.
The Board of Directors may designate one or more persons as alternate inspectors
to replace any inspector who fails to act. If no inspector or alternate has been
appointed, or if such persons are unable to act at a meeting of shareholders,
the person presiding at a shareholders' meeting shall appoint one or more
inspectors. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his or her ability.

     (b) The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding at
the meeting or any shareholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by them. Any report or certificate
made by them shall be prima facie evidence of the facts stated and of the vote
as certified by them.

     SECTION 12. List of Shareholders at Meetings: A list of shareholders as of
the record date, certified by the Secretary or by the transfer agent, shall be
produced at any meeting of shareholders upon the request thereat or prior
thereto of any shareholder. If the right to vote at any meeting is


<PAGE>

challenged, the inspectors of election, or person presiding thereat shall
require such list of shareholders to be produced as evidence of the right of the
persons challenged to vote at such meeting, and all persons who appear from such
list to be shareholders entitled to vote thereat may vote at such meeting.

                              ARTICLE II

                          BOARD OF DIRECTORS

     SECTION 1. Power of Board and Qualification of Directors: The business of
the Company shall be managed under the direction of the Board of Directors, each
of whom shall be at least eighteen years of age.

     SECTION 2. Number, Term of Office and Classification:

     (a) The Board of Directors shall consist of not less than five nor more
than twenty-one members. The number of Directors shall be determined from time
to time by resolution of a majority of the entire Board of Directors then in
office, provided that no decrease in the number of Directors shall shorten the
term of any incumbent Director. At each Annual Meeting of shareholders Directors
shall be elected to hold office until the next annual meeting.

     (b) If and whenever six full quarter-yearly dividends (whether or not
consecutive) payable on the Cumulative Preferred Stock of any series shall be in
arrears, in whole or in part, the number of Directors then constituting the
Board of Directors shall be increased by two and the holders of the Cumulative
Preferred Stock, voting separately as a class, regardless of series, shall be
entitled to elect the two additional Directors at any annual meeting of
shareholders or special meeting held in place thereof, or at a special meeting
of the holders of the Cumulative Preferred Stock called as hereinafter provided.
Whenever all arrears in dividends on the Cumulative Preferred Stock then
outstanding shall have been paid and dividends thereon for the current
quarter-yearly dividend period shall have been paid or declared and set apart
for payment, then the right of the holders of the Cumulative Preferred Stock to
elect such additional two Directors shall cease (but subject always to the same
provisions for the vesting of such voting rights in the case of any similar
future arrearages in dividends), and the terms of office of all persons elected
as Directors by the holders of the Cumulative Preferred Stock shall forthwith
terminate and the number of the Board of Directors shall be reduced accordingly.
At any time after such voting power shall have been so vested in the Cumulative
Preferred Stock, the Secretary of the Company may, and upon the written request
of any holder of the Cumulative Preferred Stock (addressed to the Secretary at
the principal office of the Company) shall, call a special meeting of the
holders of the Cumulative Preferred Stock for the election of the two Directors
to be elected by them as herein provided, such call to be made by notice similar
to that provided in the By-Laws for a special meeting of the shareholders or as
required by law. If any such special meeting required to be called as above
provided shall not be called by the Secretary within twenty days after receipt
of any such request, then any holder of Cumulative Preferred Stock may call such
meeting, upon the notice above provided, and for that purpose shall have access
to the stock books of the Company. The Directors elected at any such special
meeting shall hold office until the next annual meeting of the shareholders or
special meeting held in place thereof. In case any vacancy shall occur among the
Directors elected by the holders of the Cumulative Preferred Stock, a successor
shall be elected to serve until the next annual meeting of the shareholders or
special meeting held in place thereof by the then remaining Director elected by
the holders of the Cumulative Preferred Stock or the successor of such remaining
Director.

     (c) All Directors shall have equal voting power.

     SECTION 3. Organization: At each meeting of the Board of Directors, the
Chairman of the Board, or in his or her absence, a chairman chosen by a


<PAGE>

majority of the Directors present shall preside. The Secretary shall act as
secretary of the Board of Directors. In the event the Secretary shall be absent
from any meeting of the Board of Directors, the meeting shall select its
secretary.

     SECTION 4.  Resignations: Any Director of the Company may resign at any
time by giving written notice to the Chairman of the Board or to the Secretary
of the Company. Such resignation shall take effect at the time specified therein
or, if no time be specified, then on delivery.

     SECTION 5.  Vacancies: Newly created directorships resulting from an
increase in the number of Directors and vacancies occurring in the Board of
Directors for any reason except the removal of Directors without cause may be
filled by a vote of a majority of the Directors then in office, although less
than a quorum exists. A Director elected to fill a vacancy shall hold office
until the next annual meeting.

     SECTION 6.  Place of Meeting: The Board of Directors may hold its meetings
at such place or places within or without the State of New York as the Board of
Directors may from time to time by resolution determine.

     SECTION 7.  First Meeting: On the day of each annual election of Directors,
the Board of Directors shall meet for the purpose of organization and the
transaction of other business. Notice of such meeting need not be given. Such
first meeting may be held at any other time which shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors.

     SECTION 8.  Regular Meetings:  Regular meetings of the Board of Directors
may be held at such times as may be fixed from time to time by resolution of
the Board of Directors without notice.

     SECTION 9.  Special Meetings: Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, or by any two of the
Directors. Oral, telegraphic or written notice shall be given, sent or mailed
not less than one day before the meeting and shall state, in addition to the
purposes, the date, place and hour of such meeting.

     SECTION 10. Waivers of Notice: Notice of a meeting need not be given to any
Director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him or her.

     SECTION 11. Quorum and Manner of Acting:

     (a) If the number of Directors is twelve or more, seven Directors shall
constitute a quorum for the transaction of business or any specified item of
business. If the number of Directors is less than twelve, a majority of the
entire Board of Directors shall constitute a quorum.

     (b) A majority of the Directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place without notice to any
Director.

     SECTION 12. Written Consents:  Any action required or permitted to be
taken by the Board of Directors or any committee thereof may be taken without a
meeting if all members of the Board or the committee consent in writing to the
adoption of a resolution authorizing the action. The resolution and the written
consents thereto by the members of the Board or committee shall be filed with
the minutes of the proceedings of the Board or committee.

     SECTION 13. Participation At Meetings By Telephone: Any one or more members
of the Board of Directors or any committee thereof may participate in a meeting
of such Board or committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the


<PAGE>

meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.

     SECTION 14. Compensation:  The Board of Directors shall have authority
to fix the compensation of Directors for services in any capacity.

     SECTION 15. Interested Directors:

     (a) No contract or other transaction between the Company and one or more of
its Directors, or between the Company and any other corporation, firm,
association or other entity in which one or more of its Directors are directors
or officers, or are financially interested, shall be either void or voidable for
this reason alone or by reason alone that such Director or Directors are present
at the meeting of the Board of Directors, or of a committee thereof, which
approves such contract or transaction, or that his or her or their votes are
counted for such purpose, provided that the parties to the contract or
transaction establish affirmatively that it was fair and reasonable as to the
Company at the time it was approved by the Board, a committee, or the
shareholders.

     (b) Any such contract or transaction may not be avoided by the Company
for the reasons set forth in (a) if

         (1) the material facts as to such Director's interest in such contract
     or transaction and as to any such common directorship, officership or
     financial interest are disclosed in good faith or known to the Board or
     committee, and the Board or committee approves such contract or transaction
     by a vote sufficient for such purpose without counting the vote of such
     interested Director or, if the votes of the disinterested Directors are
     insufficient for such purpose, by unanimous vote of the disinterested
     Directors (although common or interested Directors may be counted in
     determining the presence of a quorum at a meeting of the Board or of a
     committee which approves such contract or transactions), or

         (2) the material facts as to such Director's interest in such contract
     or transaction and as to any such common directorship, officership or
     financial interest are disclosed in good faith or known to the shareholders
     entitled to vote thereon, and such contract or transaction is approved by
     vote of such shareholders.

     SECTION 16. Loans to Directors: The Company may not lend money to or
guarantee the obligation of a Director of the Company unless the particular loan
or guarantee is approved by the shareholders, with the holders of a majority of
the shares entitled to vote thereon constituting a quorum, but shares held of
record or beneficially by Directors who are benefited by such loan or guarantee
shall not be entitled to vote or to be included in the determination of a
quorum.

                                   ARTICLE III

                               EXECUTIVE COMMITTEE

     SECTION 1.  How Constituted and Powers: There shall be an Executive
Committee, consisting of not less than three nor more than nine Directors,
including the Chairman of the Board elected by a majority of the entire Board of
Directors, who shall serve at the pleasure of the Board. The Chairman of the
Board shall be the Chairman of the Executive Committee. The Executive Committee
shall have all the authority of the Board, except it shall have no authority as
to the following matters:

     (a) The submission to shareholders of any action that needs
shareholders' authorization.

     (b) The filling of vacancies in the Board or in any committee.


<PAGE>


     (c) The fixing of compensation of the Directors for serving on the Board
or on any committee.

     (d) The amendment or repeal of the By-Laws, or the adoption of new By-
Laws.

     (e) The amendment or repeal of any resolution of the Board which, by its
terms, shall not be so amendable or repealable.

     (f) The declaration of dividends.

     SECTION 2. Meetings: Meetings of the Executive Committee, of which no
notice shall be necessary, shall be held on such days and at such place as shall
be fixed, either by the Chairman of the Board or by a vote of the majority of
the whole Committee.

     SECTION 3. Quorum and Manner of Acting: Unless otherwise provided by
resolution of the Board of Directors, a majority of the Executive Committee
shall constitute a quorum for the transaction of business and the act of a
majority of all of the members of the Committee, whether present or not, shall
be the act of the Executive Committee. The members of the Executive Committee
shall act only as a Committee. The procedure of the Committee and its manner of
acting shall be subject at all times to the directions of the Board of
Directors.

     SECTION 4. Additional Committees: The Board of Directors by resolution
adopted by a majority of the entire Board may designate from among its members
additional committees, each of which shall consist of one or more Directors and
shall have such authority as provided in the resolution designating the
committee, except such authority shall not exceed the authority conferred on the
Executive Committee by Section 1 of this Article.

     SECTION 5. Alternate Members: The Board of Directors may designate one or
more eligible Directors as alternate members of the Executive Committee, or of
any other committee of the Board, who may replace any absent or disqualified
member or members at any meeting of any such committee.

                                   ARTICLE IV

                                    OFFICERS

     SECTION 1. Number: The officers of the Company shall be a Chairman of the
Board, one or more Vice Presidents, a Treasurer, a Secretary, a Controller, and
such other officers as the Board of Directors may in its discretion elect. Any
two or more offices may be held by the same person.

     SECTION 2. Term of Offices and Qualifications: Those officers whose titles
are specifically mentioned in Section 1 of this Article IV shall be chosen by
the Board of Directors on the day of the Annual Meeting. Unless a shorter term
is provided in the resolution of the Board electing such officer, the term of
office of such officer shall extend to and expire at the meeting of the Board
held on the day of the next Annual Meeting. The Chairman of the Board shall be
chosen from among the Directors.

     SECTION 3. Additional Officers: Additional officers other than those whose
titles are specifically mentioned in Section 1 of this Article IV shall be
elected for such period, have such authority and perform such duties, either in
an administrative or subordinate capacity, as the Board of Directors may from
time to time determine.

     SECTION 4. Removal of Officers: Any officer may be removed by the Board of
Directors with or without cause, at any time. Removal of an officer without
cause shall be without prejudice to his or her contract rights, if any, but his
or her election as an officer shall not of itself create contract


<PAGE>

rights.

     SECTION 5.  Resignation: Any officer may resign at any time by giving
written notice to the Board of Directors, or to the Chairman of the Board or to
the Secretary. Any such resignation shall take effect at the time specified
therein, or if no time be specified, then upon delivery.

     SECTION 6.  Vacancies:  A vacancy in any office shall be filled by the
Board of Directors.

     SECTION 7.  Chairman of the Board: The Chairman of the Board shall preside
at all meetings of the shareholders at which he or she is present, unless at
such meetings the shareholders shall appoint a chairman other than the Chairman
of the Board. The Chairman of the Board shall preside at all meetings of the
Directors at which he or she is present. The Chairman of the Board shall also be
the Chairman of the Executive Committee and shall preside at meetings of the
Executive Committee of the Board of Directors. The Chairman shall act as the
Chief Executive Officer of the Company and it shall be his or her duty to
supervise generally the management of the business of the Company with
responsibility direct to the Board and subject to the control of the Board. The
Chairman of the Board shall have such powers and perform such other duties as
may be assigned to him or her by the Board.

     SECTION 8.  The Vice Presidents:  Each Vice President shall have such
powers and shall perform such duties as may be assigned to him or her by the
Board of Directors or the Chairman of the Board.

     SECTION 9.  The Treasurer: The Treasurer shall, if required by the Board of
Directors, give a bond for the faithful discharge of his or her duties, in such
sum and with such sureties as the Board of Directors shall require. He or she
shall have charge and custody of, and be responsible for, all funds and
securities of the Company, and deposit all such funds in the name of and to the
credit of the Company in such banks, trust companies, or other depositories as
shall be selected by the Board of Directors. The Treasurer may sign certificates
for stock of the Company authorized by the Board of Directors. He or she shall
also perform all other duties customarily incident to the office of Treasurer
and such other duties as from time to time may be assigned to him or her by the
Board of Directors.

     SECTION 10. The Controller: The Controller shall keep and maintain the
books of account for internal and external reporting purposes. He or she shall
also perform all other duties customarily incident to the office of Controller
and such other duties as may be assigned to him or her from time to time by the
Board of Directors. If no Controller shall then be serving, or in the absence or
inability to act of the Controller, an Assistant Controller shall perform all of
the duties and exercise all of the powers of the Controller. If there is more
than one Assistant Controller serving at such time, the Chief Executive Officer
of the Company shall select the Assistant Controller to perform such duties and
exercise such powers.

     SECTION 11. The Secretary: It shall be the duty of the Secretary to act as
secretary of all meetings of the Board of Directors, and of the shareholders,
and to keep the minutes of all such meetings at which he or she shall so act in
a proper book or books to be provided for that purpose; he or she shall see that
all notices required to be given by the Company are duly given and served; he or
she may sign and execute in the name of the Company certificates for the stock
of the Company, deeds, mortgages, bonds, contracts or other instruments
authorized by the Board of Directors; he or she shall prepare, or cause to be
prepared, for use at meetings of shareholders the list of shareholders as of the
record date referred to in Article I, Section 12 of these By-Laws and shall
certify, or cause the transfer agent to certify, such list; he or she shall keep
a current list of the Company's Directors and officers and their residence
addresses; he or she shall be custodian of the seal of the Company and shall
affix the seal, or cause it to be affixed, to all agreements, documents and
other papers requiring the same. The Secretary


<PAGE>

shall have custody of the Minute Book containing the minutes of all meetings of
shareholders, Directors, the Executive Committee, and any other committees which
may keep minutes, and of all other contracts and documents which are not in the
custody of the Treasurer or the Controller of the Company, or in the custody of
some other person authorized by the Board of Directors to have such custody.

     SECTION 12. Appointed Officers:  The Board of Directors may delegate to
any officer or committee the power to appoint and to remove any subordinate
officer, agent or employee.

     SECTION 13. Assignment and Transfer of Stocks, Bonds, and Other Securities:
The Chairman of the Board, the Treasurer, the Secretary, any Assistant
Secretary, any Assistant Treasurer, and each of them, shall have power to
assign, or to endorse for transfer, under the corporate seal, and to deliver,
any stock, bonds, subscription rights, or other securities, or any beneficial
interest therein, held or owned by the Company.

                                    ARTICLE V

                   CONTRACTS, CHECKS, DRAFTS AND BANK ACCOUNTS

     SECTION 1.  Execution of Contracts: The Board of Directors, except as in
these By-Laws otherwise provided, may authorize any officer or officers, agent,
or agents, in the name of and on behalf of the Company to enter into any
contract or execute and dliver any instrument, and such authority may be general
or confined to specific instances; but, unless so authorized by the Board of
Directors, or expressly authorized by these By-Laws, no officer, agent or
employee shall have any power or authority to bind the Company by any contract
or engagement or to pledge its credit or to render it liable pecuniarily in any
amount for any purpose.

     SECTION 2.  Loans: No loans shall be contracted on behalf of the Company,
and no negotiable paper shall be issued in its name unless specifically
authorized by the Board of Directors.

     SECTION 3.  Checks, Drafts, etc.: All checks, drafts, and other orders for
the payment of money out of the funds of the Company, and all notes or other
evidences of indebtedness of the Company, shall be signed on behalf of the
Company in such manner as shall from time to time be determined by resolution of
the Board of Directors.

     SECTION 4.  Deposits: All funds of the Company not otherwise employed shall
be deposited from time to time to the credit of the Company in such banks, trust
companies or other depositories as the Board of Directors may select.

                                   ARTICLE VI

                              STOCKS AND DIVIDENDS

     SECTION 1.  Shares of Stock: Shares of stock of the Company shall be
represented by certificates except to the extent that the Board of Directors of
the Company shall provide by resolution that some or all of any or all classes
and series of the Company's shares shall be uncertificated shares, provided that
such resolution shall not apply to shares represented by a certificate until
such certificate is surrendered to the Company. Except as otherwise expressly
provided by law, the rights and obligations of holders of uncertificated shares
and the rights and obligations of the holders of certificates representing
shares of the same class and series shall be identical.

     SECTION 2.  Certificates For Shares. To the extent that shares of stock of
the Company are to be represented by certificates, the certificates therefor
shall be in such form as shall be approved by the Board of Directors.


<PAGE>

The certificates of stock shall be numbered in order of their issue, shall be
signed by the Chairman of the Board or a Vice President, and the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer. The signature
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Company itself or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the Company
with the same effect as if he or she were an officer at the date of issue.

     SECTION 3.  Transfer of Stock: Transfers of stock of the Company shall be
made only on the books of the Company by the holder thereof, or by his or her
duly authorized attorney, on surrender of the certificate or certificates for
stock represented by certificates, properly endorsed, or in the case of shares
of stock not represented by certificates, on delivery to the Company of proper
transfer instructions. Within a reasonable time after the issuance or transfer
of uncertificated stock, the Company shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to the Business Corporation Law of the State of New
York. Every certificate surrendered to the Company shall be marked "Canceled",
with the date of cancellation, and no new certificate shall be issued in
exchange therefor until the old certificate has been surrendered and canceled. A
person in whose name stock of the Company stands on the books of the Company
shall be deemed the owner thereof as regards the Company; provided that,
whenever any transfer of stock shall be made for collateral security, and not
absolutely, such fact, if known to the Secretary of the Company, or to its
transfer agent shall be so expressed in the entry of the transfer. No transfer
of stock shall be valid as against the Company, or its shareholders for any
purpose, until it shall have been entered in the stock records of the Company as
specified in these By-Laws by an entry showing from and to whom transferred.

     SECTION 4.  Transfer and Registry Agents: The Company may, from time to
time, maintain one or more transfer offices or agencies and/or registry offices
at such place or places as may be determined from time to time by the Board of
Directors; and the Board of Directors may, from time to time, define the duties
of such transfer agents and registrars and make such rules and regulations as it
may deem expedient, not inconsistent with these By-Laws, concerning the issue,
transfer and registration of certificates for stock or uncertificated stock of
the Company.

     SECTION 5.  Lost, Destroyed and Mutilated Certificates: The holder of any
certificated stock of the Company shall immediately notify the Company of any
loss, destruction or mutilation of the certificate therefor. The Company may
issue a new certificate or uncertificated stock in place of the lost or
destroyed certificate, but as a condition to such issue, the holder of such
certificate must make satisfactory proof of the loss or destruction thereof, and
must give to the Company a bond of indemnity in form and amount and with one or
more sureties satisfactory to the Treasurer, the Secretary or any Assistant
Treasurer or Assistant Secretary. Such bond of indemnity shall also name as
obligee each of the transfer agents and registrars for the stock the certificate
for which has been lost or destroyed.

     SECTION 6.  Record Dates for Certain Purposes: The Board of Directors of
the Company shall fix a day and hour not more than sixty days preceding the date
of any meeting of shareholders, or the date for payment of any cash or stock
dividend, or the date for the allotment of any rights of subscription, or the
date when any change or conversion or exchange of capital stock shall go into
effect, as a record date for the determination of the shareholders entitled to
notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or entitled to receive any
such allotment of rights of subscription, or entitled to exercise rights in
respect of any such change, conversion or exchange of capital stock, and in such
case, such shareholders and only such shareholders as shall be


<PAGE>

shareholders of record on the day and hour so fixed shall be entitled to such
notice of, and to vote at, such meeting or any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights of
subscription, or to exercise rights in connection with such change or conversion
or exchange of capital stock, as the case may be, notwithstanding any transfer
of any stock on the books of the Company after such day and hour fixed as
aforesaid.

     SECTION 7.  Dividends and Surplus: Subject to the limitations prescribed by
law, the Board of Directors (1) may declare dividends on the stock of the
Company whenever and in such amounts as, in its opinion, the condition of the
affairs of the Company shall render it advisable, (2) may use and apply, in its
discretion, any part or all of the surplus of the Company in purchasing or
acquiring any of the shares of stock of the Company, and (3) may set aside from
time to time out of such surplus or net profits such sum or sums as it in its
absolute discretion, may think proper as a reserve fund to meet contingencies or
for equalizing dividends, or for the purpose of maintaining or increasing the
property or business of the Company, or for any other purpose it may think
conducive to the best interest of the Company.

                                   ARTICLE VII

                                OFFICES AND BOOKS

     SECTION 1.  Offices: The Company shall maintain an office at such place in
the County of Monroe, State of New York, as the Board of Directors may
determine. The Board of Directors may from time to time and at any time
establish other offices of the Company or branches of its business at whatever
place or places seem to it expedient.

     SECTION 2.  Books and Records:

     (a) There shall be kept at one or more offices of the Company (1) correct
and complete books and records of account, (2) minutes of the proceedings of the
shareholders, Board of Directors and the Executive Committee, (3) a current list
of the Directors and officers of the Company and their residence addresses, and
(4) a copy of these By-Laws.

     (b) The stock records may be kept either at the office of the Company or at
the office of its transfer agent or registrar in the State of New York, if any,
and shall contain the names and addresses of all shareholders, the number and
class of shares held by each and the dates when they respectively became the
owners of record thereof.

                                  ARTICLE VIII

                                     GENERAL

     SECTION 1.  Seal:  The corporate seal shall be in the form of a circle
and shall bear the full name of the Company and the words and figures
"Incorporated 1906, Rochester, N. Y.".

     SECTION 2.  Indemnification of Directors and Officers: Except to the extent
expressly prohibited by law, the Company shall indemnify any person, made or
threatened to be made, a party in any civil or criminal action or proceeding,
including an action or proceeding by or in the right of the Company to procure a
judgment in its favor or by or in the right of any other corporation of any type
or kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any Director or officer of the Company
served in any capacity at the request of the Company, by reason of the fact that
he or she, his or her testator or intestate is or was a Director or officer of
the Company or serves or served such other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, in any capacity,
against judgments, fines, penalties, amounts paid in settlement and reasonable
expenses, including


<PAGE>

attorneys' fees, incurred in connection with such action or proceeding, or any
appeal therein, provided that no such indemnification shall be required with
respect to any settlement unless the Company shall have given its prior approval
thereto. Such indemnification shall include the right to be paid advances of any
expenses incurred by such person in connection with such action, suit or
proceeding, consistent with the provisions of applicable law. In addition to the
foregoing, the Company is authorized to extend rights to indemnification and
advancement of expenses to such persons by i) resolution of the shareholders,
ii) resolution of the Directors or iii) an agreement, to the extent not
expressly prohibited by law.

                                   ARTICLE IX

                                   FISCAL YEAR

     SECTION 1.  Fiscal Year:  The fiscal year of the Company shall end on the
31st day of December in each year.


                                    ARTICLE X

                                   AMENDMENTS

     SECTION 1.  Amendments: By-Laws of the Company may be amended, repealed or
adopted by a majority of the votes of the shares at the time entitled to vote in
the election of any Directors. If, at any meeting of shareholders, action is
proposed to be taken to amend, repeal or adopt By-Laws, the notice of such
meeting shall include a brief statement or summary of the proposed action. The
By-Laws may also be amended, repealed or adopted by the Board of Directors, but
any By-Law adopted by the Board may be amended or repealed by shareholders
entitled to vote thereon as hereinabove provided. If any By-Law regulating an
impending election of Directors is adopted, amended or repealed by the Board of
Directors, there shall be set forth in the notice of the next meeting of
shareholders for the election of Directors the By-Law so adopted, amended or
repealed, together with a concise statement of the changes made.


<PAGE>

                                                                 Exhibit 4(c)(8)

INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE ("this Instrument"), dated
as of November 30, 2001 among Xerox Corporation (the "Company"), Bank One, N.A.
(as successor by merger with The First National Bank of Chicago), a national
banking association duly organized and existing under the laws of the United
States, having its principal Corporate Trust Office at c/o 100 East Broad
Street, 8th Floor, Columbus, Ohio, 43215 ("Bank One"), and Wells Fargo Bank
Minnesota, National Association, a national banking association duly organized
and existing under the laws of the United States, having its principal office at
Wells Fargo Center, Sixth Street and Marquette Avenue; N9303-120, Minneapolis,
Minnesota 55479 ("Wells Fargo").

                                    RECITALS:

A. Property Trustee and Capital Securities
   ---------------------------------------

   1. Xerox Capital Trust I (the "Trust"), a Delaware statutory business trust,
was established pursuant to an Amended and Restated Declaration of Trust, dated
as of January 29, 1997 (the "Declaration of Trust") among Administrative
Trustees named therein (the "Administrative Trustees"), Bank One, as Property
Trustee, First Chicago Delaware Inc., as Delaware Trustee, and the Company, as
sponsor (in such capacity, the "Sponsor").

   2. Pursuant to the Declaration
 of Trust, the Trust issued $650,000,000
aggregate principal amount at maturity of its 8% Series A Capital Securities
("Series A Capital Securities") and $20,103,000 aggregate principal amount at
maturity of its 8% Series A Common Securities ("Series A Common Securities").

   3. Pursuant to the terms and conditions of the Prospectus dated May 9, 1997
of the Trust and the Company (the "Exchange Offer Prospectus"), the Declaration
of Trust, the Series A Capital Securities Guarantee (as defined below) and the
Indenture (as defined below), the Trust issued (a) $649,200,000 aggregate
principal amount at maturity of its 8% Series B Capital Securities ("Series B
Capital Securities" and, together with the Series A Capital Securities, the
"Capital Securities") in exchange for $649,200,000 aggregate principal amount at
maturity of its 8% Series A Capital Securities and (b) $20,103,000 aggregate
principal amount at maturity of its 8% Series B Common Securities ("Series B
Common Securities" and, together with the Series A Common Securities, the
"Common Securities") in exchange for $20,103,000 aggregate principal amount at
maturity of its 8% Series A Common Securities.

   4. Pursuant to the Declaration of Trust, the Trust appointed Bank One as the
Property Trustee of the Trust (in such capacity, the "Property Trustee"), and as
the Registrar, Paying Agent and Exchange Agent for the Capital Securities (in
such capacities, the "Registrar", the "Paying Agent" and the "Exchange Agent",
respectively), and the Trust acts as the Paying Agent, Registrar and Exchange
Agent for the Common Securities;

   5. The Declaration of Trust provides that (i) the Property Trustee may resign
as such by an instrument in writing signed by the resigning Property Trustee and
delivered to the Sponsor and the Trust, which resignation to be effective upon
appointment of a successor Property Trustee and acceptance of such appointment
by instrument signed by such successor Property Trustee and delivered to the
Trust, the Sponsor and the resigning Property Trustee, and (ii) the Paying Agent
may resign as such for the Capital Securities upon 30 days' written notice to
the Administrative Trustees.

   6. The Declaration of Trust provides that (i) unless an Event of Default (as
defined therein) shall have occurred and be continuing, trustees, including the
Property Trustee, may be appointed or removed without cause at


<PAGE>

any time by vote of the holders of a majority in liquidation amount of the
Common Securities and (ii) the Administrative Trustees, on behalf of the Trust,
are authorized to appoint the Registrar, Paying Agent and Exchange Agent for the
Capital Securities.

   7. Bank One wishes to resign as the Property Trustee and as the Registrar,
Paying Agent and Exchange Agent for the Capital Securities; and the Company, as
the sole holder of the Common Securities, wishes to appoint Wells Fargo as the
successor Property Trustee, and the undersigned Administrative Trustee, on
behalf of the Trust, wishes to appoint Wells Fargo as the successor Registrar,
Paying Agent and Exchange Agent for the Capital Securities.

B. Capital Securities Guarantee
   ----------------------------

   1. Pursuant to the Series A Capital Securities Guarantee Agreement dated as
of January 29, 1997, executed and delivered by the Company, as guarantor (in
such capacity, the "Guarantor"), Bank One, as trustee, for the benefit of the
holders of the Series A Capital Securities (the "Series A Capital Securities
Guarantee"), the Guarantor appointed Bank One as guarantee trustee (the "Series
A Capital Securities Guarantee Trustee");

   2. Pursuant to the Series B Capital Securities Guarantee Agreement dated as
of June 13, 1997, executed and delivered by the Guarantor, Bank One, as trustee,
for the benefit of the holders of the Series B Capital Securities (the "Series B
Capital Securities Guarantee" and, together with the Series A Capital Securities
Guarantee, the "Capital Securities Guarantee"), the Guarantor appointed Bank One
as guarantee trustee (the "Series B Capital Securities Guarantee Trustee" and,
in its capacity as the Series A Capital Securities Guarantee Trustee and the
Series B Capital Securities Guarantee Trustee, the "Capital Securities Guarantee
Trustee"); and

   3. The Capital Securities Guarantee provides that the Capital Securities
Guarantee Trustee may resign as such by an instrument in writing signed by the
Capital Securities Guarantee Trustee and delivered to the Guarantor, which
resignation to be effective upon appointment of a successor Capital Securities
Guarantee Trustee and acceptance of such appointment by instrument signed by
such successor Capital Securities Guarantee Trustee and delivered to the
Guarantor and the resigning Capital Securities Guarantee Trustee.

   4. Bank One wishes to resign as the Capital Securities Guarantee
Trustee, and Guarantor wishes to appoint Wells Fargo as the successor
Capital Securities Guarantee Trustee.

C. Subordinated Debentures
   -----------------------

   1. Bank One has been appointed as trustee (in such capacity, the "Debenture
Trustee") under the Indenture dated as of January 29, 1997 (the "Indenture"),
between the Company and such Debenture Trustee, pursuant to which the Company
issued $650,000,000 in aggregate principal amount at maturity of 8% Series A
Junior Subordinated Debentures due February 1, 2027 (the "Series A Subordinated
Debentures").

   2. Pursuant to the terms and conditions of the Exchange Offer Prospectus, the
Declaration of Trust, the Series A Capital Securities Guarantee and the
Indenture, the Trust issued $649,200,000 aggregate principal amount at maturity
of its 8% Series B Subordinated Debentures ("Series B Subordinated Debentures"
and, together with the Series A Subordinated Debentures, the "Subordinated
Debentures") in exchange for $649,200,000 aggregate principal amount at maturity
of its 8% Series A Subordinated Debentures.

   3. Bank One, as the Debenture Trustee, also acts as the Authenticating


<PAGE>

Agent, Paying Agent, Transfer Agent or Security Registrar for the Subordinated
Debentures under the Indenture.

   4. The Indenture provides that the Debenture Trustee may resign as such by
giving written notice of such resignation to the Company and by mailing notice
thereof to the holders of the Trust, the sole registered holder of the
Subordinated Debentures, which resignation to be effective upon appointment of a
successor Debenture Trustee and acceptance of such appointment by instrument
signed by such successor Debenture Trustee and delivered to the Company and the
resigning Debenture Trustee.

   5. Bank One wishes to resign as the Debenture Trustee, and as the
Authenticating Agent, Paying Agent, Transfer Agent or Security Registrar for the
Subordinated Debentures, and the Company wishes to appoint Wells Fargo as the
successor Debenture Trustee, and as the successor Authenticating Agent, Paying
Agent, Transfer Agent or Security Registrar for the Subordinated Debentures.

D. Bank One, in its capacities as the resigning Property Trustee, the
resigning Registrar, Paying Agent and Exchange Agent for the Capital Securities,
the resigning Capital Securities Guarantee Trustee, the resigning Debenture
Trustee and the resigning Authenticating Agent, Paying Agent, Transfer Agent or
Security Registrar for the Subordinated Debentures, collectively, is hereinafter
referred to as the "Resigning Trustee"; and Wells Fargo, in its capacities as
the successor Property Trustee, the successor Registrar, Paying Agent and
Exchange Agent for the Capital Securities, the successor Capital Securities
Guarantee Trustee, the successor Debenture Trustee and the successor
Authenticating Agent, Paying Agent, Transfer Agent or Security Registrar for the
Subordinated Debentures, collectively, is hereinafter referred to as the
"Successor Trustee".

NOW, THEREFORE, for and in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby covenanted, declared and decreed by the Company, the
Sponsor, the Guarantor, the Trust, the Successor Trustee and the Resigning
Trustee as follows:

1. Property Trustee; and Registrar, Paying Agent and Exchange Agent for the
Capital Securities.

   (a) Bank One hereby resigns, and hereby gives notice of its resignation, as
the Property Trustee and as the Registrar, Paying Agent and Exchange Agent for
the Capital Securities, such resignation to be effective as of the date hereof
upon the execution and delivery of this Instrument by all the parties hereto.
Simultaneously with the execution and delivery of this Instrument by all the
parties hereto, (i) the undersigned Administrative Trustee, on behalf of the
Trust, hereby waives any requirement relating to any prior notice of resignation
of Bank One as Registrar, Paying Agent and Exchange Agent for the Capital
Securities and (ii) each of the Trust, the Sponsor, Bank One, as the resigning
Property Trustee and as the Registrar, Paying Agent and Exchange Agent for the
Capital Securities, and Wells Fargo, as the successor Property Trustee and as
the Registrar, Paying Agent and Exchange Agent for the Capital Securities,
hereby acknowledges its receipt of notice of resignation and appointment.

   (b) The Trust hereby appoints Wells Fargo, and Wells Fargo hereby accepts
appointment, as the successor Property Trustee and as the Registrar, Paying
Agent and Exchange Agent for the Capital Securities.

2. Capital Securities Guarantee Trustee.

   (a) Bank One hereby resigns, and gives notice of its resignation, as the
Capital Securities Guarantee Trustee, such resignation to be effective as of the
date hereof upon the execution and delivery of this Instrument by all the
parties hereto. Simultaneously with the execution and delivery of this


<PAGE>

Instrument by all the parties hereto, each of the Guarantor, Bank One, as the
resigning Capital Securities Guarantee Trustee, and Wells Fargo, as the
successor Capital Securities Guarantee Trustee, hereby acknowledges its receipt
of notice of resignation and appointment.

   (b) The Guarantor hereby appoints Wells Fargo, and Wells Fargo hereby accepts
appointment, as the successor Capital Securities Guarantee Trustee.

3. Debenture Trustee; and Authenticating Agent, Paying Agent, Transfer Agent
or Security Registrar for the Subordinated Debentures.

   (a) Bank One hereby resigns, and gives notice of its resignation, as the
Debenture Trustee, Authenticating Agent, Paying Agent, Transfer Agent or
Security Registrar for the Subordinated Debentures, such resignation to be
effective as of the date hereof upon the execution and delivery of this
Instrument by all the parties hereto. Simultaneously with the execution and
delivery of this Instrument by all the parties hereto, each of the Company, Bank
One, as the resigning Debenture Trustee, Authenticating Agent, Paying Agent,
Transfer Agent or Security Registrar for the Subordinated Debentures, and Wells
Fargo, as the successor Debenture Trustee, Authenticating Agent, Paying Agent,
Transfer Agent or Security Registrar for the Subordinated Debentures, hereby
acknowledges its receipt of notice of resignation and appointment.

   (b) The Guarantor hereby appoints Wells Fargo, and Wells Fargo hereby accepts
appointment, as the successor Debenture Trustee, Authenticating Agent, Paying
Agent, Transfer Agent or Security Registrar for the Subordinated Debentures.

4. The Resigning Trustee hereby grants, gives, bargains, sells, remises,
releases, conveys, confirms, assigns, transfers and sets over to the Successor
Trustee as such successor trustee and its successors and assigns all rights,
title and interest of the Resigning Trustee in and to the trust estate and all
rights, powers and trusts, under the Indenture, Declaration of Trust and
Guarantee Agreement; and the Resigning Trustee does hereby pay over, assign and
deliver to the Successor Trustee any and all money, if any, and property, if
any, held by the Resigning Trustee; and the Company for the purpose of more
fully and certainly vesting in and confirming to the Successor Trustee said
estate, properties, rights, powers and, at the request of the Successor Trustee,
joins in the execution hereof.

5. Notwithstanding the resignation of the Resigning Trustee as Trustee under the
Indenture, Declaration of Trust and Guarantee Agreement the Company shall remain
obligated under the Indenture, Declaration of Trust, and Guarantee Agreement to
compensate and reimburse the Resigning Trustee in connection with its
Trusteeship under the Indenture.

6. The Resigning Trustee agrees to pay or indemnify, as applicable, the
Successor Trustee and hereby saves the Successor Trustee harmless from and
against any and all costs, claims, liabilities, losses or damages whatsoever
arising out of the Resigning Trustee's actions or omissions during its tenure as
Successor Trustee under the Indenture, Declaration of Trust, and Guarantee
Agreement (including the reasonable fees, expenses and disbursements of counsel
and other advisors of the Successor Trustee) that the Successor Trustee might
suffer or incur arising out of actual, alleged or adjudicated actions of
omissions of the Resigning Trustee. The Resigning Trustee will furnish to the
Successor Trustee, promptly after receipt, all papers with respect to any action
the outcome of which would make the indemnity provided for in this paragraph
operative. The Resigning Trustee will have the right to provide its own defense
and to select counsel and other advisors for the Successor Trustee in any such
action. The Resigning Trustee and Successor Trustee hereby agree that the
indemnities provided for in this paragraph shall apply only to claims, demands
and actions that are made or brought against the Successor Trustee on or before
the expiration of the period established by a statute of


<PAGE>

limitations (the "Statute of Limitations Period") adjudicated by any final order
of a court of competent jurisdiction to be applicable to such claim, demand or
action. The Resigning Trustee and the Successor Trustee further hereby agree
that the indemnities provided for in this paragraph shall not apply to any
claims, demands or actions brought against the Successor Trustee after the
expiration of an applicable Statute of Limitations Period, as determined by a
court of competent jurisdiction in any claim, demand or action brought against
the Successor Trustee.

7. The Company represents and warrants to the Successor Trustee that:

   a. It is duly organized and validly existing;

   b. It has not entered into any amendment or supplement to the Indenture,
Declaration of Trust, or Guarantee Agreement, and the Indenture, Declaration
of Trust, and Guarantee Agreement are in full force and effect;

   c. It has performed and fulfilled each covenant and condition on its part
to be performed or fulfilled under the Indenture, Declaration of Trust, and
Guarantee Agreement;

   d. The execution and delivery of this Instrument and the consummation of the
transactions contemplated hereby do not and will not conflict with, or result in
a breach of, any of the terms or provisions of, or constitute a default under,
any contract, agreement, indenture or other instrument (including, without
limitation, its certificate of incorporation and by- laws) to which it is a
party or by which it or its property is bound, or any judgment, decree or order
of any court or governmental agency or regulatory body or law, rule or
regulation applicable to it or its property;

   e. The Debentures are validly issued securities of the Company; and

   f. The Trust Securities are validly issued securities of the Trust.

8. The Company hereby certifies that the person signing this Instrument on
behalf of the Company is authorized to, among other things: (a) accept Resigning
Trustee's resignation as Trustee under the Indenture, Declaration of Trust, and
Guarantee Agreement; (b) appoint Wells Fargo Bank Minnesota, National
Association as the Successor Trustee under the Indenture, Declaration of Trust,
and Guarantee Agreement; and (c) execute and deliver such agreements and other
instruments as may be necessary or desirable to effectuate the succession of
Wells Fargo Bank Minnesota, National Association as Successor Trustee under the
Indenture, Declaration of Trust, and Guarantee Agreement;

9. The Resigning Trustee hereby represents and warrants to the Successor
Trustee that:

   a. There is no action, suit or proceeding pending or, to the best of the
knowledge of the Resigning Trustee threatened, against the Resigning Trustee
before any court or governmental authority arising out of any action or omission
by the Resigning Trustee as Successor Trustee under the Indenture, Declaration
of Trust, and Guarantee Agreement;

   b. It has made, or promptly will make, available to the Successor Trustee
originals, if available, or copies in its possession, of all Documents relating
to the trusts created by the Indenture, Declaration of Trust, and Guarantee
Agreement (the "Trusts") and all information in the possession of its corporate
trust administration department relating to the administration and status of the
Trusts and will furnish to the Successor Trustee such Documents or information
on or before the Effective Date;

   c. On and as of the date hereof, the aggregate principal amount at maturity
of the following securities with the following CUSIP numbers are outstanding:

      (1) Series A Capital Securities:        $  800,000, CUSIP 984119AA5;


<PAGE>

      (2) Series B Capital Securities:        $649,200,000, CUSIP 984119AC1;
      (3) Series A Common Securities:                 None;
      (4) Series B Common Securities:         $ 20,103,000, CUSIP 9XCAPIG53;
      (5) Series A Subordinated Debentures:   $    800,000; and
      (6) Series B Subordinated Debentures:   $649,200,000;

   d. On and as of the date hereof, the registered holder of the following
securities in the following denominations ($ in principal amount at maturity)
is as follows:

      (1) Series A Capital Securities:          Cede & Co., in a single
                                                denomination of $800,000;

      (2) Series B Capital Securities:          Cede & Co., in denominations
                                                of $200,000,000, $200,000,000,
                                                $200,000,000 and $49,200,000;

      (3) Series A Common Securities:           None;

      (4) Series B Common Securities:           the Company, in a single
                                                denomination of $20,103,000;

      (5) Series A Subordinated Debentures:     the Property Trustee, in a
                                                single denomination of
                                                $800,000; and

      (6) Series B Subordinated Debentures:     the Property Trustee, in a
                                                single denomination of
                                                $649,200,000;

   e. All interest on each of the Series A Capital Securities, Series B Capital
Securities, Series A Subordinated Debentures and Series B Subordinated
Debentures accrued through August 1, 2001 has been paid.

   f. No covenant or condition contained in the Indenture, the Subordinated
Debentures, the Declaration of Trust, the Capital Securities, the Common
Securities or the Capital Securities Guarantee Agreement has been waived by the
Resigning Trustee in its applicable capacity thereunder or to the best of the
knowledge of the Resigning Trustee, by the security holders of the percentage in
aggregate principal amount at maturity of the securities required by the
Indenture, the Subordinated Debentures, the Declaration of Trust, the Capital
Securities, the Common Securities or the Capital Securities Guarantee Agreement
to effect any such waiver.

   g. To the best of its knowledge, the Resigning Trustee has lawfully
discharged its duties as the Resigning Trustee.

   h. None of the Indenture, the Subordinated Debentures, the Declaration of
Trust, the Capital Securities, the Common Securities or the Capital Securities
Guarantee Agreement has been amended or modified in any respect, and each such
agreement and instrument is in full force and effect on the date hereof.

   i. To the best of the Resigning Trustee's knowledge, there is no default or
Event of Default that currently exists under the Indenture, the Subordinated
Debentures, the Declaration of Trust, the Capital Securities, the Common
Securities or the Capital Securities Guarantee Agreement.

10. The Successor Trustee represents and warrants to the Resigning Trustee, and
the Trust, the Sponsor, the Guarantor and the Company on and as of the date
hereof that:

   a. The execution, delivery and performance by it of this Instrument have been
duly authorized by all necessary corporate action on its part; this Instrument
has been duly executed and delivered by it and constitutes it legal, valid and
binding obligation, enforceable against it in accordance with


<PAGE>

its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law);

    b. The execution, delivery and performance of this Instrument by it do not
conflict with or constitute a breach of its charter or by-laws; and

    c. No consent, approval or authorization of, or registration with or notice
to, any federal banking authority is required for the execution, delivery or
performance by it this Instrument;

    d. It is a national banking association with trust powers and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration of Trust, the Series A and Series B Capital Securities
Guarantees, and the Indenture;

    e. It is a corporation organized and doing business under the laws of the
United States of America, authorized under such laws to exercise corporate trust
powers, having, on the date hereof and as of the end of the fiscal year for
which its most recent annual report was published, a combined capital and
surplus of at least US$50,000,000, and subject to supervision or examination by
the federal government of United States of America, or any State or territory
thereof or the District of Columbia;

    f. It does not have any "conflicting interest" within the meaning of Section
310(b) of the Trust Indenture Act; and

    g. It is not an affiliate (as defined under Rule 405 under the Securities
Act of 1933, as amended) of the Trust, the Capital Securities Guarantor or the
Company.

11. The Company and the Resigning Trustee, for the purposes of more fully and
certainly vesting in and confirming to the Successor Trustee, the rights, powers
and trusts being conferred upon the Successor Trustee in accordance with the
terms of this Instrument, agree, upon reasonable request of the Successor
Trustee, to execute, acknowledge and deliver such further instruments of
conveyance and further assurance and to do such other things as may reasonably
be required for more fully and certainly vesting and confirming to the Successor
Trustee all rights, powers and trusts which the Resigning Trustee now holds
under and by virtue of the Indenture, the Subordinated Debentures, the
Declaration of Trust, the Capital Securities, the Common Securities or the
Capital Securities Guarantee Agreement.

12. All notices, whether faxed or mailed will be deemed received when sent
pursuant to the following instructions:

    TO BANK ONE, N.A.:
    Jeffrey A. Ayres
    Director and Vice President
    100 E. Broad Street, 8th Floor
    Columbus, OH 43215
    TO THE COMPANY, SPONSOR, GUARANTOR AND HOLDER OF COMMON SECURITIES

    Xerox Corporation
    P.O. Box 1600
    800 Long Ridge Road
    Stamford, CT 06904
    Attn: Treasurer
    Fax:  (203) 968-4373
    Telephone: (203) 968-4489

    TO THE TRUST:
    Xerox Capital Trust I


<PAGE>

    c/o Xerox Corporation
    P.O. Box 1600
    800 Long Ridge Road
    Stamford, CT 06904
    Attn: Treasurer
    Fax:  (203) 968-4373
    Telephone: (203) 968-4489

    TO WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
    Jane Schweiger
    Assistant Vice President
    Wells Fargo Bank Minnesota, N.A.
    Sixth Street and Marquette Avenue; N9303-120
    Minneapolis, MN  55479
    FAX: (612) 667-9825
    Phone (612) 667-2344

12. This Instrument 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.

13. This Instrument shall be governed by and construed in accordance with the
laws of the State of New York.

    IN WITNESS WHEREOF, the parties hereto have caused this Instrument of
Resignation, Appointment and Acceptance to be duly executed and their respective
seals to be affixed hereunto and duly attested all as of the day and year first
above written.

                                      XEROX CORPORATION,
                                      as the Company, Sponsor, Guarantor
                                      and Sole Holder of Common Securities

                                      By_________________________________
                                        Name:  Gregory B. Tayler
                                        Title: Vice President and Treasurer


                                      ___________________________________
                                      Eunice M. Filter,
                                      as Administrative Trustee for
                                      Xerox Capital Trust I


                                      BANK ONE, N.A.
                                      as Resigning Trustee

                                      By_________________________________
                                               Authorized Signer


                                      WELLS FARGO BANK MINNESOTA,
                                      NATIONAL ASSOCIATION,
                                      as Successor Trustee

                                      By_________________________________
                                               Authorized Signer


<PAGE>

                                                                 Exhibit 4(e)(2)

INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE, dated as of July 26, 2001
among Xerox Corporation (the "Company"), Bank One, National Association, a
national banking association duly organized and existing under the laws of the
United States, having its principal Corporate Trust Office at c/o 100 East Broad
Street, 8th Floor, Columbus, Ohio, 43215 ("Resigning Trustee"), and Wells Fargo
Bank Minnesota, National Association, a national banking association duly
organized and existing under the laws of the United States, having its principal
office at Wells Fargo Center, Sixth Street and Marquette Avenue; N9303-120,
Minneapolis, Minnesota 55479 ("Successor Trustee").

     WHEREAS, the Company issued Convertible Subordinated Debentures Due April
21, 2018 pursuant to the Indenture dated as of April 21, 1998, (the
"Indenture"), between the Company and the Resigning Trustee, as successor by
merger with The First National Bank of Chicago;

     WHEREAS, the Company appointed the Resigning Trustee as the paying agent
(the "Paying Agent"), and the Security Registrar (the "Security Registrar")
under the Indenture;

     WHEREAS, the Indenture provides that the Resigning Trustee may at any time
resign by giving written notice
 thereof to the Company;

     WHEREAS, the Resigning Trustee represents that it gave the Company a
written notice of its resignation as Trustee, Paying Agent and Security
Registrar, a true copy of which is annexed hereto marked Exhibit A;

     WHEREAS, the Indenture further provides that, if the Trustee shall resign,
the Company shall promptly appoint a successor Trustee;

     WHEREAS, the Company authorizes, (signor of tripartite agreement), a duly
qualified and acting officer of the Company whose signature is set forth in the
certificate of incumbency attached as Exhibit B-1, to unilaterally appoint a
successor in lieu of a board resolution as provided by the Resolutions Adopted
by the Company's Board of Directors on December 8, 1997 and by Company's
Executive Committee of the Board of Directors on April 14, 1998 (Exhibit B-2)
and certified by the Company's Assistant Secretary as of the 26th July, 2001
(Exhibits B-3);

     WHEREAS, the Indenture provides that the successor Trustee shall execute,
acknowledge and deliver to the Company and to the resigning Trustee an
Instrument accepting such appointment and thereupon the resignation of the
Trustee shall become effective and such successor Trustee without any further
act, deed or conveyance, shall become vested with all rights, powers, duties and
obligations of the resigning Trustee;

     WHEREAS, the Indenture further provides that no successor Trustee shall
accept appointment as such unless at the time it is qualified and eligible under
the Indenture;

     WHEREAS, Wells Fargo Bank Minnesota, National Association is qualified,
eligible and willing to accept such appointment as successor Trustee, Paying
Agent and Security Registrar;

     WHEREAS, the Indenture further provides that the Successor Trustee shall
mail notice of the resignation of the Trustee and the appointment of a Successor
Trustee to Holders of the Debentures;

     WHEREAS, the Successor Trustee on behalf of the Company, simultaneously
with the execution and delivery of this Instrument, has caused the notice
required pursuant to the Indenture, a form of which is annexed hereto marked
Exhibit C, to be mailed to the Holders of the


<PAGE>

Debentures as therein required;

     NOW, THEREFORE, THIS INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE,
WITNESSETH: that for and in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby covenanted, declared and decreed by the Company, the
Successor Trustee and the Resigning Trustee as follows:

     1. The resignation of the Resigning Trustee, and its discharge from the
trust created by the Indenture, shall be effective as of the date hereof upon
the execution and delivery of this Instrument by all the parties hereto.

     2. The Company, in the exercise of the authority vested in it by the
Indenture, hereby appoints Wells Fargo Bank Minnesota, National Association as
Successor Trustee, Paying Agent and Security Registrar with all rights, powers,
trusts, duties and obligations under the Indenture, such appointment to be
effective as of the date hereof upon the execution and delivery of this
Instrument by all the parties hereto.

     3. The Successor Trustee hereby represents that it is qualified and
eligible under the provisions of the Indenture to be appointed Successor
Trustee, Paying Agent and Security Registrar and hereby accepts its appointment
as Successor Trustee, Paying Agent and Security Registrar effective as of the
date hereof upon the execution and delivery of this Instrument by all parties
hereto, and hereby assumes the rights, powers, trusts, duties and obligations of
the Trustee under the Indenture, Paying Agent and Registrar, subject to all
terms and provisions therein contained.

     4. The Resigning Trustee hereby grants, gives, bargains, sells, remises,
releases, conveys, confirms, assigns, transfers and sets over to the Successor
Trustee, and its successors and assigns, and the Successor Trustee, and its
successors and assigns hereby accepts such assignment and transfer, all rights,
title and interest of the Resigning Trustee in and to the trust estate and all
rights, powers, trusts, duties and obligations of the Trustee, Paying Agent and
Registrar under the Indenture; and the Resigning Trustee does hereby pay over,
assign and deliver to the Successor Trustee, and the Successor Trustee, and its
successors and assigns hereby accepts such assignment and transfer, any and all
money, if any, and property, if any, held by the Resigning Trustee pursuant to
the Indenture; and the Company for the purpose of more fully and certainly
vesting in and confirming to the Successor Trustee said estate, properties,
rights, powers and, at the request of the Successor Trustee, joins in the
execution hereof.

     5. Notwithstanding the resignation of the Resigning Trustee, as Trustee
under the Indenture, the Company shall remain obligated under the Indenture to
compensate and reimburse the Resigning Trustee in connection with its
Trusteeship under the Indenture through the date hereof.

     6. The Resigning Trustee agrees to pay or indemnify, as applicable, the
Successor Trustee and hereby saves the Successor Trustee harmless from and
against any and all costs, claims, liabilities, losses or damages whatsoever
arising out of the Resigning Trustee's actions or omissions during its tenure as
Trustee, Paying Agent and Security Registrar under the Indenture (including the
reasonable fees, expenses and disbursements of counsel and other advisors of the
Successor Trustee) that the Successor Trustee might suffer or incur arising out
of actual, alleged or adjudicated actions of omissions of the Resigning Trustee
(including in its capacity as resigning Paying Agent and Security Registrar).
The Resigning Trustee will furnish to the Successor Trustee, promptly after
receipt, all papers with respect to any action the outcome of which would make
the indemnity provided for in this paragraph operative. The Resigning Trustee
will have the right to provide its own defense and to select counsel and other
advisors for the Successor Trustee in any such action. The Resigning Trustee and
Successor


<PAGE>

Trustee hereby agree that the indemnities provided for in this paragraph shall
apply only to claims, demands and actions that are made or brought against the
Successor Trustee on or before the expiration of the period established by a
statute of limitations (the "Statute of Limitations Period") adjudicated by any
final order of a court of competent jurisdiction to be applicable to such claim,
demand or action. The Resigning Trustee and the Successor Trustee further hereby
agree that the indemnities provided for in this paragraph shall not apply to any
claims, demands or actions brought against the Successor Trustee after the
expiration of an applicable Statute of Limitations Period, as determined by a
court of competent jurisdiction in any claim, demand or action brought against
the Successor Trustee.

     7.  The Company represents and warrants to the Successor Trustee that:

          a.  It is duly organized and validly existing;

          b.  It has not entered into any amendment or supplement to the
Indenture, and the Indenture is in full force and effect;

          c.  It has performed and fulfilled each covenant and condition on its
part to be performed or fulfilled under the Indenture;

          d.  The execution and delivery of this Instrument and the consummation
of the transactions contemplated hereby do not and will not conflict with, or
result in a breach of, any of the terms or provisions of, or constitute a
default under, any contract, agreement, indenture or other instrument
(including, without limitation, its certificate of incorporation and by-laws) to
which it is a party or by which it or its property is bound, or any judgment,
decree or order of any court or governmental agency or regulatory body or law,
rule or regulation applicable to it or its property; and

          e.  The Debentures are validly issued securities of the Company.

          f.  The Company hereby certifies that the person signing this
Instrument on behalf of the Company is authorized to, among other things: (a)
accept Resigning Trustee's resignation as Trustee, Paying Agent and Security
Registrar under the Indenture; (b) appoint Wells Fargo Bank Minnesota, National
Association as the Successor Trustee and successor Paying Agent and Security
Registrar under the Indenture; and (c) execute and deliver such agreements and
other instruments as may be necessary or desirable to effectuate the succession
of Wells Fargo Bank Minnesota, National Association as Successor Trustee and
successor Paying Agent and Security Registrar under the Indenture.

     8.  The Resigning Trustee hereby represents and warrants to the
Successor Trustee that:

          a.  There is no action, suit or proceeding pending or, to the best of
the knowledge of the Resigning Trustee threatened, against the Resigning Trustee
before any court or governmental authority arising out of any action or omission
by the Resigning Trustee as Trustee, Paying Agent and Security Registrar under
the Indenture;

          b.  It has made, or promptly will make, available to the Successor
Trustee originals, if available, or copies in its possession, of all documents
relating to the trusts created by the Indenture (the "Trusts") and all
information in the possession of its corporate trust administration department
relating to the administration and status of the Trusts and will furnish to the
Successor Trustee such Documents or information on or before the effective date
hereof;

          c.  The Resigning Trustee certifies $1,008,572,000 in Principal Amount
at Stated Maturity on the Debentures is outstanding and interest has been paid
through October 21, 2000 as to the Series of Debentures.


<PAGE>

          d. No covenant or condition contained in the Indenture has been waived
by the Resigning Trustee, or to the best of the knowledge of the Resigning
Trustee, by the security holders of the percentage in aggregate principal amount
of the securities required by the Indenture to effect any such waiver.

          e.  To the best of its knowledge, it has lawfully discharged its
duties as Trustee under the Indenture.

          f.  The Indenture has not been amended or modified and is in full
force and effect except as noted.

          g. To the best of the Resigning Trustee's knowledge, there are no
defaults or Event of Default that currently exist under the Indenture.

     9. The Successor Trustee represents and warrants to the Resigning Trustee,
the Company and the Company that it is eligible to serve as trustee, Paying
Agent and Security Registrar under the Indenture and the Trust Indenture Act of
1939, as amended; and this Instrument has been duly authorized, executed and
delivered on behalf of the Successor Trustee and constitutes its legal, valid,
binding and enforceable obligation;

    10. The Company and the Resigning Trustee, for the purposes of more fully
and certainly vesting in and confirming to the Successor Trustee, as Successor
Trustee under the Indenture, said rights, powers and trusts, agrees, upon
reasonable request of the Successor Trustee, to execute, acknowledge and deliver
such further instruments of conveyance and further assurance and to do such
other things as may reasonably be required for more fully and certainly vesting
and confirming to the Successor Trustee all rights, powers and trusts which the
Resigning Trustee now holds under and by virtue of the Indenture.

    11. All notices, whether faxed or mailed will be deemed received when sent
pursuant to the following instructions:

         TO BANK ONE, N.A.:
         Jeffrey A. Ayres
         Vice President
         100 E. Broad Street, 8th Floor
         Columbus, OH 43215
         FAX: (614) 248-5195
         Phone: (614) 248-2566

         TO THE COMPANY:
         Xerox Corporation
         800 Long Ridge Road
         Stamford, CT 06904
         Attn: Treasurer
         Fax:  (203) 968-3972
         Telephone: (203) 968-4653

         TO WELLS FARGO BANK MINNESOTA, National Association
         Jane Schweiger
         Assistant Vice President
         Wells Fargo Bank Minnesota, N.A.
         Sixth Street and Marquette Avenue; N9303-120
         Minneapolis, MN  55479
         FAX: (612) 667-9825
         Phone (612) 667-2344

    12. This Instrument 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.


<PAGE>

    13.  This Instrument shall be governed by and construed in accordance
with the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Instrument of
Resignation, Appointment and Acceptance to be duly executed and their respective
seals to be affixed hereunto and duly attested all as of the day and year first
above written.

                                    Xerox Corporation

                                    By __________________________


                                    Bank One, National Association
                                    as Resigning Trustee

                                    By __________________________
                                           Authorized Signer


                                    Wells Fargo Bank Minnesota, National
                                    Association as Successor Trustee,

                                    By __________________________
                                           Authorized Signer


<PAGE>


                                    EXHIBIT A
                                    ---------


Attention:  Secretary

Gentlemen:

NOTICE IS HEREBY GIVEN THAT, pursuant to Section 6.10(b) of the Indenture, dated
as of April 21, 1998 (the "Indenture") between Xerox Corporation (the "Company")
and Bank One, National Association ("BANK ONE"), BANK ONE hereby resigns as
Trustee under the Indenture, such resignation to be effective upon the
appointment, pursuant to Section 6.10(e) of the Indenture, of a successor
Trustee, and the acceptance of such appointment by such successor Trustee,
pursuant to Section 6.11 of the Indenture.

Would you please acknowledge receipt of this notice by signing two copies and
returning them to us.

            Very truly yours,



            By_____________________
            Vice President



         Acknowledged By_______________________
         Title:



<PAGE>

                                    EXHIBIT C
                                    ---------

                                    NOTICE OF
      RESIGNATION OF TRUSTEE, PAYING AGENT AND SECURITY REGISTRAR; AND
   APPOINTMENT OF SUCCESSOR TRUSTEE, PAYING AGENT AND SECURITY REGISTRAR

                               To the Holders of:

                                Xerox Corporation

             Convertible Subordinated Debentures Due April 21, 2018
                  (CUSIP 984121BB8 - SEC registered Debentures)
                    (CUSIP 984121AY9 - Rule 144A Debentures)*


NOTICE IS HEREBY GIVEN that, effective as of July 26, 2001, Bank One, National
Association, as successor by merger with The First National Bank of Chicago, has
resigned as trustee, paying agent and security registrar, and Wells Fargo Bank
Minnesota, National Association has been appointed as successor trustee paying
agent and security registrar, for the above- referenced Debentures.

The principal corporate trust office of Wells Fargo Bank Minnesota, National
Association is located at:

                 Wells Fargo Bank Minnesota, National Association
                            Attention: Jane Schweiger
                              Wells Fargo Center
                   Sixth Street and Marquette Avenue; N9303-120
                          Minneapolis, Minnesota 55479
                            Telephone: (612) 667-2344

If you have any questions concerning the foregoing resignation and appointment,
please contact Wells Fargo Bank Minnesota, National Association at (612)
667-2344.

                                    XEROX CORPORATION


Dated:  July 26, 2001               By: _____________________
                                        Authorized signatory

_____________________________
* The CUSIP numbers included in this Notice are provided solely for the
convenience of the holders. None of Xerox Corporation, Bank One, National
Association, and Wells Fargo Bank Minnesota, National Association, makes any
representation as to the correctness or accuracy of the CUSIP numbers indicated
in this Notice.


<PAGE>

                                                                 Exhibit 4(e)(3)

                                  AMENDMENT TO
            INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE


     This AMENDMENT TO INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE
(this "Amendment") is entered into as of October 22, 2001 by and among Xerox
Corporation ("Company"), Bank One, National Association, a national banking
association duly organized and existing under the laws of the United States,
having its principal Corporate Trust Office at c/o 100 East Broad Street, 8th
Floor, Columbus, Ohio, 43215, as successor by merger with The First National
Bank of Chicago ("Resigning Trustee"), and Wells Fargo Bank Minnesota, National
Association, a national banking association duly organized and existing under
the laws of the United States, having its principal office at Wells Fargo
Center, Sixth Street and Marquette Avenue; N9303-120, Minneapolis, Minnesota
55479 ("Successor Trustee").

     WHEREAS, the Company, Resigning Trustee and Successor Trustee entered into
an Instrument of Resignation, Appointment and Acceptance dated as of July 26,
2001 (the "Instrument"), pursuant to which the Resigning Trustee resigned, and
the Successor Trustee has been appointed by the Company, as the Trustee, Paying
Agent and Security Registrar under the
 Indenture dated as of April 21, 1998
between the Company and Resigning Trustee (the "Indenture"), pursuant to which
Indenture the Company issued its Convertible Subordinated Debentures Due April
21, 2018, such resignation and appointment became effective as of July 26, 2001;
and

     WHEREAS, the parties hereto wish to amend certain provisions of the
Instrument as herein provided.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

     SECTION 1. Section 8(c) of the Instrument is hereby amended and restated in
its entirety as follows:

     "c. The Resigning Trustee certifies that $953,072,000 in aggregate
Principal Amount at Stated Maturity on the Debentures is outstanding as of July
26, 2001 and all interest on all of the Debentures has been paid through April
21, 2001."

     SECTION 2. Except as otherwise expressly set forth herein, neither the
effective date of the resignation of the Resigning Trustee, and the appointment
of the Successor Trustee, as the Trustee, Paying Agent and Security Registrar
under the Indenture, nor any other provision of the Instrument is amended or
otherwise modified.

     SECTION 3. Each party hereto represents and warrants to the other that (i)
it is duly organized, validly existing and in good standing under the laws of
its organization; (ii) its execution, delivery and performance of this Amendment
is within its corporate (or organizational) powers, have been duly authorized by
all necessary corporate (or organizational) action of such party, and do not
contravene its charter or by-laws (or constitutional documents) or any law or
contractual restriction binding upon or affecting it; (iii) no consent or
approval or other action by, and no notice to or filing with, any governmental
authority is required for its due execution, delivery and performance of this
Amendment; and (iv) this Amendment has been duly executed and delivered on its
behalf and constitutes a legal, valid and binding obligation of such party,
enforceable against it in accordance with its terms.

     SECTION 4.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN


<PAGE>


ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This Amendment may be
executed in counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date first above written.

                                    XEROX CORPORATION


                                    By:  ______________________________
                                         Name:  Richard Ragazzo
                                         Title: Assistant Treasurer


                                    BANK ONE, NATIONAL ASSOCIATION,
                                    as Resigning Trustee

                                    By:  ______________________________
                                         Name:  Robert H. Major
                                         Title: Trust Officer


                                    WELLS FARGO BANK MINNESOTA,
                                    NATIONAL ASSOCIATION,
                                    as Successor Trustee

                                    By:  ______________________________
                                         Name:  Jane Schweiger
                                         Title: Assistant Vice President



<PAGE>


                                                                    Exhibit 4(f)

                                                                  EXECUTION COPY

                    XEROX EQUIPMENT LEASE OWNER TRUST 2001-1

                                       and

                         U.S. BANK NATIONAL ASSOCIATION,

                  as Indenture Trustee and as Calculation Agent

                                    INDENTURE

                            Dated as of July 1, 2001


<PAGE>


                                TABLE OF CONTENTS

                                                                         Page

                                   ARTICLE ONE
                                   DEFINITIONS

SECTION 1.01.  DEFINITIONS.                                                2
SECTION 1.02.  INTERPRETIVE PROVISIONS.                                   11

                                   ARTICLE TWO
                                    THE NOTES
SECTION 2.01.  FORM.                                                      13
SECTION 2.02.  EXECUTION, AUTHENTICATION AND DELIVERY.                    13
SECTION 2.03.  TEMPORARY NOTES.                                           13
SECTION 2.04.  REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.       14
SECTION 2.05.  MUTILATED, DESTROYED, LOST OR STOLEN NOTES.                19
SECTION 2.06.  PERSONS DEEMED OWNERS.                                     20
SECTION 2.07.  CANCELLATION.                                              20
SECTION 2.08.  BOOK-ENTRY NOTES.                                          20
SECTION 2.09.  NOTICES TO CLEARING AGENCY.                                21
SECTION 2.10.  DEFINITIVE NOTES.                                          21
SECTION 2.11.  AUTHENTICATING AGENTS.                                     22
SECTION 2.12.  TAX TREATMENT.                                             22
SECTION 2.13.  EMPLOYEE BENEFIT PLANS.                                    23
SECTION 2.14.  REPRESENTATIONS AND WARRANTIES AS TO THE SECURITY
               INTEREST OF THE INDENTURE TRUSTEE IN THE LEASES AND
               LEASE RECEIVABLES.                                         23
SECTION 2.15.  REPRESENTATIONS AND WARRANTIES AS TO THE SECURITY
               INTEREST OF THE INDENTURE TRUSTEE IN THE ACCOUNT
               COLLATERAL.                                                24

                                  ARTICLE THREE
                                    COVENANTS

SECTION 3.01.  PAYMENT OF PRINCIPAL AND INTEREST.                         26
SECTION 3.02.  MAINTENANCE OF
 OFFICE OR AGENCY.                           26
SECTION 3.03.  MONEY FOR PAYMENTS TO BE HELD IN TRUST.                    26
SECTION 3.04.  EXISTENCE.                                                 28
SECTION 3.05.  PROTECTION OF TRUST ESTATE.                                28
SECTION 3.06.  OPINIONS AS TO TRUST ESTATE.                               28
SECTION 3.07.  PERFORMANCE OF OBLIGATIONS; ADMINISTRATION OF THE TRUST
               ESTATE.                                                    29
SECTION 3.08.  NEGATIVE COVENANTS.                                        29
SECTION 3.09.  CERTIFICATES AND REPORTS.                                  30
SECTION 3.10.  RESTRICTIONS ON CERTAIN OTHER ACTIVITIES.                  30
SECTION 3.11.  ADMINISTRATIVE AGENT DEFAULTS.                             31
SECTION 3.12.  MAINTENANCE PROVIDER DEFAULTS.                             32
SECTION 3.13.  COMPLIANCE WITH LAWS; FURTHER INSTRUMENTS AND ACTS.        33
SECTION 3.14.  DELIVERY OF THE TRUST ESTATE.                              33
SECTION 3.15.  CALCULATION OF THE INTEREST RATE.                          34

                                  ARTICLE FOUR
                           SATISFACTION AND DISCHARGE


<PAGE>

SECTION 4.01.  SATISFACTION AND DISCHARGE OF INDENTURE.                   35
SECTION 4.02.  APPLICATION OF TRUST MONEY.                                36
SECTION 4.03.  REPAYMENT OF MONIES HELD BY PAYING AGENT.                  36

                                  ARTICLE FIVE
                                INDENTURE DEFAULT

SECTION 5.01.  INDENTURE DEFAULTS.                                        37
SECTION 5.02.  RIGHTS UPON INDENTURE DEFAULT.                             38
SECTION 5.03.  COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
               INDENTURE TRUSTEE.                                         39
SECTION 5.04.  REMEDIES; PRIORITIES.                                      41
SECTION 5.05.  OPTIONAL PRESERVATION OF THE TRUST ESTATE.                 43
SECTION 5.06.  LIMITATION OF SUITS.                                       43
SECTION 5.07.  UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
               AND INTEREST.                                              44
SECTION 5.08.  RESTORATION OF RIGHTS AND REMEDIES.                        44
SECTION 5.09.  RIGHTS AND REMEDIES CUMULATIVE.                            44
SECTION 5.10.  DELAY OR OMISSION NOT A WAIVER.                            44
SECTION 5.11.  CONTROL BY NOTEHOLDERS.                                    44
SECTION 5.12.  WAIVER OF PAST DEFAULTS.                                   45
SECTION 5.13.  UNDERTAKING FOR COSTS.                                     45
SECTION 5.14.  WAIVER OF STAY OR EXTENSION LAWS.                          46
SECTION 5.15.  ACTION ON NOTES.                                           46
SECTION 5.16.  PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.        46
SECTION 5.17.  SALE OF TRUST ESTATE.                                      46

                                   ARTICLE SIX
                              THE INDENTURE TRUSTEE

SECTION 6.01.  DUTIES OF INDENTURE TRUSTEE.                               48
SECTION 6.02.  RIGHTS OF INDENTURE TRUSTEE.                               49
SECTION 6.03.  INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE.                    50
SECTION 6.04.  INDENTURE TRUSTEE'S DISCLAIMER.                            50
SECTION 6.05.  NOTICE OF DEFAULTS.                                        50
SECTION 6.06.  REPORTS BY INDENTURE TRUSTEE TO NOTEHOLDERS.               51
SECTION 6.07.  COMPENSATION AND INDEMNITY.                                51
SECTION 6.08.  REPLACEMENT OF INDENTURE TRUSTEE.                          52
SECTION 6.09.  SUCCESSOR INDENTURE TRUSTEE BY MERGER.                     53
SECTION 6.10.  APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.             53
SECTION 6.11.  ELIGIBILITY; DISQUALIFICATION.                             55
SECTION 6.12.  REPRESENTATIONS AND WARRANTIES OF INDENTURE TRUSTEE.       55

                                  ARTICLE SEVEN
                   NOTEHOLDERS' LISTS, REPORTS AND DOCUMENTS

SECTION 7.01.  TRUST TO FURNISH INDENTURE TRUSTEE NOTEHOLDER NAMES AND
               ADDRESSES.                                                 56
SECTION 7.02.  PRESERVATION OF INFORMATION; COMMUNICATIONS TO
               NOTEHOLDERS.                                               56
SECTION 7.03.  REPORTS BY INDENTURE TRUSTEE.                              56
SECTION 7.04.  FURNISHING OF DOCUMENTS.                                   56

                                  ARTICLE EIGHT
                      ACCOUNTS, DISBURSEMENTS AND RELEASES

SECTION 8.01.  COLLECTION OF MONEY.                                       57


<PAGE>

SECTION 8.02.  ACCOUNTS.                                                  57
SECTION 8.03.  GENERAL PROVISIONS REGARDING ACCOUNTS.                     59
SECTION 8.04.  PAYMENT DATE STATEMENTS.                                   59
SECTION 8.05.  RELEASE OF TRUST ESTATE.                                   60

                                  ARTICLE NINE
                             SUPPLEMENTAL INDENTURES

SECTION 9.01.  SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.    61
SECTION 9.02.  SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS.       62
SECTION 9.03.  EXECUTION OF SUPPLEMENTAL INDENTURES.                      63
SECTION 9.04.  EFFECT OF SUPPLEMENTAL INDENTURE.                          63
SECTION 9.05.  REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.             63

                                   ARTICLE TEN
                               REDEMPTION OF NOTES

SECTION 10.01. REDEMPTION.                                                65
SECTION 10.02. FORM OF REDEMPTION NOTICE.                                 65
SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE.                          66

                                 ARTICLE ELEVEN
                                  MISCELLANEOUS

SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS.                      67
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE.          68
SECTION 11.03. ACTS OF NOTEHOLDERS.                                       69
SECTION 11.04. NOTICES.                                                   69
SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER.                            70
SECTION 11.06. EFFECT OF HEADINGS AND TABLE OF CONTENTS.                  70
SECTION 11.07. SUCCESSORS AND ASSIGNS.                                    71
SECTION 11.08. SEVERABILITY.                                              71
SECTION 11.09. BENEFITS OF INDENTURE.                                     71
SECTION 11.10. LEGAL HOLIDAYS.                                            71
SECTION 11.11. GOVERNING LAW.                                             71
SECTION 11.12. COUNTERPARTS.                                              71
SECTION 11.13. RECORDING OF INDENTURE.                                    71
SECTION 11.14. TRUST OBLIGATION.                                          71
SECTION 11.15. NO PETITION.                                               72
SECTION 11.16. NO RECOURSE.                                               72
SECTION 11.17. INSPECTION.                                                72
SECTION 11.18. LIMITATION OF LIABILITY OF OWNER TRUSTEE.                  72

                                    EXHIBITS

EXHIBIT A - FORM OF NOTES                                                A-1
EXHIBIT B - FORM OF DEPOSITORY AGREEMENT                                 B-1


<PAGE>


                                    INDENTURE

     This Indenture, dated as of July 1, 2001, is between Xerox Equipment Lease
Owner Trust 2001-1, a Delaware business trust (the "Trust"), and U.S. Bank
National Association, a national banking association, as trustee (in such
capacity, the "Indenture Trustee") and as calculation agent (in such capacity,
the "Calculation Agent").

     Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the holders of the Trust's Floating Rate Asset
Backed Notes (the "Notes"):

                                 GRANTING CLAUSE

     The Trust, to secure the payment of principal and interest on, and any
other amounts owing in respect of, the Notes, equally and ratably without
prejudice, priority or distinction except as set forth herein, and to secure
compliance with the provisions of this Indenture, hereby Grants in trust to the
Indenture Trustee on the Closing Date, as trustee for the benefit of the
Noteholders, all of the Trust's right, title and interest, whether now owned or
hereafter acquired, in and to the Trust Estate and all present and future
claims, demands, causes and choses in action in respect of any or all of the
foregoing and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing, including all proceeds of
the conversion, voluntary or involuntary, into cash or other liquid property,
all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, condemnation awards, rights to payment
of any and every kind and other forms of obligations and receivables,
instruments, securities, financial assets and other property that at any time
constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Collateral"), in each case as such terms are
defined herein.

     The foregoing Grant is made in trust to secure the payment of principal and
interest on, and any other amounts owing in respect of, the Notes, equally and
ratably without prejudice, priority or distinction, and to secure compliance
with the provisions of this Indenture, all as provided in this Indenture.

     The Indenture Trustee, as trustee on behalf of the Noteholders,
acknowledges the foregoing Grant, accepts the trusts under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Noteholders may be adequately and effectively protected.

                                   ARTICLE ONE

                                   DEFINITIONS

     Section 1.01. Definitions. Capitalized terms used herein that are not
otherwise defined shall have the meanings ascribed thereto in the Administration
Agreement. Whenever used herein, unless the context otherwise requires, the
following words and phrases have the following meanings:


<PAGE>

     "Account" has the meaning set forth in the Administration Agreement.

     "Account Collateral" means securities, Permitted Investments and other
assets credited to the Securities Accounts.

     "Accrual Period" means with respect to any Payment Date for the Notes, the
period from and including the immediately preceding Payment Date (or, in the
case of the first Payment Date or if no interest has yet been paid, from and
including the Closing Date), to but excluding such Payment Date.

     "Act" has the meaning set forth in Section 11.03(a).

     "Administration Agreement" means the sale and administration agreement,
dated as of July 1, 2001, among the Trust, the Transferor, Xerox Equipment, the
Administrative Agent and the Maintenance Provider.

     "Administrative Agent" means Xerox, as Administrative Agent under the
Administration Agreement, and its successors in such capacity.

     "Administrative Agent Default" has the meaning set forth in the
Administration Agreement.

     "Administrative Agent Monthly Payment" means, with respect to a Payment
Date and the related Collection Period, the amount to be paid to the
Administrative Agent pursuant to Section 4.04 of the Administration Agreement in
respect of (i) the Payment Date Advance Reimbursement and (ii) the
Administration Fee, together with any unpaid Administration Fees in respect of
one or more prior Collection Periods.

     "Administrator" means Xerox, as Administrator under the Trust
Administration Agreement, and its successors in such capacity.

     "Advance" has the meaning set forth in the Administration Agreement.

     "Affiliate" has the meaning set forth in the Administration Agreement.

     "Authenticating Agent" means any Person authorized by the Indenture Trustee
to act on behalf of the Indenture Trustee to authenticate and deliver the Notes.

     "Authorized Newspaper" means a newspaper of general circulation in The City
of New York, printed in the English language and customarily published on each
Business Day, whether or not published on Saturdays, Sundays and holidays.

     "Authorized Officer" means, with respect to the Trust, (i) any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Trust and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date and
(ii) so long as the Trust Administration Agreement is in effect, the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary and
any Assistant Secretary of the Administrator.

     "Available Funds" has the meaning set forth in the Administration
Agreement.

     "Backup Administrative Agent" means U.S. Bank, in its capacity as Backup


<PAGE>

Administrative Agent, so long as U.S. Bank is the Indenture Trustee, and
thereafter, its successors and assigns in such capacity.

     "Basic Documents" has the meaning set forth in the Administration
Agreement.

     "Benefit Plan" has the meaning set forth in the Trust Agreement.

     "Book-Entry Notes" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.08.

     "Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in the states of Connecticut, Delaware, Illinois and
New York are authorized or obligated by law, executive order or government
decree to be closed.

     "Calculation Agent" means U.S. Bank and its successors and assigns in such
capacity.

     "Certificate Distribution Account" has the meaning set forth in the Trust
Agreement.

     "Certificateholder" has the meaning set forth in the Trust Agreement.

     "Certificates" has the meaning set forth in the Trust Agreement.

     "Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act and shall initially be DTC.

     "Clearing Agency Participant" means a broker, dealer, bank or other
financial institution or other Person for which from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.

     "Closing Date" means July 24, 2001.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Collateral" has the meaning set forth in the Granting Clause.

     "Collection Account" has the meaning set forth in the Administration
Agreement.

     "Collection Period" has the meaning set forth in the Administration
Agreement.

     "Commission" means the Securities and Exchange Commission, and its
successors.

     "Control Agreement" has the meaning set forth in the Administration
Agreement.

     "Corporate Trust Office" means the office of the Indenture Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of the execution of this Indenture is


<PAGE>

located at 111 East Wacker Drive, Suite 3000, Chicago, Illinois 60601; or at
such other address as the Indenture Trustee may designate from time to time by
notice to the Noteholders and the Trust, or the principal corporate trust office
of any successor Indenture Trustee (the address of which the successor Indenture
Trustee shall notify the Noteholders and the Trust).

     "CPC Contract" has the meaning set forth in the Administration Agreement.

     "Default" means any occurrence that is, or with notice or lapse of time or
both would become, an Indenture Default.

     "Definitive Notes" means Notes that are issued in fully registered,
certificated form to the related Noteholders or their respective nominees,
rather than to DTC or its nominee.

     "Deposit Date" has the meaning set forth in the Administration Agreement.

     "Depository Agreement" means the agreement among the Trust, the Indenture
Trustee and DTC, as the initial Clearing Agency, dated as of the Closing Date,
substantially in the form of Exhibit B, as amended or supplemented from time to
time.

     "DTC" means The Depository Trust Company, and its successors.

     "EDS" means Electronic Data Systems Corporation, and its successors.

     "EDS Services" means certain information technology and consulting services
provided by EDS (or similar service providers) in connection with the
administration and servicing of the Leases and the provision of maintenance for
the related Equipment, which services shall be similar to services provided by
EDS to Xerox as of the Closing Date.

     "EDS and Harris Fees and Expenses" means fees and expenses related to EDS
Services and Harris Services incurred in connection with the administration and
servicing of the Leases and the provision of maintenance for the related
Equipment.

     "Eligible Account" has the meaning set forth in the Administration
Agreement.

     "Entitlement Order" has the meaning set forth in the Administration
Agreement.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Executive Officer" means, with respect to any (i) corporation or
depository institution, the Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, President, Executive Vice President, any Vice
President, the Secretary or the Treasurer of such corporation or depository
institution, and (ii) partnership, any general partner thereof.

     "Final Scheduled Payment Date" means the February 2008 Payment Date.


<PAGE>

     "Fitch" means Fitch, Inc., and its successors.

     "Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture, and, with respect to the Collateral or any other agreement or
instrument, shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other monies payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.

     "Harris Interactive" means Harris Interactive, and its successors.

     "Harris Services" means certain equipment reading and inquiry collection
services provided by Harris Interactive (or similar service providers) in
connection with the administration and servicing of the Leases and the provision
of maintenance for the related Equipment, which services shall be similar to
services provided by Harris Interactive to Xerox as of the Closing Date.

     "Indenture" means this Indenture, as amended or supplemented from time to
time.

     "Indenture Default" has the meaning set forth in Section 5.01.

     "Indenture Trustee" has the meaning set forth in the preamble.

     "Independent" means, when used with respect to any specified Person, that
such Person (i) is in fact independent of the Trust, any other obligor upon the
Notes, the Administrative Agent, the Maintenance Provider and any of their
respective Affiliates, (ii) does not have any direct financial interest or any
material indirect financial interest in the Trust, any such other obligor, the
Administrative Agent, the Maintenance Provider or any of their respective
Affiliates and (iii) is not connected with the Trust, any such other obligor,
the Administrative Agent, the Maintenance Provider or any of their respective
Affiliates as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.

     "Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01(b), made by an
Independent appraiser or other expert appointed by a Trust Order, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.

     "Initial Purchaser" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as initial purchaser pursuant to the Purchase Agreement.

     "Initial Securities Balance" has the meaning set forth in the


<PAGE>

Administration Agreement.

     "Interest Rate" means a percentage equal to the sum of (i) the LIBOR Rate
and (ii) 2.00% per annum (computed on the basis of the actual number of days
elapsed, but assuming a 360-day year).

     "Lease" has the meaning set forth in the Administration Agreement.

     "Lessee" has the meaning set forth in the Administration Agreement.

     "LIBOR Determination Date" means the second London Business Day prior to
the Closing Date with respect to the first Payment Date and, as to each
subsequent Payment Date, the second London Business Day prior to the immediately
preceding Payment Date.

     "LIBOR Rate" means, with respect to any Accrual Period and the related
Payment Date, the arithmetic mean of the London interbank offered rates rounded
to the nearest 1/100,000 of 1% (.0000001), with 5 millionths of a percentage
point rounded upward, for deposits in United States dollars having a maturity of
one month commencing on the first day of the Accrual Period which appear on
Telerate Page 3750 as of 11:00 a.m., London time, on the related LIBOR
Determination Date; provided, however, that if such rate does not appear on the
Telerate Page 3750, the LIBOR Rate will equal the Reference Bank Rate on the
related LIBOR Determination Date.

     "London Business Day" means any day other than a Saturday, Sunday or a day
on which banking institutions in London, England are authorized or obligated by
law or government decree to be closed.

     "Maintenance Provider" means Xerox, as Maintenance Provider under the
Administration Agreement, and its successors in such capacity.

     "Monthly Interest" has the meaning set forth in the Administration
Agreement.

     "Moody's" means Moody's Investors Service, Inc., and its successors.

     "Note Balance" means, as of any Payment Date, the initial principal amount
of the Notes, reduced by all payments of principal made on or prior to such
Payment Date on the Notes.

     "Note Distribution Account" means the trust account established by the
Administrative Agent pursuant to Section 8.02(a), into which amounts released
from the Collection Account and, when necessary, the Reserve Fund for
distribution to Noteholders shall be deposited and from which all distributions
to Noteholders shall be made.

     "Note Owner" means, with respect to a Book-Entry Note, each Person who is
the beneficial owner of all or part of the Notes evidenced by such Book- Entry
Note, as reflected on the books of the Clearing Agency or a Person maintaining
an account with such Clearing Agency (directly as a Clearing Agency Participant
or as an indirect participant, in each case in accordance with the rules of such
Clearing Agency).

     "Note Register" and "Note Registrar" have the respective meanings set forth
in Section 2.04.


<PAGE>

     "Noteholder" means, as of any date, the Person in whose name a Note is
registered on the Note Register on such date.

     "Notes" means the Xerox Equipment Lease Trust 2001-1 Floating Rate Asset
Backed Notes, which Notes shall be substantially in the form of Exhibit A
hereto.

     "Offering Circular" means the offering circular, dated July 18, 2001,
relating to the private placement of the Notes.

     "Officer's Certificate" means a certificate signed by an Authorized Officer
of the Trust, under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 11.01 and delivered to the
Indenture Trustee.

     "Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Trust or the Administrative Agent, and who shall be satisfactory
to the Indenture Trustee and which opinion shall be in form and substance
satisfactory to the Indenture Trustee.

     "Optional Purchase" has the meaning set forth in the Trust Agreement.

     "Optional Purchase Price" has the meaning set forth in the Trust Agreement.

     "Outstanding" means, as of any date, all Notes theretofore authenticated
and delivered under this Indenture except:

     (i)   Notes theretofore cancelled by the Note Registrar or delivered to the
Note Registrar for cancellation;

     (ii)  Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee or
any Paying Agent in trust for the related Noteholders (provided, however, that
if such Notes are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor, satisfactory to the Indenture
Trustee, has been made); and

     (iii) Notes in exchange for or in lieu of other Notes that have been
authenticated and delivered pursuant to this Indenture unless proof satisfactory
to the Indenture Trustee is presented that any such Notes are held by a bona
fide purchaser;

provided, however, that, unless otherwise specified herein or in another Basic
Document, in determining whether Noteholders holding the requisite Outstanding
Amount have given any request, demand, authorization, direction, notice, consent
or waiver hereunder or under any Basic Document, Notes owned by the Trust, the
Transferor, the Administrative Agent (so long as Xerox or an Affiliate thereof
is the Administrative Agent), the Maintenance Provider (so long as Xerox or an
Affiliate thereof is the Maintenance Provider) or any of their respective
Affiliates shall be disregarded and deemed not to be Outstanding, except that,
in determining whether the Indenture Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Notes that a Responsible Officer knows to be so owned shall be so
disregarded. Notes so owned that have been pledged in good faith may be regarded
as Outstanding if the pledgee thereof


<PAGE>

establishes to the satisfaction of the Indenture Trustee such pledgee's right so
to act with respect to such Notes and that such pledgee is not the Trust, the
Transferor, the Administrative Agent (so long as Xerox or an Affiliate thereof
is the Administrative Agent), the Maintenance Provider (so long as Xerox or an
Affiliate thereof is the Maintenance Provider) or any of their respective
Affiliates.

     "Outstanding Amount" means, as of any date, the aggregate principal amount
of the applicable Notes Outstanding, reduced by all payments of principal made
in respect thereof on or prior to such date.

     "Owner Trustee" has the meaning set forth in the Trust Agreement.

     "Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee set forth in Section 6.11
and is authorized by the Trust to make the payments to and distributions from
the Note Distribution Account, including the payment of principal of or interest
on the Notes on behalf of the Trust.

     "Payment Date" means the 15th day of each month or, if such day is not a
Business Day, the immediately succeeding Business Day, commencing September 17,
2001.

     "Payment Date Statement" has the meaning set forth in the Administration
Agreement.

     "Permitted Investments" has the meaning set forth in the Administration
Agreement.

     "Person" has the meaning set forth in the Administration Agreement.

     "Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note, and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated,
destroyed, lost or stolen Note shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Note.

     "Principal Distribution Amount" has the meaning set forth in the
Administration Agreement.

     "Proceeding" has the meaning set forth in the Administration Agreement.

     "Protected Purchaser" has the meaning set forth in Article 8 of the UCC.

     "PTCE" means Prohibited Transaction Class Exemption.

     "Purchase Agreement" means the purchase agreement relating to the Notes,
dated July 18, 2001, among the Initial Purchaser, Xerox and the Transferor.

     "QIB" means a "qualified institutional buyer" within the meaning of Rule
144A.

     "Rating Agency" means each of Fitch, Moody's and Standard & Poor's.

     "Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given ten Business Days (or such shorter period


<PAGE>

as is acceptable to each Rating Agency) prior notice thereof by the Transferor
or the Administrative Agent, and that each Rating Agency shall not have notified
the Transferor or the Administrative Agent in writing that such action will
result in a qualification, reduction or withdrawal of its then- current rating
of the Notes.

     "Record Date" means, with respect to a Payment Date or Redemption Date, the
close of business on the day immediately preceding such Payment Date or
Redemption Date, as the case may be.

     "Redemption Date" means in the case of a redemption of the Notes pursuant
to Section 10.01, the Payment Date specified by the Administrative Agent or the
Trust pursuant to Section 10.01.

     "Redemption Price" means an amount equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon at the applicable
Interest Rate for the Notes being so redeemed, through the Accrual Period
related to such Redemption Date.

     "Reference Bank Rate" means, with respect to any Accrual Period, the
arithmetic mean to the nearest 1/100,000 of 1% (0.0000001), with five one-
millionths of a percentage point rounded upward, of the rates, as of 11:00 A.M.,
London time, on the related LIBOR Determination Date, at which deposits in
United States dollars, having a maturity of one month commencing on the first
day of the Accrual Period and a principal amount of not less than $1,000,000,
offered by the Reference Banks from which the Calculation Agent has received
quotations; provided however, in the event that the Calculation Agent has not
received quotations from at least two Reference Banks, the Reference Bank Rate
will be the arithmetic mean to the nearest 1/100,000 of 1% (0.0000001), with
five one-millionths of a percentage point rounded upward, of the rates quoted by
three major banks in New York City, selected by the Calculation Agent after
consultation with the Transferor, as of 11:00 A.M., New York City time, on the
LIBOR Determination Date for loans in United States dollars to leading European
Banks having a maturity of one month commencing on the first day of the Accrual
Period and in a principal amount not less than $1,000,000 that is representative
of a single transaction in the market at that time; provided, further, if no
such quotations can be obtained, the Reference Bank Rate shall be the Reference
Bank Rate for the preceding Accrual Period.

     "Reference Banks" means four major banks that are engaged in the London
interbank market that are selected by the Administrative Agent.

     "Registered Holder" means the Person in whose name a Note is registered on
the Note Register on the related Record Date.

     "Repayment Price" has the meaning set forth in the Trust Agreement.

     "Reserve Fund" has the meaning set forth in the Administration Agreement.

     "Reserve Fund Draw Amount" has the meaning set forth in the Administration
Agreement.

     "Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Department (or any successor group of the
Indenture Trustee), including any Vice President, Assistant Secretary, trust


<PAGE>

officer or other officer or assistant officer of the Indenture Trustee
customarily performing functions similar to those performed by the people who at
such time shall be officers, or to whom any corporate trust matter is referred
within Corporate Trust Department because of his knowledge of and familiarity
with the particular subject.

     "Rule 144A" means Rule 144A promulgated by the Commission under the
Securities Act.

     "Rule 144A Information" means information requested of the Transferor, in
connection with the proposed transfer of a Note, to satisfy the requirements of
paragraph (d)(4) of Rule 144A.

     "Securities" means the Notes and the Certificates.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Securities Balance" has the meaning set forth in the Administration
Agreement.

     "Securities Accounts" has the meaning set forth in the Control Agreement.

     "Securities Intermediary" has the meaning set forth in the Control
Agreement.

     "Securityholder" has the meaning set forth in the Administration Agreement.

     "Seller" means Xerox Holding, and its successors.

     "Standard & Poor's" means Standard & Poor's Ratings Group, a Division of
The McGraw Hill Companies, Inc., and its successors.

     "State" has the meaning set forth in the Administration Agreement

     "Successor Administrative Agent" has the meaning set forth in the
Administration Agreement.

     "Successor Maintenance Provider" means any Person appointed as a successor
to the Maintenance Provider pursuant to Section 8.04 of the Administration
Agreement.

     "TIA" means the Trust Indenture Act of 1939, as amended and as in force on
the date hereof, unless otherwise specifically provided.

     "Transferor" means Xerox Funding, and its successors.

     "Transition Account" has the meaning set forth in the Administration
Agreement.

     "Trust" means Xerox Equipment Lease Owner Trust 2001-1.

     "Trust Administration Agreement" has the meaning set forth in the
Administration Agreement.

     "Trust Agreement" means the trust agreement, as amended and restated as


<PAGE>

of July 1, 2001, between the Transferor and HSBC Bank & Trust Company (Delaware)
NA, as the owner trustee, as amended or supplemented from time to time.

     "Trust Estate" has the meaning set forth in the Administration Agreement.

     "Trust Order" and "Trust Request" means a written order or request of the
Trust signed in the name of the Trust by an Authorized Officer and delivered to
the Indenture Trustee.

     "Trustees" has the meaning set forth in the Administration Agreement.

     "UCC" means, unless the context otherwise requires, the Uniform Commercial
Code as in effect in the relevant jurisdiction.

     "United States" means the United States of America.

     "U.S. Bank" means U.S. Bank National Association, and its successors.

     "Xerox" means Xerox Corporation, and its successors.

     "Xerox Equipment" means Xerox Equipment LLC, and its successors.

     "Xerox Funding" means Xerox Funding LLC, and its successors.

     "Xerox Holding" means Xerox Holding LLC, and its successors.

     Section 1.02.  Interpretive Provisions.

     (a) For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires, (i) terms used herein
include, as appropriate, all genders and the plural as well as the singular,
(ii) references to this Indenture include all Exhibits hereto, (iii) references
to words such as "herein", "hereof" and the like shall refer to this Indenture
as a whole and not to any particular part, Article or Section within this
Indenture, (iv) references to an Article or Section such as "Article One" or
"Section 1.01" shall refer to the applicable Article or Section of this
Indenture, (v) the term "include" and all variations thereof shall mean "include
without limitation", (vi) the term "or" shall include "and/or" and (vii) the
term "proceeds" shall have the meaning ascribed to such term in the applicable
UCC.

     (b) As used in this Indenture and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Indenture or in any such certificate or other document, and accounting terms
partly defined in this Indenture or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Indenture or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Indenture or in any
such certificate or other document shall control.

                                   ARTICLE TWO


<PAGE>

                                    THE NOTES

     Section 2.01. Form. The Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth as
Exhibit A hereto, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of such Notes.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of such Note.

     The terms of the Notes set forth in Exhibit A hereto are part of the terms
of this Indenture.

     Section 2.02. Execution, Authentication and Delivery. The Notes shall be
executed by the Owner Trustee on behalf of the Trust. The signature of any
authorized officer of the Owner Trustee on the Notes may be manual or by
facsimile. Notes bearing the manual or facsimile signature of individuals who
were at any time authorized officers of the Owner Trustee shall bind the Trust,
notwithstanding that any such individuals have ceased to hold such offices prior
to the authentication and delivery of such Notes or did not hold such offices at
the date of such Notes.

     The Indenture Trustee shall, upon receipt of a Trust Order, authenticate
and deliver for original issue $513,000,000 aggregate principal amount of Notes.
The aggregate principal amount of the Notes outstanding at any time may not
exceed such respective amount, except as provided in Section 2.05.

     Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered notes in book-entry form in minimum denominations of
$100,000 and in integral multiples of $1,000 in excess thereof.

     No Note may be sold, pledged or otherwise transferred to any Person except
in accordance with Section 2.04 and any attempted sale, pledge or transfer in
violation of such Section shall be null and void.

     No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose unless there appears on such Note a certificate of
authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.

     Section 2.03. Temporary Notes. Pending the preparation of Definitive Notes,
the Owner Trustee may execute, on behalf of the Trust, and upon receipt of a
Trust Order, the Indenture Trustee shall authenticate and deliver, temporary
Notes that are printed, lithographed, typewritten, mimeographed or otherwise
produced, substantially of the tenor of the Definitive Notes in lieu of which
they are issued and with such variations not inconsistent with the terms of this
Indenture as the officers executing such Notes may determine, as evidenced by
their execution of such Notes.

     If temporary Notes are issued, the Trust shall cause Definitive Notes


<PAGE>

to be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of such temporary Notes at the office or agency of the Trust to be
maintained as provided in Section 3.02, without charge to the related
Noteholder. Upon surrender for cancellation of any one or more temporary Notes,
the Owner Trustee shall execute, on behalf of the Trust, and the Indenture
Trustee shall authenticate and deliver in exchange therefor, a like principal
amount of Definitive Notes of authorized denominations. Until so exchanged, such
temporary Notes shall in all respects be entitled to the same benefits under
this Indenture as Definitive Notes.

     Section 2.04.  Registration; Registration of Transfer and Exchange.

     (a) The Trust shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Trust
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee is hereby appointed the "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Trust shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.

     If a Person other than the Indenture Trustee is appointed by the Trust as
Note Registrar, the Trust shall give the Indenture Trustee prompt written notice
of such appointment and the location, and any change in such location, of the
Note Register, and the Indenture Trustee shall have the right to inspect the
Note Register at all reasonable times and to obtain copies thereof, and the
Indenture Trustee shall have the right to rely upon a certificate executed on
behalf of the Note Registrar by an Executive Officer as to the names and
addresses of the Noteholders and the principal amounts and number of such Notes.

     (b) The Notes have not been registered under the Securities Act or any
state securities law. Neither the Transferor, the Owner Trustee, the Trust, the
Note Registrar, the Indenture Trustee nor any other entity is obligated to
register the Notes under the Securities Act or any other securities or "Blue
Sky" laws or to take any other action not otherwise required under this
Indenture or the Trust Agreement to permit the transfer of any Note without
registration.

     (c) No transfer of any Note or any interest therein (including by pledge or
hypothecation) shall be made except in compliance with the restrictions on
transfer set forth in this Section (including the applicable legend to be set
forth on the face of each Note as provided in Exhibit A) in a transaction exempt
from the registration requirements of the Securities Act and applicable state
securities or "Blue Sky" laws to a person (i) who the Transferor reasonably
believes is a QIB in the form of beneficial interests in the Book-Entry Notes
and (ii) that is aware that the resale or other transfer is being made in
reliance on Rule 144A.

     (d) Each Noteholder, by acceptance of its Note (and each Note Owner, by its
acceptance of a beneficial interest in a Note), will be deemed to have
acknowledged, represented to and agreed with the Trust, the Transferor, the
Indenture Trustee and Note Registrar as follows:

         (i) It (A) is a Qualified Institutional Buyer within the meaning of
     Rule 144A (a "QIB"), (B) is acquiring the Notes for its own account or


<PAGE>

     for the account of a QIB, (C) is aware that the sale of the Notes to it is
     being made in reliance on Rule 144A and (D) understands and acknowledges
     that the Notes will be offered and may be resold by the Initial Purchaser
     to QIBs pursuant to Rule 144A in the form of beneficial interests in the
     Book-Entry Notes.

          (ii)  It understands that the Notes have not been and will not be
     registered under the Securities Act or any state or other applicable
     securities laws and that the Notes, or any interest or participation
     therein, may not be offered, sold, pledged or otherwise transferred except
     (A) to a person whom the seller reasonably believes is a QIB in a
     transaction meeting the requirements of Rule 144A and (B) in accordance
     with all applicable securities laws of any State of the United States or
     any other applicable jurisdictions..

          (iii) It acknowledges that neither the Trust, the Transferor, the
     Initial Purchaser nor any person representing the Trust, the Transferor or
     the Initial Purchaser has made any representation to it with respect to the
     Trust or the offering or sale of any Notes, other than the information
     contained in the Offering Circular, which has been delivered to it and upon
     which it is relying in making its investment decision with respect to the
     Notes. It has had access to such financial and other information concerning
     the Trust, the Transferor and the Notes as it has deemed necessary in
     connection with its decision to purchase the Notes.

          (iv) It acknowledges that the Notes will bear a legend to the
     following effect unless the Transferor determines otherwise, consistent
     with applicable law:

     THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
     OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES
     OR BLUE SKY LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT
     THIS NOTE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
     IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY
     PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO AN
     INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
     INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING
     FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
     HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR
     OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND IN ACCORDANCE
     WITH ALL APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
     ANY OTHER APPLICABLE JURISDICTIONS.

     UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
     DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR
     ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE
     ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
     REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT 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 INASMUCH AS THE REGISTERED
     OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     NO RESALE OR OTHER TRANSFER OF ANY NOTE SHALL BE MADE TO ANY TRANSFEREE
     UNLESS: (A) SUCH TRANSFEREE IS NOT, AND WILL NOT ACQUIRE THE NOTE ON BEHALF
     OR WITH PLAN ASSETS OF, AN "EMPLOYEE BENEFIT PLAN" AS DEFINED IN


<PAGE>

     SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
     AMENDED ("ERISA"), OR ANY OTHER "PLAN" AS DEFINED IN SECTION 4975(e)(1) OF
     THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "INTERNAL REVENUE
     CODE"), THAT IS SUBJECT TO ERISA OR SECTION 4975 OF THE INTERNAL REVENUE
     CODE OR (B) THE ACQUISITION AND HOLDING OF THE NOTE ARE ELIGIBLE FOR THE
     EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 84-14, PTCE 90-1, PTCE 91-38, PTCE
     95-60, PTCE 96-23 OR A SIMILAR EXEMPTION. EACH PURCHASER OR TRANSFEREE OF A
     NOTE, BY ITS ACCEPTANCE OF SUCH NOTE, WILL BE DEEMED TO HAVE MADE THE
     REPRESENTATION SET FORTH IN CLAUSE (A) OR (B) ABOVE.

     THE PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY, THE
     OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE
     AMOUNT SHOWN ON THE FACE HEREOF.

     TRANSFERS OF THE NOTES MUST GENERALLY BE ACCOMPANIED BY APPROPRIATE TAX
     TRANSFER DOCUMENTATION AND ARE SUBJECT TO RESTRICTIONS AS PROVIDED IN THE
     INDENTURE.

     THE HOLDER, BY ACCEPTANCE OF THIS NOTE, SHALL BE DEEMED TO HAVE AGREED TO
     TREAT THE NOTES AS DEBT SOLELY OF THE TRUST FOR UNITED STATES FEDERAL AND
     STATE INCOME TAX PURPOSES.

          (v)    If it is acquiring any Note, or any interest or participation
     therein, as a fiduciary or agent for one or more investor accounts, it
     represents that it has sole investment discretion with respect to such
     account and that it has full power to make the acknowledgments,
     representations and agreements contained herein on behalf of each such
     account.

          (vi)   It (A) is a QIB, (B) is aware that the sale to it is being made
     in reliance on Rule 144A and if it is acquiring such Notes or any interest
     or participation therein for the account of another QIB, such QIB is aware
     that the sale is being made in reliance on Rule 144A and (C) is acquiring
     such Notes or any interest or participation therein for its own account or
     for the account of a QIB.

          (vii)  It is purchasing the Notes for its own account, or for one or
     more investor accounts for which it is acting as fiduciary or agent, in
     each case for investment, and not with a view to, or for offer or sale in
     connection with, any distribution thereof in violation of the Securities
     Act, subject to any requirements of law that the disposition of its
     property or the property of such investor account or accounts be at all
     times within its or their control and subject to its or their ability to
     resell such Notes, or any interest or participation therein as described in
     the Offering Circular and pursuant to the provisions of this Indenture.

          (viii) It agrees that if in the future it should offer, sell or
     otherwise transfer such Note or any interest or participation therein, it
     will do so only (A) to the Transferor or (B) pursuant to Rule 144A to a
     person who it reasonably believes is a QIB in a transaction meeting the
     requirements of Rule 144A, purchasing for its own account or for the
     account of a QIB, whom it has informed that such offer, sale or other
     transfer is being made in reliance on Rule 144A.

          (ix)   (A) It is not and will not acquire the Note on behalf of or
     with plan assets of (1) an "employee benefit plan" (as defined in


<PAGE>

     Section 3(3) of ERISA) that is subject to the provisions of Title I of
     ERISA or (2) any other "plan" as defined in Section 4975(e)(1) of the Code
     that is subject to Section 4975 of the Internal Revenue Code or (B) its
     acquisition and holding of the Note are eligible for the exemptive relief
     available under PTCE 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23
     or a similar exemption.

          (x) It acknowledges that the Transferor, the Trust, the Initial
     Purchaser and others will rely on the truth and accuracy of the foregoing
     acknowledgments, representations and agreements, and agrees that if any of
     the foregoing acknowledgments, representations and agreements deemed to
     have been made by it are no longer accurate, it shall promptly notify the
     Transferor, the Indenture Trustee and the Initial Purchaser.

          (xi) It acknowledges that transfers of the Notes or any interest or
     participation therein shall otherwise be subject in all respects to the
     restrictions applicable thereto contained in this Indenture.

     Any transfer, resale, pledge or other transfer of the Notes by the
Noteholder contrary to the restrictions set forth above and in this Indenture
shall be deemed void ab initio by the Indenture Trustee.

     (e)  The Transferor shall make the Rule 144A Information available to the
prospective transferor and transferee of a Note. The Rule 144A Information shall
include any or all of the following items requested by the prospective
transferee:

          (i)   the Offering Circular, as amended or supplemented to the date of
     such transfer,

          (ii)  each Payment Date Statement delivered to holders of the Note on
     each Payment Date preceding such request and

          (iii) such other information as is reasonably available to the
     Transferor in order to comply with requests for information pursuant to
     Rule 144A.

     (f)  Neither the Transferor, the Note, the Indenture Trustee, the Owner
Trustee nor any other entity is under an obligation to register any Note under
the Securities Act or any state securities laws.

     (g)  Notwithstanding anything to the contrary contained herein, each Note
and this Indenture may be amended or supplemented to modify the restrictions on
and procedures for resale and other transfers of the Notes to reflect any change
in applicable law or regulation (or the interpretation thereof) or in practices
relating to the resale or transfer of restricted securities generally. Each
Noteholder shall by its acceptance of such Note, have agreed to any such
amendment or supplement.

     (h)  Upon surrender for registration of transfer of any Note at the office
or agency of the Trust to be maintained as provided in Section 3.02, if the
requirements of Section 8-401 of the UCC are met, the Owner Trustee shall
execute, on behalf of the Trust, and the Indenture Trustee shall authenticate
and the related Noteholder shall obtain from the Indenture Trustee, in the name
of the designated transferee, one or more new Notes in any authorized
denominations, of a like aggregate principal amount.


<PAGE>

     At the option of the related Noteholder, Notes may be exchanged for other
Notes in any authorized denominations, of a like aggregate principal amount,
upon surrender of such Notes at such office or agency. Whenever any Notes are so
surrendered for exchange, if the requirements of Section 8-401 of the UCC are
met, the Owner Trustee shall execute, on behalf of the Trust, the Indenture
Trustee shall authenticate and the Noteholder shall obtain from the Indenture
Trustee the Notes that the Noteholder making such exchange is entitled to
receive.

     Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form and substance satisfactory to the Trust and the Indenture
Trustee, duly executed by the Noteholder thereof or its attorney-in-fact duly
authorized in writing.

     All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Trust, evidencing the same debt and
entitled to the same benefits under this Indenture as the Notes surrendered upon
such registration of transfer or exchange.

     No service charge shall be made to a Noteholder for any registration of
transfer or exchange of Notes, but the Trust may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith, other than exchanges pursuant to Sections 2.03 or 9.05 not
involving any transfer.

     The preceding provisions of this Section notwithstanding, the Trust shall
not be required to make, and the Note Registrar need not register, transfers or
exchanges of any Note (i) selected for redemption or (ii) for a period of 15
days preceding the due date for any payment with respect to such Note.

     Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Trust, the Owner Trustee and the
Indenture Trustee harmless, then, in the absence of notice to the Owner Trustee,
the Note Registrar or the Indenture Trustee that such Note has been acquired by
a Protected Purchaser, and provided that the requirements of Section 8-405 of
the UCC are met, the Owner Trustee shall execute, on behalf of the Trust, and
upon receipt of a Trust Request the Indenture Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a replacement Note; provided, however, that if any such destroyed,
lost or stolen Note (but not a mutilated Note) shall have become or within seven
days shall become due and payable, or shall have been called for redemption,
instead of issuing a replacement Note, the Trust may pay such destroyed, lost or
stolen Note when so due or payable or upon the Redemption Date without the
surrender thereof. If, after the delivery of such replacement Note or payment of
a destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a Protected Purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Trust
and the Indenture Trustee shall be entitled to recover such replacement Note (or
such payment) from the Person to whom it was delivered or any Person taking such
replacement Note from such Person to whom such replacement Note was delivered


<PAGE>

or any assignee of such Person, except a Protected Purchaser, and shall be
entitled to recover upon the security or indemnity provided therefor to the
extent of any loss, damage, cost or expense incurred by the Trust or the
Indenture Trustee in connection therewith.

     Upon the issuance of any replacement Note under this Section, the Trust or
the Indenture Trustee may require the payment by the related Noteholder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee or the Note Registrar) connected therewith.

     Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Trust, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.

     The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.

     Section 2.06. Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Trust, the Note Registrar and the
Indenture Trustee and their respective agents may treat the Person in whose name
any Note is registered (as of the date of determination) as the owner of such
Note for the purpose of receiving payments of principal and interest, if any, on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and neither the Trust, the Note Registrar and the Indenture Trustee nor
any of their respective agents shall be affected by notice to the contrary.

     Section 2.07. Cancellation. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Indenture Trustee, be delivered to the Indenture Trustee and shall be
promptly cancelled by the Indenture Trustee. The Trust may at any time deliver
to the Indenture Trustee for cancellation any Notes previously authenticated and
delivered hereunder that the Trust may have acquired in any manner whatsoever,
and all Notes so delivered shall be promptly cancelled by the Indenture Trustee.
No Notes shall be authenticated in lieu of or in exchange for any Notes
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Trust shall direct by a Trust Order that they be
destroyed or returned to it; provided, that such Trust Order is timely and that
such Notes have not been previously disposed of by the Indenture Trustee.

     Section 2.08. Book-Entry Notes. Unless otherwise specified, the Notes, upon
original issuance, will be issued in the form of one or more typewritten Notes
representing the Book-Entry Notes, to be delivered to the Indenture Trustee, as
agent for DTC, the initial Clearing Agency, by, or on behalf of, the Trust. One
fully registered Note shall be issued with respect to each $400 million in
principal amount of the Notes or such lesser amount as necessary. Such Notes
shall initially be registered on the Note Register in the name of Cede & Co.,
the nominee of the initial Clearing Agency, and no


<PAGE>

Note Owner shall receive a Definitive Note representing such Note Owner's
interest in such Note except as provided in Section 2.10. Unless and until
Definitive Notes have been issued to Note Owners pursuant to Section 2.10:

     (a) the provisions of this Section shall be in full force and effect;

     (b) the Note Registrar and the Indenture Trustee shall be entitled to deal
with the Clearing Agency for all purposes of this Indenture (including the
payment of principal and interest on the Notes and the giving of instructions or
directions hereunder) as the sole Noteholder, and shall have no obligation to
Note Owners;

     (c) to the extent that the provisions of this Section conflict with any
other provisions of this Indenture, the provisions of this Section shall
control;

     (d) the rights of Note Owners shall be exercised only through the Clearing
Agency and shall be limited to those established by law and agreements between
or among such Note Owners and the Clearing Agency or Clearing Agency
Participants; pursuant to the Depository Agreement, unless and until Definitive
Notes are issued pursuant to Section 2.11, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive and
transmit payments of principal and interest on the Notes to such Clearing Agency
Participants; and

     (e) whenever this Indenture requires or permits actions to be taken based
upon instructions or directions of Noteholders evidencing a specified percentage
of the Outstanding Amount, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to such effect
from Note Owners or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the Notes
and has delivered such instructions to the Indenture Trustee.

     Section 2.09. Notices to Clearing Agency. Whenever a notice or other
communication to Noteholders is required under this Indenture, unless and until
Definitive Notes shall have been issued to Note Owners pursuant to Section 2.10,
the Indenture Trustee shall give all such notices and communications specified
herein to be given to Noteholders to the Clearing Agency, and shall have no
obligation to the Note Owners.

     Section 2.10. Definitive Notes. If (i) (A) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities as described in the Depository
Agreement and (B) neither the Indenture Trustee nor the Administrator is able to
locate a qualified successor, (ii) the Administrator at its option advises the
Indenture Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency or (iii) after an Indenture Default, Note Owners
representing in the aggregate not less than 51% of the Outstanding Amount advise
the Indenture Trustee through the Clearing Agency and Clearing Agency
Participants in writing that the continuation of a book-entry system through the
Clearing Agency or its successor is no longer in the best interest of Note
Owners, the Indenture Trustee shall be required to notify all Note Owners,
through the Clearing Agency, of the occurrence of such event and the
availability through the Clearing Agency of Definitive Notes to Note Owners
requesting the same. Upon surrender to the Indenture Trustee by the Clearing
Agency of the Note or


<PAGE>

Notes representing the Book-Entry Notes and the receipt of instructions for
re-registration, the Indenture Trustee shall issue Definitive Notes to Note
Owners, who thereupon shall become Noteholders for all purposes of this
Indenture. None of the Owner Trustee, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.

     The Indenture Trustee shall not be liable if the Indenture Trustee or the
Administrative Agent is unable to locate a qualified successor Clearing Agency.
The Definitive Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of such methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.

     If Definitive Notes are issued and the Indenture Trustee is not the Note
Registrar, the Owner Trustee shall furnish or cause to be furnished to the
Indenture Trustee a list of the names and addresses of the Noteholders (i) as of
each Record Date, within five days thereafter and (ii) as of not more than ten
days prior to the time such list is furnished, within 30 days after receipt by
the Owner Trustee of a written request therefor.

     If Definitive Notes are issued, the prospective transferee shall be
required to execute and deliver to the Indenture Trustee, the Owner Trustee, the
Initial Purchaser and the Transferor an investor representation letter
substantially in the form attached as an Exhibit to the Offering Circular as a
condition to the registration of any transfer of a Note.

     Section 2.11. Authenticating Agents. Upon the request of the Trust, the
Indenture Trustee shall, and if the Indenture Trustee so chooses the Indenture
Trustee may, appoint one or more Authenticating Agents with power to act on its
behalf and subject to its direction in the authentication of Notes in connection
with issuance, transfers and exchanges under Sections 2.02, 2.04, 2.05 and 9.05,
as fully to all intents and purposes as though each such Authenticating Agent
had been expressly authorized by such Sections to authenticate the Notes. For
all purposes of this Indenture, the authentication of Notes by an Authenticating
Agent pursuant to this Section shall be deemed to be the authentication of Notes
by the Indenture Trustee.

     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 the corporate trust business
of any Authenticating Agent, shall be the successor of such Authenticating Agent
hereunder, without the execution or filing of any further act on the part of the
parties hereto or such Authenticating Agent or such successor corporation.

     Any Authenticating Agent may at any time resign by giving written notice of
resignation to the Indenture Trustee and the Trust. The Indenture Trustee may at
any time terminate the agency of any Authenticating Agent by giving written
notice of termination to such Authenticating Agent and the Trust. Upon receiving
such notice of resignation or upon such termination, the Indenture Trustee shall
promptly appoint a successor Authenticating Agent and shall give written notice
of such appointment to the Trust.

     The Indenture Trustee agrees to pay to each Authenticating Agent from


<PAGE>

time to time reasonable compensation for its services and reimbursement for its
reasonable expenses relating thereto, and the Indenture Trustee shall be
entitled to be reimbursed for all such payments, subject to Section 6.07. The
provisions of Sections 2.04 and 6.04 shall be applicable to any Authenticating
Agent.

     Section 2.12. Tax Treatment. The Trust has entered into this Indenture, and
the Notes will be issued, with the intention that, for all purposes including
federal, state and local income, single business and franchise tax purposes, the
Notes will qualify as indebtedness. The Trust, by entering into this Indenture,
and each Noteholder, by its acceptance of a Note (and each Note Owner by its
acceptance of an interest in the applicable Book-Entry Note), agree to treat the
Notes for all purposes including federal, state and local income, single
business and franchise tax purposes as indebtedness.

     Section 2.13. Employee Benefit Plans. A fiduciary of a Benefit Plan
purchasing the Notes with the assets of a Benefit Plan is deemed to represent
that the purchase of one or more Notes is consistent with its fiduciary duties
under ERISA and does not result in a nonexempt prohibited transaction as defined
in Section 406 of ERISA or Section 4975 of the Code. If the Transferor, the
Administrative Agent, the Indenture Trustee, the Owner Trustee or any of their
respective Affiliates (i) has investment or administrative discretion with
respect to the assets of a Benefit Plan, (ii) has authority or responsibility to
give, or regularly gives, investment advice with respect to such Benefit Plan
assets, for a fee and pursuant to an agreement or understanding that such advice
(a) will serve as a primary basis for investment decisions with respect to such
Benefit Plan assets and (b) will be based on the particular investment needs for
such Benefit Plan or (iii) is an employer maintaining or contributing to such
Benefit Plan, then a purchase of the Notes by such a Benefit Plan may represent
a conflict of interest or act of self-dealing by the fiduciary.

     Section 2.14. Representations and Warranties as to the Security Interest of
the Indenture Trustee in the Leases and Lease Receivables. The Trust makes the
following representations and warranties to the Indenture Trustee. The
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, and shall survive the sale of the Trust
Estate to the Trust and the pledge thereof to the Indenture Trustee pursuant to
this Agreement.

     (a) This Agreement creates a valid and continuing security interest (as
defined in the UCC) in the Leases and Lease Receivables in favor of the
Indenture Trustee, which security interest is prior to all other Liens, and is
enforceable as such as against creditors of and purchasers from the Trust.

     (b) The Leases constitute "chattel paper", "payment intangibles" or
"accounts" within the meaning of the Revised Article 9 of the UCC and "chattel
paper", "general intangibles" or "accounts" within the meaning of the UCC in
states that have not adopted the Revised Article 9 of the UCC.

     (c) The Lease Receivables constitute "payment intangibles" or "accounts"
within the meaning of the Revised Article 9 of the UCC and "general intangibles"
or "accounts" within the meaning of the UCC in states that have not adopted the
Revised UCC.

     (d) The Trust owns and has good and marketable title to the Lease


<PAGE>

Receivables free and clear of any lien, claim or encumbrance of any Person and,
immediately prior to the pledge of the Trust Estate to the Indenture Trustee, a
valid first priority perfected security interest in the Leases.

     (e) The Trust has caused or will have caused, within ten days, the filing
of all appropriate financing statements in the proper filing office in the
appropriate jurisdictions under applicable law in order to perfect the security
interest in the Leases and Lease Receivables granted to the Indenture Trustee
hereunder.

     (f) Other than the security interest granted to the Indenture Trustee
pursuant to this Agreement, the Trust has not pledged, assigned, sold, granted a
security interest in, or otherwise conveyed any of the Leases and Lease
Receivables. The Trust has not authorized the filing of and is not aware of any
financing statements against the Trust that include a description of collateral
covering the Leases and Lease Receivables other than any financing statement
relating to the security interest granted to the Indenture Trustee hereunder or
that has been terminated. The Trust is not aware of any judgment or tax lien
filings against it.

     (g) To extent that the original copy of a cost per copy contract related to
a Lease has not been destroyed, the Administrative Agent as custodian for the
Trust has in its possession all original copies of the cost per copy contracts
that constitute or evidence the Leases. The cost per copy contracts that
constitute or evidence the Leases and Lease Receivables do not have any marks or
notations indicating that they have been pledged, assigned or otherwise conveyed
to any Person other than the Indenture Trustee.

     Section 2.15. Representations and Warranties as to the Security Interest of
the Indenture Trustee in the Account Collateral. The Trust makes the following
representations and warranties to the Indenture Trustee. The representations and
warranties speak as of the execution and delivery of this Agreement and as of
the Closing Date, and shall survive the sale of the Trust Estate to the Trust
and the pledge thereof to the Indenture Trustee pursuant to this Agreement.

     (a) This Agreement creates a valid and continuing security interest (as
defined in the UCC) in the Account Collateral in favor of the Indenture Trustee,
which security interest is prior to all other Liens, and is enforceable as such
as against creditors of and purchasers from the Trust.

     (b) All of the Account Collateral has been and will have been credited to
one of the Securities Accounts. The Securities Intermediary for each Securities
Account has agreed to treat all assets credited to the Securities Accounts as
"financial assets" within the meaning of the UCC.

     (c) The Trust owns and has good and marketable title to the Account
Collateral free and clear of any Lien, claim or encumbrance of any Person.

     (d) The Trust has received all consents and approvals required by the terms
of the Account Collateral to the transfer to the Indenture Trustee of its
interest and rights in the Account Collateral hereunder.

     (e) The Trust has delivered to the Indenture Trustee a fully executed
agreement pursuant to which the Securities Intermediary has agreed to comply
with all instructions originated by the Indenture Trustee relating to the
Securities Accounts without further consent by the Trust.


<PAGE>

     (f) Other than the security interest granted to the Indenture Trustee
pursuant to this Agreement, the Trust has not pledged, assigned, sold, granted a
security interest in, or otherwise conveyed any of the Account Collateral. The
Trust has not authorized the filing of and is not aware of any financing
statements against it that include a description of collateral covering the
Account Collateral other than any financing statement relating to the security
interest granted to the Indenture Trustee hereunder or that has been terminated.
The Trust is not aware of any judgment or tax lien filings against it.

     (g) The Securities Accounts are not in the name of any person other than
the Trust or the Indenture Trustee. The Trust has not consented to compliance by
the Securities Intermediary of any Securities Account with Entitlement Orders of
any person other than the Indenture Trustee.

                                  ARTICLE THREE

                                    COVENANTS

     Section 3.01. Payment of Principal and Interest. The Trust shall duly and
punctually pay the principal and interest on the Notes in accordance with the
terms of the Notes, the Administration Agreement and this Indenture. Without
limiting the foregoing, subject to Sections 8.02(c) and 8.02(d), the Trust shall
cause to be distributed all amounts on deposit in the Note Distribution Account
on each Payment Date that have been deposited therein for the benefit of the
Notes as set forth in Section 8.02(e). Amounts properly withheld under the Code
by any Person from a payment to any Noteholder of interest or principal shall be
considered to have been paid by the Trust to such Noteholder for all purposes of
this Indenture.

     Section 3.02. Maintenance of Office or Agency. The Note Registrar, on
behalf of the Trust, shall maintain at the Corporate Trust Office or at such
other location in the Borough of Manhattan, The City of New York chosen by the
Note Registrar, acting for the Trust, an office or agency where Notes may be
surrendered for registration of transfer or exchange, and where notices to and
demands upon the Trust in respect of the Notes and this Indenture may be served.
The Trust hereby appoints the Indenture Trustee as its agent to receive all such
surrenders, notices and demands. The Trust shall give prompt written notice to
the Indenture Trustee of the location, and of any change in the location, of any
such office or agency. If at any time the Trust shall fail to maintain any such
office or agency or shall fail to furnish the Indenture Trustee with the address
thereof, such surrenders, notices and demands may be made or served at the
Corporate Trust Office, and the Trust hereby appoints the Indenture Trustee as
its agent to receive all such surrenders, notices and demands.

     Section 3.03. Money for Payments to be Held in Trust. As provided in
Sections 5.04(b) and 8.02, all payments of amounts due and payable with respect
to any Notes that are to be made from amounts withdrawn from the Collection
Account and the Note Distribution Account pursuant to Section 8.02 shall be made
on behalf of the Trust by the Indenture Trustee or by another Paying Agent, and
no amounts so withdrawn therefrom for payments on Notes shall be paid over to
the Trust except as provided in this Section.

     On or before each Payment Date and Redemption Date, the Trust shall deposit
or cause to be deposited into the Note Distribution Account an


<PAGE>

aggregate sum sufficient to pay the amounts then becoming due under the Notes,
and the Paying Agent shall hold such sum in trust for the benefit of the Persons
entitled thereto and (unless the Paying Agent is the Indenture Trustee) shall
promptly notify the Indenture Trustee of any failure by the Trust to effect such
deposit.

     The Indenture Trustee, if the Indenture Trustee acts as the Paying Agent,
hereby agrees to perform the obligations listed in the sub-paragraphs below, and
the Trust shall cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees to the extent relevant), subject to the
provisions of this Section, that such Paying Agent shall:

     (a) hold all sums held by it for the payment of amounts due with respect to
the Notes in trust for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and pay such sums to such Persons as herein provided;

     (b) give the Indenture Trustee notice of any default by the Trust of which
it has actual knowledge (or any other obligor upon the Notes, if any) in the
making of any payment required to be made with respect to the Notes;

     (c) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture Trustee
all sums so held in trust by such Paying Agent;

     (d) immediately resign as a Paying Agent and forthwith pay to the Indenture
Trustee all sums held by it in trust for the payment of Notes if at any time it
ceases to meet the standards required to be met by a Paying Agent at the time of
its appointment; and

     (e) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon (including the payment thereof to the
appropriate taxing authority if documentation is not obtained which exempts any
such payments from withholding or subjects such payments to a reduced rate
thereof) and with respect to any applicable reporting requirements in connection
therewith.

     The Trust may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Trust Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which such sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.

     Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be discharged from such trust and
be paid to the Trust on Trust Request, and the related Noteholder shall
thereafter, as an unsecured general creditor, look only to the Trust for payment
thereof, and all liability of the Indenture Trustee or such


<PAGE>

Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that the Indenture Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Trust cause to be
published once, in an Authorized Newspaper, notice that such money remains
unclaimed and that, after a date specified therein, which date shall not be less
than 30 days from the date of such publication, any unclaimed balance of such
money then remaining shall be paid to the Transferor. The Indenture Trustee
shall also adopt and employ, at the expense of the Trust, any other reasonable
means of notification of such repayment (including mailing notice of such
repayment to Noteholders the Notes of which have been called but not surrendered
for redemption or whose right to or interest in monies due and payable but not
claimed is determinable from the records of the Indenture Trustee or any Paying
Agent at the last address of record for each such Noteholder).

     Section 3.04. Existence. The Trust shall keep in full effect its existence,
rights and franchises as a trust under the laws of the State of Delaware (unless
it becomes, or any successor Trust hereunder is or becomes, organized under the
laws of any other State or of the United States, in which case the Trust shall
keep in full effect its existence, rights and franchises under the laws of such
other jurisdiction) and shall obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Estate, in connection with this Indenture and the other Basic Documents
and the transactions contemplated hereby and thereby until such time as the
Trust shall terminate in accordance with the terms hereof.

     Section 3.05. Protection of Trust Estate. The Trust intends the security
interest Granted pursuant to this Indenture in favor of the Indenture Trustee on
behalf of the Noteholders to be prior to all other liens in respect of the Trust
Estate, and the Trust shall take all actions necessary to obtain and maintain,
for the benefit of the Indenture Trustee on behalf of the Noteholders, a first
lien on and a first priority, perfected security interest in the Trust Estate.
The Trust shall from time to time execute and deliver all such supplements and
amendments hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, all as prepared by the
Administrative Agent and delivered to the Trust, and shall take such other
action necessary or advisable to:

     (a) Grant more effectively all or any portion of the Trust Estate;

     (b) maintain or preserve the lien and security interest (and the priority
thereof) created by this Indenture or carry out more effectively the purposes
hereof;

     (c) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;

     (d) enforce any of the Collateral;

     (e) preserve and defend title to the Trust Estate and the rights of the
Indenture Trustee and the Noteholders in the Trust Estate against the claims of
all Persons; or

     (f)..pay all taxes or assessments levied or assessed upon the Trust


<PAGE>

Estate when due.

     The Trust hereby designates the Administrative Agent as its agent and
attorney-in-fact to execute all financing statements, continuation statements or
other instruments required to be executed pursuant to this Section.

     Section 3.06. Opinions as to Trust Estate.

     (a) Promptly after the execution and delivery of this Indenture, the Trust
shall furnish to the Indenture Trustee an Opinion of Counsel to the effect that,
in the opinion of such counsel, either (i) all financing statements and
continuation statements have been executed and filed that are necessary to
create and continue the Indenture Trustee's first priority perfected security
interest in the collateral for the benefit of the Noteholders, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) no such action shall be necessary to perfect such
security interest.

     (b) On or before April 15 of each calendar year, beginning with April 15,
2002, the Trust shall furnish to the Indenture Trustee an Opinion of Counsel to
the effect that in the opinion of such counsel, either (i) all financing
statements and continuation statements have been executed and filed that are
necessary to continue the lien and security interest of the Indenture Trustee in
the Collateral and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (ii) no such action is
necessary to continue such lien and security interest.

     Section 3.07. Performance of Obligations; Administration of the Trust
Estate.

     (a) The Trust shall not take any action and shall use its best efforts not
to permit any action to be taken by others, including the Administrative Agent,
that would release any Person from any of such Person's material covenants or
obligations under any instrument or agreement included in the Trust Estate or
that would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any such instrument or
agreement, except as expressly provided in the Basic Documents or such other
instrument or agreement.

     (b) The Trust may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officer's Certificate of the Trust
shall be deemed to be action taken by the Trust. Initially, the Trust has
contracted with the Administrator, and the Administrator has agreed, to assist
the Trust in performing its duties under this Indenture.

     (c) The Trust shall, and, shall cause the Administrator to, punctually
perform and observe all of its obligations and agreements contained in this
Indenture, the other Basic Documents and the instruments and agreements included
in the Trust Estate, including filing or causing to be filed all UCC financing
statements and continuation statements required to be filed by the terms of this
Indenture and the other Basic Documents in accordance with and within the time
periods provided for herein and therein. Except as otherwise expressly provided
therein, the Trust, as a party to the Basic Documents, shall not, and shall not
cause the Administrative Agent or the Administrator to, modify, amend,
supplement, waive or terminate any Basic Document or any


<PAGE>

provision thereof without the consent of the Indenture Trustee or the
Noteholders of at least a majority of the Outstanding Amount or such greater
percentage as may be specified in the particular provision or Basic Document.

     Section 3.08.  Negative Covenants.  So long as any Notes are
Outstanding, the Trust shall not:

     (a) except as expressly permitted by this Indenture and the other Basic
Documents, sell, exchange, transfer or otherwise dispose of any of the
properties or assets of the Trust, including those comprising the Trust Estate,
unless directed to do so by the Indenture Trustee;

     (b) claim any credit on or make any deduction from the principal or
interest payable in respect of the Notes (other than amounts properly withheld
from such payments under the Code or applicable state law) or assert any claim
against any present or former Noteholder by reason of the payment of the taxes
levied or assessed upon any part of the Trust Estate;

     (c) (i) permit the validity or effectiveness of this Indenture to be
impaired, permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged or permit any Person to be released from
any covenants or obligations under this Indenture, except as may be expressly
permitted hereby, (ii) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance to be created on or extend to or
otherwise arise upon or burden the Trust Estate, any part thereof or any
interest therein or the proceeds thereof (other than tax liens, mechanics' liens
and other liens that arise by operation of law, in each case on any asset
comprising part of the Trust Estate and arising solely as a result of an action
or omission of the related Lessee) or (iii) except as otherwise provided in the
Basic Documents, permit the lien of this Indenture not to constitute a valid
first priority (other than with respect to any such tax, mechanics' or other
lien) security interest in the Trust Estate; or

     (d)  except as otherwise permitted by the Basic Documents, dissolve or
liquidate in whole or in part.

     Section 3.09.  Certificates and Reports.

     (a) The Trust shall deliver to the Indenture Trustee and each Rating
Agency, on or before April 30 of each calendar year, beginning with April 30,
2002, an Officer's Certificate stating, as to the Authorized Officer signing
such Officer's Certificate, that:

          (i) a review of the activities of the Trust during the preceding 12
     months ended December 31 (or such shorter period in the case of the first
     such Officer's Certificate) and of the Trust's performance under this
     Indenture has been made under such Authorized Officer's supervision and

          (ii) to the best of such Authorized Officer's knowledge, based on such
     review, the Trust has complied with all conditions and covenants under this
     Indenture throughout the preceding 12-month period (or such shorter period
     in the case of the first such Officer's Certificate), or, if there has been
     a Default in the compliance of any such condition or covenant, specifying
     each such Default known to such Authorized Officer and the nature and
     status thereof.


<PAGE>

     (b) Unless the Trust otherwise determines, the fiscal year of the Trust
shall end on December 31 of each year.

     Section 3.10. Restrictions on Certain Other Activities. Except as otherwise
provided in the Basic Documents, the Trust shall not: (i) engage in any
activities other than financing, acquiring, owning, leasing, pledging and
managing the Trust Estate in the manner contemplated by the Basic Documents and
activities incidental thereto; (ii) issue, incur, assume, guarantee or otherwise
become liable, directly or indirectly, for any indebtedness other than the Notes
and any other indebtedness permitted by or arising under the Basic Documents;
(iii) make any loan, advance or credit to, guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person; or
(iv) make any expenditure (by long-term or operating lease or otherwise) for
capital assets (either realty or personalty).

     Section 3.11.  Administrative Agent Defaults.

     (a) If the Trust or a Responsible Officer of the Indenture Trustee shall
have knowledge of the occurrence and continuance of an Administrative Agent
Default, such Person shall promptly notify the other Person and each Rating
Agency thereof, and shall specify in such notice the action, if any, the Trust
is taking in respect of such default. If an Administrative Agent Default shall
arise from the failure of the Administrative Agent to perform any of its duties
or obligations under the Administration Agreement, the Trust shall take all
reasonable steps available to it to remedy such failure. Upon the occurrence and
continuance of an Administrative Agent Default, the Indenture Trustee or the
Noteholders may terminate all of the rights and obligations of the
Administrative Agent in the manner set forth in Section 8.01(b) of the
Administration Agreement, and a Successor Administrative Agent shall be
appointed in accordance with the Administration Agreement. The Indenture Trustee
may withdraw from the Transition Account or, if the amount on deposit in the
Transition Account is insufficient, may require the Administrative Agent to
allocate from payments made in respect of the Maintenance Component of the
Leases, an amount necessary to pay for all reasonable costs and expenses
incurred in connection with the transition to a Successor Administrative Agent
following an Administrative Agent Default including costs associated with the
transfer of the Lease Files to a Successor Administrative Agent and amending the
Administration Agreement.

     (b) As promptly as possible after the giving of notice of termination to
the Administrative Agent of the Administrative Agent's rights and powers
pursuant to Section 8.01 of the Administration Agreement, the Indenture Trustee
shall appoint a Successor Administrative Agent in accordance with Section 8.02
of the Administration Agreement, and such Successor Administrative Agent shall
accept its appointment by a written assumption in a form acceptable to the
Trustees. Upon the termination or resignation of Xerox as Administrative Agent,
so long as U.S. Bank is the Indenture Trustee, the Backup Administrative Agent
shall be the initial Successor Administrative Agent. In the event that a
Successor Administrative Agent has not been appointed and accepted its
appointment at the time when the Administrative Agent ceases to act as
Administrative Agent, the Indenture Trustee without


<PAGE>

further action shall automatically be appointed the Successor Administrative
Agent. The Indenture Trustee or the Backup Administrative Agent may resign as
the Administrative Agent by giving written notice of such resignation to the
Trust and in such event will be released from such duties and obligations, such
release not to be effective until the Indenture Trustee appoints a Successor
Administrative Agent and such Successor Administrative Agent accepts appointment
under the Administration Agreement in manner set forth in Section 8.02(a) of the
Administration Agreement. Upon such acceptance of its appointment, the Successor
Administrative Agent shall be successor to the predecessor Administrative Agent
under the Administration Agreement. Any Successor Administrative Agent other
than the Indenture Trustee or the Backup Administrative Agent shall satisfy the
criteria for a Successor Administration Agent set forth in Section 8.02(a) of
the Administration Agreement. In connection with any such appointment, the Trust
may make such arrangements for the compensation of such successor as it and such
successor shall agree, subject to the limitations and conditions set forth below
and in Section 8.02 of the Administration Agreement. If the Indenture Trustee
shall succeed to the Administrative Agent's duties under the Administration
Agreement as provided herein, it shall do so in its individual capacity and not
in its capacity as Indenture Trustee and, accordingly, the provisions of Article
Six shall be inapplicable to the Indenture Trustee in its duties as the
Successor Administrative Agent. In case the Indenture Trustee or the Backup
Administrative Agent shall become successor to the Administrative Agent under
the Administration Agreement, the Indenture Trustee or the Backup Administrative
Agent shall be entitled to appoint as Administrative Agent any one of its
Affiliates or agents, provided that it shall be fully liable for the actions and
omissions of such Affiliate or agent in such capacity as Successor
Administrative Agent. If Xerox has been terminated as Administrative Agent, and
the Backup Administrative Agent is acting as Administrative Agent, Xerox will
continue to be obligated to pay EDS and Harris Fees and Expenses. If Xerox fails
to pay EDS and Harris Fees and Expenses, the Backup Administrative Agent may pay
such amounts from payments made in respect of the Maintenance Component of the
Leases.

     (c) Upon any termination of the Administrative Agent's rights and powers or
resignation of the Administrative Agent pursuant to the Administration
Agreement, the Trust shall promptly, but in any event within two Business Days
of such termination or resignation, notify the Indenture Trustee thereof.

     Section 3.12.  Maintenance Provider Defaults.

     (a) If the Trust or a Responsible Officer of the Indenture Trustee shall
have knowledge of the occurrence and continuance of a Maintenance Provider
Default, such Person shall promptly notify the other Person and each Rating
Agency thereof, and shall specify in such notice the action, if any, the Trust
is taking in respect of such default. If a Maintenance Provider Default shall
arise from the failure of the Maintenance Provider to perform any of its duties
or obligations under the Administration Agreement, the Trust shall take all
reasonable steps available to it to remedy such failure. Upon the occurrence and
continuance of a Maintenance Provider Default, the Indenture Trustee or the
Noteholders may terminate all of the rights and obligations of the Maintenance
Provider in the manner set forth in Section 8.03(b) of the Administration
Agreement, and a Successor Maintenance Provider shall be appointed in accordance
with the Administration Agreement. The Indenture Trustee may withdraw from the
Transition Account or, in the event the amount on deposit in the Transition
Account is insufficient, may have the


<PAGE>

Administrative Agent allocate payments made in respect of the Maintenance
Component of the Leases, an amount necessary to pay for all reasonable costs and
expenses incurred in connection with the transition to a Successor Maintenance
Provider including, among other things, costs associated with the transfer of
servicing and maintenance records of the related Equipment to a Successor
Maintenance Provider and amending the Administration Agreement.

     (b) As promptly as possible after the giving of notice of termination to
the Maintenance Provider of the Maintenance Provider's rights and powers
pursuant to Section 8.03 of the Administration Agreement, the Indenture Trustee
shall appoint a Successor Maintenance Provider in accordance with Section 8.04
of the Administration Agreement, and such Successor Maintenance Provider shall
accept its appointment by a written assumption in a form acceptable to the
Trustees. In the event that a Successor Maintenance Provider has not been
appointed and accepted its appointment at the time when the Maintenance Provider
ceases to act as Maintenance Provider, the Indenture Trustee without further
action shall automatically be appointed the Successor Maintenance Provider. The
Indenture Trustee may resign as the Maintenance Provider by giving written
notice of such resignation to the Trust and in such event will be released from
such duties and obligations, such release not to be effective until the
Indenture Trustee appoints a Successor Maintenance Provider and such Successor
Maintenance Provider accepts appointment under the Administration Agreement in
the manner set forth in Section 8.04(a) of the Administration Agreement. Upon
such acceptance of its appointment, the Successor Maintenance Provider shall be
successor to the predecessor Administrative Agent under the Administration
Agreement. Any Successor Maintenance Provider shall be an established corporate
entity whose regular business includes the provision of supplies, maintenance
and servicing in respect of document processing equipment. If within 45 days
after the delivery of the notice referred to above, the Indenture Trustee has
not appointed a Successor Maintenance Provider, the Indenture Trustee may
appoint, or may petition a court of competent jurisdiction to appoint, a
Successor Maintenance Provider. In connection with any such appointment, the
Trust may make such arrangements for the compensation of such successor as it
and such successor shall agree, subject to the limitations and conditions set
forth in Section 8.04 of the Administration Agreement, the Trust and the
Transferor shall enter into an agreement with such successor for the provision
of maintenance (such agreement to be in form and substance satisfactory to the
Indenture Trustee).

     (c) Upon any termination of the Maintenance Provider's rights and powers or
resignation of the Maintenance Provider pursuant to the Administration
Agreement, the Trust shall promptly, but in any event within two Business Days
of such termination or resignation, notify the Indenture Trustee thereof.

     Section 3.13. Compliance with Laws; Further Instruments and Acts. The Trust
shall comply with the requirements of all applicable laws, the non- compliance
with which would, individually or in the aggregate, materially and adversely
affect the ability of the Trust to perform its obligations under the Notes, this
Indenture or any other Basic Document. Upon request of the Indenture Trustee,
the Trust shall execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purposes of this Indenture.

     Section 3.14. Delivery of the Trust Estate. On the Closing Date, the Trust
shall deliver or cause to be delivered to the Indenture Trustee as


<PAGE>

security for its obligations hereunder, the Trust Estate.

     Section 3.15. Calculation of the Interest Rate. On each LIBOR Determination
Date, the Calculation Agent shall provide the Indenture Trustee with the Note
Rate for the Accrual Period commencing on the related Payment Date and inform
the Administrative Agent (at the facsimile number given to the Indenture Trustee
in writing) of such rate. The determinations of the Note Rate by the Calculation
Agent shall, in the absence of manifest error, be conclusive for all purposes
and binding on the Noteholders. All percentages resulting from any calculation
of the rate of interest will be rounded, if necessary, to the nearest 1/100,000
of 1% (.0000001), with five one-millionths of a percentage point rounded upward.

                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

     Section 4.01. Satisfaction and Discharge of Indenture. This Indenture shall
discharge with respect to the Collateral securing the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08,
3.10, 3.11, 3.12 and 3.13, (v) the rights, obligations and immunities of the
Indenture Trustee hereunder (including the rights of the Indenture Trustee under
Section 6.07 and the obligations of the Indenture Trustee under Section 4.02)
and (vi) the rights of Noteholders as beneficiaries hereof with respect to the
property so deposited with the Indenture Trustee payable to all or any of them,
and the Indenture Trustee, on demand and at the expense and on behalf of the
Trust, shall execute proper instruments acknowledging satisfaction and discharge
of this Indenture, when:

     (a)  either

          (i)  all Notes theretofore authenticated and delivered (other than (A)
     Notes that have been mutilated, destroyed, lost or stolen and that have
     been replaced or paid as provided in Section 2.05 and (B) Notes for whose
     payment money has theretofore been deposited in trust or segregated and
     held in trust by the Trust and thereafter paid to the Persons entitled
     thereto or discharged from such trust, as provided in Section 3.03) have
     been delivered to the Indenture Trustee for cancellation; or

          (ii) all Notes not theretofore delivered to the Indenture Trustee for
     cancellation (A) have become due and payable, (B) will become due and
     payable on the Final Scheduled Payment Date within one year or (C) are to
     be called for redemption within one year under arrangements satisfactory to
     the Indenture Trustee for the giving of notice of redemption by the
     Indenture Trustee in the name, and at the expense, of the Trust, and the
     Trust, in the case of clauses (A), (B) or (C) above, has irrevocably
     deposited or caused to be irrevocably deposited with the Indenture Trustee
     cash or direct obligations of or obligations guaranteed by the United
     States (that will mature prior to the date such amounts are payable), in
     trust for such purpose, in an amount sufficient to pay and discharge the
     entire indebtedness on such Notes (including interest, any fees due and
     payable to the Owner Trustee or the Indenture Trustee) not theretofore
     delivered to the Indenture Trustee for cancellation, when due, to the Final
     Scheduled Payment Date, or to the


<PAGE>

     Redemption Date (if Notes shall have been called for redemption pursuant to
     Section 10.01), as the case may be;

     (b) the Trust has paid or performed or caused to be paid or performed all
other amounts and obligations which the Trust may owe to or on behalf of the
Indenture Trustee for the benefit of the Noteholders under this Indenture or the
Notes;

     (c) all amounts payable to the Indenture Trustee pursuant to Section 6.07
or otherwise payable hereunder have been paid or provided for; and

     (d) the Trust has delivered to the Indenture Trustee an Officer's
Certificate and an Opinion of Counsel, each meeting the applicable requirements
of Section 11.01 and, subject to Section 11.02, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with (and, in the case of an Officer's Certificate,
stating that the Rating Agency Condition has been satisfied).

     Section 4.02. Application of Trust Money. All monies deposited with the
Indenture Trustee pursuant to Section 4.01 shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Indenture Trustee
may determine, to the Noteholders of the particular Notes for the payment or
redemption of which such monies have been deposited with the Indenture Trustee
of all sums due and to become due thereon for principal and interest. Such
monies need not be segregated from other funds except to the extent required
herein or in the Administration Agreement or as required by law.

     Section 4.03. Repayment of Monies Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
monies then held by any Paying Agent other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Trust, be paid to the Indenture Trustee to be held and applied according to
Section 3.03 and such Paying Agent shall thereupon be released from all further
liability with respect to such monies.

                                  ARTICLE FIVE

                                INDENTURE DEFAULT

     Section 5.01. Indenture Defaults. Any one of the following events (whatever
the reason for such Indenture Default and whether it shall be voluntary or
involuntary or 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) shall constitute a default under this Indenture (each, an
"Indenture Default"):

     (a) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of five
days or more;

     (b)  default in the payment of principal of any Note on the Final
Scheduled Payment Date or the Redemption Date;

     (c) default in the observance or performance of any covenant or


<PAGE>

agreement of the Trust made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere in
this Section specifically dealt with), or any representation or warranty of the
Trust made in this Indenture or in any certificate or other writing delivered
pursuant hereto or in connection herewith proving to have been incorrect in any
material respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or condition in
respect of which such misrepresentation or warranty was incorrect shall not have
been eliminated or otherwise cured, for a period of 60 days or, in the case of a
materially incorrect representation or warranty, 30 days, after there shall have
been given, by registered or certified mail, to the Trust and the Indenture
Trustee or by Noteholders representing at least 25% of the Outstanding Amount, a
written notice specifying such default or incorrect representation or warranty
and requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder;

     (d) the commencement of a proceeding seeking entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of the Trust or
any substantial part of the Trust Estate in an involuntary case under any
applicable federal or state bankruptcy, liquidation, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Trust or for any
substantial part of the Trust Estate, or ordering the winding up or liquidation
of the Trust's affairs, and such proceeding shall remain unstayed, undismissed
and in effect for a period of 60 consecutive days or immediately upon entry of
any such decree or order; or

     (e) the commencement by the Trust of a voluntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or hereafter in
effect or the consent by the Trust to the entry of an order for relief in an
involuntary case under any such law, the consent by the Trust to the appointment
of or taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Trust or for any substantial part of the
Trust Estate, the making by the Trust of any general assignment for the benefit
of creditors, the admission in writing of its inability to or the failure by the
Trust generally to pay its debts as such debts become due or the taking of
action by the Trust in furtherance of any of the foregoing.

     The Trust shall deliver to the Indenture Trustee, each Rating Agency and
each Noteholder, within five days after the occurrence thereof, written notice
in the form of an Officer's Certificate of any event that with the giving of
notice and the lapse of time would become an Indenture Default under clause (c),
its status and what action the Trust is taking or proposes to take with respect
thereto.

     Subject to the provisions herein relating to the duties of the Indenture
Trustee, if an Indenture Default occurs and is continuing, the Indenture Trustee
shall be under no obligation to exercise any of the rights or powers under this
Indenture at the request or direction of any Noteholder, if the Indenture
Trustee reasonably believes that it will not be adequately indemnified against
the costs, expenses and liabilities that might be incurred by it in complying
with such request. Subject to such provisions for indemnification and certain
limitations contained herein, Noteholders representing not less than a majority
of the Outstanding Amount shall have the right to direct the time, method and
place of conducting any proceeding


<PAGE>

or any remedy available to the Indenture Trustee or exercising any trust power
conferred on the Indenture Trustee, and Noteholders representing not less than a
majority of the Outstanding Amount may, in certain cases, waive any default with
respect thereto, except a default in the payment of principal or interest or a
default in respect of a covenant or provision of the Indenture that cannot be
modified without the waiver or consent of all of the holders of the Outstanding
Notes.

     Section 5.02. Rights upon Indenture Default. If an Indenture Default shall
have occurred and be continuing, Noteholders representing at least 66 2/3% of
the Outstanding Amount may declare the principal of the Notes immediately due
and payable at par, together with accrued interest thereon. Such declaration may
be rescinded by the Noteholders representing at least 66 2/3% of the Outstanding
Amount before a judgment or decree for payment of the amount due has been
obtained by the Indenture Trustee if (a) the Trust has deposited with the
Indenture Trustee an amount sufficient to pay (i) all interest on and principal
of the Notes as if the Indenture Default giving rise to such declaration had not
occurred and (ii) all amounts advanced by the Indenture Trustee and its costs
and expenses and (b) all Indenture Defaults (other than the nonpayment of
principal of the Notes that has become due solely by such declaration) have been
cured or waived.

     At any time prior to the declaration of the maturity of the Notes,
Noteholders holding not less than a majority of the Outstanding Amount may waive
such Indenture Default and its consequences in the manner set forth, and in
accordance with Section 5.12.

     If the Notes have been declared due and payable following an Indenture
Default, the Indenture Trustee may institute proceedings to collect amounts due
as set forth in Section 5.04, exercise remedies as a secured party (including
foreclosure or sale of the Trust Estate) or elect to maintain the Trust Estate
and continue to apply the proceeds from the Trust Estate as if there had been no
such declaration. Any sale of the Trust Estate by the Indenture Trustee will be
subject to the terms and conditions of Section 5.04.

     Section 5.03.  Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.

     (a) The Trust covenants that if there is a default in the payment of (i)
any interest on the Notes when the same becomes due and payable, and such
default continues for a period of five days or more or (ii) the principal on any
Notes on the Final Scheduled Payment Date or the Redemption Date, the Trust
shall, upon demand of the Indenture Trustee, pay to the Indenture Trustee, for
the benefit of such Noteholders, the entire amount then due and payable on such
Notes for principal and interest, with interest on the overdue principal, and,
to the extent payment at such rate of interest shall be legally enforceable,
upon overdue installments of interest, at the Interest Rate in effect from time
to time and in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee and
its agents, attorneys and counsel.

     (b) The Indenture Trustee is hereby vested with the power to execute,
acknowledge and deliver any notice, document, certificate, paper, pleading or
instrument and to do in the name of the Indenture Trustee as well as in the
name, place and stead of such Person such acts, things and deeds for or on


<PAGE>

behalf of and in the name of such Person under this Indenture (including
specifically under Section 5.04) and under the other Basic Documents which such
Person could or might do or which may be necessary, desirable or convenient in
the Indenture Trustee's sole discretion to effect the purposes contemplated
hereunder and under the other Basic Documents and, without limitation, following
the occurrence of an Indenture Default, exercise full right, power and authority
to take, or defer from taking, any and all acts with respect to the
administration, maintenance or disposition of the Trust Estate.

     (c) If an Indenture Default occurs and is continuing, the Indenture Trustee
may, in its discretion, proceed to protect and enforce its rights and the rights
of the Noteholders, by such appropriate Proceedings as the Indenture Trustee
shall deem most effective to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other proper
remedy or legal or equitable right vested in the Indenture Trustee by this
Indenture or by law.

     (d) Notwithstanding anything to the contrary contained in this Indenture,
if the Trust fails to perform its obligations under Section 10.01(b) when and as
due, the Indenture Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Noteholders by such appropriate proceedings as
the Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for specific performance of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other remedy or legal or equitable right vested in the Indenture Trustee by
this Indenture or by law; provided that the Indenture Trustee shall only be
entitled to take any such actions to the extent such actions (i) are taken only
to enforce the Trust's obligations to redeem the principal amount of Notes, and
(ii) are taken only against the portion of the Collateral, if any, consisting of
the Reserve Fund, any investments therein and any proceeds thereof.

     (e) In case there shall be pending, relative to the Trust or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Trust or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Trust or
other obligor upon the Notes, or to the creditors or property of the Trust or
such other obligor, the Indenture Trustee, irrespective of whether the principal
on any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:

          (i) to file and prove a claim or claims for the whole amount of
     principal and interest owing and unpaid in respect of the Notes and to file
     such other papers or documents as may be necessary or advisable in order to
     have the claims of the Indenture Trustee (including any claim for
     reasonable compensation to the Indenture Trustee and each predecessor
     Indenture Trustee, and their respective agents, attorneys and counsel, and
     for reimbursement of all expenses and liabilities


<PAGE>

     incurred, and all advances and disbursements made, by the Indenture Trustee
     and each predecessor Indenture Trustee, except as a result of negligence or
     bad faith) and of the Noteholders allowed in such Proceedings;

          (ii) unless prohibited by applicable law and regulations, to vote on
     behalf of the Noteholders in any election of a trustee, a standby trustee
     or Person performing similar functions in any such Proceedings;

          (iii) to collect and receive any monies or other property payable or
     deliverable on any such claims and to distribute all amounts received with
     respect to the claims of the Noteholders and the Indenture Trustee on their
     behalf; and

          (iv) 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 Indenture
     Trustee or the Noteholders allowed in any judicial proceedings relative to
     the Trust, its creditors and its property;

and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each Noteholder to make payments to
the Indenture Trustee and, in the event the Indenture Trustee shall consent to
the making of payments directly to the Noteholders, to pay to the Indenture
Trustee such amounts as shall be sufficient to cover reasonable compensation to
the Indenture Trustee, each predecessor Indenture Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred
and all advances and disbursements made by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.

     (f) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Noteholder or to vote in
respect of the claim of any Noteholder in any such proceeding except, as
aforesaid, to vote for the election of a trustee in bankruptcy or similar
Person.

     (g) All rights of action and of asserting claims under this Indenture, or
under the Notes, may be enforced by the Indenture Trustee without the possession
of the Notes or the production thereof in any trial or other Proceedings
relative thereto, and any such action or Proceedings instituted by the Indenture
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, subject to the payment of the expenses, advances,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents, attorneys and counsel shall be
for the ratable benefit of the Noteholders in respect of which such judgment has
been recovered.

     (h) In any Proceedings brought by the Indenture Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.

     Section 5.04.  Remedies; Priorities.


<PAGE>

     (a) If an Indenture Default shall have occurred and be continuing, the
Indenture Trustee may do one or more of the following (subject to Sections 5.02
and 5.05):

          (i) institute Proceedings in its own name and as trustee of an express
     trust for the collection of all amounts then payable on the Notes or under
     this Indenture with respect thereto, whether by declaration or otherwise,
     enforce any judgment obtained, and collect from the Trust and any other
     obligor upon such Notes monies adjudged due;

          (ii) institute Proceedings from time to time for the complete or
     partial foreclosure of this Indenture with respect to the Trust Estate;

          (iii) exercise any remedies of a secured party under the UCC and take
     any other appropriate action to protect and enforce the rights and remedies
     of the Indenture Trustee and the Noteholders; and

          (iv) subject to Section 5.17, after a declaration of the maturity of
     the Notes pursuant to Section 5.02, sell the Trust Estate or any portion
     thereof or rights or interest therein, at one or more public or private
     sales called and conducted in any manner permitted by law and deliver the
     proceeds of such sale or liquidation to the Trustee for distribution in
     accordance with the terms of this Indenture; provided, however, that,
     except as otherwise provided in the immediately succeeding sentence, no
     such sale or liquidation can be made if the proceeds of such sale or
     liquidation distributable to the Noteholders are not sufficient to pay all
     outstanding principal of and accrued interest on the Notes;

provided, however, any sale of the Leases pursuant to any of clauses (i) through
(iv) above shall be subject to the condition that so long as no Maintenance
Provider Default has occurred and is continuing, the Maintenance Provider will
continue to act in such capacity and will continue to be paid the Maintenance
Component payable to it; provided, further, the proceeds of such sale or
liquidation need not be sufficient to pay all outstanding principal and accrued
interest on the Notes if the related Indenture Default arose as described in
clause (a), (b), (d) or (e) of Section 5.01 and (1) the Noteholders representing
100% of the Outstanding Amount consent to such sale or liquidation or (2) the
Indenture Trustee determines that the Trust Estate will not continue to provide
sufficient funds for the payment of principal and interest on the Notes as they
would have become due if the Notes had not been declared due and payable, the
Indenture Trustee provides prior written notice of such sale or liquidation to
each Rating Agency and Noteholders representing at least 66% of the Outstanding
Amount consent to such sale or liquidation. In determining such sufficiency or
insufficiency of (i) the proceeds of such sale or liquidation to pay all
outstanding principal and accrued interest on the Notes or (ii) the Trust Estate
to provide sufficient funds for the payment of principal and interest on the
Notes as they would have become due if the Notes had not been declared due and
payable, the Indenture Trustee may but need not obtain (at the expense of the
Trust) and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
Notwithstanding the foregoing, the Indenture Trustee will be required to sell or
otherwise liquidate the Trust Estate upon the conditions specified in Section
9.02 of the Trust Agreement.


<PAGE>

     (b)  If the Indenture Trustee collects any money or property pursuant to
Article Five upon sale of the Trust Estate, it shall pay out such money or
property in the following order:

          (i)   to the Indenture Trustee for amounts due as compensation or
     indemnity payments under this Indenture (if not previously paid by the
     Administrative Agent);

          (ii)  to the Administrative Agent, any accrued but unpaid
     Administrative Agent Monthly Payment;

          (iii) to Noteholders for the payments of interest which is due and
     unpaid on the Notes (including any overdue interest, and to the extent
     permitted under applicable law, interest on any overdue interest at the
     Interest Rate);

          (iv)  to the Noteholders in payment of the principal amount due and
     unpaid on the Notes until the Note Balance has been reduced to zero;

          (v)   to the Certificate Distribution Account for distribution to the
     Certificateholders for amounts due and unpaid in respect of the principal
     amount due and unpaid on the Certificates, until the Certificates have been
     paid in full; and

          (vi)  any remaining amounts to the Transferor.

     (c)  The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date, the Trust shall mail to each Noteholder and the Indenture Trustee a
notice that states the record date, the payment date and the amount to be paid.

     Section 5.05. Optional Preservation of the Trust Estate. If the Notes have
been declared to be due and payable under Section 5.02 following an Indenture
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, unless directed to sell pursuant to Section
9.02 of the Trust Agreement, but need not, elect to maintain possession of the
Trust Estate and continue to apply the proceeds thereof in accordance with
Section 4.04 of the Administration Agreement and Section 3.01 hereof. It is the
intent of the parties hereto and the Noteholders that there be at all times
sufficient funds for the payment of principal and interest on the Notes, and the
Indenture Trustee shall take such intent into account when determining whether
or not to maintain possession of the Trust Estate. In determining whether to
maintain possession of the Trust Estate, the Indenture Trustee may but need not
obtain (at the expense of the Trust) and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose. Notwithstanding the foregoing provisions of this
Section and Section 5.04, the Indenture Trustee shall sell the Trust Estate if
so instructed by the Owner Trustee pursuant to Section 9.02 of the Trust
Agreement, and the proceeds of such sale shall be distributed in accordance with
Section 4.04 of the Administration Agreement.

     Section 5.06.  Limitation of Suits.


<PAGE>

     (a) No holder of any Note shall have any right to institute any Proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless: (i) such
Noteholder previously has given to the Indenture Trustee written notice of a
continuing Indenture Default, (ii) Noteholders representing not less than 25% of
the Outstanding Amount have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Indenture Default in its own name
as Indenture Trustee, (iii) such Noteholder has offered the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in complying with such request, (iv) the Indenture Trustee has for 60 days
failed to institute such Proceedings and (v) no direction inconsistent with such
written request has been given to the Indenture Trustee during such 60-day
period by Noteholders representing not less than a majority of the Outstanding
Amount.

     No Noteholder or group of Noteholders shall have any right in any manner
whatever by virtue of, or by availing of, any provision of this Indenture to
affect, disturb or prejudice the rights of any other Noteholders or to obtain or
to seek to obtain priority or preference over any other Noteholder or to enforce
any right under this Indenture, except in the manner herein provided.

     In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Noteholders, each
representing less than a majority of the Outstanding Amount, the Indenture
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.

     (b) No Noteholder shall have any right to vote except as provided pursuant
to this Indenture and the Notes, nor any right in any manner to otherwise
control the operation and management of the Trust.

     Section 5.07. Unconditional Rights of Noteholders to Receive Principal and
Interest. Notwithstanding any other provision in this Indenture, each Noteholder
shall have the right, which is absolute and unconditional, to receive payment of
the principal and interest on, if any, such Note on or after the respective due
dates thereof expressed in such Note or this Indenture (or, in the case of
redemption, on or after the Redemption Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Noteholder.

     Section 5.08. Restoration of Rights and Remedies. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or such
Noteholder, then and in every such case the Trust, the Indenture Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Indenture Trustee and the Noteholders shall
continue as though no such Proceeding had been instituted.

     Section 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at
law, in equity or otherwise. The assertion or employment of any right or


<PAGE>

remedy hereunder or otherwise shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

     Section 5.10. Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee or any Noteholder to exercise any right or remedy accruing
upon any Default or Indenture Default shall impair any such right or remedy or
constitute a waiver of any such Default or Indenture Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Indenture
Trustee or the Noteholders may be exercised from time to time, and as often as
may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the
case may be.

     Section 5.11. Control by Noteholders. Noteholders representing at least a
majority of the Outstanding Amount shall have the right to direct the time,
method and place of conducting any Proceeding or any remedy available to the
Indenture Trustee with respect to the Notes or with respect to the exercise of
any trust or power conferred on the Indenture Trustee, provided that:

     (a)  such direction shall not be in conflict with any rule of law or
this Indenture;

     (b) subject to Section 5.04, any direction to the Indenture Trustee to,
sell or liquidate the Trust Estate shall be made by Noteholders representing not
less than 100% of the Outstanding Amount;

     (c) if the conditions set forth in Section 5.05 have been satisfied and the
Indenture Trustee elects to retain the Trust Estate pursuant to such Section,
and except in the case of a sale of the Trust Estate pursuant to Section 9.02 of
the Trust Agreement, then any direction to the Indenture Trustee by Noteholders
representing less than 100% of the Outstanding Amount to sell or liquidate the
Trust Estate shall be of no force and effect; and

     (d) the Indenture Trustee may take any other action deemed proper by the
Indenture Trustee that is not inconsistent with such direction.

     Notwithstanding the rights of Noteholders set forth in this Section,
subject to Section 6.01, the Indenture Trustee need not take any action it
determines might expose it to personal liability or might materially adversely
affect or unduly prejudice the rights of any Noteholders not consenting to such
action.

     Section 5.12. Waiver of Past Defaults. Prior to a declaration of maturity
of the Notes pursuant to Section 5.02, Noteholders representing not less than a
majority of the Outstanding Amount may waive any past Indenture Default and its
consequences except an Indenture Default (i) in payment of principal or interest
on the Notes or (ii) in respect of a covenant or provision hereof that cannot be
modified or amended without the consent of each Noteholder. In the case of any
such waiver, the Trust, the Indenture Trustee and the Noteholders shall be
restored to their former positions and rights hereunder, respectively, but no
such waiver shall extend to any subsequent or other Indenture Default or impair
any right consequent thereto.

     Upon any such waiver, such Indenture Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Indenture Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture, but no such waiver shall extend to any
subsequent or other Indenture Default or impair any right consequent thereto.


<PAGE>

     Section 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Noteholder by such Noteholder's 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 Indenture Trustee for any action taken, suffered or omitted by it as
Indenture 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,
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 shall not apply to (i) any suit instituted by the
Indenture Trustee, (ii) any suit instituted by any Noteholder or group of
Noteholders, in each case representing more than 10% of the Outstanding Amount
or (iii) any suit instituted by any Noteholder for the enforcement of the
payment of principal or interest on any Note on or after the related due dates
expressed in such Note and in this Indenture (or, in the case of redemption, on
or after the Redemption Date).

     Section 5.14. Waiver of Stay or Extension Laws. The Trust covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, or
plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture, and
the Trust (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.

     Section 5.15. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Trust or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Trust. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.04(b).

     Section 5.16.  Performance and Enforcement of Certain Obligations.

     (a) Promptly following a request from the Indenture Trustee to do so, the
Trust shall take all such lawful action as the Indenture Trustee may request to
compel or secure the performance and observance by the Transferor, the
Administrative Agent and the Maintenance Provider, as applicable, of each of
their obligations to the Trust under or in connection with the Administration
Agreement in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Trust under or
in connection with each such agreement to the extent and in the manner directed
by the Indenture Trustee, including the transmission of notices of default on
the part of the Administrative Agent thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Transferor, the Administrative Agent and the Maintenance Provider of their
respective obligations under the Administration Agreement.


<PAGE>

     (b) If an Indenture Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of Noteholders
representing not less than a majority of the Outstanding Amount, shall, exercise
all rights, remedies, powers, privileges and claims of the Trust against the
Transferor, the Administrative Agent and the Maintenance Provider under or in
connection with the Administration Agreement, including the right or power to
take any action to compel or secure performance or observance by the
Administrative Agent or the Maintenance Provider of their respective obligations
to the Trust thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Administration Agreement, and any right
of the Trust to take such action shall be suspended.

     Section 5.17. Sale of Trust Estate. If the Indenture Trustee acts to sell
the Trust Estate or any part thereof pursuant to Section 5.04(a), the Indenture
Trustee shall publish a notice in an Authorized Newspaper stating that the
Indenture Trustee intends to effect such a sale in a commercially reasonable
manner and on commercially reasonable terms, which shall include the
solicitation of competitive bids. Following such publication, the Indenture
Trustee shall, unless otherwise prohibited by applicable law from any such
action, sell the Trust Estate or any part thereof, in such manner and on such
terms as provided above to the highest bidder; provided, however, that the
Indenture Trustee may from time to time postpone any sale by public announcement
made at the time and place of such sale. The Indenture Trustee shall give notice
to the Transferor and the Administrative Agent of any proposed sale, and the
Transferor, the Administrative Agent and their respective Affiliates shall be
permitted to bid for the Trust Estate at any such sale. The Indenture Trustee
may obtain a prior determination from a conservator, receiver or trustee in
bankruptcy of the Trust that the terms and manner of any proposed sale are
commercially reasonable. The power to effect any sale of any portion of the
Trust Estate pursuant to Section 5.04 and this Section shall not be exhausted by
any one or more sales as to any portion of the Trust Estate remaining unsold,
but shall continue unimpaired until the entire Trust Estate shall have been sold
or all amounts payable on the Notes shall have been paid.

                                   ARTICLE SIX

                              THE INDENTURE TRUSTEE

     Section 6.01.  Duties of Indenture Trustee.

     (a)  If an Indenture Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture and
in the same degree of care and skill in their exercise as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.

     (b)  Except during the continuance of an Indenture Default:

          (i)   the Indenture Trustee undertakes to perform such duties and only
     such duties as are specifically set forth in this Indenture and no implied
     covenants or obligations shall be read into this Indenture against the
     Indenture Trustee; and


<PAGE>

          (ii)  in the absence of bad faith on its part, the Indenture Trustee
     may conclusively rely, as to the truth of the statements and the
     correctness of the opinions expressed therein, upon certificates or
     opinions furnished to the Indenture Trustee and conforming to the
     requirements of this Indenture; however, the Indenture Trustee shall
     examine the certificates and opinions to determine whether or not they
     conform to the requirements of this Indenture and the other Basic Documents
     to which the Indenture Trustee is a party.

     (c)  The Indenture Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful,
misconduct, except that:

          (i)   this paragraph does not limit the effect of paragraph (b);

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

          (iii) the Indenture Trustee shall not be liable with respect to any
     action it takes or omits to take in good faith in accordance with a
     direction received by it pursuant to any provision of this Indenture.

     (d)  Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b) and (c).

     (e)  The Indenture Trustee shall, and hereby agrees that it will perform
all of the obligations and duties required of it under the Administration
Agreement.

     (f)  The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Trust.

     (g)  Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Administration Agreement.

     (h)  No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

     (i)  Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section.

     (j)  The Indenture Trustee shall not be deemed to have knowledge of any
Default, Indenture Default. Administrative Agent Default, Maintenance Provider
Default or other event unless a Responsible Officer has actual knowledge thereof
or has received written notice thereof in accordance with the provisions of this
Indenture or the Administration Agreement.

     Section 6.02.  Rights of Indenture Trustee.


<PAGE>

     (a) Except as provided by the second succeeding sentence, the Indenture
Trustee may conclusively rely and shall be protected in acting upon or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, note, direction, demand,
election or other paper or document believed by it to be genuine and to have
been signed or presented by the proper person. The Indenture Trustee need not
investigate any fact or matter stated in the related item or document.
Notwithstanding the foregoing, the Indenture Trustee, upon receipt of all
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments furnished to it that shall be specifically required to be
furnished pursuant to any provision of this Indenture, shall examine them to
determine whether they comply as to form to the requirements of this Indenture.

     (b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate (with respect to factual matters) or an Opinion
of Counsel, as applicable. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such Officer's
Certificate or Opinion of Counsel.

     (c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any agent, attorney, custodian or nominee appointed with due
care by it hereunder.

     (d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.

     (e) The Indenture Trustee may consult with counsel, and the advice of such
counsel or any Opinion of Counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.

     (f) The Indenture Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture or to institute, conduct or
defend any litigation under this Indenture or in relation to this Indenture or
to honor the request or direction of any of the Noteholders pursuant to this
Indenture unless such Noteholders shall have offered to the Indenture Trustee
reasonable security or indemnity against the reasonable costs, expenses,
disbursements, advances and liabilities that might be incurred by it, its agents
and its counsel in compliance with such request or direction.

     (g) The Indenture 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 or
other paper or document, unless requested in writing to do so by the Noteholders
representing not less than 25% of the Outstanding Amount; provided, however,
that if the payment within a reasonable time to the Indenture Trustee of the
costs, expenses or liabilities likely to be incurred


<PAGE>

by it in the making of such investigation is, in the opinion of the Indenture
Trustee, not reasonably assured to the Indenture Trustee by the security
afforded to it by the terms of this Indenture, the Indenture Trustee may require
reasonable indemnity against such costs, expenses or liabilities as a condition
to so proceeding. The reasonable expense of each such investigation shall be
paid by the Person making such request, or, if paid by the Indenture Trustee,
shall be reimbursed by the Person making such request upon demand.

     (h) Any request or direction of the Trust mentioned herein shall be
sufficiently evidenced by a Trust Request.

     Section 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Trust or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar,
co-registrar, co-paying agent, co-trustee or separate trustee may do the same
with like rights. The Indenture Trustee must, however, comply with Section 6.11.

     Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Trust Estate or the Notes, shall not be
accountable for the Trust's use of the proceeds from the Notes and shall not be
responsible for any statement in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes, all of which shall be
taken as the statements of the Trust, other than the Indenture Trustee's
certificate of authentication.

     Section 6.05. Notice of Defaults. If a Default occurs and is continuing,
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to each Noteholder and each Rating Agency notice of
such Default within 60 days after it occurs. Except in the case of a Default
with respect to payment of principal or interest on any Note (including payments
pursuant to the redemption of Notes), the Indenture Trustee may withhold such
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding such notice is in the interests of the Noteholders;
provided, however, that in the case of any Indenture Default of the character
specified in Section 5.01(e), no such notice shall be given until at least 30
days after the occurrence thereof.

     Section 6.06. Reports by Indenture Trustee to Noteholders. The Indenture
Trustee, at the expense of the Trust, shall deliver to each Noteholder or Note
Owner, not later than the latest date permitted by law, such information as may
be reasonably requested (and reasonably available to the Indenture Trustee) to
enable such holder to prepare its federal and state income tax returns.

     Section 6.07. Compensation and Indemnity. The Indenture Trustee shall
receive reasonable compensation for its services as Indenture Trustee and Backup
Administrative Agent from Available Funds in accordance with Section 4.04(a) of
the Administration Agreement. The Administrative Agent or, in the event Xerox is
not the Administrative Agent, the Trust, from the Transition Account until the
amount on deposit therein equals zero and then from Available Funds in
accordance with Section 4.04(a) of the Administration Agreement, shall (i)
reimburse the Indenture Trustee and Backup Administrative Agent for all
reasonable expenses, advances and disbursements


<PAGE>

reasonably incurred by it and (ii) indemnify the Indenture Trustee for, and hold
it harmless against, any and all loss, liability or expense (including
reasonable attorneys' fees) incurred by it in connection with the administration
of the Trust or the performance of its duties. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Indenture Trustee and Backup Administrative Agent shall
notify the Trust and the Administrative Agent promptly of any claim for which it
may seek indemnity. Failure by the Indenture Trustee or the Backup
Administrative Agent to so notify the Trust and the Administrative Agent shall
not relieve the Trust or the Administrative Agent of its obligations hereunder.
The Administrative Agent or the Trust, as applicable, shall defend any such
claim, and the Indenture Trustee and Backup Administrative Agent may have
separate counsel and the Administrative Agent shall pay the fees and expenses of
such counsel. The Indenture Trustee and Backup Administrative Agent shall not be
indemnified by the Administrative Agent or the Trust against any loss, liability
or expense incurred by it through its own willful misconduct, negligence or bad
faith, except that the Indenture Trustee shall not be liable (i) for any error
of judgment made by it in good faith unless it is proved that the Indenture
Trustee was negligent in ascertaining the pertinent facts, (ii) with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it from the Noteholders in accordance with the terms of
this Indenture and (iii) for interest on any money received by it except as the
Indenture Trustee and the Trust may agree in writing. Any amounts payable by the
Trust pursuant to this Section will be paid in accordance with Section 4.04(a)
of the Administration Agreement.

     The Administrative Agent's and the Trust's payment obligations to the
Indenture Trustee and the Backup Administrative Agent pursuant to this Section
shall survive the discharge of this Indenture. When the Indenture Trustee and
the Backup Administrative Agent incurs expenses after the occurrence of an
Indenture Default set forth in Section 5.01(d) or (e) with respect to the Trust,
the expenses are intended to constitute expenses of administration under Title
11 of the United States Code or any other applicable federal or state
bankruptcy, insolvency or similar law.

     Section 6.08. Replacement of Indenture Trustee. Noteholders representing
not less than a majority of the Outstanding Amount may remove the Indenture
Trustee without cause by so notifying the Indenture Trustee and the Trust, and
following such removal may appoint a successor Indenture Trustee. The Trust
shall give prompt written notice to each Rating Agency of such removal. The
Indenture Trustee may resign at any time by so notifying the Trust, the
Administrator, the Administrative Agent and each Rating Agency. The Trust shall
remove the Indenture Trustee if:

     (i)  the Indenture Trustee fails to comply with Section 6.11;

     (ii) a court having jurisdiction in the premises in respect of the
Indenture Trustee in an involuntary case or proceeding under federal or state
banking or bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, shall
have entered a decree or order granting relief or appointing a receiver,
liquidator, assignee, custodian, trustee, conservator, sequestrator (or similar
official) for the Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or ordering the winding-up or liquidation of the Indenture
Trustee's affairs, provided any such decree or order shall have continued
unstayed and in effect for a period of 30


<PAGE>

consecutive days;

     (iii) the Indenture Trustee commences a voluntary case under any federal or
state banking or bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator or other similar
official for the Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or makes any assignment for the benefit of creditors or
fails generally to pay its debts as such debts become due or takes any corporate
action in furtherance of any of the foregoing; or

     (iv)  the Indenture Trustee otherwise becomes incapable of acting.

     Upon the resignation or required removal of the Indenture Trustee, or the
failure of the Noteholders to appoint a successor Indenture Trustee following
the removal without cause of the Indenture Trustee (the Indenture Trustee in any
such event being referred to herein as the retiring Indenture Trustee), the
Administrator shall be required promptly to appoint a successor Indenture
Trustee. Any successor Indenture Trustee must at all times satisfy the
eligibility requirements of Section 6.11. Prior to the appointment of any
successor Indenture Trustee, the Rating Agency Condition must be satisfied with
respect to such successor Indenture Trustee.

     A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Trust. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective
and the successor Indenture Trustee, without any further act, deed or
conveyance, shall have all the rights, powers and duties of the Indenture
Trustee under this Indenture, subject to satisfaction of the Rating Agency
Condition. The successor Indenture Trustee shall mail a notice of its succession
to the Noteholders. The retiring Indenture Trustee shall promptly transfer all
property held by it as Indenture Trustee to the successor Indenture Trustee.

     If a successor Indenture Trustee does not take office within 45 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Trust or Noteholders holding not less than a majority of the
Outstanding Amount may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.

     If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.

     Any resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to this Section. Notwithstanding the replacement of
the Indenture Trustee pursuant to this Section, the retiring Indenture Trustee
shall be entitled to payment or reimbursement of such amounts as such Person is
entitled pursuant to Section 6.07. Upon the resignation or removal of U.S. Bank
as Indenture Trustee, U.S. Bank shall cease to be the Backup Administrative
Agent.

     Section 6.09. Successor Indenture Trustee by Merger. If the Indenture


<PAGE>

Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to another corporation
or depository institution the resulting, surviving or transferee corporation,
without any further act, shall be the successor Indenture Trustee; provided,
that such corporation or depository institution shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide each Rating
Agency prior written notice of any such transaction.

     In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture, the Notes shall have been authenticated but not delivered, any
such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Notes so
authenticated, and in case at that time the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee, and in all such cases such certificates
shall have the full force that it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.

     Section 6.10.  Appointment of Co-Trustee or Separate Trustee.

     (a) Notwithstanding any other provision of this Indenture, at any time, for
the purpose of meeting any legal requirement of any jurisdiction in which any
part of the Trust Estate may at the time be located, the Indenture Trustee and
the Administrative Agent acting jointly shall have the power and may execute and
deliver all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Collateral, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Trust Estate or any part hereof
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee and the Administrative
Agent may consider necessary or desirable. If the Administrative Agent shall not
have joined in such appointment within 15 days after it received a request that
it so join, the Indenture Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 6.11 and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 6.08.

     (b)  Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:

          (i) all rights, powers, duties and obligations conferred or imposed
     upon the Indenture Trustee shall be conferred or imposed upon and exercised
     or performed by the Indenture Trustee and such separate trustee or
     co-trustee jointly (it being intended that such separate trustee or co-
     trustee is not authorized to act separately without the Indenture Trustee
     joining in such act), except to the extent that under any law of any
     jurisdiction in which any particular act or acts are to be performed, the
     Indenture Trustee shall be incompetent or unqualified to perform such act
     or acts, in which event such rights, powers, duties and obligations
     (including the holding of title to the Collateral or any portion thereof in
     any such jurisdiction) shall be exercised and performed singly by such
     separate


<PAGE>

trustee or co-trustee, but solely at the direction of the Indenture Trustee;

          (ii)  no separate trustee or co-trustee hereunder shall be personally
liable by reason of any act or omission of any other trustee hereunder; and

          (iii) the Indenture Trustee and the Administrator may at any time
accept the resignation of or remove any separate trustee or co-trustee.

     (c)  Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then-separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Indenture
Trustee or separately, as may be provided therein, subject to all the provisions
of this Indenture and specifically including every provision of this Indenture
relating to the conduct of, affecting the liability of or affording protection
to the Indenture Trustee. Every such instrument shall be filed with the
Indenture Trustee and a copy thereof given to the Administrator.

     (d)  Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, then all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee to the extent permitted by law, without the
appointment of a new or successor trustee. Notwithstanding anything to the
contrary in this Indenture, the appointment of any separate trustee or
co-trustee shall not relieve the Indenture Trustee of its obligations and duties
under this Indenture.

     Section 6.11. Eligibility; Disqualification. The Indenture Trustee shall at
all times satisfy the requirements of Section 310(a) of the TIA and shall in
addition have a combined capital and surplus of at least $50,000,000 (as set
forth in its most recent published annual report of condition) and a long-term
debt rating of "A" or better by, or be otherwise acceptable to, each Rating
Agency. The Indenture Trustee shall satisfy the requirements of Section 310(b)
of the TIA. The Transferor, the Administrative Agent, the Maintenance Provider,
the Administrator and their respective Affiliates may maintain normal commercial
banking relationships with the Indenture Trustee and its Affiliates, but neither
the Trust nor any Affiliate of the Trust may serve as Indenture Trustee.

     Section 6.12. Representations and Warranties of Indenture Trustee. The
Indenture Trustee hereby makes the following representations and warranties on
which the Trust and Noteholders shall rely:

          (i) the Indenture Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States; and

          (ii) the Indenture Trustee has full power, authority and legal right
to execute, deliver, and, perform this Indenture and the other Basic Documents


<PAGE>

to which it is a party and shall have taken all necessary action to authorize
the execution, delivery and performance by it of this Indenture and such other
Basic Documents.

                                  ARTICLE SEVEN

                  NOTEHOLDERS' LISTS, REPORTS AND DOCUMENTS

     Section 7.01. Trust to Furnish Indenture Trustee Noteholder Names and
Addresses. The Trust shall furnish or cause to be furnished to the Indenture
Trustee (i) not more than five days after each Record Date a list, in such form
as the Indenture Trustee may reasonably require, of the names and addresses of
the Noteholders as of such Record Date and (ii) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Trust of any such request, a list of similar form and content as of a date not
more than ten days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar or the Notes are
issued as Book-Entry Notes, no such list shall be required to be furnished to
the Indenture Trustee.

     Section 7.02. Preservation of Information; Communications to Noteholders.
The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the names and addresses of the Noteholders contained in the most
recent list furnished to the Indenture Trustee as provided in Section 7.01 and
the names and addresses of Noteholders received by the Indenture Trustee in its
capacity as Note Registrar. The Indenture Trustee may destroy any list furnished
to it as provided in Section 7.01 upon receipt of a new list so furnished.

     Section 7.03. Reports by Indenture Trustee. If required by TIA Section
313(a), within 60 days after each April 15, beginning with April 15, 2001, the
Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b).

     Section 7.04. Furnishing of Documents. The Indenture Trustee shall furnish
to any Noteholder promptly upon receipt of a written request by such Noteholder
(at the expense of the requesting Noteholder) therefor, duplicates or copies of
all reports, notices, requests, demands, certificates and any other instruments
furnished to the Indenture Trustee under the Basic Documents.

                                  ARTICLE EIGHT

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

     Section 8.01. Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or


<PAGE>

performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim an
Indenture Default under this Indenture and any right to proceed thereafter as
provided in Article Five.

     Section 8.02.  Accounts.

     (a)  Pursuant to Section 4.01 of the Administration Agreement, the
Transferor shall, on or prior to the Closing Date, establish and maintain an
Eligible Account in the name of the Indenture Trustee, on behalf of (i) the
Noteholders, which shall be designated as the "Note Distribution Account", (ii)
the Noteholders, which shall be designated as the "Collection Account", (iii)
the Trust, which shall be designated as the "Reserve Fund" and (iv)the
Securityholders, which shall be designated as the "Transition Account". The Note
Distribution Account shall be held in trust for the benefit of the Noteholders,
the Collection Account, the Reserve Fund and the Transition Account shall be
held in trust for the Securityholders. Each Account shall be established with
the Indenture Trustee and shall be under the sole dominion and control of the
Indenture Trustee.

     (b)  On or before each Payment Date, all amounts required to be deposited
in the Collection Account with respect to the related Collection Period will be
deposited as provided in Sections 2.07, 3.02, 3.03 and 4.02 of the
Administration Agreement. On or before each Payment Date, all amounts required
to be deposited in the Note Distribution Account with respect to the related
Collection Period pursuant to Section 4.04 of the Administration Agreement will
be transferred from the Collection Account and/or the Reserve Fund to the Note
Distribution Account.

     (c)  On each Payment Date and Redemption Date, the Indenture Trustee shall
distribute all amounts on deposit in the Note Distribution Account in respect of
the related Collection Period to Noteholders in respect of the Notes to the
extent of amounts due and unpaid on the Notes for interest and principal in the
following amounts and in the following order of priority (except as otherwise
provided in Section 5.04(b)):

          (i)   to each Noteholder, for payment of interest on the Notes, the
Monthly Note Interest; provided, that if there are not sufficient funds in the
Note Distribution Account or the Reserve Fund to pay the Monthly Interest due,
the amount available shall be allocated to each Noteholder pro rata on the basis
of the total amount of interest due to it;

          (ii)  to each Noteholder, for payment of principal of the Notes, an
amount equal to the Principal Distributable Amount; and

          (iii) to each Noteholder, for payment of principal of the Notes, an
amount equal to the Additional Principal Distribution Amount until the Notes are
paid in full.

     All other Available Funds for such Payment Date will be distributed as
described in Section 4.04 of the Administration Agreement.

     (d)  On each Payment Date, after taking into account, among other things,
amounts to be distributed to Noteholders from the Note Distribution Account,
pursuant to Section 4.04(b) of the Administration Agreement, the Administrative
Agent will allocate the Reserve Fund Draw Amount, if any, reflected in the
related Payment Date Statement and will instruct the


<PAGE>

Indenture Trustee to make the following deposits and distributions to the Note
Distribution Account in the following amounts and order of priority, prior to
11:00 a.m., New York City time:

          (i)  to pay any remaining Monthly Interest due on the outstanding
Notes on such Payment Date and

          (ii) to pay any remaining Principal Distribution Amount due on the
Notes.

     (e)  On each Payment Date or Redemption Date, from the amounts on deposit
in the Note Distribution Account, the Indenture Trustee shall duly and
punctually distribute payments of principal and interest on the Notes due and by
check mailed to the Person whose name appears as the Registered Holder of a Note
(or one or more Predecessor Notes) on the Note Register as of the close of
business on the related Record Date, except that with respect to Notes
registered on the Record Date in the name of (i) the nominee of DTC (initially,
such nominee to be Cede & Co.) and (ii) a Person (other than the nominee of DTC)
that holds Notes with original denominations aggregating at least $1 million and
has given the Indenture Trustee appropriate written instructions at least five
Business Days prior to the related Record Date (which instructions, until
revised, shall remain operative for all Payment Dates thereafter), payments
shall be made by wire transfer in immediately available funds to the account
designated by such nominee or Person. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that the Note be
submitted for notation of payment. Any reduction in the principal amount of any
Note (or any one or more Predecessor Notes) affected by any payments made on any
Payment Date or Redemption Date shall be binding upon all future holders of any
Note issued upon the registration of transfer thereof or in exchange hereof or
in lieu hereof, whether or not noted thereon. Amounts properly withheld under
the Code by any Person from payment to any Noteholder of interest or principal
shall be considered to have been paid by the Indenture Trustee to such
Noteholder for purposes of this Indenture. If funds are expected to be
available, pursuant to the notice delivered to the Indenture Trustee, for
payment in full of the remaining unpaid principal amount of the Notes on a
Payment Date or Redemption Date, then the Indenture Trustee, in the name of and
on behalf of the Trust, shall notify each Person who was the Registered Holder
of a Note as of the Record Date preceding the most recent Payment Date or
Redemption Date by notice mailed within 30 days of such Payment Date or
Redemption Date and the amount then due and payable shall be payable only upon
presentation and surrender of the Note at the Corporate Trust Office of the
Indenture Trustee or at the office of the Indenture Trustee's agent appointed
for such purposes located in The City of New York.

     Section 8.03.  General Provisions Regarding Accounts.

     (a) For so long as no Indenture Default shall have occurred and be
continuing, funds in the Accounts shall be invested and reinvested by the
Indenture Trustee, until the Outstanding Amount has been reduced to zero and
thereafter by the Owner Trustee, in each case at the direction of the
Administrative Agent in Permitted Investments. No such investment shall be sold
prior to maturity. On each Payment Date, net investment earnings on the
Collection Account, the Transition Account and the Reserve Fund shall be
deposited in the Collection Account.


<PAGE>

     (b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in the Accounts resulting from any
loss on any Permitted Investments included therein, except for losses
attributable to the Indenture Trustee's failure to make payments on any such
Permitted Investments issued by the Indenture Trustee in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.

     (c) If (i) the Administrative Agent shall have failed to give investment
directions for any funds on deposit in the Accounts to the Indenture Trustee by
3:00 p.m., New York City time (or such other time as may be agreed by the
Administrative Agent and Indenture Trustee), on any Business Day or (ii) a
Default or Indenture Default shall have occurred and be continuing with respect
to the Notes but the Notes shall not have been declared due and payable pursuant
to Section 5.02 or (iii) if the Notes shall have been declared due and payable
following an Indenture Default, amounts collected or receivable from the Trust
Estate are being applied in accordance with Section 5.05 as if there had not
been such a declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in investments that are Permitted
Investments as set forth in paragraph (vi) of the definition thereof.

     Section 8.04.  Payment Date Statements.

     (a) On each Payment Date, the Indenture Trustee shall send a copy of the
Payment Date Statement delivered to it by the Administrative Agent pursuant to
Section 4.07 of the Administration Agreement by first class mail to each Person
that was a Noteholder as of the close of business on the related Record Date
(which shall be Cede & Co. as the nominee of DTC unless Definitive Notes are
issued under the limited circumstances described herein).

     (b) The Indenture Trustee shall have no duty or obligation to verify or
confirm the accuracy of any of the information or numbers set forth in the
Payment Date Statement delivered to the Indenture Trustee in accordance with
this Section, and the Indenture Trustee shall be fully protected in relying upon
such Payment Date Statement.

     Section 8.05.  Release of Trust Estate.

     (a) Subject to the payment of its fees and expenses pursuant to Section
6.07, the Indenture Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture Trustee
as provided in this Article shall be bound to ascertain the Indenture Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any monies.

     (b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture and release to the Trust or any other
Person entitled thereto any funds then on deposit in the Accounts. Such release
shall include delivery to the Trust or its designee of the Trust Estate and
delivery to the Securities Intermediary under the Control


<PAGE>

Agreement of a certificate evidencing the release of the lien of this Indenture
and transfer of dominion and control over the Reserve Fund to the Owner Trustee.
The Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section only upon receipt of a Trust Request.

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

     Section 9.01.  Supplemental Indentures Without Consent of Noteholders.

     (a)  Without the consent of the Noteholders, but with prior notice to each
Rating Agency and subject to the satisfaction of the Rating Agency Condition,
the Trust and the Indenture Trustee, when so requested by a Trust Request, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Indenture Trustee, for any of
the following purposes:

          (i)   to correct or amplify the description of any property at any
     time subject to the lien of this Indenture, or better to assure, convey or
     confirm unto the Indenture Trustee any property subject or required to be
     subjected to the lien of this Indenture, or to subject additional property
     to the lien of this Indenture;

          (ii)  to evidence the succession, in compliance with the applicable
     provisions hereof, of another Person to the Trust and the assumption by any
     such successor of the covenants of the Trust contained herein and in the
     Notes;

          (iii) to add to the covenants of the Trust for the benefit of the
     Noteholders or to surrender any right or power herein conferred upon the
     Trust;

          (iv)  to convey, transfer, assign, mortgage or pledge any property to
     or with the Indenture Trustee;

          (v)   to cure any ambiguity, correct or supplement any provision
     herein or in any supplemental indenture that may be defective or
     inconsistent with any other provision herein or in any supplemental
     indenture or make any other provisions with respect to matters or questions
     arising under this Indenture or in any supplemental indenture that shall
     not be inconsistent with the provisions of this Indenture; provided that
     such other provisions shall not adversely affect the interests of the
     Noteholders; or

          (vi)  to evidence and provide for the acceptance of the appointment
     hereunder by a successor trustee with respect to the Notes or to add to or
     change any of the provisions of this Indenture as shall be necessary to
     facilitate the administration of the trusts hereunder by more than one
     trustee, pursuant to the requirements of Article Six.

     The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations as may be therein contained.

     (b)  The Trust and the Indenture Trustee, when requested by a Trust
Request, may also without the consent of any of the Holders of the Notes but


<PAGE>

with prior notice to each Rating Agency enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or for the
purpose of modifying in any manner (other than the modifications set forth in
Section 9.02, which require consent of the Holder of each Note affected thereby)
the rights of the Noteholders under this Indenture; provided, however, that (i)
such action shall not, as evidenced by an Opinion of Counsel, materially
adversely affect the interests of any Noteholder and (ii) the Rating Agency
Condition shall have been satisfied with respect to such action.

     Section 9.02. Supplemental Indentures With Consent of Noteholders. The
Trust and the Indenture Trustee, when requested by a Trust Request, also may,
with prior notice to each Rating Agency, with the consent of Noteholders
representing not less than a majority of the Outstanding Amount, by Act of such
Noteholders delivered to the Trust and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto 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 Noteholders
under this Indenture subject to the satisfaction of the Rating Agency Condition
and provided, however, that, no such supplemental indenture shall, without the
consent of the Noteholder of each Outstanding Note affected thereby:

     (a) change the Final Scheduled Payment Date of or the date of payment of
any installment of principal or interest on any Note, or reduce the principal
amount thereof, the Interest Rate thereon or the Redemption Price with respect
thereto, change the provision of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to payment of
principal or interest on the Notes, or change any place of payment where, or the
coin or currency in which, any Note or the interest thereon is payable, or
impair the right to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as provided in
Article Five, to the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or after the
Redemption Date);

     (b) reduce the percentage of the Outstanding Amount, the consent of the
Noteholders of which is required for any such supplemental indenture or the
consent of the Noteholders of which is required for any waiver of compliance
with provisions of this Indenture or Indenture Defaults hereunder and their
consequences provided for in this Indenture;

     (c)  modify or alter the provisions of the proviso to the definition of
the term "Outstanding";

     (d) reduce the percentage of the Outstanding Amount required to direct the
Indenture Trustee to direct the Owner Trustee to sell the Trust Estate pursuant
to Section 5.04, if the proceeds of such sale would be insufficient to pay the
Outstanding Amount plus accrued but unpaid interest on the Notes;

     (e) modify any provision of this Section, except to increase any percentage
specified herein or to provide that certain additional provisions of this
Indenture or the other Basic Documents cannot be modified or waived without the
consent of the Noteholder of each Outstanding Note affected thereby; or


<PAGE>

     (f) permit the creation of any lien ranking prior to or on a parity with
the lien of this Indenture with respect to any part of the Trust Estate or,
except as otherwise permitted or contemplated herein, terminate the lien of this
Indenture on any property at any time subject hereto or deprive any Noteholder
of the security provided by the lien of this Indenture.

     The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon all Noteholders, whether theretofore or thereafter
authenticated and delivered hereunder. The Indenture Trustee shall not be liable
for any such determination made in good faith.

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

     Promptly after the execution by the Trust and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Noteholders a notice setting forth in general terms the substance of
such supplemental indenture. Any failure of the Indenture 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.

     Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Indenture Trustee shall be entitled to receive, and subject
to Sections 6.01 and 6.02, shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may but shall
not be obligated to enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or indemnities under this
Indenture or otherwise.

     Section 9.04. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Trust, the Owner Trustee and the Noteholders 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 shall be deemed to be part of
the terms and conditions of this Indenture for any and all purposes.

     Section 9.05. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Trust or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Trust, to any such supplemental indenture may
be prepared and executed by the Trust and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.

                                   ARTICLE TEN


<PAGE>

                               REDEMPTION OF NOTES
     Section 10.01.  Redemption.

     (a) Pursuant to Section 9.01 of the Trust Agreement, the Transferor shall
be permitted at its option to purchase the Trust Estate on any Redemption Date
relating to the exercise of an Optional Purchase. In connection with the
exercise of an Optional Purchase, the Transferor will deposit the Optional
Purchase Price (other than amounts on deposit in the Reserve Fund to be applied
in connection with an Optional Purchase described in Section 9.03 of the Trust
Agreement, which amount will constitute part of the related Reserve Fund Draw
Amount) into the Collection Account on the Deposit Date relating to the
Redemption Date. In connection with an Optional Purchase, the Notes shall be
redeemed on the Redemption Date in whole, but not in part, for the Redemption
Price and thereupon the pledge of the Trust Estate shall be discharged and
released and the Trust Estate shall be returned to or upon the order of the
Transferor.

     (b) In connection with the exercise of an Optional Purchase, pursuant to
Section 4.04(a) of the Administration Agreement, on the Redemption Date, prior
to 11:00 a.m., New York City time, the Indenture Trustee shall transfer the
Optional Purchase Price (including, in connection with an Optional Purchase
described in Section 9.03(a)(ii) of the Trust Agreement, the portion of the
Optional Purchase Price constituting the Reserve Fund Draw Amount) as part of
the Available Funds from the Collection Account as follows: (i) to the Note
Distribution Account, the Redemption Price and (ii) to the Certificate
Distribution Account, the Repayment Price.

     (c) The Administrative Agent or the Trust shall furnish each Rating Agency
notice of such redemption. If the Notes are to be redeemed pursuant to this
Section, the Administrative Agent or the Trust shall provide at least 15 days'
prior notice of the redemption of the Notes to the Indenture Trustee and the
Owner Trustee, and the Indenture Trustee shall provide at least 10 days' notice
thereof to the Noteholders.

     Section 10.02. Form of Redemption Notice. Notice of redemption under
Section 10.01 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, mailed to each holder of Notes as of the close of business on
the Record Date preceding the applicable Redemption Date at such holder's
address appearing in the Note Register. In addition, the Administrative Agent
shall notify each Rating Agency upon the redemption of the Notes, pursuant to
the Trust Administration Agreement.

     All notices of redemption shall state:

     (a)  the Redemption Date;

     (b)  the Redemption Price;

     (c) the place where the Notes to be redeemed are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of the
Trust to be maintained as provided in Section 3.02); and

     (d) that on the Redemption Date, the Redemption Price will become due and
payable upon each such Note and that interest thereon shall cease to accrue from
and after the Redemption Date.


<PAGE>

     Notice of redemption of the Notes shall be given by the Indenture Trustee
in the name and at the expense of the Trust. Failure to give notice of
redemption (or any defect therein) to any Noteholder shall not impair or affect
the validity of the redemption of any other Note.

     Section 10.03. Notes Payable on Redemption Date. The Notes to be redeemed
shall, following notice of redemption as required by Section 10.02, become due
and payable on the Redemption Date at the Redemption Price and (unless the Trust
shall default in the payment of the Redemption Price) no interest shall accrue
on the Redemption Price for any period after the date to which accrued interest
is calculated for purposes of calculating the Redemption Price.

                                 ARTICLE ELEVEN

                                  MISCELLANEOUS

     Section 11.01.  Compliance Certificates and Opinions.

     (a)  Upon any application or request by the Trust to the Indenture Trustee
to take any action under any provision of this Indenture, the Trust shall
furnish to the Indenture Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that, in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.

     Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:

          (i)   a statement that each signatory of such certificate or opinion
     has read such covenant or condition and the definitions herein relating
     thereto;

          (ii)  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;

          (iii) a statement that, in the opinion of each such signatory, such
     signatory has made such examination or investigation as is necessary to
     enable such signatory to express an informed opinion as to whether or not
     such covenant or condition has been complied with; and

          (iv) a statement as to whether, in the opinion of each such signatory,
     such condition or covenant has been complied with.

     (b)  In addition to any obligation imposed in Section 11.01(a) or
elsewhere in this Indenture:

          (i) Prior to the deposit of any Collateral or other property or
     securities with the Indenture Trustee that is to be made the basis for the
     release of any property or securities subject to the lien of this
     Indenture, the Trust shall furnish to the Indenture Trustee an Officer's
     Certificate certifying or stating the opinion of each Person signing


<PAGE>

     such certificate as to the fair value (within 90 days of such deposit) to
     the Trust of the Collateral or other property or securities to be so
     deposited.

          (ii) Whenever the Trust is required to furnish to the Indenture
     Trustee an Officer's Certificate certifying or stating the opinion of any
     signer thereof as to the matters described in clause (i) above, the Trust
     shall also deliver to the Indenture Trustee an Independent Certificate as
     to the same matters, if the fair value of the property or securities to be
     so deposited and of all other such securities made the basis of any such
     withdrawal or release since the commencement of the then-current calendar
     year of the Trust, as set forth in the Officer's Certificate delivered
     pursuant to clause (i) above, is 10% or more of the Outstanding Amount;
     provided, however, such Independent Certificate need not be furnished with
     respect to any securities so deposited, if the fair value thereof to the
     Trust as set forth in the related Officer's Certificate is less than
     $25,000 or less than 1% of the Outstanding Amount.

          (iii) Other than with respect to any release described in clause (A)
     or (B) of Section 11.01(b)(v), whenever any property or securities are to
     be released from the lien of this Indenture, the Trust shall also furnish
     to the Indenture Trustee an Officer's Certificate certifying or stating the
     opinion of each Person signing such certificate as to the fair value
     (within 90 days of such release) of the property or securities proposed to
     be released and stating that in the opinion of such Person, the proposed
     release will not impair the security under this Indenture in contravention
     of the provisions hereof.

          (iv) Whenever the Trust is required to furnish to the Indenture
     Trustee an Officer's Certificate certifying or stating the opinion of any
     signer thereof as to the matters described in clause (iii) above, the Trust
     shall also furnish to the Indenture Trustee an Independent Certificate as
     to the same matters, if the fair value of the property or securities and of
     all other property, or securities (other than property described in clauses
     (A) or (B) of Section 11.01(b)(v)) released from the lien of this Indenture
     since the commencement of the then current calendar year, as set forth in
     the Officer's Certificates required by clause (iii) above and this clause,
     equals 10% or more of the Outstanding Amount, but such Officer's
     Certificate need not be furnished in the case of any release of property or
     securities if the fair value thereof as set forth in the related Officer's
     Certificate is less than $25,000 or less than 1% of the Outstanding Amount.

          (v) Notwithstanding Section 2.08 or any other provision of this
     Section, the Trust may (A) collect, liquidate, sell or otherwise dispose of
     the Collateral as and to the extent permitted or required by the Basic
     Documents and (B) make cash payments out of the Accounts as and to the
     extent permitted or required by the Basic Documents.

     Section 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify


<PAGE>

or give an opinion as to such matters in one or several documents.

     Any certificate or opinion of an Authorized Officer may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of or representations by an officer or officers of the Administrator,
the Administrative Agent, the Transferor or the Trust, stating that the
information with respect to such factual matters is in the possession of the
Administrator, the Administrative Agent, the Transferor or the Trust, unless
such officer or counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

     Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

     Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Trust
shall deliver any document as a condition of the granting of such application,
or as evidence of the Trust's compliance with any terms hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Trust to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article Six.

     Section 11.03.  Acts of Noteholders.

     (a)  Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Noteholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Noteholders in person or by agents duly appointed
in writing; and except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Indenture Trustee, and, where it is hereby expressly required, to the Trust.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Indenture Trustee and the Trust, if made in the manner provided in this
Section.

     (b)  The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.

     (c)  The ownership of Notes shall be proved by the Note Register.


<PAGE>

     (d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the holder of any Note shall bind the holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Trust in reliance thereon, whether or not notation of such action
is made upon such Note.

     Section 11.04. Notices. All demands, notices and communications hereunder
shall be in writing and shall be delivered or mailed by registered or certified
first-class United States mail, return receipt requested, postage prepaid, hand
delivery, prepaid courier service or by telecopier, and addressed in each case
as follows: (i) if to the Trust c/o the Owner Trustee, at 1201 Market Street,
10th Floor, Wilmington, Delaware 19801, (telecopier no. (302) 657-8415),
Attention: Anton Bodor, with a copy to the Administrative Agent, at 800 Long
Ridge Road, Stamford, Connecticut 06904 (telecopier no. (203) 968-3000),
Attention: Treasurer; (ii) if to the Indenture Trustee, at 111 East Wacker
Drive, Suite 3000, Chicago, Illinois 60601 (telecopier no. (312) 228-9401),
Attention: Xerox Equipment Lease Owner Trust 2001-1; (iii) if to Moody's, at 99
Church Street, New York, New York 10007 (telecopier no. (212) 553-7820),
Attention: ABS Monitoring Group; (iv) if to Standard & Poor's, to Standard &
Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., 55 Water
Street, New York, New York, 10041 (telecopier no. (212) 208-0030), Attention:
Asset Backed Monitoring Group; (v) if to Fitch, to Fitch Inc., 55 East Monroe
Street, Suite 3800, Chicago, Illinois 60603 (telecopier no. (312) 368-2069),
Attention: Asset Backed Monitoring Group (Equipment Leases); or (vi) at such
other address as shall be designated by any of the foregoing in a written notice
to the other parties hereto. Delivery shall occur only upon receipt or reported
tender of such communication by an officer of the recipient entitled to receive
such notices located at the address of such recipient for notices hereunder.

     Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first class, postage prepaid to each Noteholder affected by such
event, at its address as it appears on the Note Register, not later than the
latest and not earlier than the earliest date prescribed for the giving of such
notice. In any case where notice to Noteholders is given by mail, neither the
failure to mail such notice nor any defect in any notice so mailed to any
particular Noteholder shall affect the sufficiency of such notice with respect
to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.

     Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.

     In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event of Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving


<PAGE>

such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.

     Where this Indenture provides for notice to each Rating Agency, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute an Indenture Default.

     Section 11.06. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.

     Section 11.07. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Trust shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors.

     Section 11.08. Severability. If any one or more of the covenants,
agreements, provisions or terms of this Agreement or the Notes shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement or the Notes, as supplemented or amended,
and shall in no way affect the validity or enforceability of the other
covenants, agreements, provisions or terms of this Agreement or the Notes.

     Section 11.09. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, the Noteholders, and any other party
secured hereunder and any other Person with an ownership interest in any part of
the Trust Estate, any benefit or any legal or equitable right, remedy or claim
under this Indenture.

     Section 11.10. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.

     Section 11.11. Governing Law. This Indenture shall be governed by and
construed in accordance with the internal laws of the State of New York without
regard to any otherwise applicable principles of conflict of laws (other than
Section 5-1401 of the New York General Obligations Law).

     Section 11.12.  Counterparts.  This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.

     Section 11.13. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Trust accompanied by an Opinion of Counsel (who may be counsel
to the Indenture Trustee or any other counsel reasonably acceptable to the
Indenture Trustee) to the effect that such recording is necessary either for the
protection of the Noteholders or any other Person secured hereunder or for the
enforcement of any right or remedy granted to the


<PAGE>

Indenture Trustee under this Indenture.

     Section 11.14. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Trust, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
Certificateholder, (iii) any owner of a beneficial interest in the Trust or (iv)
any partner, owner, beneficiary, agent, officer, director, employee or agent of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
Certificateholder, the Owner Trustee or of the Indenture Trustee or any
successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.

     Section 11.15. No Petition. The Indenture Trustee, by entering into this
Indenture, and each Noteholder or Note Owner, by accepting a Note or in the case
of a Note Owner, a beneficial interest in a Note, hereby covenant and agree that
they will not institute against the Trust or the Transferor, or join in
instituting against the Trust or the Transferor, any bankruptcy, reorganization,
arrangement, insolvency or liquidation Proceeding, or other Proceeding under
federal or State bankruptcy or similar laws for a period of one year and a day
after payment in full of all amounts due in respect of the Securities.

     Section 11.16. No Recourse. Each Noteholder or Note Owner, by acceptance of
a Note or, in the case of a Note Owner, a beneficial interest in a Note,
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Trust, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith against (i) the Indenture Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Trust or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee in its individual
capacity or any holder of a beneficial interest in the Trust, the Owner Trustee
or the Indenture Trustee or of any successor or assign of the Indenture Trustee
or the Owner Trustee in its individual capacity, except as any such Person may
have expressly agreed and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.

     Section 11.17. Inspection. The Trust agrees that on reasonable prior notice
it will permit any representative of the Indenture Trustee, during the Trust's
normal business hours, to examine all the books of account, records, reports and
other papers of the Trust, to make copies and extracts therefrom, to cause such
books to be audited by Independent certified public accountants and to discuss
the Trust's affairs, finances and accounts with the Trust's officers, employees
and Independent certified public accountants, all at such reasonable times and
as often as may be reasonably requested. The Indenture Trustee shall and shall
cause its representatives to hold in confidence all


<PAGE>

such information, except to the extent disclosure may be required by law (and
all reasonable applications for confidential treatment are unavailing) and
except to the extent the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.

     Section 11.18. Limitation of Liability of Owner Trustee. Notwithstanding
anything contained herein to the contrary, this instrument has been
countersigned by HSBC Bank & Trust Company (Delaware) NA not in its individual
capacity but solely in its capacity as Owner Trustee of the Trust and in no
event shall HSBC Bank & Trust Company (Delaware) NA in its individual capacity
or any beneficial owner of the Trust have any liability for the representations,
warranties, covenants, agreements or other obligations of the Trust hereunder,
as to all of which recourse shall be had solely to the assets of the Trust. For
all purposes of this Indenture, in the performance of any duties or obligations
of the Trust hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Articles Six, Seven, Eight and Ten
of the Trust Agreement.

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

                            XEROX EQUIPMENT LEASE OWNER TRUST 2001-1


                            By: HSBC BANK & TRUST COMPANY (DELAWARE) NA,
                                as Owner Trustee


                            By:
                                Name:
                                Title:


                            U.S. BANK NATIONAL ASSOCIATION,
                                 as Indenture Trustee


                            By:
                                Name:
                                Title:


                            U.S. BANK NATIONAL ASSOCIATION,
                                 as Calculation Agent


                            By:
                                Name:
                                Title:


<PAGE>

                                                                       EXHIBIT A

                                  FORM OF NOTE

                       SEE REVERSE FOR CERTAIN DEFINITIONS

     THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE
MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE
WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR THAT THE
HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR
THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE
REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A
AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTIONS.

     UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT 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 INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

     NO RESALE OR OTHER TRANSFER OF ANY NOTE SHALL BE MADE TO ANY TRANSFEREE
UNLESS: (A) SUCH TRANSFEREE IS NOT, AND WILL NOT ACQUIRE THE NOTE ON BEHALF OR
WITH PLAN ASSETS OF, AN "EMPLOYEE BENEFIT PLAN" AS DEFINED IN SECTION 3(3) OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR ANY
OTHER "PLAN" AS DEFINED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "INTERNAL REVENUE CODE"), THAT IS SUBJECT TO ERISA OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OR (B) THE ACQUISITION AND HOLDING OF
THE NOTE ARE ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 84-14, PTCE
90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 OR A SIMILAR EXEMPTION. EACH PURCHASER
OR TRANSFEREE OF A NOTE, BY ITS ACCEPTANCE OF SUCH NOTE, WILL BE DEEMED TO HAVE
MADE THE REPRESENTATION SET FORTH IN CLAUSE (A) OR (B) ABOVE.

     THE PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.

     TRANSFERS OF THE NOTES MUST GENERALLY BE ACCOMPANIED BY APPROPRIATE TAX
TRANSFER DOCUMENTATION AND ARE SUBJECT TO RESTRICTIONS AS PROVIDED IN THE
INDENTURE.

    THE HOLDER, BY ACCEPTANCE OF THIS NOTE, SHALL BE DEEMED TO HAVE AGREED TO
TREAT THE NOTES AS DEBT SOLELY OF THE TRUST FOR UNITED STATES FEDERAL, STATE AND
LOCAL INCOME, SINGLE BUSINESS AND FRANCHISE TAX PURPOSES.


<PAGE>

                    XEROX EQUIPMENT LEASE OWNER TRUST 2001-1

                         FLOATING RATE ASSET BACKED NOTE

     REGISTERED                                                     $400,000,000
     No. R-1                                             CUSIP NO.   98414F AA 8

     Xerox Equipment Lease Owner Trust 2001-1, a business trust organized and
existing under the laws of the State of Delaware (including any permitted
successors and assigns, the "Trust"), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of FOUR HUNDRED MILLION
DOLLARS ($400,000,000) in monthly installments on the 15th day of each month, or
if such day is not a Business Day, on the immediately succeeding Business Day,
commencing on September 17, 2001 (each, a "Payment Date"), until the principal
of this Note is paid or made available for payment, and to pay interest on each
Payment Date on the Note Balance as of the preceding Payment Date (after giving
effect to all payments of principal made on the preceding Payment Date), or as
of the Closing Date in the case of the first Payment Date or if no interest has
yet been paid, at the rate per annum equal to the LIBOR Rate plus 2.00% (the
"Interest Rate"), in each case as and to the extent described below; provided,
however, that the entire Note Balance shall be due and payable on the earlier of
February 15, 2008 (the "Final Scheduled Payment Date") and the Redemption Date,
if any, pursuant to Section 10.01 of the Indenture. The Trust shall pay interest
on overdue installments of interest at the Interest Rate in effect from time to
time to the extent lawful. Such principal of and interest on this Note shall be
paid in the manner specified on the reverse hereof.

     The principal of and interest on this Note are payable in such coin or
currency of the United States as at the time of payment is legal tender for
payment of public and private debts. All payments made by the Trust with respect
to this Note shall be applied first to interest due and payable on this Note as
provided above and then to the unpaid principal of this Note.

     Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.

     Unless the certificate of authentication hereon has been executed by the
Indenture Trustee the name of which appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof or be valid or obligatory for any purpose.

     IN WITNESS WHEREOF, the Trust has caused this instrument to be signed,
manually or by facsimile, by its Authorized Officer as of the date set forth
below.

     Dated:                , 2001   XEROX EQUIPMENT LEASE OWNER TRUST 2001-1,


                                    By:  HSBC BANK & TRUST COMPANY
                                            (DELAWARE) NA,
                                            as Owner Trustee


<PAGE>


                                    By:
                                       Name:
                                       Title:

                INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION

     This is one of the Notes designated above and referred to in the within-
mentioned Indenture.

     Dated:                 , 2001  By:  U.S. BANK NATIONAL ASSOCIATION,
                                             as Indenture Trustee


                                     By:
                                        Name:
                                        Title:

                                [REVERSE OF NOTE]

     This Note is one of a duly authorized issue of Notes of the Trust,
designated as its "Xerox Equipment Lease Owner Trust 2001-1 Floating Rate Asset
Backed Notes" (herein called the "Notes") issued under an Indenture, dated as of
July 1, 2001 (such indenture, as supplemented or amended, is herein called the
"Indenture"), between the Trust and U.S. Bank National Association, as trustee
(the "Indenture Trustee", which term includes any successor Indenture Trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Trust, the Indenture Trustee and the Noteholders.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.

     The Notes are and will be equally and ratably secured by the Collateral
pledged as security therefor as provided in the Indenture. However, except under
the circumstances set forth in the Indenture, on each Payment Date principal
will be paid on the Notes. Principal payable on the Notes will be paid on each
Payment Date in the amount specified in the Indenture. As described above, the
entire unpaid principal amount of this Note will be payable on the earlier of
the Final Scheduled Payment Date and the Redemption Date, if any, selected
pursuant to the Indenture. Notwithstanding the foregoing, under certain
circumstances, the entire unpaid principal amount of the Notes shall be due and
payable following the occurrence and continuance of an Indenture Default, as
described in the Indenture. In such an event, principal payments on the Notes
shall be made to the Noteholders until the Note Balance has been reduced to
zero.

     Payments of principal and interest on this Note due and payable on each
Payment Date or Redemption Date shall be made by check mailed to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on the
related Record Date, except that with respect to Notes registered on the Record
Date in the name of (i) the nominee of DTC (initially, such nominee to be Cede &
Co.), and (ii) a Person (other than the nominee of DTC) that holds


<PAGE>

Notes with original denominations aggregating at least $1 million and has given
the Indenture Trustee appropriate written instructions at least five Business
Days prior to the related Record Date (which instructions, until revised, shall
remain operative for all Payment Dates thereafter), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee or Person. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) affected by any payments made on any Payment Date
or Redemption Date shall be binding upon all future holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the remaining
unpaid principal amount of this Note on a Payment Date or Redemption Date, then
the Indenture Trustee, in the name of and on behalf of the Trust, will notify
the Person who was the Registered Holder hereof as of the Record Date preceding
such Payment Date or Redemption Date by notice mailed within five days of such
Payment Date or Redemption Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Corporate Trust
Office of the Indenture Trustee or at the office of the Indenture Trustee's
agent appointed for such purposes located in The City of New York.

     As provided in the Indenture, the Transferor will be permitted at its
option to purchase the Trust Estate from the Trust and to terminate the pledge
thereof on any Payment Date if, either before or after giving effect to any
payment of principal required to be made on such Payment Date, the Securities
Balance is less than or equal to 5% of the Initial Securities Balance. The
purchase price for the Trust Estate shall equal the unpaid principal balances of
the Securities, together with accrued interest on the Notes through the Accrual
Period related to the Payment Date on which the Redemption Date occurs and
certain other amounts, which amount shall be deposited by the Transferor into
the Collection Account on the Deposit Date relating to the Payment Date fixed
for redemption. In connection with an Optional Purchase, the Notes will be
redeemed on such Payment Date in whole, but not in part, for the Redemption
Price and thereupon the pledge of the Trust Estate shall be discharged and
released and the Trust Estate shall be returned to the Transferor.

     As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Trust pursuant to the Indenture. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
Transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.

     Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Trust, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Trust or
(iii) any partner, owner, beneficiary, agent, officer, director or


<PAGE>

employee of the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Trust, the Owner Trustee or
the Indenture Trustee or of any successor or assign of the Indenture Trustee or
the Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.

     The Notes represent obligations of the Trust only and do not represent
interests in, recourse to or obligations of the Transferor, the Seller, the
Administrative Agent, Xerox Equipment or any of their respective Affiliates.

     Each Noteholder by acceptance of a Note, or in the case of a Note Owner, by
acceptance of a beneficial interest in the Notes, hereby covenants and agrees
that it will not institute against the Trust or the Transferor, or join in
instituting against the Trust or the Transferor, any bankruptcy, reorganization,
arrangement, insolvency or liquidation Proceeding, or other Proceeding under
federal or State bankruptcy or similar laws for a period of one year and a day
after payment in full of all amounts due in respect of the Securities.

     Prior to the due presentment for registration of transfer of this Note, the
Owner Trustee, the Indenture Trustee and any agent of the Owner Trustee or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Owner Trustee, the Indenture Trustee nor any such agent
shall be affected by notice to the contrary.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trust and the rights of the Noteholders under the Indenture at any time by the
Trust with the consent of the Noteholders representing not less than a majority
of the Outstanding Amount. The Indenture also contains provisions permitting
Noteholders representing specified percentages of the Outstanding Amount, on
behalf of all Noteholders, to waive compliance by the Trust with certain
provisions of the Indenture and certain past Defaults under the Indenture and
their consequences. Any such consent or waiver by the Noteholder of this Note
(or any one or more Predecessor Notes) shall be conclusive and binding upon such
Noteholder and upon all future Noteholders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of the Noteholders.

     The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.

     This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws.

     No reference herein to the Indenture and no provision of this Note or the
Indenture shall alter or impair the obligation of the Trust, which is


<PAGE>

absolute and unconditional, to pay the principal and interest on this Note at
the times, place and rate and in the coin or currency herein prescribed.

                                   ASSIGNMENT

     Social Security or taxpayer I.D. or other identifying number of assignee:

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers

unto

                         (name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes

and appoints attorney, to transfer said Note on the books kept for

registration thereof, with full power of substitution in the premises.

     Dated*:


     Signature Guaranteed:

* The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.

                                                                       EXHIBIT B

                          FORM OF DEPOSITORY AGREEMENT


<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.


<PAGE>

                                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.


<PAGE>

          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


<PAGE>

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,


<PAGE>

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.


<PAGE>

                                                                 Exhibit 4(g)(2)

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

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

                              XEROX FUNDING LLC II

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

                                    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 Funding LLC II 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.


<PAGE>



                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
                                    ARTICLE I
                                   DEFINITIONS

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

                                   ARTICLE II
                                   SECURITIES

SECTION 2.01.    Forms Generally.........................................    8
SECTION 2.02.    Execution and Authentication............................    8
SECTION 2.03.    Form and Payment and Delivery...........................    9
SECTION 2.04.    Legends.................................................    9
SECTION 2.05.    Global Security.........................................    9
SECTION 2.06.    Interest................................................   11
SECTION 2.07.    Transfer and Exchange...................................   12
SECTION 2.08.    Replacement Securities..................................   12
SECTION 2.09.    Temporary Securities....................................   13

SECTION 2.10.    Cancellation............................................   13
SECTION 2.11.    Defaulted Interest......................................   13
SECTION 2.12.    CUSIP Numbers...........................................   14

                                   ARTICLE III
                       PARTICULAR COVENANTS OF THE COMPANY

SECTION 3.01.    Payment and Delivery of amounts Due.....................   15
SECTION 3.02.    Offices for Notices and Payments, etc...................   15
SECTION 3.03.    Appointments to Fill Vacancies in Trustee's Office......   15
SECTION 3.04.    Provision as to Paying Agent............................   16
SECTION 3.05.    Certificate to Trustee..................................   16
SECTION 3.06.    Payment Upon Resignation or Removal.....................   17

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

SECTION 4.01.    Lists of Securityholders................................   17
SECTION 4.02.    Reports by the Trustee..................................   17
SECTION 4.03.    Periodic Reports to Trustee.............................   17

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

SECTION 5.01.    Events of Default.......................................   18
SECTION 5.02.    Payment of Securities on Default; Suit Therefor.........   20
SECTION 5.03.    Application of Moneys Collected by Trustee..............   22
SECTION 5.04.    Proceedings by Securityholders..........................   22
SECTION 5.05.    Proceedings by Trustee..................................   23
SECTION 5.06.    Remedies Cumulative and Continuing......................   23
SECTION 5.07.    Direction of Proceedings and Waiver of Defaults by
                 Majority of Securityholders.............................   24
SECTION 5.08.    Notice of Defaults......................................   24
SECTION 5.09.    Undertaking to Pay Costs................................   25

                                   ARTICLE VI
                             CONCERNING THE TRUSTEE

SECTION 6.01.    Duties and Responsibilities of Trustee..................   25
SECTION 6.02.    Reliance on Documents, Opinions, etc....................   26
SECTION 6.03.    No Responsibility for Recitals, etc.....................   27
SECTION 6.04.    Trustee, Authenticating Agent, Paying Agents,
                 Transfer Agents or Registrar May Own Securities.........   27
SECTION 6.05.    Moneys to be Held in Trust..............................   28
SECTION 6.06.    Compensation and Expenses of Trustee....................   28
SECTION 6.07.    Officers' Certificate as Evidence.......................   28
SECTION 6.08.    Conflicting Interest of Trustee.........................   29
SECTION 6.09.    Eligibility of Trustee..................................   29
SECTION 6.10.    Resignation or Removal of Trustee.......................   29


<PAGE>

SECTION 6.11.    Acceptance by Successor Trustee.........................   30
SECTION 6.12.    Succession by Merger, etc...............................   31
SECTION 6.13.    Limitation on Rights of Trustee as a Creditor...........   31
SECTION 6.14.    Authenticating Agents...................................   32
SECTION 6.15.    Appointment of Conversion Agent.........................   33

                                   ARTICLE VII
                         CONCERNING THE SECURITYHOLDERS

SECTION 7.01.    Action by Securityholders...............................   33
SECTION 7.02.    Proof of Execution by Securityholders...................   34
SECTION 7.03.    Who Are Deemed Absolute Owners..........................   34
SECTION 7.04.    Securities Owned by Company Deemed Not Outstanding......   34
SECTION 7.05.    Revocation of Consents; Future Holders Bound............   35

                                  ARTICLE VIII
                            SECURITYHOLDERS' MEETINGS

SECTION 8.01.    Purposes of Meetings....................................   35
SECTION 8.02.    Call of Meetings by Trustee.............................   35
SECTION 8.03.    Call of Meetings by Company or Securityholders..........   36
SECTION 8.04.    Qualifications for Voting...............................   36
SECTION 8.05.    Regulations.............................................   36
SECTION 8.06.    Voting..................................................   37

                                   ARTICLE IX
                                   AMENDMENTS

SECTION 9.01.    Without Consent of Securityholders......................   37
SECTION 9.02.    With Consent of Securityholders.........................   38
SECTION 9.03.    Compliance with Trust Indenture Act; Effect of
                 Supplemental Indentures.................................   39
SECTION 9.04.    Notation on Securities..................................   40
SECTION 9.05.    Evidence of Compliance of Supplemental Indenture
                 to be Furnished to Trustee..............................   40

                                 ARTICLE X
             CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

SECTION 10.01.   Company May Merge, Consolidate or Sell Assets...........   40
SECTION 10.02.   Opinion of Counsel to be Given Trustee..................   41

                                   ARTICLE XI
                     SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 11.01.   Discharge of Indenture..................................   42
SECTION 11.02.   Deposited Moneys to be Held in Trust by Trustee.........   42
SECTION 11.03.   Paying Agent to Repay Moneys Held.......................   42
SECTION 11.04.   Return of Unclaimed Moneys..............................   43
SECTION 11.05.   Defeasance Upon Deposit of Moneys or U.S.
                 Government Obligations..................................   43

                                   ARTICLE XII
                        IMMUNITY OF MEMBERS AND OFFICERS

SECTION 12.01.   Indenture and Securities Solely Corporate Obligations...   44


<PAGE>

                                  ARTICLE XIII
                            MISCELLANEOUS PROVISIONS

SECTION 13.01.   Successors..............................................   45
SECTION 13.02.   Official Acts by Successor Entity or Person.............   45
SECTION 13.03.   Surrender of Company Powers.............................   45
SECTION 13.04.   Addresses for Notices, etc..............................   45
                                           -
SECTION 13.05.   Governing Law...........................................   45
SECTION 13.06.   Evidence of Compliance with Conditions Precedent........   45
SECTION 13.07.   Business Days...........................................   46
SECTION 13.08.   Trust Indenture Act to Control..........................   46
SECTION 13.09.   Table of Contents, Headings, etc........................   46
SECTION 13.10.   Execution in Counterparts...............................   46
SECTION 13.11.   Separability............................................   46
SECTION 13.12.   Assignment..............................................   47
SECTION 13.13.   Acknowledgement of Rights...............................   47

                                   ARTICLE XIV
                                   REDEMPTION

SECTION 14.01.   Optional Redemption by Company..........................   47
SECTION 14.02.   No Sinking Fund.........................................   48
SECTION 14.03.   Notice of Redemption; Selection of Securities...........   48
SECTION 14.04.   Payment of Securities Called for Redemption.............   49
SECTION 14.05.   Conversion Arrangement on Call for Redemption...........   49

                                   ARTICLE XV
                                    PURCHASE

SECTION 15.01.   Purchase of Securities at Option of the Holder..........   50
SECTION 15.02.   Purchase of Securities at Option of the Holder
                 upon a Change in Control................................   50

                                   ARTICLE XVI
                                   CONVERSION

                                  ARTICLE XVII
                           SUBORDINATION OF SECURITIES

SECTION 17.01.   Agreement to Subordinate................................   52
SECTION 17.02.   Default on Senior Indebtedness..........................   52
SECTION 17.03.   Liquidation; Dissolution; Bankruptcy....................   52
SECTION 17.04.   Subrogation.............................................   54
SECTION 17.05.   Trustee to Effectuate Subordination.....................   54
SECTION 17.06.   Notice by the Company...................................   54
SECTION 17.07.   Rights of the Trustee; Holders of Senior Indebtedness...   55
SECTION 17.08.   Subordination May Not Be Impaired.......................   56


<PAGE>

               THIS INDENTURE, dated as of November 27, 2001, between XEROX
FUNDING LLC II, a Delaware limited liability company (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) Trust Preferred Securities; (xi)
Xerox Debentures; and (xii) Xerox 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


<PAGE>

Person is an individual, any entity of which the specified Person is an officer,
director or general partner.

               "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.

               "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" has the meaning set forth in Section 15.02 of
the Xerox Indenture.

               "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 Securities" shall mean the common securities of Xerox
Capital.

               "Common Stock" shall mean the Common Stock, par value $1.00 per
share, of Xerox 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 Funding LLC II, a Delaware limited
liability company, and, subject to the provisions of Article X, shall include
its successors and assigns.

               "Company Request" or "Company Order" shall mean a written request
or order signed in the name of the Company by any member thereof or its duly
authorized officer and delivered to the Trustee.

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

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

               "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


<PAGE>

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(a)(i).

               "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(b).

               "Event of Default" shall mean any event specified in Section
5.01, continued for the period of time, if any, and after the giving of the
notice, if any, therein designated.

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

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

               "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.

               "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.

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

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

               "Issue Date" means November 27, 2001.


<PAGE>

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

               "Like Amount" means (i) with respect to a conversion, redemption
or purchase of the Securities, Securities having an aggregate principal amount
equal to the aggregate principal amount of Xerox Debentures to be converted,
redeemed or purchased in accordance with their terms, (ii) with respect to a
conversion, redemption or purchase of the Securities, Securities having an
aggregate principal amount equal to the aggregate liquidation amount of Trust
Securities to be converted, redeemed or purchased in accordance with their
terms, (iii) with respect to the distribution of Xerox Debentures upon an
Exchange Event, Xerox Debentures having a principal amount equal to the
aggregate principal amount of the Securities of the holder to whom such Xerox
Debentures are distributed and (iv) with respect to a distribution of Securities
upon a Trust Dissolution Event of Xerox Capital, Securities having a principal
amount equal to the aggregate liquidation amount of the Trust Securities of the
holder to whom such Securities are distributed.

               "Maturity Date" means November 27, 2021.

               "Member" means any member of the Company.

               "Non Book-Entry Trust Preferred Securities" shall have the
meaning set forth in Section 2.05.

               "Officers" shall mean any duly appointed officer of the Company.

               "Officers' Certificate" shall mean a certificate signed by any
Officer or Member 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.

               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


<PAGE>

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.

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

               "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.

               "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 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


<PAGE>

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.

               "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.

               "Securities" means the securities issued hereunder.

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

               "Securityholder", "holder of Securities", 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
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 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.

               "Security Register" shall mean (i) prior to a Trust Dissolution
Event, the List of Holders provided to the Trustee pursuant to Section 4.01, and
(ii) following a Trust Dissolution 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


<PAGE>

or not such obligation is assumed by such obligor), except for any such
indebtedness that is by its terms subordinated to or ranks pari passu with the
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, and 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
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.

               "Trust Dissolution Event" means the dissolution of Xerox Capital
and the distribution of a Like Amount of Securities to holders of the Trust
Securities.

               "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.

               "Trust Securities Guarantee" means the Trust Securities Guarantee
Agreement, dated as of November 27, 2001, between Xerox and the guarantee
trustee thereto.

               "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


<PAGE>

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" means Xerox Corporation, a New York corporation, and its
successors and assigns

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

                                   ARTICLE II

                                   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.

               Any Member or 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.


<PAGE>

               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 any 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.

               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.

               (a) In connection with a Trust Dissolution Event,

                    (i) 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 the Property Trustee 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 liquidation amount of all
     outstanding Trust Preferred Securities, 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 the Property Trustee; 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 Trust Preferred Securities are held in
     certificated form, the related Definitive Securities may be presented to
     the Trustee by the Property Trustee and any Trust Preferred Security
     certificate which represents Trust Preferred Securities other than Trust
     Preferred Securities in book-entry form ("Non Book-Entry Trust Preferred
     Securities") will be deemed to represent beneficial interests in Securities
     presented to the Trustee by the Property Trustee having an aggregate
     principal amount equal to the aggregate liquidation amount of the Non
     Book-Entry Trust Preferred Securities until such Trust Preferred Security
     certificates are presented to the Security Registrar for


<PAGE>

     transfer or reissuance, at which time such Trust Preferred Security
     certificates will be cancelled and a Security, registered in the name of
     the holder of the Trust Preferred Security certificate or the transferee of
     the holder of such Trust Preferred Security certificate, as the case may
     be, with an aggregate principal amount equal to the aggregate liquidation
     amount of the Trust Preferred Security 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 by the Property Trustee 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 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.


<PAGE>

               (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 Securities, the Xerox
Debentures or the Trust Preferred Securities are being represented by global
securities, 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 full
calendar month, the number of days lapsed in such month.

               (c) During such time as 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 or Xerox Capital will be responsible for, nor will the Company, Xerox or
Xerox Capital be required to compensate holders of or investors in the Trust
Preferred Securities (or the Securities that may be distributed by Xerox
Capital) for, any withholding taxes that are imposed on interest payments on the
Securities 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 such
payment 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 shall be deemed to have been paid
in full on such date.

               SECTION 2.07. Transfer and Exchange.

               (1) 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


<PAGE>

law. Upon any distribution of the Securities following a Trust Dissolution
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
Declaration to the extent applicable in the circumstances existing at such time.

               (2) 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.

               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


<PAGE>

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 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) unless the Company directs them to be returned to it. 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


<PAGE>

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 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.


<PAGE>

               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, for 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 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, for 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


<PAGE>

     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 or premium (if any) 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
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. 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,


<PAGE>

removal or resignation.

                                   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):


<PAGE>

               (a) default in the payment of any interest upon any Security when
it becomes due and payable, and continuance of such default for a period of 30
days, to the extent 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

               (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 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 any such cash 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 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 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 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 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, or shall fail generally to pay their debts as they
become due; or


<PAGE>


               (g) the occurrence and continuance of an Event of Default under
the Xerox 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 have
continued for a period of 30 days, to the extent such payment is not made or
otherwise duly provided for from proceeds from the Pledged Account in


<PAGE>

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 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 any such cash 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 Capital, without duplication of any
other amounts paid by 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 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 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


<PAGE>

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:

               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
negligence or bad faith;


<PAGE>

               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 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 itself of any
provision of this Indenture to affect, disturb or prejudice the rights of the
holders of any other 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.


<PAGE>

               The Company and the Trustee acknowledge that so long as 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.

               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; 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


<PAGE>

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 if the Securities are held by the Property
Trustee, such waiver or modification to such waiver 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; provided
further, that 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. 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 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


<PAGE>

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

                    (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.


<PAGE>

               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)
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 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,


<PAGE>

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 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 an Officer 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 gross negligence or bad faith. The Company


<PAGE>

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) 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


<PAGE>

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.

               (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 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


<PAGE>

      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 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.


<PAGE>

               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.

               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


<PAGE>

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 the 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. 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


<PAGE>

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.

               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


<PAGE>

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 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 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


<PAGE>

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 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 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.


<PAGE>

               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

               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


<PAGE>

                                   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 Company 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
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 Trust Preferred
Securities in the event of a distribution of Securities by the Company following
a Trust Dissolution 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


<PAGE>

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 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 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 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 amendment to the Indenture or waive compliance by the
Company with any covenant or waive any past default; provided, however, that if
the Securities are held solely by the Property Trustee, such modification or
amendment shall not be effective until the holders of a majority in liquidation
amount of Trust Securities shall have consented to such amendment; provided,
further, that if the consent of the holder of each outstanding Security is
required, such amendment shall not be effective until each holder of the Trust
Securities shall have consented to such amendment.

               Upon the request of the Company accompanied by an Officer's
Certificate 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.


<PAGE>

               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 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 Company, 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 to 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.


<PAGE>

                                    ARTICLE X

                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

               SECTION 10.01. Company May Merge, Consolidate or Sell Assets.

               (a) The Company may not merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, except as described in
Section 10.01(b).

               (b) So long as the Company holds the Xerox Debentures, the
Company may merge with or into, consolidate, amalgamate, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, a trust, limited liability company or similar
entity organized as such under the laws of any State; provided, that, if the
Company is not the successor entity:

                    (i) such successor entity (the "Successor Entity") either:

                              (A) expressly assumes all of the obligations of
               the Company under the Securities; or

                              (B) substitutes for the Securities other
               securities having substantially the same terms as the Securities
               (the "Successor Securities") so long as the Successor Securities
               rank the same as the Securities rank with respect to payments
               upon liquidation, redemption and otherwise;

                    (ii) such merger, consolidation, amalgamation, replacement,
          conveyance, transfer or lease does not cause the Securities (including
          any Successor Securities) to be downgraded by any nationally
          recognized statistical rating organization;

                    (iii) such merger, consolidation, amalgamation, replacement,
          conveyance, transfer or lease does not adversely affect the rights,
          preferences and privileges of the Holders (including any Successor
          Securities) in any material respect (other than with respect to any
          dilution of such Holders' interests in the new entity);

                    (iv) such Successor Entity has a purpose substantially
          identical to that of the Company;

                    (v) prior to such merger, consolidation, amalgamation,
          replacement, conveyance, transfer or lease, the Company has received
          an opinion of an independent counsel to the Company experienced in
          such matters to the effect that:

                              (A) such merger, consolidation, amalgamation,
               replacement, conveyance, transfer or lease does not adversely
               affect the rights, preferences and privileges of the Holders
               (including any Successor Securities) in any material respect;

                              (B) following such merger, consolidation,
               amalgamation, replacement, conveyance, transfer or lease, the


<PAGE>

               Company (or the Successor Entity) will not be required to
               register as an investment company under the Investment Company
               Act; and

                              (C) following such merger, consolidation,
               amalgamation, replacement, conveyance, transfer or lease, the
               Company (or the Successor Entity) will not be treated as an
               association or a publicly traded partnership taxable as a
               corporation for United States federal income tax purposes; and

                    (vi) Xerox or any permitted successor or assignee owns all
          of the common securities of such Successor Entity and guarantees the
          obligations of such Successor Entity under the Successor Securities at
          least to the extent provided by the Debenture Guarantee.

               SECTION 10.02. 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

               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, and interest due or to become due to the Maturity Date or the
applicable 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 and
Article XVI hereof, 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'


<PAGE>

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 agrees 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 or 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 further liability with
respect to such moneys.

               SECTION 11.04. Return of Unclaimed Moneys.

               Any moneys or U.S. Government Obligations 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


<PAGE>

     (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, Purchase Price or Redemption 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 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, 3.08, 3.09, 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 MEMBERS AND OFFICERS

               SECTION 12.01. Indenture and Securities Solely Corporate
Obligations.

               No recourse for the payment of the principal of or premium,


<PAGE>

if any, Redemption Price, Purchase Price or 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 member, 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.

               SECTION 13.02. Official Acts by Successor Entity or Person.

               Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any member, board, committee
or Officer of the Company shall and may be done and performed with like force
and effect by the like member, 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 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, c/o Xerox Corporation, 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


<PAGE>

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 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, Redemption Price, Purchase 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


<PAGE>

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 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 Capital or a trustee of such trust, so long as the Securities are
held by Xerox Capital, if the Property Trustee fails to enforce its rights under
this Indenture as the holder of the Securities held as the assets of Xerox
Capital any holder of Trust Preferred Securities may institute legal proceedings
directly against the Company to enforce such Property Trustee's rights under
this 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, Redemption Price, Purchase 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, Redemption
Price, Purchase 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.

                                   ARTICLE XIV

                                   REDEMPTION


<PAGE>

               SECTION 14.01. Optional Redemption by Company.

               Upon the repayment of the Xerox Debentures in whole or in part,
at maturity or upon early redemption (either at the option of Xerox or pursuant
to a Special Event), the proceeds from such repayment by Xerox shall be
simultaneously applied by the Trustee (subject to, prior to the occurrence of a
Trust Dissolution Event, the Property Trustee having received notice no later
than 45 days prior to such repayment) to redeem a Like Amount of the Securities
at a redemption price equal to (i) in the case of the repayment of the Xerox
Debentures at maturity or the optional redemption of the Xerox Debentures prior
to December 4, 2004 upon the occurrence and continuation of a Special Event, the
Regular Redemption Price and (ii) in the case of the optional redemption of the
Xerox Debentures on or after December 4, 2004, the Special 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 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.

               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 Xerox shall desire to exercise the right to redeem
all, or, as the case may be, any part of the Xerox Debentures in accordance with
their terms, the date fixed for redemption for the Securities shall be the date
for redemption of the Xerox Debentures.

               The Company shall forward the 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


<PAGE>

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 amount of money
sufficient to prepay 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


<PAGE>

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 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) The Company shall purchase, at the option of the Holder, the
Securities held by such Holder on December 4, 2004, November 27, 2006, November
27, 2008, November 27, 2011 and November 27, 2016 (each, a "Purchase Date"), at
the principal amount thereof, plus accrued and unpaid interest thereon to but
excluding the applicable Purchase Date (the "Purchase Price"), upon satisfaction
of the conditions, and in the manner specified in Article XV of the Xerox
Indenture.

               So long as the Securities are held by the Property Trustee, if
holders of the Trust Securities require Xerox Capital to purchase all or a
portion of their Trust Securities on a Purchase Date, Xerox will be required, in
accordance with Article XV of the Xerox Indenture, to purchase an equivalent
principal amount of the Xerox Debentures then held by the Company at such
Purchase Price. The Company will be obligated to use the same consideration
received in connection with any such purchase to purchase a Like Amount of
Securities on the applicable Purchase Date.

               (b) After a Trust Dissolution Event, the Securities shall be
purchased by the Company on any Purchase Date at the Purchase Price, at the
option of the Holder thereof, upon satisfaction of the conditions, and in the
manner specified in Article XV of the Xerox Indenture.

               SECTION 15.02. Purchase of Securities at Option of the


<PAGE>

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, at a
price equal to the principal amount thereof, plus accrued and unpaid interest
thereon to but excluding the applicable purchase date (the "Change in Control
Purchase Price"), upon satisfaction of the conditions, and in the manner
specified in Article XV of the Xerox Indenture.

               So long as the Securities are held by the Property Trustee, if
holders of the Trust Securities require Xerox Capital to purchase all or a
portion of their Trust Securities on a Change in Control Purchase Date, Xerox
will be required, in accordance with Article XV of the Xerox Indenture, to
purchase an equivalent principal amount of the Xerox Debentures then held by the
Company at such Change in Control Purchase Price. The Company will be obligated
to use the same consideration received in connection with any such purchase to
purchase a Like Amount of Securities on the applicable purchase date.

               (b) After a Trust Dissolution Event, the Securities shall be
purchased by the Company on the applicable purchase date specified in Article XV
of the Xerox Indenture at the Change in Control Purchase Price, at the option of
the Holder thereof, upon satisfaction of the conditions, and in the manner
specified in Article XV of the Xerox Indenture.

                                   ARTICLE XVI

                                   CONVERSION

               The Securities will be convertible into fully paid and
nonassessable shares of Common Stock at an initial rate of 5.4795 shares of
Common Stock per $50 principal amount, subject to certain adjustments set forth
in Article XVI of the Xerox Indenture (as so adjusted, the "Conversion Rate"),
in accordance with the conditions and procedures set forth in Article XVI of the
Xerox Indenture.

               So long as the Securities are held by the Property Trustee, if
holders of the Trust Securities elect to convert all or a portion of such Trust
Securities, the Company, as holder of the Xerox Debentures, shall, upon receipt
of notice from the conversion agent under the Declaration of a notice of
conversion thereunder, elect to convert a Like Amount of the Xerox Debentures
then held by it into shares of Common Stock at the Conversion Rate by delivering
to the conversion agent under the Xerox Indenture a notice of conversion
thereunder. The Company will be obligated to deliver the shares of Common Stock
received from Xerox in connection with any such conversion to holders of such
converted Trust Securities. Upon any such conversion, a Like Amount of
Securities shall be deemed to have been paid in full in the manner provided for
in the eighth paragraph of Section 16.02 of the Xerox Indenture

               On and after the date on which Trust Securities are no longer
outstanding, in order to convert Securities into Common Stock, a Holder, or its
authorized agent, shall submit to the Conversion Agent an irrevocable Notice of
Conversion to direct the Company to, (i) elect to convert a Like Amount of Xerox
Debentures then held by the Company into


<PAGE>

shares of Common Stock by delivering to the conversion agent under the Xerox
Indenture 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 for
distribution to such Holder. The Company will be obligated to deliver the shares
of Common Stock received from Xerox in connection with any such conversion to
holders of such converted Securities. Upon such delivery, the Conversion Agent
shall notify the Trustee of such conversion whereupon a Like Amount of
Securities shall be deemed to have been paid in full in the manner provided for
in the eighth paragraph of Section 16.02 of the Xerox Indenture.

               The Company hereby agrees not to convert any Xerox Debentures
held by it except pursuant to, (i) so long as the Securities are held by the
Property Trustee, a notice of conversion delivered to the conversion agent by a
holder of Trust Securities and (ii) on and after the date on which the Trust
Securities are no longer outstanding, a Notice of Conversion delivered to the
Conversion Agent by a Holder. If any Trust Securities are outstanding, the
Holder agrees that it will not elect to convert any of its Securities other than
as provided in this Section.

               Upon surrender of a Security that is converted in part, the
Company shall execute, and the Trust 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 so surrendered.

                                  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 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.


<PAGE>

               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, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another Person or the


<PAGE>

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.

               SECTION 17.06. Notice by the Company.


<PAGE>

               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 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


<PAGE>

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


<PAGE>

               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 FUNDING LLC II


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


                            WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                            as Trustee


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

                                    EXHIBIT A

                           (FORM OF FACE 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 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


<PAGE>

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. 98414X  AA9

                              XEROX FUNDING LLC II

            7 1/2% 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 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 Securities, the Xerox Debentures or the Trust
Preferred Securities are being represented by global securities, the 15th
calendar day immediately preceding the relevant interest


<PAGE>

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 and 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 and 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 same effect as though
fully set forth at this place.

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


<PAGE>

                            XEROX FUNDING LLC II


                            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 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.


<PAGE>

               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 Xerox
Corporation and subject to purchase at the option of the holders hereof as
described in the Indenture.

               The Securities may be exchanged for a Like Amount of Xerox
Debentures upon the occurrence of an Exchange Event as described in the LLC
Agreement.

               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 provisions 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 if the Securities 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


<PAGE>

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 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


<PAGE>

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.

                              NOTICE OF CONVERSION

               To:      Wells Fargo Bank Minnesota, National Association
                        Conversion Agent for Xerox Funding LLC II

               The undersigned owner of this Security or Securities hereby
irrevocably exercises the option to convert this Security or Securities, or the
portion designated below, into Common Stock, par value $1.00 per share (the
"Common Stock"), of Xerox Corporation or its successor, ("Xerox") in accordance
with the terms of the Indenture (as amended from time to time, the "Indenture"),
dated as of November 27, 2001, between Xerox Funding LLC II (the "Company") and
Wells Fargo Bank Minnesota, National Association, as Trustee. Pursuant to the
aforementioned exercise of the option to convert the Security or Securities, the
undersigned hereby directs the Conversion Agent (as that term is defined in the
Indenture) to (a) direct the Company to convert immediately an equivalent
aggregate principal amount of Xerox Debentures then held by the Company on
behalf of such Holders, into Common Stock and, if applicable, other securities,
cash or property (at the conversion rate specified in the Indenture), and (b) to
direct the Company to direct Xerox to deliver such property to the Trustee for
delivery to the undersigned.

               The undersigned also hereby directs the Conversion Agent that the
shares of Common Stock issuable and deliverable upon conversion, together with
any check in payment for fractional shares, be issued in the name of and
delivered to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.

               Date:

                    in whole

                    in part

Number of Securities to be converted
($50 principal amount or
integral multiples thereof):


<PAGE>


                                                                 Exhibit 4(g)(3)




                    AMENDED AND RESTATED DECLARATION OF TRUST


                                       OF


                             XEROX CAPITAL TRUST II


                          Dated as of November 27, 2001


<PAGE>


                                TABLE OF CONTENTS

                                                                            Page

                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS

SECTION 1.1    Definitions.                                                   1

                                   ARTICLE II
                               TRUST INDENTURE ACT

SECTION 2.1    Trust Indenture Act; Application.                              8
SECTION 2.2    Lists of Holders of Securities.                                9
SECTION 2.3    Reports by the Property Trustee.                               9
SECTION 2.4    Periodic Reports to Property Trustee.                          9
SECTION 2.5    Evidence of Compliance with Conditions Precedent.              9
SECTION 2.6    Events of Default; Waiver.                                    10
SECTION 2.7    Event of Default; Notice.                                     12

                                   ARTICLE III
                                  ORGANIZATION

SECTION 3.1    Name.                                                         12
SECTION 3.2    Office.                                                       13
SECTION 3.3    Purpose.                                                      13
SECTION 3.4    Authority.                                                    13
SECTION 3.5    Title to Property of the Trust.                               13
SECTION 3.6    Powers and Duties of the Administrative Trustees.             13
SECTION 3.7    Prohibition of Actions by the Trust and the Trustees.         16
SECTION 3.8    Powers and Duties of the Property Trustee.                    17
SECTION 3.9    Certain Duties and Responsibilities of the Property
                 Trustee.                                                    19
SECTION 3.10   Certain Rights of Property Trustee.                           20
SECTION 3.11   Delaware Trustee.                                             22
SECTION 3.12   Execution of Documents.                                       23
SECTION 3.13   Not Responsible for Recitals or Issuance of Securities.       23
SECTION 3.14   Duration of Trust.                                            23

SECTION 3.15   Mergers.                                                      23
SECTION 3.16   Compensation.                                                 25

                                   ARTICLE IV
                                     SPONSOR

SECTION 4.1    Sponsor's Purchase of Common Securities.                      25
SECTION 4.2    Responsibilities of the Sponsor.                              25
SECTION 4.3    Right to Proceed.                                             26

                                    ARTICLE V
                                    TRUSTEES

SECTION 5.1    Number of Trustees: Appointment of Co-Trustee.                26
SECTION 5.2    Delaware Trustee.                                             27
SECTION 5.3    Property Trustee; Eligibility.                                27
SECTION 5.4    Certain Qualifications of Administrative Trustees and
                 Delaware Trustee Generally.                                 28
SECTION 5.5    Administrative Trustees.                                      28
SECTION 5.6    Delaware Trustee.                                             29


<PAGE>


SECTION 5.7    Appointment, Removal and Resignation of Trustees.             29
SECTION 5.8    Vacancies among Trustees.                                     30
SECTION 5.9    Effect of Vacancies.                                          30
SECTION 5.10   Meetings.                                                     31
SECTION 5.11   Delegation of Power.                                          31
SECTION 5.12   Merger, Conversion, Consolidation or Succession to
                 Business.                                                   31

                                   ARTICLE VI
                                  DISTRIBUTIONS

SECTION 6.1    Distributions.                                                32

                                   ARTICLE VII
                             ISSUANCE OF SECURITIES

SECTION 7.1    General Provisions Regarding Securities.                      32
SECTION 7.2    Execution and Authentication.                                 33
SECTION 7.3    Form and Dating.                                              33
SECTION 7.4    Registrar, Paying Agent, Exchange Agent and the
                 Conversion Agent.                                           35
SECTION 7.5    Paying Agent to Hold Money in Trust.                          35
SECTION 7.6    Replacement Securities.                                       36
SECTION 7.7    Outstanding Trust Preferred Securities.                       36
SECTION 7.8    Trust Preferred Securities in Treasury.                       36
SECTION 7.9    Temporary Securities.                                         36
SECTION 7.10   Cancellation.                                                 37
SECTION 7.11   CUSIP Numbers.                                                38

                                  ARTICLE VIII
                              TERMINATION OF TRUST

SECTION 8.1    Termination of Trust.                                         38

                                   ARTICLE IX
                              TRANSFER OF INTERESTS

SECTION 9.1    Transfer of Securities.                                       39
SECTION 9.2    Transfer Procedures and Restrictions.                         39
SECTION 9.3    Deemed Security Holders.                                      45
SECTION 9.4    Book Entry Interests.                                         45
SECTION 9.5    Notices to Clearing Agency.                                   46
SECTION 9.6    Appointment of Successor Clearing Agency.                     46

                                    ARTICLE X
      LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES AND OTHERS

SECTION 10.1   Liability.                                                    46
SECTION 10.2   Exculpation.                                                  46
SECTION 10.3   Fiduciary Duty.                                               47
SECTION 10.4   Indemnification.                                              48
SECTION 10.5   Outside Businesses.                                           50
SECTION 11.1   Fiscal Year.                                                  51

                                   ARTICLE XI
                                   ACCOUNTING


<PAGE>


SECTION 11.2   Certain Accounting Matters.                                   51
SECTION 11.3   Banking.                                                      51
SECTION 11.4   Withholding.                                                  51

                                   ARTICLE XII
                             AMENDMENTS AND MEETINGS

SECTION 12.1   Amendments.                                                   52
SECTION 12.2   Meetings of the Holders; Action by Written Consent.           54

                                  ARTICLE XIII
            REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE

SECTION 13.1   Representations and Warranties of Property Trustee.           55
SECTION 13.2   Representations and Warranties of Delaware Trustee.           56

                                   ARTICLE XIV
                                  MISCELLANEOUS

SECTION 14.1   Notices.                                                      56
SECTION 14.2   Governing Law.                                                57
SECTION 14.3   Intention of the Parties.                                     58
SECTION 14.4   Headings.                                                     58
SECTION 14.5   Successors and Assigns.                                       58
SECTION 14.6   Partial Enforceability.                                       58
SECTION 14.7   Counterparts.                                                 58

ANNEX I       TERMS OF SECURITIES                                           I-1
EXHIBIT A-1   FORM OF TRUST PREFERRED SECURITY CERTIFICATE                 A1-1
EXHIBIT A-2   FORM OF COMMON SECURITY CERTIFICATE                          A2-1
EXHIBIT B     SPECIMEN OF XEROX FUNDING DEBENTURE                           B-1
EXHIBIT C     SPECIMEN OF XEROX DEBENTURE                                   C-1
EXHIBIT D     PURCHASE AGREEMENT                                            D-1


<PAGE>


                              AMENDED AND RESTATED
                             DECLARATION OF TRUST OF
                             XEROX CAPITAL TRUST II

                                November 27, 2001

     AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of November 27, 2001, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial interests in the Trust to be issued pursuant to this Declaration;

     WHEREAS, certain of the Trustees and the Sponsor established Xerox Capital
Trust II (the "Trust"), a trust formed under the Delaware Business Trust Act
pursuant to a Declaration of Trust dated as of November 19, 2001 (the "Original
Declaration"), and a Certificate of Trust filed with the Secretary of State of
the State of Delaware on November 19, 2001, for the sole purpose of issuing and
selling certain securities representing undivided beneficial interests in the
assets of the Trust and investing the proceeds thereof in certain Debentures of
the Debenture Issuer (each as hereinafter defined);

     WHEREAS, as of the date hereof, no interests in the Trust have been issued;
and

     WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend
and restate each and every term and provision of the Original Declaration.

     NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.

                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS

     SECTION 1.1 Definitions.

     Unless the context otherwise requires:

     (a) each capitalized terms used in this Declaration but not defined in the
Preamble above has the meaning assigned to it in this Section 1.1;

     (b) a term defined anywhere in this Declaration has the same meaning
throughout;

     (c) all references to "the Declaration" or "this Declaration" are to this
Declaration and each Annex and Exhibit hereto, as modified, supplemented or
amended from time to time;

     (d) all references in this Declaration to Articles and Sections and Annexes
and Exhibits are to Articles and Sections of and Annexes and Exhibits to this
Declaration unless otherwise specified;


<PAGE>


     (e) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or unless
the context otherwise requires; and

     (f) a reference to the singular includes the plural and vice versa.

     "Administrative Action" has the meaning set forth in Annex I.

     "Administrative Trustee" has the meaning set forth in Section 5.1.

     "Affiliate" has the same meaning as given to that term in Rule 405 under
the Securities Act or any successor rule thereunder.

     "Agent" means any Paying Agent, Registrar, Conversion Agent or Exchange
Agent.

     "Authorized Officer" of a Person means any other Person that is authorized
to legally bind such former Person.

     "Book Entry Interest" means a beneficial interest in a Global Certificate
registered in the name of a Clearing Agency or its nominee, ownership and
transfers of which shall be maintained and made through book entries by a
Clearing Agency as described in Section 9.4.

     "Business Day" means any day other than a Saturday or a Sunday or a day on
which banking institutions in The City of New York are permitted or required by
applicable law or executive order to close.

     "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. C. Section 3801 et seq., as it may be amended from time to time, or any
successor legislation.

     "cash" has the meaning set forth in Annex I.

     "Change in Control Purchase Date" has the meaning set forth in Annex I.

     "Change in Control Purchase Notice" has the meaning set forth in Annex I.

     "Change in Control Purchase Price" has the meaning set forth in Annex I.

     "Change in Control Sponsor Notice" has the meaning set forth in Annex I.

     "Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depositary for the
Trust Preferred Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Trust Preferred Securities.

     "Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Clearing Agency
effects book entry transfers and pledges of securities deposited with the
Clearing Agency.

     "Closing Time" has the meaning specified under the Purchase Agreement.


<PAGE>

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.

     "Commission" means the United States Securities and Exchange Commission as
from time to time constituted, or if at any time after the execution of this
Declaration such Commission is not existing and performing the duties now
assigned to it under applicable Federal securities laws, then the body
performing such duties at such time.

     "Common Securities" has the meaning specified in Section 7.1(a).

     "Company Indemnified Person" means (a) any Administrative Trustee; (b) any
Affiliate of any Administrative Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Administrative Trustee; or (d) any officer, employee or agent of the Trust or
its Affiliates.

     "Conversion Agent" has the meaning set forth in Section 7.4.

     "Conversion Date" has the meaning set forth in Annex I.

     "Conversion Rate" has the meaning set forth in Annex I.

     "Corporate Trust Office" means the principal corporate trust office of the
Property 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 Property
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.

     "Covered Person" means: (a) any officer, director, shareholder, partner,
member, representative, employee or agent of (i) the Trust or (ii) the Trust's
Affiliates; and (b) any Holder of Securities.

     "Debenture Issuer" means either Xerox Funding or the Sponsor, as the case
may be, or any successor entity resulting from any consolidation, amalgamation,
merger or other business combination, in its respective capacity as issuer of
the related Debentures under the related Indenture.

     "Debenture Trustee" means Wells Fargo Bank Minnesota, National Association,
a national banking association, as trustee under the Indentures until a
successor is appointed thereunder, and thereafter means such successor trustee.

     "Debentures" means, collectively, the Xerox Funding Debentures and the
Xerox Debentures.

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

     "Definitive Trust Preferred Securities" shall have the meaning set forth in
Section 7.3(c).


<PAGE>

     "Delaware Trustee" has the meaning set forth in Section 5.2.

     "Direct Action" shall have the meaning set forth in Section 3.8(e).

     "Distribution" means a distribution payable to Holders in accordance with
Section 6.1.

     "DTC" means The Depository Trust Company, the initial Clearing Agency.

     "Event of Default" in respect of the Securities means an Event of Default
(as defined in each of the Indentures) that has occurred and is continuing in
respect of the Debentures.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.

     "Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b).

     "Fiscal Year" has the meaning set forth in Section 11.1.

     "Global Trust Preferred Security" has the meaning set forth in Section
7.3(a).

     "Holder" means a Person in whose name a Security is registered, such Person
being a beneficial owner within the meaning of the Business Trust Act.

     "Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.

     "Indentures" means the Xerox Funding Indenture and the Xerox Indenture.

     "Investment Company" means an investment company as defined in the
Investment Company Act.

     "Investment Company Act" has the meaning set forth in Annex I.

     "Legal Action" has the meaning set forth in Section 3.6(g).

     "Liquidation Amount" means an amount with respect to the assets of the
Trust equal to $50 per Trust Security.

     "Majority in liquidation amount" means, with respect to the Trust
Securities, except as provided in the terms of the Trust Preferred Securities or
by the Trust Indenture Act, Holder(s) of outstanding Trust Securities voting
together as a single class or, as the context may require, Holders of
outstanding Trust Preferred Securities or Holders of outstanding Common
Securities voting separately as a class, who are the record owners of more than
50% of the aggregate liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.

     "Ministerial Action" has the meaning set forth in Annex I hereto.

     "Notice of Conversion" means the notice given by a Holder of Trust
Securities to the Conversion Agent directing the Conversion Agent to instruct


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Xerox Funding to convert immediately an equivalent principal amount of Xerox
Debentures into Common Stock of the Sponsor on behalf of such Holder. The form
of such notice is included in the Trust Common Securities Certificate and Trust
Preferred Securities Certificate.

     "Offering Memorandum" ha