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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 25, 1999
IKON Receivables, LLC
---------------------
(Exact name of registrant as specified in its charter)
Delaware 333-71073 23-2990188
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(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
Attention: President 31208
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1738 Bass Road (Zip Code)
P.O. Box 9115
Macon, Georgia
(Address of Principal Executive Offices)
Registrant's telephone number, including area code
(912) 471-2300
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________________________________________________________________________________
No change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
------------------------------------
Description of the Notes and the Leases
IKON Receivables, LLC (the "Registrant" or the "Issuer") has
registered $1,825,000,000 in principal amount of Lease-Backed Notes for issuance
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Act"), by a Registration Statement on Form S-3 (File
No. 333-71073) (as amended, the "Registration Statement").
Pursuant to the Registration Statement, the Registrant issued
$751,642,000 in aggregate principal amount of its Lease-Backed Notes (the
"Notes"), on May 25, 1999 (the "Closing Date").
This Current Report on Form 8-K is being filed to satisfy an
undertaking to file copies of certain agreements executed in connection with the
issuance of the Notes, the forms of which were filed as Exhibits to the
Registration Statement.
The Notes were issued pursuant to an Indenture attached hereto as
Exhibit 4.1, dated as of April 1, 1999, among the Issuer, IOS Capital, Inc. as
- -----------
Servicer, and Harris Trust and Savings Bank, as Trustee.
The primary assets of the Issuer are a pool of equipment leases (the
"Leases"), a security interest in the underlying equipment and other property
relating to the Leases, which were transferred to the Issuer on the Closing Date
pursuant to the Assignment and Servicing Agreement attached hereto as
Exhibit 10.1. As of the Closing Date, the Leases had the characteristics
- ------------
described in the Prospectus dated May 7, 1999, the Preliminary Prospectus
Supplement dated May 11, 1999 previously filed with the Commission pursuant to
Rule 424(b)(3) of the Act and the Prospectus Supplement dated May 19, 1999
previously filed with the Commission pursuant to Rule 424(b)(5) of the Act.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated May 19, 1999, among the Issuer,
IKON Receivables-1, LLC, IOS Capital, Inc., and Lehman Brothers as
Representative of the Underwriters.
4.1 Indenture, dated as of April 1, 1999 among the Issuer, Harris
Trust Savings Bank, as Trustee, and IOS Capital Inc., as Servicer.
4.2 Certificate Guaranty Insurance Policy, dated May 25, 1999, issued
and delivered by Ambac Assurance Corporation.
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5.1 Opinion of Dewey Ballantine LLP regarding legality of the
registered securities, dated May 25, 1999.
8.1 Opinion of Dewey Ballantine LLP regarding tax matters, dated
May 25, 1999.
10.1 Assignment and Servicing Agreement, dated as of April 1, 1999,
among the Issuer, IKON Receivables-1, and LLC, IOS Capital, Inc., as Originator
and Servicer.
10.2 Indemnification Agreement, dated as of May 25, 1999, among Lehman
Brothers, Chase Securities Inc., Deutsche Bank Securities Inc., PNC Capital
Markets, Inc., as Underwriters (the "Underwriters"), and Ambac Assurance
Corporation, as Insurer.
10.3 Insurance and Indemnity Agreement, dated as of May 25, 1999,
among IOS Capital, Inc., as Originator and Servicer, the Issuer, IKON
Receivables-1, LLC, and Ambac Assurance Corporation, as Insurer.
23.1 Consent of KPMG LLP regarding financial statements of Ambac
Assurance Corporation, and their report.*
* Previously filed on Form 8-K filed with the Securities and Exchange
Commission on May 21, 1999.
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SIGNATURES
Pursuant to the requirements 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.
IKON Receivables, LLC
By: IKON Receivables Funding, Inc.,
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its Manager
By: /s/ Robert K. McLain
----------------------
Name: Robert K. McLain
Title: President
Dated: June 3, 1999
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EXHIBIT INDEX
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Exhibit No. Description
- ---------- -----------
1.1 Underwriting Agreement, dated May 19, 1999, among the Issuer,
IKON Receivables-1, LLC, IOS Capital, Inc., and Lehman Brothers
as Representative of the Underwriters.
4.1 Indenture, dated as of April 1, 1999 among the Issuer, Harris
Trust Savings Bank, as Trustee, and IOS Capital Inc., as
Servicer.
4.2 Certificate Guaranty Insurance Policy, dated May 25, 1999, issued
and delivered by Ambac Assurance Corporation.
5.1 Opinion of Dewey Ballantine LLP regarding legality of the
registered securities, dated May 25, 1999.
8.1 Opinion of Dewey Ballantine LLP regarding tax matters, dated
May 25, 1999.
10.1 Assignment and Servicing Agreement, dated as of April 1, 1999,
among the Issuer, IKON Receivables-1, and LLC, IOS Capital, Inc.,
as Originator and Servicer.
10.2 Indemnification Agreement, dated as of May 25, 1999, among Lehman
Brothers, Chase Securities Inc., Deutsche Bank Securities Inc.,
PNC Capital Markets, Inc., as Underwriters (the "Underwriters"),
and Ambac Assurance Corporation, as Insurer.
10.3 Insurance and Indemnity Agreement, dated as of May 25, 1999,
among IOS Capital, Inc., as Originator and Servicer, the Issuer
IKON Receivables-1, LLC, and Ambac Assurance Corporation, as
Insurer.
23.1 Consent of KPMG LLP regarding financial statements of Ambac
Assurance Corporation, and their report.*
* Previously filed on Form 8-K filed with the Securities and
Exchange Commission on May 21, 1999.
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EXHIBIT 1.1
IKON RECEIVABLES LLC
$ 304,474,000 - 5.11% Class A-1 Lease-Backed Notes, Series 1999-1
$ 61,579,000 - 5.60% Class A-2 Lease-Backed Notes, Series 1999-1
$ 304,127,000 - 5.99% Class A-3 Lease-Backed Notes, Series 1999-1
$ 81,462,000 - 6.23% Class A-4 Lease-Backed Notes, Series 1999-1
UNDERWRITING AGREEMENT
----------------------
May 19, 1999
LEHMAN BROTHERS INC.,
as Representative for the Underwriters
3 World Financial Center
200 Vesey Street
New York, New York 10285
Ladies and Gentlemen:
IKON Receivables LLC, a limited liability company organized and
existing under the laws of Delaware (the "Issuer"), IKON Receivables-1 LLC, a
limited liability company organized and existing under the laws of Delaware (the
"Seller"), and IOS Capital, Inc., a corporation organized and existing under the
laws of Delaware ("IOS Capital"), hereby agree with you as follows:
Section 1. Issuance and Sale of Notes. The Issuer has authorized
--------------------------
the issuance of $304,474,000 of 5.11% Class A-1 Lease-Backed Notes, Series 1999-
1 (the "Class A-1 Notes"); $61,579,000 of 5.60% Class A-2 Lease-Backed Notes,
Series 1999-1 (the "Class A-2 Notes"); $304,127,000 of 5.99% Class A-3 Lease-
Backed Notes, Series 1999-1 (the "Class A-3 Notes"); and $81,462,000 of 6.23%
Class A-4 Lease-Backed Notes, Series 1999-1 (the "Class A-4 Notes"; together
with the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes, the "Notes"). The
Notes will be issued pursuant to an Indenture, dated as of April 1, 1999 (the
"Indenture"), among the Issuer, IOS Capital, as Servicer, and Harris Trust and
Savings Bank (the "Trustee"). The Notes are more fully described in the Final
Prospectus (as defined below), a copy of which the Issuer is furnishing to you.
The Notes will evidence secured debt obligations of the Issuer. The assets of
the Issuer will include a pool of primarily office equipment lease contracts,
including certain payments due thereunder (the "Leases"), and the Issuer's
interest in the underlying equipment (the "Equipment"). The Notes will be
entitled to the benefits of a financial guaranty insurance policy issued by
Ambac Assurance Corporation ("Ambac") in accordance with the terms of an
Insurance and Indemnity Agreement among Ambac,
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the Issuer, the Seller, IOS Capital and the Trustee (the "Insurance Agreement").
Capitalized terms used and not defined herein shall have the meanings specified
in the Indenture.
The Notes will be sold by the Issuer to the Underwriters in the
amounts set forth on Schedule A hereto.
The terms which follow, when used in this Underwriting Agreement (this
"Agreement"), shall have the meanings indicated:
"Base Prospectus" means the prospectus included in the
Registration Statement.
"Effective Date" means each date that the Registration Statement
and any post-effective amendment or amendments thereto became or become
effective under the Securities Act.
"Execution Time" means the date and time that this Agreement is
executed and delivered by the parties hereto.
"Final Prospectus" means the Base Prospectus together with any
prospectus supplement delivered to purchasers of the Notes at or before the
time of confirmation of their purchases.
"Preliminary Prospectus" means any preliminary prospectus
supplement specifically relating to the Notes, together with the Base
Prospectus.
"Registration Statement" means the registration statement on Form
S-3 (File No. 333-71073) in respect of the Notes filed with the Securities
and Exchange Commission, including amendments, incorporated documents,
exhibits and financial statements, in the form in which it has or shall
become effective and, in the event that any post-effective amendment
thereto becomes effective prior to the Issuance Date, shall also mean such
registration statement as so amended.
"Rule 424" refers to such rule under the Securities Act.
"Underwriters" means Lehman Brothers Inc., Chase Securities Inc.,
Deutsche Bank Securities Inc. and PNC Capital Markets, Inc.
"Underwriting Information" has the meaning given to such term in
Section 8(b) hereof.
Section 2. Purchase and Sale of Notes.
--------------------------
(a) Subject to the terms and conditions and in reliance upon the
covenants, representations and warranties set forth herein, the Underwriters
agree to purchase from the Issuer the Notes pursuant to the terms of this
Agreement on the Issuance Date at the purchase price or prices (the "Purchase
Price") set forth on Schedule A attached hereto.
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(b) The obligations of each of the Underwriters hereunder to purchase
the respective Notes shall be several and not joint. Each Underwriter's
obligation shall be to purchase the aggregate principal amount of Notes as is
indicated with respect to each Underwriter on Schedule A attached hereto. The
rights of the parties in the event of the failure on the part of the
Underwriters to purchase any Notes as contemplated herein shall be as set forth
in Section 13 hereof.
(c) It is understood that the Underwriters propose to offer the Notes
for sale to the public in the manner set forth in the Final Prospectus.
Section 3. Delivery and Payment.
--------------------
Delivery of and payment for the Notes to be purchased by the
Underwriters shall be made at the offices of Dewey Ballantine LLP, 1301 Avenue
of the Americas, New York, New York, at 10:00 A.M., New York time, on May 25,
1999 (the "Issuance Date"). The Notes shall be delivered against payment by the
Underwriters of the Purchase Price therefor, to or upon the order of the Issuer
by one or more wire transfers in immediately available funds. Following the
Effective Date, at the request of the Underwriters, delivery of one or more
global notes (the "Global Notes") representing the Notes shall be made to the
respective accounts of the Underwriters. The Global Notes to be so delivered
shall be registered in the name of Cede & Co., as nominee for The Depository
Trust Company ("DTC"). The interests of beneficial owners of the Notes will be
represented by book entries on the records of DTC and participating members
thereof. Definitive Notes representing the Notes will be available under the
circumstances described in the Indenture.
Section 4. Representations and Warranties.
------------------------------
(a) The Issuer hereby represents and warrants to, and agrees with,
the Underwriters as follows:
(i) The Issuer meets the requirements for use of Form S-3
under the Securities Act of 1933, as amended (the "Securities Act"), and
has filed with the Securities and Exchange Commission (the "Commission")
the Registration Statement, including the Base Prospectus and form of
Prospectus Supplement, on such Form S-3 for the registration under the
Securities Act of the Notes. Such Registration Statement has been declared
effective. The Issuer may have filed one or more amendments thereto, each
of which has previously been furnished to you. The Issuer will file with
the Commission either, (A) prior to the effectiveness of such Registration
Statement, a further amendment thereto (including the form of Final
Prospectus) or, (B) after effectiveness of such Registration Statement, a
Final Prospectus in accordance with Rule 424(b). In the case of clause (B),
the Issuer will include in such Registration Statement, as amended at the
Effective Date, all information required by the Securities Act and the
rules thereunder to be included with respect to the Notes and the offering
thereof. As filed, such amendment and form of Final Prospectus, or such
Final Prospectus, shall include all information required by the Securities
Act and,
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except to the extent you shall agree in writing to a modification, shall be
in all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other changes (beyond
that contained in the latest Preliminary Prospectus which has previously
been furnished to you) as the Issuer has advised you, prior to the
Execution Time, will be included or made therein.
(ii) On the Effective Date, the Registration Statement did
or will comply in all material respects with the applicable requirements of
the Securities Act and the rules thereunder; on the Effective Date and when
the Final Prospectus is first filed (if required) in accordance with Rule
424(b) and on the Issuance Date, the Final Prospectus will comply in all
material respects with the applicable requirements of the Securities Act
and the rules thereunder; on the Effective Date, the Registration Statement
did not or will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading; and the Final Prospectus, as of its
date and on the Issuance Date, did not or will not include any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, provided, however, that the
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Issuer makes no representation or warranty as to the Underwriting
Information.
(iii) This Agreement has been duly authorized, executed and
delivered by the Issuer and constitutes a legal, valid and binding
agreement of the Issuer enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors rights generally and to general principles of equity, and except
that the provisions hereof relating to indemnification of the Underwriters
may be subject to limitations of public policy.
(iv) Each of the Indenture and the Assignment and
Servicing Agreement (the "Assignment and Servicing Agreement") has been
duly authorized by the Issuer and, when executed and delivered, will
constitute the legal, valid and binding obligation of the Issuer,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors rights
generally and to general principles of equity, and each of the Indenture
and the Assignment and Servicing Agreement conforms to the description
thereof contained in the Final Prospectus.
(v) The issuance of the Notes has been duly authorized by
the Issuer and, when duly and validly executed, authenticated and delivered
in accordance with the Indenture and this Agreement, will be the legal,
valid and binding obligations of the Issuer, enforceable in accordance with
their terms,
4
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subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors rights generally and to general principles of equity,
and entitled to the benefits of the Indenture.
(vi) The performance of this Agreement, the Indenture and
the Assignment and Servicing Agreement by the Issuer will not (A) conflict
with or result in a breach of, and will not constitute a default under any
of the provisions of, its certificate of formation or any law, governmental
rule or regulation, or any judgment, decree or order binding on the Issuer
or its properties, or any of the provisions of any indenture, mortgage,
deed of trust, contract or other agreement or instrument to which the
Issuer is a party or by which it is bound, or (B) result in the creation or
imposition of any Adverse Claim and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Notes
or the consummation by the Issuer of the transactions contemplated by this
Agreement, except such consents, approvals, authorizations, registrations
or qualifications as have been already obtained and such as may be required
under the Securities Act and under state securities or Blue Sky laws in
connection with the purchase and distribution of the Notes by the
Underwriters. As used herein, "Adverse Claim" means a lien, pledge,
security interest or other charge or encumbrance.
(vii) The Issuer is not, and will not, as of the Issuance
Date, be an "investment company" under the Investment Company Act of 1940,
as amended (the "1940 Act").
(viii) The Indenture, when executed and delivered, will have
been duly qualified under the Trust Indenture Act of 1939.
(ix) There is no pending or threatened action, suit or
proceeding against or affecting the Issuer in any court or tribunal or
before any arbitrator of any kind or before or by any governmental
authority (i) asserting the invalidity of this Agreement, the Assignment
and Servicing Agreement, the Indenture or the Notes, (ii) seeking to
prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement, the Assignment and Servicing
Agreement or the Indenture or (iii) seeking any determination or ruling
that might materially and adversely affect (A) its performance of its
obligations under this Agreement, the Assignment and Servicing Agreement or
the Indenture (as applicable) or (B) the validity or enforceability of this
Agreement, the Assignment and Servicing Agreement, the Indenture or the
Notes.
(b) IOS Capital hereby represents and warrants to and agrees with the
Underwriters as follows:
(i) This Agreement has been duly authorized, executed and
delivered by IOS Capital and constitutes a legal, valid and binding
agreement of IOS Capital enforceable in accordance with its terms, subject
to bankruptcy,
5
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insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principals of equity, and except that the
provisions hereof relating to indemnification of the Underwriters may be
subject to limitations of public policy.
(ii) Each of the Indenture and the Assignment and
Servicing Agreement have been duly authorized, and when executed and
delivered, will constitute the legal, valid and binding obligation of IOS
Capital, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors rights
generally and to general principles of equity, and each of the Indenture
and the Assignment and Servicing Agreement conforms in all material
respects to the description thereof contained in the Final Prospectus.
(iii) The performance of this Agreement by IOS Capital, and
the consummation by IOS Capital of the transactions herein contemplated,
will not (A) conflict with or result in a breach of, and will not
constitute a default under any of the provisions of its certificate of
incorporation or by-laws or any law, governmental rule or regulation, or
any judgment, decree or order binding on IOS Capital or its properties, or
any of the provisions of any indenture, mortgage, deed of trust, contract
or other agreement or instrument to which IOS Capital is a party or by
which it is bound, which conflict, breach or default would be material to
the issue and sale of the Notes or would have a material adverse effect on
the operations, management, prospects or financial condition of IOS Capital
or on the shareholders equity of IOS Capital, or (B) result in the creation
or imposition of any Adverse Claim and no consent, approval, authorization,
order, registration or qualification of or with any court or governmental
agency or body is required for the consummation by IOS Capital of the
transactions contemplated by this Agreement, except such consents,
approvals, authorizations, registrations or qualifications as have been
already obtained and such as may be required under the Securities Act and
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Notes by the Underwriters.
(iv) IOS Capital represents and warrants it has delivered
to the Underwriters complete and correct copies of its balance sheet and
statements of income and retained earnings reported by IOS Capital, Inc.
and IKON Office Solutions, Inc. (the "IKON Entities") for the fiscal year
ended September 30, 1998. Except as set forth in or contemplated in the
Registration Statement and the Final Prospectus, there has been no material
adverse change in the condition (financial or otherwise) of the IKON
Entities since September 30, 1998.
(v) Any taxes, fees and other governmental charges
arising from the execution and delivery of this Agreement, the Assignment
and Servicing Agreement and the Indenture and in connection with the
execution, delivery and issuance of the Notes and with the transfer of the
Leases and the Equipment, have been paid or will be paid by the Issuer
prior to the Issuance Date.
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(vi) Ernst & Young LLP is an independent public accountant
with respect to the IKON Entities and the Issuer within the meaning of the
Securities Act and the rules and regulations promulgated thereunder.
(vii) There is no pending or threatened action, suit or
proceeding against or affecting IOS Capital in any court or tribunal or
before any arbitrator of any kind or before or by any governmental
authority (i) asserting the invalidity of this Agreement, the Assignment
and Servicing Agreement, the Indenture or the Notes, (ii) seeking to
prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement, the Assignment and Servicing
Agreement or the Indenture or (iii) seeking any determination or ruling
that might materially and adversely affect (A) its performance of its
obligations under this Agreement, the Assignment and Servicing Agreement or
the Indenture (as applicable) or (B) the validity or enforceability of this
Agreement, the Assignment and Servicing Agreement, the Indenture or the
Notes.
In addition, IOS Capital hereby makes and repeats the representations
and warranties set forth in Section 2 of the Assignment and Servicing Agreement.
Such representations and warranties are incorporated by reference in this
Section 4(b), and the Underwriters may rely thereon as if such representations
and warranties were fully set forth herein.
(c) The Seller hereby represents and warrants to and agrees with the
Underwriters as follows:
(i) This Agreement has been duly authorized, executed and
delivered by the Issuer and constitutes a legal, valid and binding
agreement of the Seller enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors rights generally and to general principles of equity, and except
that the provisions hereof relating to indemnification of the Underwriters
may be subject to limitations of public policy.
(ii) The Assignment and Servicing Agreement has been duly
authorized by the Seller and, when executed and delivered, will constitute
the legal, valid and binding obligation of the Seller, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors rights generally and to
general principles of equity.
(iii) The performance of this Agreement and the Assignment
and Servicing Agreement by the Seller will not (A) conflict with or result
in a breach of, and will not constitute a default under any of the
provisions of, its certificate of formation or any law, governmental rule
or regulation, or any judgment, decree or order binding on the Seller or
its properties, or any of the provisions of any indenture, mortgage, deed
of trust, contract or other agreement
7
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or instrument to which the Seller is a party or by which it is bound, or
(B) result in the creation or imposition of any adverse claim and no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
issue and sale of the Notes or the consummation by the Seller of the
transactions contemplated by this Agreement, except such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Securities Act and under state securities or Blue Sky
laws in connection with the purchase and distribution of the Notes by the
Underwriters.
(iv) There is no pending or threatened action, suit or
proceeding against or affecting the Seller in any court or tribunal or
before any arbitrator of any kind or before or by any governmental
authority (i) asserting the invalidity of this Agreement, the Assignment
and Servicing Agreement, the Indenture or the Notes, (ii) seeking to
prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement, the Assignment and Servicing
Agreement or the Indenture or (iii) seeking any determination or ruling
that might materially and adversely affect (A) its performance of its
obligations under this Agreement or the Assignment and Servicing Agreement
or (B) the validity or enforceability of this Agreement, the Assignment and
Servicing Agreement, the Indenture or the Notes.
In addition, the Seller hereby makes and repeats the representations
and warranties set forth in Section 3 of the Assignment and Servicing Agreement.
Such representations and warranties are incorporated by reference in this
Section 4(c), and the Underwriters may rely thereon as if such representations
and warranties were fully set forth herein.
(d) The Underwriters severally and not jointly hereby make and repeat
each of the representations set forth in the third paragraph under
"Underwriting" in the Prospectus Supplement (dealing with offers and sales
of Notes to persons in the United Kingdom). Such representations are
incorporated by reference in this Section 4(d), and the Issuer, the Seller
and IOS Capital may rely thereon as if such representations were fully set
forth herein.
Section 5. Covenants of the Issuer and IOS Capital. The Issuer
---------------------------------------
hereby covenants and agrees with you, and IOS Capital hereby covenants and
agrees with you to cause the Issuer:
(a) to use its best efforts to cause the Registration Statement, and
any amendment thereto, if not effective as of the date hereof, to become
effective; if the Registration Statement has become or becomes effective, or
filing of the Final Prospectus is otherwise required under Rule 424(b), to file
the Final Prospectus, properly completed, pursuant to Rule 424(b) within the
time period prescribed and to provide evidence satisfactory to the Underwriters
of such timely filing; to promptly advise the Underwriters (i) when the
Registration Statement shall have become effective, (ii) when any amendment
thereof shall have become effective, (iii) of any request by the
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Commission for any amendment or supplement of the Registration Statement, the
Final Prospectus, or for any additional information, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that purpose,
and (v) of the receipt by the Issuer of any notification with respect to the
suspension of the qualification of the Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; to not file any
amendment of the Registration Statement or supplement to the Final Prospectus to
which the Underwriters reasonably object; and to use best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as possible
the withdrawal thereof;
(b) if, at any time when a Final Prospectus relating to the Notes is
required to be delivered under the Securities Act, any event occurs as a result
of which the Final Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading or, if it shall be necessary to supplement such Final
Prospectus to comply with the Securities Act or the rules thereunder, to
promptly prepare and file with the Commission, subject to paragraph (a) of this
Section 5, a supplement which will correct such statement or omission or an
amendment which will effect such compliance;
(c) as soon as practicable, to make generally available to the
holders of Notes (the "Noteholders") and to the Underwriters an earnings
statement or statements of the Issuer which will satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 under the Securities Act;
(d) to furnish to the Underwriters and counsel for the Underwriters,
without charge, a signed copy of the Registration Statement (including exhibits
thereto) and, so long as delivery of a prospectus by any of the Underwriters or
any dealer may be required by the Securities Act, to furnish as many copies of
each Final Prospectus and Preliminary Prospectus relating to the Notes and any
supplement thereto as the Underwriters may reasonably request;
(e) to take all reasonable actions requested by the Underwriters to
arrange for the qualification of the Notes for sale under the laws of such
jurisdictions within the United States and as the Underwriters may designate and
as necessary to qualify the Notes for book-entry registration under the rules of
DTC and to maintain such qualifications in effect so long as required for the
completion of the distribution of the Notes; provided, in connection therewith
--------
that neither the Issuer nor IOS Capital shall be required to qualify to do
business as a foreign corporation in any jurisdiction where it is not so
qualified or to take any action that would subject it to service of process in
any jurisdiction where it is not so subject, other than in suits arising out of
the offering of the Notes or the transactions contemplated by the Notes, the
Indenture or the Assignment and Servicing Agreement;
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(f) for so long as the Notes are outstanding, to deliver to the
Underwriters by first-class mail and as soon as practicable a copy of all
reports and notices delivered to the Rating Agencies, Trustee, Ambac or the
Noteholders under the Indenture;
(g) for so long as the Notes are outstanding, to furnish to the
Underwriters as soon as practicable after filing any other information
concerning the Issuer or IOS Capital filed with any government or regulatory
authority which is otherwise publicly available; and
(h) to the extent, if any, that any rating provided with respect to
the Notes set forth in Section 6(g) hereof is conditional upon the furnishing of
documents reasonably available to the Issuer, the Seller or IOS Capital, to
furnish such documents within any required time period.
Section 6. Conditions of Underwriters' Obligation. The
--------------------------------------
obligations of the Underwriters to purchase and pay for the Notes on the
Issuance Date shall be subject to the accuracy in all material respects of the
respective representations and warranties of the Issuer, the Seller and IOS
Capital herein, in the Assignment and Servicing Agreement and in the Indenture,
to the performance by the Issuer, the Seller and IOS Capital in all material
respects of their respective obligations hereunder, under the Assignment and
Servicing Agreement and under the Indenture and to the following additional
conditions:
(a) The Issuer, the Seller and IOS Capital shall each have delivered
a certificate (an "Officer's Certificate"), dated the Issuance Date, signed by
its Vice President and its Chief Financial Officer, to the effect that:
(i) the representations and warranties made by the
Issuer, the Seller or IOS Capital (as the case may be) in this Agreement,
the Indenture and the Assignment and Servicing Agreement are true and
correct in all material respects at and as of the date of such Officer's
Certificate as if made on and as of such date (except to the extent they
expressly relate to an earlier date);
(ii) the Issuer, the Seller or IOS Capital (as the case
may be) has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied under this Agreement,
the Indenture and the Assignment and Servicing Agreement at or prior to the
date of such Officer's Certificate;
(iii) nothing has come to such officer's attention that
would lead him to believe that the Final Prospectus contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and
(iv) such officer is not aware of (A) any request of the
Commission for further amendment of the Registration Statement or the Final
Prospectus for any additional information, (B) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding
for that purpose or (C) any notification
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with respect to the suspension of the qualification of the Notes for sale
in any jurisdiction or the threatening of any proceeding for that purpose.
(b) You shall have received a favorable opinion from Ballard Spahr
Andrews & Ingersoll, LLP, counsel to the Issuer, the Seller and IOS Capital
(subject to customary and usual qualifications), each dated the Issuance Date
and reasonably satisfactory in form and substance to the Underwriters and their
counsel with respect to or to the effect that: (i) the existence and good
standing of IOS Capital, (ii) that the Issuer, the Seller and IOS Capital, as
applicable, have the corporate authority to perform this Agreement, the
Assignment and Servicing Agreement, the Indenture and the Insurance Agreement
(collectively, the "Transaction Documents") and the transactions contemplated
herein and therein; (iii) the due authorization, execution, delivery and
enforceability of this Agreement and the other Transaction Documents, as
applicable, by the Issuer, the Seller and IOS Capital; (iv) each of this
Agreement and the other Transaction Documents are the legal, valid and binding
obligation of the Issuer, the Seller and IOS Capital, as applicable, enforceable
against each of them in accordance with its terms (subject to customary
exceptions relating to bankruptcy and laws affecting creditors' rights); (v) the
Notes have been duly authorized, executed and delivered by the Issuer and
constitute the legal, valid and binding obligations of the Issuer enforceable in
accordance with their terms (subject to customary exceptions as to bankruptcy
and laws affecting creditors' rights) and are entitled to the benefits of the
Indenture; (vi) the issuance and sale of the Notes by the Issuer, the
performance of this Agreement by the Issuer, the Seller and IOS Capital and
compliance by the Issuer, the Seller and IOS Capital with the terms of the
Transaction Documents, as applicable, and the consummation of the transactions
contemplated herein and therein will not conflict with the organizational
documents of the Issuer or the Seller, or to the best of such counsel's
knowledge, any other contract to which the Issuer or the Seller is a party or by
which either of them is bound; (vii) to the best of such counsel's knowledge,
there is no legal or governmental proceeding threatened or pending against the
Issuer or the Seller which would have a material adverse effect on the issuance
of the Notes, the performance by the Issuer or the Seller of this Agreement or
compliance by the Issuer or the Seller with the terms of the Transaction
Documents to which they are parties, respectively; and (viii) on the Issuance
Date the Registration Statement is effective, and, that to the best of such
counsel's knowledge no stop order suspending the effectiveness of the
Registration Statement has been issued or is threatened, and that although such
counsel is not passing on the factual accuracy, completeness or fairness of the
statements contained in the sections entitled "The Issuer", "The Servicer and
the Originator" and "The Asset Pool" in the Prospectus Supplement and "The
Issuer", "The Asset Pools", "Management's Discussion and Analysis of Financial
Condition", "Directors and Executive Officers of the Manager of the Issuer",
"The Leases" and "The Originator's Leasing Business" in the Base Prospectus
nothing came to such counsel's attention that leads such counsel to believe that
any of such sections (as of the Effective Date or the date of the Final
Prospectus) contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made not
misleading (in each case other than the financial and statistical information
and notes and schedules thereto, as to which such counsel need express no
opinion). In rendering such opinion, counsel may rely, to the
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extent deemed proper and as stated therein, as to matters of fact on
certificates of responsible officers of the Issuer, the Seller or IOS Capital
and public officials and as to matters of state law of jurisdictions other than
the jurisdictions in which such counsel is admitted to practice, on opinions of
local counsel satisfactory to the Underwriters.
(c) You shall have received a favorable opinion from Karen Kinney
Esq., counsel to IOS Capital (subject to customary and usual qualifications),
dated the Issuance Date and reasonably satisfactory in form and substance to the
Underwriters and their counsel with respect to or to the effect that: (i) the
issuance and sale of the Notes by the Issuer, the performance of this Agreement
by the Issuer, the Seller and IOS Capital and compliance by the Issuer, the
Seller and IOS Capital with the terms of the Transaction Documents, as
applicable, will not conflict with the organizational documents of IOS Capital
or any other contract to which IOS Capital is a party or by which IOS Capital is
bound; and (ii) there is no legal or governmental proceeding pending, or to the
best knowledge of such counsel threatened, against IOS Capital which would have
a material adverse effect on the issuance of the Notes, the performance by the
Issuer, the Seller or IOS Capital of this Agreement or compliance by the Issuer,
the Seller or IOS Capital with the terms of the Transactions Documents.
(d) You shall have received a favorable opinion from Parker, Hudson,
Rainer & Dobbs, counsel to the Issuer, the Seller and IOS Capital (subject to
customary and usual qualifications), dated the Issuance Date and reasonably
satisfactory in form and substance to the Underwriters and their counsel with
respect to or to the effect, in each case to the extent governed by the laws of
the State of Georgia, that: (A) in the event a court disregarded the intent of
the parties and characterized the transfer by IOS Capital to the Seller of the
Leases and the related Equipment owned by IOS Capital located in the State of
Georgia pursuant to the Assignment and Servicing Agreement as a pledge of
collateral rather than an absolute assignment by way of capital contribution,
the Assignment and Servicing Agreement creates a valid security interest in
favor of the Seller therein, which security interest is a perfected first
priority security interest, (B) in the event a court disregarded the intent of
the parties and characterized the transfer by the Seller to the Issuer of the
Leases pursuant to the Assignment and Servicing Agreement as a pledge rather
than an absolute assignment by way of capital contribution, the Assignment and
Servicing Agreement creates a valid security interest in favor of the Issuer
therein, which security interest is a perfected first priority security
interest, (C) the Assignment and Servicing Agreement creates a valid security
interest in the Seller's right, title and interest in and to the Equipment,
which security interest is a perfected first priority security interest, and (D)
the Indenture creates a valid security interest in favor of the Trustee in the
Issuer's right, title and interest in and to the Leases and the related
Equipment, which security interest is a perfected first priority security
interest (such counsel being permitted to assume for purposes of such opinions
that no prior financing statements covering the Leases or Equipment are in
effect based on a review of UCC searches as of a recent date and that financing
statements (i) naming the Seller as secured party and IOS Capital as debtor and
the Leases and any related Equipment as the collateral, (ii) the Issuer as
secured party and the Seller as debtor and the Leases and all right, title and
interest of the Seller in the related Equipment as the collateral, and (iii)
naming the Trustee as secured party and the Issuer as debtor and the Leases and
all right,
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title and interest of the Issuer in and to the Equipment as the collateral have
been filed in the filing offices within the State of Georgia identified in such
opinion).
(e) You shall have received a favorable opinion from Richards, Layton
& Finger, special counsel to the Issuer, the Seller and IKON Receivables Funding
Inc. (the "Manager") (subject to customary and usual qualifications) with
respect to or to the effect that: (i) the due formation, existence and good
standing of the Issuer, the Seller and the Manager, (ii) the legal, valid and
binding effect and enforceability of the limited liability company agreement of
the Seller and the Issuer, (iii) a Delaware court applying Delaware law would
conclude that the consent of the Manager and of IOS Capital, as sole member of
the Seller, would be required to file a voluntary bankruptcy petition on behalf
of the Seller and the provisions requiring such consent would be enforceable,
(iv) a Delaware court applying Delaware law would conclude that the consent of
the Manager and of the Seller, as sole member of the Issuer, would be required
to file a voluntary bankruptcy petition on behalf of the Issuer and the
provisions requiring such consent would be enforceable, (v) an insolvency or
bankruptcy event affecting the sole member of the Seller or the Issuer would not
result in the dissolution of such entity, (vi) a bankruptcy court would hold
that Delaware law, and not federal law, governs the determination of what
persons or entities have authority to file a voluntary bankruptcy petition on
behalf of the Issuer or the Seller, as applicable, (vii) creditors of IOS
Capital or the Seller may only claim against the respective ownership interests
in the Seller (in the case of IOS Capital ) and the Issuer (in the case of the
Seller) and have no direct claim to the assets of the Seller or the Issuer, as
applicable, and (viii) that the Seller and the Issuer are separate legal
entities under Delaware law.
(f) The Underwriters shall have received from Dewey Ballantine LLP,
counsel for the Underwriters, such opinion or opinions, dated the Issuance Date,
with respect to the validity of the Notes, the Registration Statement, the Final
Prospectus, true sale, nonconsolidation, enforceability of the Transaction
Documents and the Notes, certain securities law issues, perfection, federal
taxes, and other related matters as the Underwriters may require.
(g) At the Execution Time and at the Issuance Date, Ernst & Young LLP
shall have furnished to the Underwriters a letter or letters, dated the date of
this Agreement and the Issuance Date, respectively, in form and substance
satisfactory to the Underwriters.
(h) The Class A-1 Notes shall have been rated at least "A-1+" and "P-
1", that the Class A-2, A-3 and A-4 notes be rated at least "AAA" and "Aaa" by
Standard & Poor's Ratings Group ("S&P") and Moody's Investors Service, Inc.
("Moody's"), respectively, which ratings shall not have been reduced or
withdrawn as evidenced by the Officer's Certificate referred to in Section 6(b).
(i) Counsel to the Trustee shall have delivered a favorable opinion
(subject to customary and usual exceptions), dated the Issuance Date, as the
case may be, and satisfactory in form and substance to the Underwriters and
counsel for the
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Underwriters and to the Issuer, the Seller and IOS Capital and their counsel
with respect to, or to the effect that: (i) the due incorporation and valid
existence of the Trustee, (ii) the due authorization, execution and delivery by
the Trustee of the Indenture, (iii) the Indenture is the legal, valid and
binding obligation of the Trustee, enforceable against the Trustee in accordance
with its terms (subject to the customary and usual exceptions), (iv) the
execution, delivery and performance of the Indenture will not conflict with the
Trustee's organizational documents and (v) the Notes have been duly
authenticated by the Trustee.
(j) All proceedings in connection with the transactions contemplated
by this Agreement and all documents incident hereto shall be reasonably
satisfactory in form and substance to you, and you and your counsel shall have
received such other information, certificates and documents as you or they may
reasonably request.
Section 7. Reimbursement of Expenses. In the event that (x) no
-------------------------
closing of the sale of the Notes occurs by the Issuance Date through no fault of
the Issuer or IOS Capital or because any of the conditions set forth in Sections
6(e), 6(f), 6(h), 6(i) and 6(j) have not been met, or (y) the Underwriters
terminate the engagement pursuant to Section 10 or because any conditions
precedent in Section 6 (other than Section 6(a), 6(b), 6(c), 6(d) and 6(g)) have
not been fulfilled, then the liability of the Issuer and IOS Capital to the
Underwriters shall be limited to the reimbursement of the Underwriters' expenses
incurred through the date of termination for its reasonable out-of-pocket and
incidental expenses. In addition, whether or not the Notes are issued or sold:
(a) The Issuer or IOS Capital shall pay the reasonable fees and
expenses associated with the transactions contemplated hereby not paid by the
Underwriters in accordance with the provisions of Section 7(b), including,
without limitation, the following fees and expenses:
(i) Rating Agency fees payable with respect to their ratings
of the Notes;
(ii) fees charged by the firm of independent public
accountants referred to in Section 6(d);
(iii) filing fees in connection with the transactions
contemplated hereby including, but not limited to, the Commission;
(iv) fees and expenses of Dewey Ballantine LLP;
(v) Trustee's fees and fees of counsel to the Trustee;
(vi) Ambac's fee and fees of counsel to Ambac;
(vii) the costs and expenses of printing the Registration
Statement, the Final Prospectus and each Preliminary Prospectus;
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(viii) the costs of printing or reproducing this Agreement,
the Blue Sky Survey and any other documents in connection with the offer,
sale and delivery of the Notes;
(ix) all expenses in connection with the qualification of
the Notes under state securities laws as provided in section 5(e),
including the fees and disbursements of counsel in connection with the Blue
Sky Survey;
(x) the cost of preparing the Notes;
(xi) the cost or expenses of any transfer agent or
registrar; and
(xii) all other costs and expenses incident to the
performance of their obligations hereunder which are not otherwise
specifically provided for in this Section 7; provided, however, that the
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Issuer and IOS Capital do not hereby waive any right to reimbursement from
the Underwriters in the event of any of the Underwriters' failure to
perform in accordance with this Agreement.
(b) It is understood and agreed that, except as provided in Sections
8 and 9, the Underwriter will pay securities transfer taxes on resale of
any of the Notes by them, and any advertising expenses connected with any
offers they may make.
Section 8. Indemnification and Contribution.
--------------------------------
(a) The Issuer and IOS Capital, jointly and severally, will indemnify
and hold harmless each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls any Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Securities and Exchange Act of 1934 as amended (the "Exchange Act") (each an
"Indemnified Party") from and against any and all losses, claims, damages or
liabilities, joint or several, to which such Underwriter or any such controlling
persons may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the Final
Prospectus or any amendment or supplement thereto, or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances in
which they were made not misleading, and will promptly reimburse each such
Indemnified Party for any legal or other expenses reasonably incurred by each
such Indemnified Party in connection with investigating, preparing to defend or
defending, or appearing as a third-party witness in connection with, any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Issuer and IOS Capital shall not be liable in any
- -------- -------
such case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement or the Final
Prospectus, or any such amendment or supplement, in reliance upon and in
conformity with the Underwriting Information. The foregoing
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indemnity agreement is in addition to any liability which each of the Issuer and
IOS Capital may otherwise have to you or any person who controls you.
(b) Each Underwriter agrees severally, and not jointly, to indemnify
and hold harmless the Issuer and IOS Capital against any losses, claims, damages
or liabilities to which the Issuer or IOS Capital may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
an untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Final Prospectus, or any amendment or
supplement thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement or the Final Prospectus or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Issuer or IOS Capital by or on behalf of such Underwriter
expressly for use therein and will reimburse the Issuer or IOS Capital for any
legal or other expenses reasonably incurred by the Issuer or IOS Capital in
connection with the investigating, preparing to defend or defending, or
appearing as a third-party witness in connection with, any such loss, claim,
damage, liability or action. The Issuer and IOS Capital acknowledge that the
statements set forth in the second, third, fifth and sixth paragraphs under the
heading "Underwriting" in the Prospectus Supplement constitute the only
information furnished in writing by or on behalf of the Underwriters for
inclusion in the Registration Statement and the Final Prospectus (the
"Underwriting Information"), and each of you with respect to yourself confirm
that such statements are correct.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the claim or commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
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that if the defendants in any such action include both the indemnified party and
the indemnifying party, and the indemnified party shall have been advised by
counsel that representation of such indemnified party and the indemnifying party
may be inappropriate under applicable standards of professional conduct due to
actual or potential differing interests between them, the indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. It is understood that the
indemnifying party shall, in connection with any such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of
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only one separate firm of attorneys together with appropriate local counsel at
any time from all indemnified parties not having actual or potential differing
interests with any other indemnified party. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to appoint
counsel to defend such action and approval by the indemnified party of such
counsel, the indemnifying party will not be liable for any settlement entered
into without its consent and will not be liable to such indemnified party under
this Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence, (ii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party; and except that, if clause (i) or (iii) is applicable, such
liability shall be only in respect of the counsel referred to in such clause (i)
or (iii). Notwithstanding the immediately preceding sentence and the first
sentence of this paragraph, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel, the indemnifying party agrees that it shall be liable for
any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement.
(d) Each Underwriter agrees severally and not jointly to deliver to
the Issuer or IOS Capital no later than the date on which the Final Prospectus
is required to be filed pursuant to Rule 424 with a copy of its Derived
Information (defined below) for filing with the Commission.
(e) Each Underwriter agrees severally and not jointly, assuming all
Company-Provided Information (defined below) is accurate and complete in all
material respects, to indemnify and hold harmless the Issuer and IOS Capital
against any and all losses, claims, damages or liabilities, joint or several, to
which they may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement of a material fact contained in the
Derived Information provided by you, or arise out of or are based upon, when
read in conjunction with the Final Prospectus, the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and agrees to reimburse each such indemnified party
for any legal or other expenses reasonably incurred by him, her or it in
connection with investigating or defending or preparing to defend any such loss,
claim, damage, liability or action as such expenses are incurred. Your
obligations under this Section 8(e) shall be in addition to any liability which
you may otherwise have.
(f) Each of the Issuer and IOS Capital agrees to indemnify and hold
harmless the Underwriters, the directors, officers, employees and agents of each
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Underwriter and each person who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several, to which they
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement of a material fact contained in the
Company-Provided Information provided by the Issuer , the Seller or IOS Capital,
or arise out of or are based upon, when read in conjunction with the Final
Prospectus, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
agrees to reimburse each such indemnified party for any legal or other expenses
reasonably incurred by him, her or it in connection with investigating or
defending or preparing to defend any such loss, claim, damage, liability or
action as such expenses are incurred. Your obligation under this Section 8(f)
shall be in addition to any liability which you may otherwise have.
(g) The procedures set forth in Section 8(c) shall be equally
applicable to Sections 8(e) and 8(f).
(h) For purposes of this Section 8, the term "Derived Information"
means such portion, if any, of the information delivered to the Issuer or IOS
Capital by the Underwriters pursuant to Section 8(d) for filing with the
Commission as:
(i) is not contained in the Final Prospectus without taking
into account information incorporated therein by reference;
(ii) does not constitute Company-Provided Information; and
(iii) is of the type of information defined as Collateral
Term Sheets, Structural Term Sheets or Computational Materials (as such
terms are interpreted in the No-Action Letters).
"Company-Provided Information" means any computer tape furnished to
the Underwriters by the Issuer, the Seller or IOS Capital concerning the Leases
or any other information furnished by the Issuer, the Seller or IOS Capital to
the Underwriters that is relied on or is reasonably anticipated by the parties
hereto to be relied on by the Underwriters in the course of the Underwriters'
preparation of its Derived Information or the Underwriting Information.
The terms "Collateral Term Sheet" and "Structural Term Sheet" shall
have the respective meanings assigned to them in the February 13, 1995 letter
(the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the SEC staff's response thereto, were
publicly available February 17, 1995). The term "Collateral Term Sheet" as used
herein includes any subsequent Collateral Term Sheet that reflects a substantive
change in the information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "Kidder letter" and
together with the PSA Letter, the "No-Action
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<PAGE>
Letters") of Brown & Wood on behalf of Kidder, Peabody & Co., Inc. (which
letter, and the SEC staff's response thereto, were publicly available May 20,
1994).
(i) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) in such proportion as is equitable and as shall reflect the
relative benefits received by the Issuer, the Seller and IOS Capital on the one
hand and the Underwriters on the other from the offering of the Notes. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Issuer, the Seller or IOS Capital on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Issuer, the Seller or IOS
Capital on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion that the total net proceeds from the offering (before
deducting expenses) received by the Issuer, the Seller and IOS Capital bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus
Supplement. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuer or IOS Capital on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Issuer, IOS
Capital and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (i) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (i). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this subsection (i) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating, preparing to defend or defending, or appearing as a third-party
witness in connection with, any such action or claim. Notwithstanding the
provisions of this subsection (i), none of the Underwriters shall be required to
contribute any amount in excess of the total underwriting discount and
commissions as set forth on the cover page of the Prospectus Supplement paid to
the respective Underwriter. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
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(j) The obligations of the Issuer and IOS Capital under this Section
8 shall be in addition to any liability which the Issuer or IOS Capital may
otherwise have and shall extend, upon the same terms and conditions, to each
director, officer, employee and agent of each Underwriter and each person, if
any, who controls any of the Underwriters within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Issuer, the Seller and IOS
Capital and to each person, if any, who controls the Issuer or IOS Capital
within the meaning of the Securities Act.
(k) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
Section 9. Survival. The respective representations, warranties
--------
and agreements of the Issuer, the Seller, IOS Capital and the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, notwithstanding any investigation heretofore or hereafter made by or on
behalf of the Issuer, the Seller, IOS Capital or the Underwriters, and such
representations, warranties and agreements made by the Issuer, the Seller and
IOS Capital shall survive the delivery and payment for the Notes. The provisions
of Sections 7 and 8 shall survive the termination or cancellation of this
Agreement.
Section 10. Termination.
-----------
(a) This Agreement may be terminated by you in your absolute
discretion at any time upon the giving of notice at any time prior to the
Issuance Date: (i) if there has been, since September 30, 1998, any material
adverse change in the condition, financial or otherwise, of IOS Capital, the
Seller or the Issuer, or in the earnings, business affairs or business prospects
of IOS Capital, the Seller or the Issuer, whether or not arising in the ordinary
course of business, or (ii) if there has occurred any outbreak or escalation of
hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in your reasonable judgment,
impracticable to market the Notes or enforce contracts for the sale of the
Notes, or (iii) if trading generally on either the American Stock Exchange or
the New York Stock Exchange has been suspended, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required, by either of said exchanges or by order of the Commission or any other
governmental authority, or (iv) if a banking moratorium has been declared by
either federal or New York authorities. In the event of any such termination, no
party will have any liability to any other party hereto, except as otherwise
provided in Section 7 or 8 hereof.
20
<PAGE>
(b) This Agreement may not be terminated by the Issuer, the Seller or
IOS Capital, without the written consent of the Underwriters, except in
accordance with law.
(c) Notwithstanding anything herein to the contrary, in the event the
Issuer, the Seller or IOS Capital does not perform any obligation under this
Agreement or any representation and warranty hereunder is incomplete or
inaccurate in any material respect, this Agreement and all of the Underwriters'
obligations hereunder may be immediately cancelled by the Underwriters by notice
thereof to the Issuer or IOS Capital. Any such cancellation shall be without
liability of any party to any other party except that the provisions of Sections
7 and 8 hereof shall survive any such cancellation.
Section 11. Notices. All communications provided for or permitted
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by certified or registered mail, postage
prepaid, or transmitted by telex or telegraph and confirmed by a similar mailed
writing, if to you, addressed to you, at the addresses first stated in this
Agreement, or to such other address as you may designate in writing to the
Issuer, the Seller and IOS Capital; if to IOS Capital, addressed to IOS Capital
at 1738 Bass Road, P.O. Box 9115, Macon, Georgia, 31210; if to the Issuer,
addressed to IKON Receivables, LLC at 1738 Bass Road P.O. Box 9115, Macon,
Georgia 31210; and if to the Seller, addressed to IKON Receivables -1 LLC at
1738 Bass Road, P.O. Box 9115, Macon, Georgia 31210, or such other address as
IOS Capital, the Issuer or the Seller may have designated in writing to you.
Section 12. Successors. This Agreement will inure to the benefit
----------
of and be binding upon the Issuer, the Seller and IOS Capital and their
respective successors and assigns and the Underwriters and their respective
successors and assigns.
Section 13. Default by Any of the Underwriters. Subject to
----------------------------------
Section 6 hereof, if any of the Underwriters shall fail on the Issuance Date to
purchase the Notes, which it is obligated to purchase hereunder (the "Defaulted
Notes"), the remaining Underwriter(s) (the "Non-Defaulting Underwriter(s)")
shall have the right, but not the obligation, within one (1) Business Day
thereafter, to make arrangements to purchase all, but not less than all, of the
Defaulted Notes upon the terms herein set forth; if, however, the Non-Defaulting
Underwriter(s) shall not have completed such arrangements within such one (1)
Business Day period, then this Agreement shall terminate without liability on
the part of the Non-Defaulting Underwriter(s).
No action taken pursuant to this Section 13 shall relieve the
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, any of the Non-Defaulting Underwriters or the
Company shall have the right to postpone the Issuance Date for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement, the Final Prospectus or in any other documents or arrangements.
21
<PAGE>
Section 14. Entire Agreement. This Agreement and the documents
----------------
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties.
Section 15. Governing Law.
-------------
(a) THIS AGREEMENT IS TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE ISSUER, THE SELLER AND IOS CAPITAL HEREBY SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS
SET FORTH IN SECTION 11 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U. S. MAILS,
POSTAGE PREPAID. THE ISSUER, THE SELLER AND IOS CAPITAL HEREBY WAIVE ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
----- --- ----------
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE ISSUER, THE SELLER OR IOS CAPITAL TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT EITHER'S RIGHT TO BRING
ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE ISSUER, THE SELLER AND IOS CAPITAL HEREBY WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION
WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN
A BENCH TRIAL WITHOUT A JURY.
Section 16. Counterparts. This Agreement may be executed in two
------------
or more counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.
Section 17. Miscellaneous. Neither this Agreement nor any term
-------------
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
22
<PAGE>
If you are in agreement with the foregoing, please sign a counterpart
hereof and return the same to the Issuer, the Seller or IOS Capital, whereupon
this Agreement shall become a binding agreement between the Underwriters, on the
one hand, and the Issuer, the Seller and IOS Capital on the other.
23
<PAGE>
Very truly yours,
IOS CAPITAL, INC.
By: /s/ J.F. Quinn
___________________________
Name: J.F. Quinn
Title: Treasurer
IKON RECEIVABLES, LLC
By: IKON Receivables Funding, Inc., its Manager
By: /s/ Robert K. McLain
___________________________
Name: Robert K. McLain
Title: President
IKON RECEIVABLES-1 LLC
By: IKON Receivables Funding, Inc., its Manager
By: /s/ Robert K. McLain
___________________________
Name: Robert K. McLain
Title: President
The foregoing Agreement is
hereby accepted and entered
into as of the date hereof.
LEHMAN BROTHERS INC.,
as Representative of the Underwriters
By: /s/ Kurt A. Locher
_____________________________________
Name: Kurt A. Locher
Title: Managing Director
[Signature Page to the Underwriting Agreement]
24
<PAGE>
SCHEDULE A
The Notes will be purchased by Lehman Brothers Inc., Chase Securities
Inc. Deutsche Bank Securities Inc., and PNC Capital Markets, Inc. as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Lehman Brothers Chase Securities Deutsche Bank PNC Capital
Inc. Inc. Principal Securities Inc. Markets, Inc. Underwriting
Principal Amount Amount Principal Amount Principal Amount Discount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A-
1 Notes $213,131,800 $30,447,400 30,447,400 30,447,400 0.200%
- ---------------------------------------------------------------------------------------------------------------------
Class A-
2 Notes $ 43,105,300 $ 6,157,900 6,157,900 6,157,900 0.225%
- ---------------------------------------------------------------------------------------------------------------------
Class A-
3 Notes $212,888,900 $30,412,700 30,412,700 30,412,700 0.375%
- ---------------------------------------------------------------------------------------------------------------------
Class A-
4 Notes $ 57,023,400 $ 8,146,200 8,146,200 8,146,200 0.450%
- ---------------------------------------------------------------------------------------------------------------------
Totals $526,149,400 $75,164,200 $75,164,200 $75,164,200
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IKON RECEIVABLES, LLC,
Issuer
HARRIS TRUST AND SAVINGS BANK,
Trustee
and
IOS CAPITAL, INC.,
Servicer
----------------------
INDENTURE
Dated as of April 1, 1999
----------------------
$751,642,000 in aggregate principal amount
of Lease-Backed Notes, consisting of:
$304,474,000 of 5.11% Class A-1 Lease-Backed Notes
$ 61,579,000 of 5.60% Class A-2 Lease-Backed Notes
$304,127,000 of 5.99% Class A-3 Lease-Backed Notes
$ 81,462,000 of 6.23% Class A-4 Lease-Backed Notes
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
IKON RECEIVABLES LLC
Reconciliation and Tie between the Indenture
dated as of April 1, 1999 and the
Trust Indenture Act of 1939, as amended
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <C>
(S) 310 (a)(1)................................ (S) 8.07
(a)(2)................................ 8.07
(a)(3)................................ Not Applicable
(a)(4)................................ Not Applicable
(b)................................... 8.07; 8.08; 7.07; 1.05; 1.06
(c)................................... Not Applicable
311 (a)................................... 8.13
(b)................................... 8.13
312 (a)................................... 2.11
(b)................................... 12.02
(c)................................... 12.02
313 (a)................................... 8.14
(b)(1)................................ Not Applicable
(b)(2)................................ 8.14
(c)................................... 8.14; 1.06
(d)................................... 8.14
314 (a)................................... 9.12; 9.09; 1.06
(b)................................... Not Applicable
(c)(1)................................ 12.04
(c)(2)................................ 12.04
(c)(3)................................ 12.01
(d)................................... 12.01
(e)................................... 12.05
(f)................................... Not Applicable
315 (a)................................... 8.01(a)
(b)................................... 8.02; 1.06
(c)................................... 8.01(b)
(d)................................... 8.01(c)
(e)................................... 7.13
316 (a) (last sentence)................... 2.12
(a)(1)(A)............................. 7.12
(a)(1)(b)............................. 7.11
(a)(2)................................ Not Applicable
317 (a)(1)................................ 7.03(c)
(a)(2)................................ 7.04
(b)................................... 9.03(c)
318 (a)................................... 12.01, 12.02
(c)................................... 12.01
</TABLE>
ii
<PAGE>
INDENTURE
This INDENTURE dated as of April 1, 1999, is among IKON RECEIVABLES,
LLC, a Delaware limited liability company (herein called the "Issuer"), HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation, as trustee (herein
called the "Trustee"), and IOS CAPITAL, INC., as servicer (herein called the
"Servicer").
RECITALS
The Issuer has duly authorized the issuance of $751,642,000 in
aggregate principal amount of its Lease-Backed Notes, consisting of $304,474,000
aggregate principal amount of 5.11% Class A-1 Lease-Backed Notes (the "Class A-1
Notes"), $61,579,000 aggregate principal amount of 5.60% Class A-2 Lease-Backed
Notes (the "Class A-2 Notes"), $304,127,000 aggregate principal amount of 5.99%
Class A-3 Lease-Backed Notes (the "Class A-3 Notes"), and $81,462,000 aggregate
principal amount of 6.23% Class A-4 Lease-Backed Notes (the "Class A-4 Notes",
together with the Class A-1 Notes, Class A-2 Notes, and Class A-3 Notes, the
"Notes"), and to provide therefor the Issuer has duly authorized the execution
and delivery of this Indenture. The Notes shall be entitled to payments of
interest and principal as set forth herein.
Ambac Assurance Corporation, a Wisconsin stock insurance company (the
"Insurer"), has issued and delivered a financial guaranty insurance policy,
dated the Issuance Date (with endorsements, the "Policy"), pursuant to which the
Insurer guarantees Insured Payments, as defined in the Policy.
As an inducement to the Insurer to issue and deliver the Policy, the
Issuer and the Insurer have executed and delivered the Insurance and Indemnity
Agreement, dated as of April 1, 1999 (as amended from time to time, the
"Insurance Agreement") among IOS Capital, Inc., IKON Receivables-1, LLC, the
Issuer and the Insurer.
As an additional inducement to the Insurer to issue the Policy, and as
security for the performance by the Issuer of the Insurer Secured Obligations
(as defined below) and as security for the performance by the Issuer of the
Trustee Secured Obligations, the Issuer has agreed to assign the Asset Pool (as
defined below) to the Trustee for the benefit of the Issuer Secured Parties, as
their respective interests may appear.
<PAGE>
All things necessary to make the Notes, when executed by the Issuer
and authenticated and delivered hereunder, the valid obligations of the Issuer,
and to make this Indenture a valid agreement of the Issuer, in accordance with
its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the holders thereof, it is mutually covenanted and agreed, for the benefit of
all Noteholders, as follows:
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee on the Issuance Date, for the
benefit and security of the Issuer Secured Parties, all of the Issuer's right,
title and interest in and to (a) the Leases and all Lease Payments, Casualty
Payments, Retainable Deposits, Lease Purchase Amounts, Termination Payments,
Servicer Advances and other amounts now due or becoming due with respect thereto
since the Cut-Off Date (other than any prepayments of rent required pursuant to
the terms of any Lease at or before the commencement of the Lease and any
payments due before the Cut-Off Date) and all Additional Leases and Substitute
Leases and all Lease Payments, Casualty Payments, Retainable Deposits, Lease
Purchase Amounts, Termination Payments, Servicer Advances and other amounts due
or becoming due with respect thereto since the effective date of their
respective addition or substitution (other than any prepayments of rent required
by the terms of any Lease at or before the commencement of the Lease and any
payments due before the effective date of such addition or substitution), (b)
all rights to payment or performance under any Lease Guaranty, (c) all rights
and interests of the Issuer in any collateral with respect to any Lease,
including any security deposit (whether or not they shall have become Retainable
Deposits) and any security interest in any Equipment securing the obligations of
the related Lessees under the Leases, (d) all interests of the Issuer in the
Equipment (which, however, excludes any ownership interests therein) at any time
subject to any Lease, including the security interest granted by the Seller to
the Issuer pursuant to the Assignment and Servicing Agreement in the Equipment,
(e) all moneys from time to time on deposit in any of the Transaction Accounts,
including all investments and income from the investment of such moneys, (f) all
rights of the Issuer under the Assignment and Servicing Agreement, and (g) all
proceeds of any of the foregoing, whether in cash or other property
(collectively, the "Asset Pool").
Such Grant is made in trust to the Trustee, for the benefit of the
Issuer Secured Parties.
The Grant of the Asset Pool effected by this Indenture shall include
all rights, powers, and options (but none of the obligations) of the Issuer with
respect thereto, including, without limitation, the immediate and continuing
right to claim for, collect, receive, and give receipts for Lease Payments in
respect of the Leases and all other moneys constituting part of the Asset Pool,
to give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options,
2
<PAGE>
to bring judicial proceedings in the name of the Issuer or otherwise, and
generally to do and receive anything that the Issuer is or may be entitled to do
or receive under the Leases or with respect to any part of the Asset Pool.
In addition, the Insurer shall cause the Policy to be issued to the
Trustee for the benefit of the Noteholders.
The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof, and agrees to perform the duties herein
required to the best of its ability and to the end that the interests of the
Noteholders and the Insurer may be adequately and effectively protected as
hereinafter provided.
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01. General Definitions.
-------------------
Except as otherwise specified or as the context may otherwise require,
the following terms have the meanings set forth below for all purposes of this
Indenture, and the definitions of such terms are applicable to the singular as
well as to the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms.
Acceleration Event: if: (i) a Servicer Event of Default has occurred
------------------
(regardless of whether the rights and obligations of the Servicer have been
terminated pursuant to Section 6.01); (ii) with respect to any Payment Date, the
Overcollateralization Balance is less than or equal to the Overcollateralization
Floor; (iii) for any three consecutive Due Periods, the average of the
Annualized Default Rates for those Due Periods is greater than 6.25%,; or (iv)
for any three consecutive Due Periods, the average of the Delinquency Rates for
those Due Periods is greater than 8.0%.
Act: with respect to any Noteholder, as defined in Section 1.04.
---
Additional Lease: as defined in Section 14 of the Assignment and
----------------
Servicing Agreement.
Additional Principal: with respect to each Payment Date equals the
--------------------
excess, if any, of (i)(A) the Outstanding Principal Amount of the Notes plus the
Overcollateralization Balance as of the immediately preceding Payment Date after
giving effect to payments on such Payment Date minus (B) the Discounted Present
Value of the Performing Leases as of the related Determination Date, over (ii)
the Class A Principal Payment to be paid on such Payment Date.
Affiliate: with respect to any specified Person, any other Person
---------
which directly or indirectly controls, or is controlled by, or is under common
control with, such specified Person. The term "control" means the possession,
directly or indirectly, of the
3
<PAGE>
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
Annualized Default Rate: for any Due Period, the sum as of the related
-----------------------
Determination Date of the Discounted Present Value of the Leases that became
Non-Performing Leases during such Due Period minus the sum of the recoveries on
Non-Performing Leases received during such Due Period, divided by the Discounted
Present Value of the Leases on the Determination Date immediately preceding that
Determination Date, multiplied by twelve
Assignment and Servicing Agreement: the Assignment and Servicing
----------------------------------
Agreement dated as of April 1, 1999 among the Issuer, the Seller and IOS
Capital, as the same may be amended or modified from time to time in accordance
with the provisions hereof and thereof.
Authorized Officer: with respect to any matter, any officer of or
------------------
other Person representing the Issuer, IOS Capital or the Servicer, as the case
may be, who is authorized to act for the Issuer, IOS Capital or the Servicer, as
the case may be.
Available Funds: with respect to any Payment Date, the following
---------------
amounts on deposit in the Collection Account on the related Determination Date:
(a) Lease Payments due during the immediately preceding or any prior Due Period,
(b) recoveries from Non-Performing Leases (including amounts received from the
Seller pursuant to Section 5.05 of the Assignment and Servicing Agreement) to
the extent IOS Capital has not substituted Substitute Leases for such Non-
Performing Leases; (c) late charges received on delinquent Lease Payments not
advanced by the Servicer; (d) proceeds from purchases by IOS Capital of Leases
as a result of breaches of representations and warranties to the extent IOS
Capital has not substituted Substitute Leases for such Leases; (e) proceeds from
the investment of funds in the Collection Account, the Reserve Account and the
Security Deposit Account; (f) Casualty Payments and Retainable Deposits; (g)
Servicer Advances, if any, in respect of the related Due Period; (h) Termination
Payments to the extent the Issuer does not reinvest such Termination Payments in
Additional Leases; (i) proceeds received for redemption of the Notes pursuant to
Section 2.01(b); (j) payments received from the Insurer pursuant to Section
3.07; and (k) to the extent there occurs an Available Funds Shortfall, funds, if
any, on deposit in the Reserve Account after making any distribution in respect
of such Payment Date from the Reserve Account to the Collection Account on
account of investment earnings pursuant to the first sentence of Section
3.04(b).
Available Funds Shortfall: as defined in Section 3.04(b).
-------------------------
Available Reserve Amount: with respect to any Payment Date, the
------------------------
amount on deposit in the Reserve Account after making any distribution in
respect of such Payment Date from the Reserve Account to the Collection Account
on account of investment earnings pursuant to the first sentence of Section
3.04(b).
Benefit Plan: as defined in Section 2.03(a).
------------
4
<PAGE>
Book-Entry Class A-1 Notes: the Class A-1 Notes, evidenced by one or
--------------------------
more global notes registered in the name of DTC or its nominee, the ownership
and transfers of which shall be made through book entries by DTC as described in
Section 2.05.
Book-Entry Class A-2 Notes: the Class A-2 Notes, evidenced by one or
--------------------------
more global notes registered in the name of DTC or its nominee, the ownership
and transfers of which shall be made through book entries by DTC as described in
Section 2.05.
Book-Entry Class A-3 Notes: the Class A-3 Notes, evidenced by one or
--------------------------
more global notes registered in the name of DTC or its nominee, the ownership
and transfers of which shall be made through book entries by DTC as described in
Section 2.05.
Book-Entry Class A-4 Notes: the Class A-4 Notes, evidenced by one or
--------------------------
more global notes registered in the name of DTC or its nominee, the ownership
and transfers of which shall be made through book entries by DTC as described in
Section 2.05.
Book-Entry Note: any Book-Entry Class A-1 Note, Book-Entry Class A-2
---------------
Note, Book-Entry Class A-3 Note or Book-Entry Class A-4 Note.
Business Day: any day that is not a Saturday, Sunday or other day on
------------
which commercial banking institutions in the cities in which the Corporate Trust
Office and the principal offices of the Insurer and the Servicer are located are
authorized or obligated by law or executive order to remain closed.
Casualty Payment: any payment pursuant to a Lease on account of the
----------------
loss, theft, condemnation, governmental taking, destruction, or damage beyond
repair of any item of Equipment subject thereto which results, in accordance
with the terms of the Lease, in a reduction in the number or amount of any
future Lease Payments due thereunder or in the termination of the Lessee's
obligation to make future Lease Payments thereunder.
Cede & Co.: the initial registered holder of the Class A Notes,
----------
acting as nominee of The Depository Trust Company.
Cedel: CEDEL S.A.
-----
Class A Notes: as defined in the Recitals hereto.
-------------
Class A Percentage: 84.26254%.
------------------
Class A Principal Payment: (a) while the Class A-1 Notes are
-------------------------
outstanding, (i) on all Payment Dates prior to the Payment Date in June, 2000,
the lesser of (1) the amount necessary to reduce the Outstanding Principal
Amount on the Class A-1 Notes to zero and (2) the difference between (A) the
Discounted Present Value of the Performing Leases as of the Determination Date
for the preceding Payment Date and (B)
5
<PAGE>
the Discounted Present Value of the Performing Leases as of the related
Determination Date, and (ii) on and after the Payment Date in June, 2000, the
entire Outstanding Principal Amount of the Class A-1 Notes, and (b) after the
Class A-1 Notes have been paid in full, the amount necessary to reduce the
aggregate Outstanding Principal Amount on the Class A Notes to the Class A
Target Investor Principal Amount.
Class A Target Investor Principal Amount: with respect to each
----------------------------------------
Payment Date, an amount equal to the product of (a) the Class A Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
Class A-1 Initial Principal Amount: $304,474,000.
----------------------------------
Class A-1 Note Interest Rate: the rate at which interest accrues on
----------------------------
the Class A-1 Notes, which rate shall be equal to 5.11% per annum.
Class A-1 Note Owner: with respect to a Book-Entry Class A-1 Note,
--------------------
the Person who is the beneficial owner of such Book-Entry Class A-1 Note, as
reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly or as an indirect participant, in accordance with the
rules of DTC).
Class A-1 Noteholder: Cede & Co. or a holder of a Definitive Class A-
--------------------
1 Note.
Class A-1 Notes: as defined in the Recitals hereto.
---------------
Class A-2 Initial Principal Amount: $61,579,000.
----------------------------------
Class A-2 Note Interest Rate: the rate at which interest accrues on
----------------------------
the Class A-2 Notes, which rate shall be equal to 5.60% per annum.
Class A-2 Note Owner: with respect to a Book-Entry Class A-2 Note,
--------------------
the Person who is the beneficial owner of such Book-Entry Class A-2 Note, as
reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly or as an indirect participant, in accordance with the
rules of DTC).
Class A-2 Noteholder: Cede & Co. or a holder of a Definitive Class A-
--------------------
2 Note.
Class A-2 Notes: as defined in the Recitals hereto.
---------------
Class A-3 Initial Principal Amount: $304,127,000.
----------------------------------
Class A-3 Note Interest Rate: the rate at which interest accrues on
----------------------------
the Class A-3 Notes, which rate shall be equal to 5.99% per annum.
Class A-3 Note Owner: with respect to a Book-Entry Class A-3 Note,
--------------------
the Person who is the beneficial owner of such Book-Entry Class A-3 Note, as
reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly or as an indirect participant, in accordance with the
rules of DTC).
6
<PAGE>
Class A-3 Noteholder: Cede & Co. or a holder of a Definitive Class A-
--------------------
3 Note.
Class A-3 Notes: as defined in the Recitals hereto.
---------------
Class A-4 Initial Principal Amount: $81,462,000.
----------------------------------
Class A-4 Note Interest Rate: the rate at which interest accrues on
----------------------------
the Class A-4 Notes, which rate shall be equal to 6.23% per annum.
Class A-4 Note Owner: with respect to a Book-Entry Class A-4 Note,
--------------------
the Person who is the beneficial owner of such Book-Entry Class A-4 Note, as
reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly or as an indirect participant, in accordance with the
rules of DTC).
Class A-4 Noteholder: Cede & Co. or a holder of a Definitive Class A-
--------------------
4 Note.
Class A-4 Notes: as defined in the Recitals hereto.
---------------
Clearing Agency: an organization registered as a "clearing agency"
---------------
pursuant to Section 17A of the Exchange Act, or any successor provision thereof.
The initial Clearing Agency shall be DTC.
Clearing Agency Participant: a broker, dealer, bank, other financial
---------------------------
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
Code: as defined in Section 2.03(a).
----
Collection Account: the account or accounts by that name established
------------------
and maintained by the Trustee pursuant to Section 3.01(a).
Commission: the Securities and Exchange Commission.
----------
Corporate Trust Office: the principal corporate trust office of the
----------------------
Trustee located at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Indenture Trust Administration, or at such other address as the
Trustee may designate from time to time by notice to the Noteholders, the
Insurer, the Issuer and the Servicer.
Cumulative Loss Amount: with respect to each Payment Date, an amount
----------------------
equal to the excess, if any, of (a) the total of (i) the Outstanding Principal
Amount of the Notes as of the immediately preceding Payment Date after giving
effect to all principal payments made on that day, plus (ii) the
Overcollateralization Balance as of the immediately preceding Payment Date,
minus (iii) the lesser of (A) the Discounted Present Value of the Performing
Leases as of the Determination Date relating to the immediately preceding
Payment Date minus the Discounted Present Value of the Performing Leases as of
the related Determination Date and (B) Available Funds remaining after the
payment of the Insurer Premium, amounts owing the Servicer, Interest Payments
and
7
<PAGE>
Reimbursement Amounts on such Payment Date, over (b) the Discounted Present
Value of the Performing Leases as of the related Determination Date.
Cut-Off Date: the opening of business on April 1, 1999.
------------
Default: any occurrence that is, or with notice or the lapse of time
-------
or both would become, an Event of Default.
Deficiency Amount: (a) for any Payment Date, any shortfall in the sum
-----------------
of Available Funds (excluding amounts in the Reserve Account) plus amounts on
deposit in the Reserve Account to pay the related Interest Payments due on such
Payment Date, (b) on the Payment Date in June 2000, any shortfall in the sum of
Available Funds (excluding amounts in the Reserve Account) plus amounts on
deposit in the Reserve Account to pay the Outstanding Principal Amount of Class
A-1 Notes and (c) on the Payment Date in May 2005, any shortfall in the sum of
Available Funds (excluding amounts in the Reserve Account) plus amounts on
deposit in the Reserve Account to pay the Outstanding Principal Amount of the
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes (in each case after
taking into account all payments to be made on such Payment Date, including
payments resulting from the application of funds in accordance with Section
3.07).
Definitive Note: a definitive, fully registered Note issued pursuant
---------------
to Section 2.07.
Delinquency Rate: for any Due Period, the sum as of the related
----------------
Determination Date of the Discounted Present Value of the Leases that are 61 or
more days delinquent, as of such Determination Date, divided by the Discounted
Present Value of the Leases on that Determination Date.
Delinquent Lease: as of any Determination Date, any Lease (other than
----------------
a Lease which became a Non-Performing Lease prior to such Determination Date)
with respect to which the Lessee has not paid all Lease Payments then due.
Depository Agreement: the letter of representations, between the
--------------------
Issuer and the Depository Trust Company, as Clearing Agency.
Determination Date: with respect to any Payment Date, the fifth
------------------
Business Day immediately preceding such Payment Date.
Discount Rate: with respect to any Determination Date, 7.16%.
-------------
Discounted Present Value: with respect to any Lease as of any date,
------------------------
an amount equal to the net present value of all remaining scheduled Lease
Payments, determined by discounting each such Lease Payment on a monthly basis
(assuming a calendar year consisting of twelve 30-day months), at a rate equal
to the Discount Rate, to the last day of the Due Period prior to the relevant
calculation date. In determining the Discounted Present Value of any Lease on
any date, it will be assumed that Lease Payments are due on the last day of the
calendar month immediately preceding the relevant calculation date and the
future remaining Lease Payments will be calculated after
8
<PAGE>
giving effect to any payments received prior to the date of calculation to the
extent such payments relate to Lease Payments due and payable by the Lessee with
respect to the related Due Period and any prior Due Period.
Discounted Present Value of the Delinquent Leases: with respect to any
-------------------------------------------------
Payment Date or Determination Date, the Discounted Present Value of the Leases
that are Delinquent Leases and as to which a Lease Payment, or any portion
thereof, was 61 or more days overdue as of the last day of the Due Period
immediately preceding such Payment Date or Determination Date.
Discounted Present Value of the Performing Leases: the Discounted
-------------------------------------------------
Present Value of the Leases, reduced by the discounted present value of all
future remaining scheduled Lease Payments on the Non-Performing Leases,
discounted at the Discount Rate and otherwise determined in accordance with the
definition of "Discounted Present Value".
DTC: the Depository Trust Company.
---
Due Period: with respect to any Payment Date and the Determination
----------
Date with respect thereto, the period beginning on the first day and ending on
the last day of the calendar month prior to the month in which such Payment Date
and such Determination Date occur.
Eligible Account: either (a) an account maintained with a depository
----------------
institution or trust company acceptable to each of the Rating Agencies and (so
long as no Insurer Default has occurred and is continuing) the Insurer or (b) a
trust account or similar account maintained with a federal or state chartered
depository institution, which may be an account maintained with the Trustee.
Eligible Investments: any one or more of the following obligations or
--------------------
securities:
(a) direct non-callable obligations of, and non-callable obligations
fully guaranteed by, the United States of America, or any agency or
instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America;
(b) demand and time deposits in, certificates of deposits of, and
bankers' acceptances issued by, any depository institution or company
(including the Trustee acting in its commercial capacity) incorporated
under the laws of the United States of America or any state thereof, having
a combined capital and surplus of at least $100,000,000, and subject to
supervision and examination by federal and/or state banking authorities, so
long as at the time of such investment or contractual commitment providing
for such investment the commercial paper or other short-term debt
obligations of such depository institution or company (or, in the case of a
depository institution that is the principal subsidiary of a holding
company, the commercial paper or other short-term debt obligations of such
holding company) have the highest short-term credit ratings available from
Moody's and S&P;
9
<PAGE>
(c) purchase obligations with respect to and collateralized by (i)
any security described in clause (a) above or (ii) any other security
issued or guaranteed by an agency or instrumentality of the United States
of America, in each case entered into with a depository institution or
company (acting as principal) of the type described in clause (b) above;
provided that the Trustee has taken delivery of such security;
--------
(d) commercial paper (including both non-interest bearing discount
obligations and interest-bearing obligations) payable on demand or on a
specified date not more than 270 days after the date of issuance thereof
having the highest short-term credit ratings from Moody's and S&P at the
time of such investment;
(e) money market funds that redeem their shares on demand, invest
only in other Eligible Investments, and are rated Aaa by Moody's and AAAm
or AAAm-G by S&P (including funds for which the Trustee or any of its
affiliates is investment manager or advisor);
(f) demand notes payable on demand issued by an institution rated A2
by Moody's and A-1+ by S&P at the time of such investment;
(g) funding agreements or guaranteed investment contracts provided by
issuers rated Aaa or P-1 by Moody's and A-1+ by S&P which provide, by their
terms, for receipt by the Trustee on or prior to the next Payment Date of a
predetermined fixed dollar amount which cannot vary or change; and
(h) such other investments as may be approved by the Rating Agencies
and, so long as no Insurer Default has occurred and is continuing, the
Insurer.
Equipment: each item of personal property, together with any
---------
replacement parts, additions, and repairs thereto, any replacements thereof, and
any accessories incorporated therein and/or affixed thereto, subject to a Lease
or, following expiration or termination of the Lease to which the same was
previously subject, remaining subject to the security interest granted by the
Seller to the Issuer pursuant to Section 1.02(b) of the Assignment and Servicing
Agreement.
ERISA: the Employee Retirement Income Security Act of 1974, as
-----
amended.
Euroclear: the Euroclear System.
---------
Event of Default: as defined in Section 7.01.
----------------
Exchange Act: the Securities Exchange Act of 1934, as amended.
------------
Excess Copy Charge: with respect to any Lease, means the amount owing
------------------
by such Lessee under such Lease reflecting usage of the related Equipment in
excess of a specified copy amount per month.
10
<PAGE>
Financing Statement: as defined in Section 14 of the Assignment and
-------------------
Servicing Agreement.
Governmental Authority: Any court or federal or state regulatory body,
----------------------
administrative agency or other tribunal or other governmental instrumentality.
Grant: grant, bargain, sell, convey, assign, transfer, mortgage,
-----
pledge, create and grant a security interest in and right of set-off against,
deposit, set over and confirm.
Holder: a holder of a Note.
------
Indemnified Party: as defined in Section 9.11.
-----------------
Indenture: this instrument as originally executed and as from time to
---------
time supplemented or amended pursuant to the applicable provisions hereof.
Initial Payment Date: June 15, 1999.
--------------------
Interest Payments: as defined in Section 2.01(c).
-----------------
Insurance Agreement: as defined in the Recitals hereto.
-------------------
Insured Payments: as defined in the Policy.
----------------
Insurer: as defined in the Recitals hereto.
-------
Insurer Default: the failure by the Insurer to make a payment
---------------
required under the Policy in accordance with the terms thereof.
Insurer Premium: any monthly premium fees due and payable to the
---------------
Insurer pursuant to the Insurance Agreement.
Insurer Secured Obligations: all amounts and obligations which may at
---------------------------
any time be owed to or on behalf of the Insurer (or any agents, accountants or
attorneys for the Insurer) under this Indenture, the Insurance Agreement or any
other Transaction Document.
IOS Capital: IOS Capital, Inc., a Delaware corporation.
-----------
Issuance Date: May 25, 1999.
-------------
Issuer: the Person named as the "Issuer" in the first paragraph of
------
this instrument.
Issuer Order or Issuer Request: a written order or request delivered
------------------------------
to the Trustee and signed in the name of the Issuer by an Authorized Officer.
Issuer Secured Parties: each of the Trustee, in respect of the
----------------------
Trustee Secured Obligations, and the Insurer, in respect of the Insurer Secured
Obligations.
11
<PAGE>
Lease: collectively, (i) each lease agreement, conditional sale
-----
contract and other agreement creating a contractual obligations to which the
Originator is a party, to the extent that such lease agreement, conditional sale
contract or other agreement is described in Exhibit A to the Assignment and
Servicing Agreement (as such Exhibit A may be amended from time to time in
accordance with the Assignment and Servicing Agreement), including, without
limitations, each Additional Lease and Substitute Lease; (ii) each schedule or
supplement to each such lease agreement, conditional sale contract or other
agreement (and each master lease agreement insofar as it relates to any such
schedule or supplement); and (iii) any and all amendments or modifications from
time to time to each such lease agreement, conditional sale contract or other
agreement, or to any schedule or supplement, in accordance with the Assignment
and Servicing Agreement.
Lease Delinquency Payment: any payment made with respect to a Lease
-------------------------
in an amount equal to all or part of any specific Lease Payment due with respect
to such Lease (a) by the Servicer pursuant to Section 5.01 of the Assignment and
Servicing Agreement, (b) by a transfer from the Reserve Account pursuant to
Section 3.04, or (c) by the Issuer in its sole discretion.
Lease Guaranty: with respect to any Lease, any guaranty of payment or
--------------
performance of the whole or any part of the liabilities or obligations of the
Lessee under such Lease.
Lease Payment: the equipment financing portion of each fixed
-------------
periodic rental payment payable by a Lessee under a Lease. Casualty Payments,
Retainable Deposits, Termination Payments, prepayments of rent required pursuant
to the terms of a Lease, payments becoming due before the Cut-Off Date and
supplemental or additional payments required by the terms of a Lease with
respect to taxes, insurance, maintenance (including, without limitation, any
Maintenance Charges), security deposits or other specific charges (including,
without limitation, any Excess Copy Charges) shall not be Lease Payments
hereunder and, in calculating the Discounted Present Value of the Leases and the
Discounted Present Value of the Performing Leases, the amount thereof shall not
be included.
Lease Purchase Amount: at any date of determination with respect to
---------------------
any Lease, means the sum of (i) the Discounted Present Value of the Lease as of
the beginning of the Due Period relating to such date of determination (plus any
amounts previously due and unpaid) and (ii) the product of (x) the amount
described in the foregoing clause (i) and (y) one-twelfth of the Discount Rate.
Lessee: with respect to any Lease, the lessee thereunder.
------
Lien: as defined in Section 14 of the Assignment and Servicing
----
Agreement.
Maintenance Charges: with respect to any Lease, the amount owing by
-------------------
the Lessee under the terms of the related Lease in respect of maintenance
services being provided in connection therewith.
12
<PAGE>
Maturity: with respect to any installment of principal of or interest
--------
on any Note, the date on which such installment is due and payable as therein or
herein provided, whether at the Stated Maturity, by declaration of acceleration,
or otherwise.
Moody's: Moody's Investors Service, Inc. and any successors thereto.
-------
Non-Performing Lease: as of any Determination Date, any Lease with
--------------------
respect to which at any time following the Cut-Off Date or related Transfer
Date, as the case may be, either (a) a Lease Payment, or any portion thereof,
was 121 or more days overdue as of the last day of the Due Period with respect
to such Determination Date, unless on or before such Determination Date such
Lease Payment (or portion thereof) has been paid or (b) the Servicer has
accelerated the remaining payments or (c) the Servicer has determined such Lease
to be uncollectible in accordance with the Servicer's customary practices prior
to the last day of the Due Period with respect to such Determination Date.
Noteholder: at any time, any Person in whose name a Note is
----------
registered in the Note Register.
Note Interest Rate: the Class A-1 Note Interest Rate, the Class A-2
------------------
Note Interest Rate, the Class A-3 Note Interest Rate or the Class A-4 Note
Interest Rate, as the case may be.
Note Owner: the beneficial owner of a Note issued hereunder.
----------
Note Register: as defined in Section 2.03(a).
-------------
Note Registrar: as defined in Section 2.03(a)
--------------
Notes: any notes authorized by, and authenticated and delivered
-----
under, this Indenture.
Notice of Claim: as defined in the Policy.
---------------
Officers' Certificate: with respect to the Issuer, the Seller or the
---------------------
Servicer, a certificate signed by the Chairman, the President or a Vice
President of the Issuer, the Seller or the Servicer, as the case may be, and by
another Vice President, the Treasurer, and Assistant Treasurer, the Secretary,
or an Assistant Secretary of the Issuer, the Seller or the Servicer, as the case
may be, who is not the same Person as the other officer signing such
certificate.
Opinion of Counsel: a written opinion, which shall be satisfactory in
------------------
form and substance to the Trustee and the Insurer, of counsel who may, except as
otherwise expressly provided in this Indenture, be inside or outside counsel for
the Issuer and who shall be satisfactory to the Trustee and the Insurer.
Other Lease Payments: all payments on or in respect of Leases which
--------------------
are not Lease Payments, Lease Delinquency Payments, Casualty Payments,
Retainable
13
<PAGE>
Deposits or Termination Payments, including Maintenance Charges and Excess Copy
Charges.
Outstanding: with respect to the Notes, as of any date of
-----------
determination, all Notes theretofore authenticated and delivered under this
Indenture except:
(a) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes or portions thereof for whose payment money in the
necessary amount has been theretofore irrevocably deposited with the
Trustee in trust for the holders of such Notes; and
(c) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by a
Person in whose hands the Note is a valid obligation;
provided, however, that Notes which have been paid with proceeds of the Policy
- -------- -------
shall continue to remain Outstanding for purposes of this Indenture until the
Insurer has been paid as subrogee hereunder or reimbursed as to such payment
pursuant to the Insurance Agreement as evidenced by a written notice from the
Insurer delivered to the Trustee, and the Insurer shall be deemed to be the
Holder thereof to the extent of any payments thereon made by the Insurer and,
provided further, that in determining whether the holders of the requisite
- -------- -------
percentage of the Outstanding Principal Amount of the Notes have given any
request, demand, authorization, direction, notice, consent, or waiver hereunder,
Notes owned by the Issuer or any Affiliate of the Issuer shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, or waiver, only Notes that a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Notes so owned by the Issuer or any Affiliate of the Issuer that
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Issuer, any other
obligor upon the Notes, IOS Capital, the Seller or any Affiliate of any of the
foregoing Persons.
Outstanding Class A Principal Amount: The aggregate principal amount
------------------------------------
of the Class A Notes Outstanding at any time.
Outstanding Class A-1 Principal Amount: the aggregate principal
--------------------------------------
amount of the Class A-1 Notes Outstanding at any time.
Outstanding Class A-2 Principal Amount: the aggregate principal
--------------------------------------
amount of the Class A-2 Notes Outstanding at any time.
Outstanding Class A-3 Principal Amount: the aggregate principal
--------------------------------------
amount of the Class A-3 Notes Outstanding at any time.
14
<PAGE>
Outstanding Class A-4 Principal Amount: the aggregate principal
--------------------------------------
amount of the Class A-4 Notes Outstanding at any time.
Outstanding Principal Amount: the aggregate unpaid principal amount
----------------------------
of the Notes Outstanding at any time.
Overcollateralization Balance: with respect to each Payment Date is
-----------------------------
an amount equal to the excess, if any, of (a) the Discounted Present Value of
Performing Leases as of the related Determination Date over (b) the Outstanding
Principal Amount of the Notes as of such Payment Date after giving effect to all
principal payments made on that day.
Overcollateralization Floor: with respect to any Payment Date, (a)
---------------------------
2.5% of the Discounted Present Value of the Leases as of the Cut-Off Date, plus
(b) the Cumulative Loss Amount with respect to such Payment Date, minus (c) the
amount on deposit in the Reserve Account (after giving effect to withdrawals to
be made on account of such Payment Date).
Paying Agent: each agent of the Issuer appointed for the purpose of
------------
making payments on the Notes, including the Trustee.
Payment Date: the 15th day of each month (or the next Business Day
------------
thereafter if such day is not a Business Day), commencing on the Initial Payment
Date, and ending on the latest Stated Maturity.
Person: any individual, corporation, partnership, joint venture,
------
association, limited liability company, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
Policy: the financial guaranty insurance policy No. ABO254BE with
------
respect to the Notes dated May 25, 1999, including any endorsements thereto,
issued by the Insurer to the Trustee for the benefit of the Noteholders.
Principal Payments: as defined in Section 2.01(b).
------------------
Preference Claim: as defined in Section 4.02(b).
----------------
Rating Agency: each of S&P and Moody's.
-------------
Record Date: with respect to any Payment Date, the last day of the
-----------
calendar month immediately preceding such Payment Date. The Record Date will be
the Issuance Date with respect to the first Payment Date.
Reimbursement Amount: any amount (i) due to the Insurer under the
--------------------
terms of the Insurance Agreement and (ii) any amount paid by the Insurer under
Section 3.07 (to the extent not included in clause (i)).
Required Deposit Date: as defined in Section 3.03(a).
---------------------
15
<PAGE>
Required Payments: as defined in Section 3.04(b).
-----------------
Required Reserve Amount: as of any time, the lesser of (a) 1.00% of
-----------------------
the initial Discounted Present Value of the Leases as of the Cut-Off Date and
(b) the then Outstanding Principal Amount of the Notes.
Reserve Account: the account by that name established and maintained
---------------
by the Trustee pursuant to Section 3.01.
Responsible Officer: with respect to the Trustee, any officer
-------------------
assigned to the Corporate Trust Office of the Trustee, including any managing
director, vice president, assistant vice president, assistant treasurer,
assistant secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Indenture, and also,
with respect to a particular matter, any other officer, to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
Retainable Deposits: any security or other similar deposit which the
-------------------
Servicer has determined in accordance with its customary servicing practices is
not refundable to the related Lessee.
S&P: Standard & Poor's Rating Services, a division of The McGraw-Hill
---
Companies Inc. and any successor thereto.
Securities Act: the Securities Act of 1933, as amended.
--------------
Security Deposit Account: the account by that name established and
------------------------
maintained by the Trustee pursuant to Section 3.01.
Seller: IKON Receivables-1, LLC, a Delaware limited liability
------
company.
Servicer: IOS Capital and any successor Servicer appointed pursuant
--------
to the terms hereof and of the Assignment and Servicing Agreement and, to the
extent that it at any time is performing the functions of the Servicer, the
Trustee, subject to the terms of Section 5.01 hereof.
Servicer Advance: as defined in Section 5.01 of the Assignment and
----------------
Servicing Agreement.
Servicer Event of Default: as defined in Section 10.01 of the
-------------------------
Assignment and Servicing Agreement.
Servicer Order: a written order or request delivered to the Trustee
--------------
and signed in the name of the Servicer by an Authorized Officer.
Servicing Fee: the Servicing Fee payable pursuant to the Assignment
-------------
and Servicing Agreement.
16
<PAGE>
Servicing Report: as defined in Section 6.01(b) of the Assignment and
----------------
Servicing Agreement.
Stated Maturity: The stated maturity date with respect to the Class
---------------
A-1 Notes is the Payment Date in June, 2000 (the "Class A-1 Stated Maturity
Date"), the stated maturity date with respect to the Class A-2 Notes is the
Payment Date in May, 2005 (the "Class A-2 Stated Maturity Date"), the stated
maturity date with respect to the Class A-3 Notes is the Payment Date in May,
2005 (the "Class A-3 Stated Maturity Date"), and the stated maturity date with
respect to Class the A-4 Notes is the Payment Date in May, 2005 (the "Class A-4
Stated Maturity Date" and, together with the Class A-1 Stated Maturity Date, the
Class A-2 Stated Maturity Date, the Class A-3 Stated Maturity Date, the "Stated
Maturity Dates").
Substitute Lease: as defined in Section 11.01(a) of the Assignment
----------------
and Servicing Agreement.
Termination Payment: a payment payable by a Lessee under a Lease upon
-------------------
the early termination of such Lease (but not on account of a casualty or a Lease
default) which may be agreed upon by the Servicer, acting in the name of the
Issuer, and the Lessee in accordance with the provisions of Section 5.02 of the
Assignment and Servicing Agreement.
Transaction Accounts: the Collection Account, the Reserve Account and
--------------------
the Security Deposit Account.
Transaction Documents: this Indenture, the Assignment and Servicing
---------------------
Agreement and the Insurance Agreement.
Transaction Payment Amount: for each Required Deposit Date, the
--------------------------
amount of all Lease Payments, Lease Delinquency Payments, Lease Purchase
Amounts, recoveries relating to Non-Performing Leases, Casualty Payments,
Retainable Deposits, Termination Payments and other payments on or in respect of
a Lease received by the Servicer required to be deposited in the Collection
Account pursuant to Section 3.03(a) and required to be reported by the Servicer
for such Required Deposit Date in accordance with Section 6.01(c) of the
Assignment and Servicing Agreement.
Transfer Date: With respect to any Substitute Lease or Additional
-------------
Lease, the date of transfer thereof to the Issuer pursuant to the Assignment and
Servicing Agreement.
Trustee: the Person named as the "Trustee" in the first paragraph of
-------
this instrument until a successor Person shall have become the Trustee pursuant
to the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean such successor Person; provided, that the provisions of Section 8.07 and
--------
Section 8.10, as applicable to any Person at any time serving as Trustee
hereunder, shall survive the termination of such Person's status as Trustee
hereunder and the succession of any other Person to such status.
17
<PAGE>
Trustee Secured Obligations: all amounts and obligations which the
---------------------------
Issuer or the Servicer, as the case may be, may at any time owe to or on behalf
of itself or of the Trustee for the benefit of the Noteholders under this
Indenture or the Notes.
Trust Indenture Act: the Trust Indenture Act of 1939 as in effect on
-------------------
the date on which this Indenture is qualified under the Trust Indenture Act,
except as provided in Section 10.06 or 12.01 hereof.
Underwriting Agreement: the Underwriting Agreement, among the Issuer,
----------------------
IOS Capital and the several Underwriters named therein relating to the issuance
of the Notes.
Uniform Commercial Code: with respect to a particular jurisdiction,
-----------------------
the Uniform Commercial Code, as in effect from time to time in such
jurisdiction, or any successor statute thereto.
Warranty Lease: a Lease subject to purchase by IOS Capital as a
--------------
result of a breach of a representation or warranty in accordance with the
provisions of Section 5.04 of the Assignment and Servicing Agreement.
SECTION 1.02. Compliance Certificates and Opinions.
------------------------------------
Upon any written application or request (or oral application with
prompt written or telecopied confirmation) by the Issuer to the Trustee to take
any action under any provision of this Indenture, other than any request that
(a) the Trustee authenticate the Notes specified in such request, (b) the
Trustee invest moneys in any of the Transaction Accounts pursuant to the written
directions specified in such request, or (c) the Trustee pay moneys due and
payable to the Issuer hereunder to the Issuer's assignee specified in such
request, the Trustee shall require the Issuer to furnish to the Trustee and, so
long as no Insurer Default has occurred and is continuing, the Insurer, an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and that the request otherwise is in accordance with the terms of the Indenture,
and 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 requested action as to which other evidence of satisfaction of the
conditions precedent thereto is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
SECTION 1.03. Form of Documents Delivered to Trustee and Insurer.
--------------------------------------------------
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
or give an opinion as to such matters in one or several documents.
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Any certificate or opinion of an officer of the Issuer delivered to
the Trustee or the Insurer 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 Officer's
Certificate or opinion and any 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 Issuer as to such factual matters 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. Any Opinion of Counsel may be based on the written opinion of
other counsel, in which event such Opinion of Counsel shall be accompanied by a
copy of such other counsel's opinion and shall include a statement to the effect
that such counsel believes that such counsel and the Trustee and the Insurer may
reasonably rely upon the opinion of such other counsel.
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.
Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee or the Insurer, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of compliance with any term 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 Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's or the Insurer's right to rely upon the truth
and accuracy of any statement or opinion contained in any such document as
provided in Section 8.01(a)(ii).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default or Servicer Event
of Default is a condition precedent to the taking of any action by the Trustee
or the Insurer at the request or direction of the Issuer, then, notwithstanding
that the satisfaction of such condition is a condition precedent to the Issuer's
right to make such request or direction, the Trustee and the Insurer shall be
protected in acting in accordance with such request or direction if it does not
have knowledge of the occurrence and continuation of such Default or Event of
Default or Servicer Event of Default. For all purposes of this Indenture,
neither the Trustee nor the Insurer shall be deemed to have knowledge of any
Insurer Default, Servicer Event of Default, Default or Event of Default nor
shall the Trustee or the Insurer have any duty to monitor or investigate to
determine whether such default has occurred (other than an Event of Default of
the kind described in Section 7.01(a) or 7.01(b)) unless, in the case of the
Trustee, a Responsible Officer of the Trustee shall have actual knowledge
thereof or shall have been notified in writing thereof by the Issuer, the
Servicer, the Insurer or any Noteholder.
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SECTION 1.04. Acts of Noteholders, etc.
------------------------
(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 Trustee and, where it is hereby expressly required, to the
Issuer and/or the Insurer. 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 8.01)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section 1.04.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the holder of any Note shall bind every future holder of
the same Note and the holder of every Note issued upon the registration of
transfer thereof or in exchange therefore or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Issuer in
reliance thereon, whether or not notation of such action is made upon such Note.
(d) By accepting the Notes issued pursuant to this Indenture, each
Noteholder irrevocably appoints the Trustee hereunder as the special attorney-
in-fact for such Noteholder vested with full power on behalf of such Noteholder
to effect and enforce the rights of such Noteholder and the revisions pursuant
hereto for the benefit of such Noteholder; provided that nothing contained in
--------
this Section 1.04(d) shall be deemed to confer upon the Trustee any duty or
power to vote on behalf of the Noteholders with respect to any matter on which
the Noteholders have a right to vote pursuant to the terms of this Indenture.
SECTION 1.05. Notices, etc., to Trustee, Servicer, Issuer,
-------------------------------------------
Insurer and Rating Agencies.
- ---------------------------
Any request, demand, authorization, direction, notice, consent,
waiver, Act of Noteholders, or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with, the Trustee,
the Issuer, the Insurer or the Servicer shall be sufficient for every purpose
hereunder (unless otherwise herein
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expressly provided) if in writing and mailed, first-class postage prepaid or
certified mail return receipt requested, or sent by private courier or confirmed
telecopy. Unless otherwise specifically provided herein, no such request,
demand, authorization, direction, notice, consent, waiver, Act of Noteholders or
other document shall be effective until received and any provision hereof
requiring the making, giving, furnishing, or filing of the same on any date
shall be interpreted as requiring the same to be sent or delivered in such
fashion that it will be received on such date. Any such request, demand,
authorization, direction, notice, consent, waiver, Act of Noteholders, or other
document shall be sent or delivered to the following addresses:
(a) if to the Trustee, at the Corporate Trust Office (Number for
telecopy (312) 461-3525), or at any other address previously furnished in
writing to the Issuer, the Insurer and the Servicer by the Trustee; or
(b) if to the Issuer, at IKON Receivables, LLC, 1738 Bass Road,
P.O. Box 9115, Macon, Georgia 31208, Attention: Robert McLain (Number for
telecopy: (912) 471-2375), or at any other address previously furnished in
writing to the Trustee, the Insurer and the Servicer by the Issuer; or
(c) if to the Servicer, at IOS Capital, Inc., 1738 Bass Road, P.O.
Box 9115, Macon, Georgia, 31208, Attention: Harry G. Kozee, Vice President -
Finance, with a copy to the General Counsel, (Number for telecopy: (912) 471-
2375), or at any other address previously furnished in writing to the Trustee,
the Insurer and the Servicer; or
(d) if to the Rating Agencies: to Standard and Poor's, 25 Broadway,
New York, New York 10004, Attention: Structured Finance Ratings, and to Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, Attention:
ABS Monitoring Department; or
(e) if to the Insurer: to Ambac Assurance Corporation, One State
Street Plaza, New York, New York 10004, Attention: Structured Asset Backed
Securities Department Head (Number for telecopy: (212) 208-3547).
SECTION 1.06. Notice to Noteholders; Waiver.
-----------------------------
(a) Where this Indenture provides for notice to Noteholders of any
event, or the mailing of any report to Noteholders, such notice or report shall
be sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid or certified mail return receipt
requested, or sent by private courier or confirmed telecopy to each Noteholder
affected by such event or to whom such report is required to be mailed, at its
address as it appears in the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice or
the mailing of such report. In any case where a notice or report to Noteholders
is mailed, neither the failure to mail such notice or report, nor any defect in
any notice or report so mailed, to any particular Noteholder shall affect the
sufficiency of such notice or report with respect to other Noteholders. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such
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notice. Waivers of notice by Noteholders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
(b) In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to mail or send notice to
Noteholders, in accordance with Section 1.06(a), of any event or any report to
Noteholders when such notice or report is required to be delivered pursuant to
any provision of this Indenture, then such notification or delivery as shall be
made with the approval of the Trustee shall constitute a sufficient notification
for every purpose hereunder.
SECTION 1.07. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and in the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 1.08. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Issuer or the
Trustee shall bind its respective successors and permitted assigns, whether so
expressed or not.
SECTION 1.09. Benefits of Indenture.
---------------------
The Insurer and its successors and assigns shall be a third-party
beneficiary to the provisions of this Indenture, and shall be entitled to rely
upon and directly to enforce the provisions of this Indenture so long as no
Insurer Default has occurred and is continuing. Nothing in this Indenture or in
the Notes, express or implied, shall give to any other Person, other than the
parties hereto and their successors hereunder and the Noteholders, and any other
party secured hereunder, and any other Person with an ownership interest in any
part of the Asset Pool, any benefit or any legal or equitable right, remedy or
claim under this Indenture. The Insurer may disclaim any of its rights and
powers under this Indenture, but not its duties and obligations under the
Policy, upon delivery of a written notice to the Trustee.
SECTION 1.10. Recording of Indenture.
----------------------
If this Indenture is subject to recording in any appropriate public
recording offices, such recording is to be effected by the Issuer and at its
expense accompanied by an Opinion of Counsel (which may be counsel to the
Trustee or any other counsel reasonably acceptable to the Trustee and the
Insurer) 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 Trustee under this Indenture.
SECTION 1.11. GOVERNING LAW.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THIS INDENTURE IS SUBJECT
TO THE TRUST INDENTURE ACT
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OF 1939, AS AMENDED, AND SHALL BE GOVERNED THEREBY AND CONSTRUED IN ACCORDANCE
THEREWITH.
SECTION 1.12. Legal Holidays.
--------------
In any case where any Payment Date or the Stated Maturity or any other
date on which principal of or interest on any Note is proposed to be paid shall
not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Notes) such 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 such Payment Date, Stated Maturity, or other date on which principal of
or interest on any Note is proposed to be paid; provided that no interest shall
--------
accrue for the period from and after such Payment Date, Stated Maturity, or any
other date on which principal of or interest on any Note is proposed to be paid,
as the case may be, until such next succeeding Business Day.
SECTION 1.13. Execution in 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 1.14. Inspection.
----------
The Issuer agrees that, on reasonable prior notice, it will permit the
representatives of the Trustee or the Insurer or any Noteholder holding Notes,
or a beneficial interest therein, evidencing at least 25% of the Outstanding
Principal Amount of the Notes, during the Issuer's normal business hours, to
examine all of the books of account, records, reports and other papers of the
Issuer, to make copies thereof and extracts therefrom, to cause such books to be
audited by independent accountants selected by the Issuer and reasonably
acceptable to the Trustee and the Insurer or such Noteholder, as the case may
be, and to discuss the Issuer's affairs, finances and accounts with its
officers, employees and independent accountants (and by this provision the
Issuer hereby authorizes its accountants to discuss with such representatives
such affairs, finances and accounts), all at such reasonable times and as often
as may be reasonably requested for the purpose of reviewing or evaluating the
financial condition or affairs of the Issuer or the performance of and
compliance with the covenants and undertakings of the Issuer in this Indenture,
the Assignment and Servicing Agreement or any of the other documents referred to
herein or therein. Any expense incident to the exercise by the Trustee or the
Insurer at any time or any Noteholder during the continuance of any Default or
Event of Default, of any right under this Section 1.14 shall be borne by the
Issuer.
SECTION 1.15. Survival of Representations and Warranties.
------------------------------------------
The representations, warranties and certifications of the Issuer made
in this Indenture or in any certificate or other writing delivered by the Issuer
pursuant hereto shall survive the authentication and delivery of the Notes
hereunder.
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ARTICLE II
THE NOTES
SECTION 2.01. General Provisions; Optional Redemption by Issuer.
-------------------------------------------------
(a) The Notes shall consist of $304,474,000 principal amount of
Class A-1 Notes, $61,579,000 principal amount of Class A-2 Notes, $304,127,000
- -----
principal amount of Class A-3 Notes, $81,462,000 principal amount of Class A-4
Notes and the forms thereof and of the Trustee's certificate of authentication
shall be in substantially the forms set forth in Exhibit A hereto, with such
appropriate insertions, omissions, substitutions, and other variations as are
required or permitted by this Indenture.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $751,642,000 of Notes, except for
Notes authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Section 2.03, 2.04, or
10.05. The Notes shall be issuable only in registered form and only in minimum
denominations of at least $1,000; provided that the foregoing shall not restrict
--------
or prevent the transfer in accordance with Section 2.03 of any Note having a
remaining Outstanding Principal Amount of other than an integral multiple of
$1,000, or the issuance of a single Note of each Class, with a denomination less
than $1,000.
(b) For each Payment Date, payments of principal (the "Principal
Payments") on the Notes will be made in accordance with Sections 3.03(b), or
7.06, as applicable. Except as otherwise provided in Section 7.02, no part of
the principal of any Note shall be paid prior to the Payment Date on which such
principal is due in accordance with the preceding provisions of this Section
2.01(b), except that the Issuer may redeem the Notes in their entirety
(including any unpaid interest due), without premium, as of any Payment Date on
which the Discounted Present Value of the Performing Leases is less than or
equal to ten percent (10%) of the aggregate Discounted Present Value of the
Leases as of the Cut-Off Date (after giving effect to all Principal Payments on
such Payment Date). The Issuer will give written notice of any such redemption
to the Trustee and the Trustee shall give written notice to the Noteholders at
least 30 days before the Payment Date fixed for such prepayment by certified
mail return receipt requested, hand delivery or overnight courier. Notice of
such prepayment having been so given, the remaining unpaid principal as of the
Payment Date fixed for prepayment together with all interest accrued and unpaid
to such Payment Date, shall become due and payable on such Payment Date.
(c) For each Payment Date, the interest due and payable (the
"Interest Payments") with respect to the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes and Class A-4 Notes will be the interest that has accrued on the
respective Notes since the last Payment Date or, in the case of the first
Payment Date, since the Issuance Date, at the Class A-1 Note Interest Rate,
Class A-2 Note Interest Rate, Class A-3 Note Interest Rate and Class A-4 Note
Interest Rate, respectively, applied to the then Outstanding Principal Amounts
of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes,
respectively, on the preceding Payment Date. With respect to the Class A-1
Notes, the
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interest will be calculated on the basis of a year of 360 days and the actual
number of days in the related interest accrual period. With respect to all other
Notes, the interest will be calculated on the basis of a year of 360 days
comprised of twelve 30-day months. Interest Payments will be made in accordance
with Sections 3.03(b), 3.04(b) and 7.06, as applicable.
(d) All payments made with respect to any Note shall be made in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts and shall be applied first
to the interest then due and payable on such Notes, then to the principal
thereof, and finally to premium, if any.
(e) All Class A-1 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-1 Notes shall be made pro rata
among all Outstanding Class A-1 Notes, without preference or priority of any
kind.
(f) All Class A-2 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-2 Notes shall be made pro rata
among all Outstanding Class A-2 Notes, without preference or priority of any
kind.
(g) All Class A-3 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-3 Notes shall be made pro rata
among all Outstanding Class A-3 Notes, without preference or priority of any
kind.
(h) All Class A-4 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-4 Notes shall be made pro rata
among all Outstanding Class A-4 Notes, without preference or priority of any
kind.
SECTION 2.02. Execution, Authentication, Delivery, and Dating.
-----------------------------------------------
(a) The Notes shall be manually executed by the Issuer.
(b) Any Note bearing the signature of an individual who was at the
time of execution thereof a proper officer of the Issuer shall bind the Issuer,
notwithstanding that such individual ceases to hold such office prior to the
authentication and delivery of such Note or did not hold such office at the date
of such Note.
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(c) 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 Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. Each Note shall be dated the date of
its authentication.
(d) The Notes may from time to time be executed by the Issuer and
delivered to the Trustee for authentication together with a Trust Request to the
Trustee directing the authentication and delivery of such Notes and thereupon
the same shall be authenticated and delivered by the Trustee in accordance with
such Trust Request.
SECTION 2.03. Transfer and Exchange.
---------------------
(a) The Trustee is hereby appointed "Note Registrar" for the purpose
of registering Notes and transfers of Notes as herein provided. The Note
Registrar shall cause to be kept at the Corporate Trust Office a register (the
"Note Register") in which, subject to such reasonable regulations as the Trustee
may prescribe, the Issuer shall provide for the registration of Notes and of
transfers of Notes.
The Trustee shall not register the transfer of any Note (other than
the transfer of a Note to the nominee of the Clearing Agency) unless the
transferee has executed and delivered to the Trustee a certification to the
effect that either (i) the transferee is not (A) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA or (b) a plan (as defined in Section 4975(e)(1) of the Internal Revenue
Code of 1986, as amended (the "Code")) that is subject to Section 4975 of the
Code (each of the foregoing, a "Benefit Plan"), and is not acting on behalf of
or investing the assets of a benefit Plan, or (ii) the transferee's acquisition
and continued holding of the Note will be covered by a U.S. Department of Labor
Prohibited Transaction Class Exemption. Each transferee of a Book-entry Note
shall be deemed to make one of the foregoing representations.
(b) Subject to Section 2.03(a), upon surrender for registration of
transfer of any Note at the office designated pursuant to Section 9.02 for such
purpose, the Issuer shall execute and the Trustee upon request shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
aggregate original principal amount. The Trustee shall make a notation on any
such new Note of the amount of principal, if any, that has been paid on such
Note.
(c) All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(d) Every Note presented or surrendered for registration of transfer
or for exchange shall (if so required by the Issuer or the Trustee) be duly
endorsed, or be
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<PAGE>
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Trustee duly executed, by the holder thereof or his attorney duly
authorized in writing.
(e) No service charge shall be made for any registration of transfer
or exchange of Notes, but the Issuer or the Trustee may require payment by the
transferor of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Notes, other than exchanges pursuant to Section 10.05 not involving any
transfer.
SECTION 2.04. Mutilated, Destroyed, Lost and Stolen Notes.
-------------------------------------------
(a) If any mutilated Note is surrendered to the Trustee, the Issuer
shall execute and the Trustee shall authenticate and deliver in exchange
therefore a replacement Note of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
(b) If (i) there shall be delivered to the Issuer and the Trustee
evidence to their satisfaction of the destruction, loss or theft of any Note and
(ii) there is delivered to the Issuer, the Trustee and (unless an Insurer
Default has occurred and is continuing) the Insurer such security or indemnity
as may be required by them to save each of them and any agent of either of them
harmless, then, in the absence of actual notice to the Issuer or the Trustee
that such Note has been acquired by a bona fide purchaser, the Issuer shall
execute and upon its written request the Trustee shall authenticate and deliver,
in lieu of any such destroyed, lost or stolen Note, a replacement Note of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
(c) In case the final installment of principal on any such
mutilated, destroyed, lost or stolen Note has become or will at the next Payment
Date become due and payable, the Issuer in its discretion may, instead of
issuing a replacement Note, pay such Note.
(d) Upon the issuance of any replacement Note under this Section,
the Issuer or the Trustee may require the payment by the Noteholder of a sum
sufficient to cover any tax or other governmental charge that may be imposed as
a result of the issuance of such replacement Note.
(e) Every replacement Note issued pursuant to this Section 2.04 in
lieu of any destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the 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.
(f) The provisions of this Section 2.04 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.
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SECTION 2.05. Book-Entry Registration.
-----------------------
Each of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and
Class A-4 Notes, upon original issuance, shall be issued in the form attached as
Exhibit A and delivered to The Depository Trust Company, the initial Clearing
Agency, by, or on behalf of, the Issuer. Each of the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and Class A-4 Notes shall initially be registered on the
Note Register in the name of Cede & Co., the nominee of The Depository Trust
Company, as the initial Clearing Agency, and no Class A-1 Note Owner, Class A-2
Note Owner, Class A-3 Note Owner or Class A-4 Note Owner will receive a
definitive note representing such Note Owner's interest, except as provided in
Section 2.07. Unless and until Definitive Class A-1 Notes, Definitive Class A-2
Notes, Definitive Class A-3 Notes, and/or Definitive Class A-4 Notes
("Definitive Notes") have been issued to the applicable Note Owners pursuant to
Section 2.07:
(a) the provisions of this Section 2.05 shall be in full force and
effect with respect to the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes or
the Class A-4 Notes, as the case may be;
(b) the Issuer, the Servicer and the Trustee, and their officers,
directors, employees and agents, may deal with the Clearing Agency and the
Clearing Agency Participants for all purposes with respect to the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes or Class A-4 Notes, as the case may be
(including the making of distributions on the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes, as the case may be), as the authorized
representatives of the respective Note Owners;
(c) to the extent that the provisions of this Section 2.05 conflict
with any other provisions of this Indenture, the provisions of this Section 2.05
shall control; and
(d) the rights of the respective Note Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and shall be
limited to those established by law and agreements between such respective Note
Owners and the Clearing Agency and/or the Clearing Agency Participants.
Pursuant to the Depository Agreement, unless and until Definitive Notes, are
issued pursuant to Section 2.07, the initial Clearing Agency will make book-
entry transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the related Class A-1 Notes, Class A-
2 Notes, Class A-3 Notes and Class A-4 Notes, as the case may be, to such
Clearing Agency Participants.
For purposes of any provision of this Indenture requiring or
permitting actions with the consent of, or at the direction of, holders of Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes or Class A-4 Notes, as the case may
be, evidencing a specified percentage of the Outstanding Principal Amount of the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes or the Class A-4 Notes,
respectively, such direction or consent may be given by Note Owners (acting
through the Clearing Agency and the Clearing Agency Participants) owning Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes or
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Class A-4 Notes evidencing the requisite percentage of the Outstanding Principal
Amount of such Notes, respectively.
SECTION 2.06. Notice to Clearing Agency Noteholders.
-------------------------------------
Whenever notice or other communication to the Class A-1 Noteholders,
Class A-2 Noteholders, Class A-3 Noteholders or Class A-4 Noteholders is
required under this Agreement, unless and until Definitive Notes shall have been
issued to the related Note Owners pursuant to Section 2.07, the Trustee shall
give all such notices and communications specified herein to be given to such
Noteholders to the applicable Clearing Agency which shall give such notices and
communications to the related Class A-1 Note Owners, Class A-2 Note Owners,
Class A-3 Note Owners or Class A-4 Note Owners in accordance with its applicable
rules, regulations and procedures.
SECTION 2.07. Definitive Notes.
----------------
(a) If (a) (i) the Servicer advises the Issuer in writing that DTC is
no longer willing or able to properly discharge its responsibilities under the
Depository Agreement with respect to the Notes and (ii) the Issuer is unable to
locate a qualified successor, (b) the Servicer, at its option, advises the
Issuer in writing that it elects to terminate the book-entry system with respect
to the Notes or (c) after the occurrence of an "Event of Default" under this
Indenture or a default by the Servicer under the Assignment and Servicing
Agreement, Noteholders evidencing not less than a majority of the aggregate
unpaid Outstanding Principal Amount of the Notes advise the Issuer in writing
that the continuation of a book-entry system with respect to the Notes is no
longer in the best interests of the Note Owners, then the Issuer shall notify
the Trustee and all Note Owners through the Clearing Agency, of the occurrence
of any such event and of the availability of Definitive Notes. Upon surrender by
DTC of the Notes, accompanied by registration and transfer instructions from DTC
for registration, the Issuer shall reissue such Notes as Definitive Notes to the
Noteholders. The Issuer shall not be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Notes, as the case may be,
all references herein to obligations imposed upon or to be performed by DTC
shall be deemed to be imposed upon and performed by the Issuer, to the extent
applicable with respect to such Definitive Notes, and the Issuer shall recognize
the holders of the relevant Definitive Notes as Noteholders hereunder.
(b) Definitive Notes will not be eligible for clearing or settlement
through DTC, Euroclear or Cedel.
SECTION 2.08. Payment of Interest and Principal; Rights Preserved.
---------------------------------------------------
(a) Any installment of interest or principal, payable on any Note
that is punctually paid or duly provided for by the Issuer on the applicable
Payment Date shall be paid to the Person in whose name such Note was registered
at the close of business on the Record Date for such Payment Date by wire
transfer of federal funds to the account and number specified in the Note
Register on such Record Date for such Person or, if no
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such account or number is so specified, then by check mailed to such Person's
address as it appears in the Note Register on such Record Date.
(b) All reductions in the principal amount of a Note effected by
payments of installments of principal made on any Payment Date shall be binding
upon all holders of such Note and of any Note issued upon the registration of
transfer thereof or in exchange therefore or in lieu thereof, whether or not
such payment is noted on such Note. All payments on the Notes shall be paid
without any requirement of presentment but each holder of any Note shall be
deemed to agree, by its acceptance of the same, to surrender such Note at the
Corporate Trust Office against payment of the final installment of principal of
such Note.
SECTION 2.09. Persons Deemed Owners.
---------------------
Prior to due presentment of a Note for registration of transfer, the
Issuer, the Trustee, the Insurer, and any agent of the Issuer, the Trustee or
the Insurer may treat the registered Noteholder as the owner of such Note for
the purpose of receiving payment of principal of and interest on such Note and
for all other purposes whatsoever, whether or not such Note be overdue, and
neither the Issuer, the Trustee, the Insurer nor any agent of the Issuer, the
Trustee or the Insurer shall be affected by notice to the contrary.
SECTION 2.10. Cancellation.
------------
All Notes surrendered for registration of transfer or exchange or
following final payment shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
cancelled by the 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. Subject to the next sentence, all
cancelled Notes held by the Trustee may be disposed of in the normal course of
its business or as directed by an Issuer Order. Promptly following the date on
which all principal of and interest on the Notes has been paid in full and the
Notes have been surrendered to the Trustee, the Trustee shall, if the Insurer
has paid any amount in respect of the Notes under the Policy or otherwise which
has not been reimbursed to it, deliver such surrendered Notes to the Insurer.
SECTION 2.11. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders and shall otherwise comply with Section 312(a) of the Trust
Indenture Act. In the event the Trustee no longer serves as the Note Registrar,
the Issuer (or any other obligor upon the Notes) shall furnish to the Trustee at
least five Business Days before each interest payment date (and in all events in
intervals of not more than 6 months) and at such other times as the Trustee may
request in writing a list in such form and as of such date as the
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Trustee may reasonably require of the names and addresses of Noteholders, and
the Issuer shall otherwise comply with Section 312(a) of the Trust Indenture
Act.
SECTION 2.12. Treasury Notes.
--------------
In determining whether the Noteholders of the required Outstanding
Principal Amount of the Notes have concurred in any direction, waiver or
consent, Notes owned by the Issuer, any other obligor upon the Notes or an
Affiliate of the Issuer shall be considered as though not Outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes which a Responsible
Officer actually knows are so owned shall be so disregarded.
SECTION 2.13. CUSIP Numbers.
-------------
The Issuer in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall indicate the "CUSIP" numbers of
the Notes in notices of redemption and related materials as a convenience to
Noteholders; provided that any such notice may state that no representation is
--------
made as to the correctness of such numbers either as printed on the Notes or as
contained in any notice of redemption and related materials.
ARTICLE III
ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION
AND APPLICATION OF MONEYS; REPORTS
SECTION 3.01. Transaction Accounts; Investments by Trustee.
--------------------------------------------
(a) On or before the Issuance Date, the Trustee shall establish in
the name of the Trustee for the benefit of the Noteholders and the Insurer to
the extent of their interests therein as provided in this Indenture the
following accounts, which accounts shall be Eligible Accounts maintained at the
Corporate Trust Office:
(i) Collection Account;
(ii) Reserve Account; and
(iii) Security Deposit Account.
Subject to the further provisions of this Section 3.01(a), the Trustee shall,
upon receipt or upon transfer from another account, as the case may be, deposit
into such accounts all amounts received by it which are required to be deposited
therein in accordance with the provisions of this Indenture. All such amounts
and all investments made with such amounts, including all income and other gain
from such investments, shall be held by the Trustee in such accounts as part of
the Asset Pool as herein provided, subject to
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withdrawal by the Trustee in accordance with, and for the purposes specified in
the provisions of, this Indenture.
(b) The Trustee shall hold in trust but shall not be required to
deposit in any account specified in Section 3.01(a) any payment received by it
until such time as the Trustee shall have identified to its reasonable
satisfaction the nature of such payment and, on the basis thereof, the proper
account or accounts into which such payment is to be deposited. In determining
into which of the accounts, if any, referred to above any amount received by the
Trustee is to be deposited, the Trustee may conclusively rely (in the absence of
bad faith on the part of the Trustee) on the advice of the Servicer. Unless the
Trustee is advised differently in writing by the Lessee making the payment or by
the Servicer in writing (with the Servicer's instruction controlling), the
Trustee shall assume that any amount remitted to it by such Lessee is to be
deposited into the Collection Account pursuant to Section 3.03. The Trustee may
establish from time to time such deadline or deadlines as it shall determine are
reasonable or necessary in the administration of the Asset Pool after which all
amounts received or collected by the Trustee on any day shall not be deemed to
have been received or collected until the next succeeding Business Day.
(c) Neither the Servicer nor the Trustee shall have any right of set-
off with respect to the Collection Account, the Reserve Account or the Security
Deposit Account or any investment therein.
(d) So long as no Event of Default has occurred and is continuing,
all or a portion of the amounts in the Transaction Accounts, shall be invested
and reinvested by the Trustee pursuant to a Servicer Order in one or more
Eligible Investments. Subject to the restrictions on the maturity of investments
set forth in Section 3.01(f), each such Servicer Order may authorize the Trustee
to make the specific Eligible Investments set forth therein, to make Eligible
Investments from time to time consistent with the general instructions set forth
therein, or to make specific Eligible Investments pursuant to instructions
received in writing or by telegraph or facsimile transmission from the employees
or agents of the Servicer, identified therein, in each case in such amounts as
such Servicer Order shall specify. The Issuer agrees to report as income for
financial reporting and tax purposes (to the extent reportable) all investment
earnings on amounts in the Collection Account, the Reserve Account or the
Security Deposit Account. The Servicer agrees to give appropriate and timely
investment directions to the Trustee so that there will not be more than two
Business Days in any one calendar year at the end of which funds in the
Transaction Accounts are not invested, directly or indirectly, pursuant to a
Servicer Order in Eligible Investments that mature on or after the opening of
business on the next Business Day.
(e) In the event that either (i) the Servicer, shall have failed to
give investment directions to the Trustee by 9:30 A.M., New York City time on
any Business Day on which there may be uninvested cash or (ii) an Event of
Default shall be continuing, the Trustee shall promptly invest and reinvest the
funds then in the Collection Account, the Reserve Account or the Security
Deposit Account, as the case may be, to the fullest extent practicable in
Eligible Investments specified in clause (e) of the definition thereof. All
investments made by the Trustee shall mature no later than the
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maturity date therefore permitted by Section 3.01(f) unless the Trustee shall
have received written confirmation from each Rating Agency, that the liquidation
of such Eligible Investments prior to their respective maturity dates, will not
result in the reduction or withdrawal of such Rating Agency's then-current
rating of the Notes.
(f) Unless payable on demand, no investment of any amount held in
the Transaction Accounts shall mature later than the Business Day immediately
preceding the Payment Date which is scheduled to occur immediately following the
date of investment. All income or other gains (net of losses) from the
investment of moneys deposited in the Transaction Accounts shall be deposited by
the Trustee in such account immediately upon receipt.
(g) Any investment of any funds in the Transaction Accounts and any
sale of any investment held in such accounts, shall be made under the following
terms and conditions:
(i) each such investment shall be made in the name of the Trustee
or in the name of a nominee of the Trustee, in each case in such manner as shall
be necessary to maintain the identity of such investments as assets of the Asset
Pool;
(ii) any certificate or other instrument evidencing such investment
shall be delivered directly to the Trustee or its agent and the Trustee shall
have sole possession of such instrument, and all income on such investment; and
(iii) the proceeds of any sale of an investment shall be remitted
by the purchaser thereof directly to the Trustee for deposit in the account in
which such investment was held.
(h) If any amounts are needed for disbursement from the Transaction
Accounts and sufficient uninvested funds are not collected and available therein
to make such disbursement, in the absence of a Servicer Order for the
liquidation of investments held therein in an amount sufficient to provide the
required funds, the Trustee shall select and cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such accounts.
(i) The Trustee shall not in any way be held liable by reason of any
insufficiency in the Transaction Accounts resulting from losses on investments
made in accordance with the provisions of this Section 3.01 (but the institution
serving as Trustee shall at all times remain liable for its own debt
obligations, if any, constituting part of such investments) or losses incurred
in respect of the liquidation of any Eligible Investment prior to its stated
maturity. The Trustee shall not be liable for the selection of any Eligible
Investment or any investment made by it in accordance with this Section 3.01 on
the grounds that it could have made a more favorable investment or a more
favorable selection for sale of an investment.
SECTION 3.02. Collection of Moneys.
--------------------
(a) On or before the Issuance Date, the Servicer shall designate a
lockbox for the receipt directly from Lessees of all payments under the Leases
and for the
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receipt from IOS Capital or the Lessees of security deposits in respect of any
of the Leases. Amounts so received shall be deposited in the Collection Account
in accordance with the provisions of Section 3.03(a) or, in the case of security
deposits, the Security Deposit Account in accordance with Section 3.08(a).
(b) The Trustee shall from time to time, in accordance with
instructions of the Servicer, withdraw from the Collection Account and pay to
the Servicer for appropriate application by the Servicer any amounts in the
Collection Account which the Servicer advises the Trustee in writing are Other
Lease Payments. Prior to such payment, the Trustee shall have rights to and an
interest in such amounts to the extent (but only to the extent) it is determined
that such amounts actually constitute Transaction Payment Amounts.
(c) If at any time the Issuer shall receive any amount referred to
in Section 3.03(a), it shall hold such payment in trust for the benefit of the
Trustee, the holders of the Notes and the Insurer, shall segregate such payment
from the other property of the Issuer, and shall, promptly (but in no event
later than the next following Business Day) upon receipt, deliver such payment
in the form received to the Trustee.
SECTION 3.03. Collection Account; Payments.
----------------------------
(a) The Servicer shall within two Business Days of receipt (a
"Required Deposit Date") deposit the following funds, as received, into the
Collection Account:
(i) Lease Payments;
(ii) recoveries from Non-Performing Leases to the extent IOS Capital
has not substituted Substitute Leases for such Non-Performing Leases;
(iii) late charges received on delinquent Lease Payments not advanced
by the Servicer;
(iv) proceeds from purchases by IOS Capital of Leases as a result of
breaches of representations and warranties of IOS Capital pursuant to Section
5.04 of the Assignment and Servicing Agreement to the extent IOS Capital has not
substituted Substitute Leases for such Leases;
(v) Casualty Payments;
(vi) Servicer Advances, if any;
(vii) Termination Payments to the extent the Issuer does not reinvest
such Termination Payments in Additional Leases; and
(viii) proceeds for redemption of the Notes in the event the Issuer
exercises its right to redeem the Notes in accordance with Section 2.01(b).
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(b) Unless the Notes have been declared due and payable pursuant to
Section 7.02 and moneys collected by the Trustee are being applied in accordance
with Section 7.06, Available Funds on deposit in the Collection Account
(including the amounts, if any, deposited into the Collection Account from the
Reserve Account and the Security Deposit Account in accordance with the
provisions of Sections 3.04 and 3.08) shall be withdrawn by the Trustee as
directed by the Servicer in the related Servicing Report on or before each
Payment Date from the Collection Account, in the amounts required, for
application in the following order of priority, to make the following Required
Payments (all in accordance with the applicable Servicing Report):
(i) to pay the Insurer the amounts then due and owing in respect of
the Insurer Premium;
(ii) to pay the Servicing Fee;
(iii) to reimburse unreimbursed Servicer Advances in respect of a
prior Payment Date;
(iv) concurrently and pro rata: (a) to make Interest Payments on
--- ----
the Class A-1 Notes; (b) to make Interest Payments on the Class A-2 Notes; (c)
to make Interest Payments on the Class A-3 Notes; and (d) to make Interest
Payments on the Class A-4 Notes;
(v) to pay the Insurer any Reimbursement Amounts due under the
terms of the Insurance Agreement;
(vi) to make the Class A Principal Payment (i) to the Class A-1
Noteholders only, until the Outstanding Principal Amount on the Class A-1 Notes
is reduced to zero, then (ii) to the Class A-2 Noteholders only, until the
Outstanding Principal Amount on the Class A-2 Notes is reduced to zero, then
(iii) to the Class A-3 Noteholders only, until the Outstanding Principal Amount
on the Class A-3 Notes is reduced to zero and finally, (iv) to the Class A-4
Noteholders until the Outstanding Principal Amount on the Class A-4 Notes is
reduced to zero;
(vii) if an Acceleration Event has occurred, to pay the Additional
Principal, if any, as an additional reduction of principal, to the Class A
Noteholders then receiving the Class A Principal Payment, in the order
established in clause (vi) above, until the Outstanding Principal Amount on all
of the Class A Notes has been reduced to zero;
(viii) to make a deposit to the Reserve Account in an amount equal to
the excess of the Required Reserve Amount over the Available Reserve Amount; and
(ix) to pay the Issuer, the balance, if any.
(c) Notwithstanding the foregoing, on any Payment Date the Servicer
shall instruct the Trustee to retain, and the Trustee shall retain, in the
Collection Account an amount equal to all Lease Payments received that were due
after the prior Due Period, and all Casualty Payments, and Termination Payments
received or realized after the
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Determination Date for such Payment Date and shall not distribute any such
amounts on such Payment Date. If at any time any amount or portion thereof
previously distributed pursuant to this Section 3.03(c) shall have been
recovered, or shall be subject to recovery, in any proceeding with respect to
the Issuer or otherwise, then for purposes of determining future distributions
pursuant to this Section 3.03(c) such amount or portion thereof shall be deemed
to have not been previously so distributed.
(d) The Servicer shall submit with the Servicing Report a certificate
(i) setting forth any amounts to be withdrawn (on an item-by-item basis) from
the Collection Account other than as provided in Section 3.03(b), (ii) stating
that none of such amounts are all or part of any amounts required to be retained
in the Collection Account pursuant to this Section 3.03 and (iii) identifying
the Lease or Leases to which such amounts relate.
SECTION 3.04. The Reserve Account.
-------------------
(a) On the Issuance Date, the Issuer has made an initial deposit of
$8,351,582.19 into the Reserve Account. On each Payment Date, the Trustee shall
transfer to the Collection Account from the Reserve Account such amounts as
shall be required by Section 3.04(b).
(b) Prior to each Payment Date the Trustee shall transfer from the
Reserve Account to the Collection Account the amount specified by the Servicer
in the related Servicing Report representing investment earnings on amounts held
in the Reserve Account as of the related Determination Date. If by 12:00 noon,
New York City time, on the Business Day preceding any Payment Date, Available
Funds are insufficient to permit on such Payment Date all distributions required
by Section 3.03(b)(i) through 3.03(b)(vi) (such payments, the "Required
Payments" and such shortfall, an "Available Funds Shortfall"), then, to the
extent of the Available Reserve Amount, the Trustee shall transfer, not later
than the end of such Business Day, from the Reserve Account to the Collection
Account such amount to the extent available as shall be necessary to make on
such Payment Date all Required Payments.
(c) In the event that after giving effect to all the disbursements
required to be made on any Payment Date, the Available Reserve Amount exceeds
the Required Reserve Amount, the Trustee shall transfer, not later than the end
of business on such Payment Date, an amount equal to such excess to the Issuer.
(d) Upon the satisfaction and discharge of this Indenture, any
balance remaining in the Reserve Account, after all obligations to the
Noteholders hereunder have been fully satisfied, shall be paid to reimburse the
Trustee for any amounts owing to it arising from the performance of its
obligations under this Indenture and, then, to the Issuer.
SECTION 3.05. Reports by Trustee; Notices of Certain Payments.
-----------------------------------------------
(a) The Trustee shall within two Business Days after the request of
the Issuer, the Servicer, the Insurer or any Noteholder, deliver to the
requesting Person a written report setting forth the amounts on deposit in the
Collection Account, the Reserve
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Account and the Security Deposit Account and identifying the investments
included therein.
(b) On or prior to each Payment Date, the Servicer shall provide to
the Trustee and the Trustee shall forward to the Insurer, each Rating Agency and
each Noteholder of record a statement setting forth at least the following
information as to the Notes to the extent applicable:
(i) the amount of Interest Payments and payments in reduction of
principal paid on such Payment Date with respect to all Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes and Class A-4 Notes, respectively;
(ii) the aggregate Outstanding Principal Amount of all Outstanding
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes,
respectively and the Pool Factor for each such Class after giving effect to all
payments reported under (i) above;
(iii) the amount of the Servicing Fee and unreimbursed Servicer
Advances paid on such Payment Date pursuant to Section 3.03(b)(ii) and Section
3.03(b)(iii);
(iv) the amount on deposit in the Collection Account, the Reserve
Account and the Security Deposit Account, in each case after giving effect to
all of the withdrawals and applications or transfers required on or before such
Payment Date pursuant to Sections 3.02, 3.03, 3.04 and 3.08;
(v) the Discounted Present Value of Performing Leases and the
Discounted Present Value of Non-Performing Leases as of the last day of the
related Due Period; and
(vi) the aggregate Lease Purchase Amounts for Leases purchased by
the Originator pursuant to Section 5.04 of the Assignment and Servicing
Agreement during the related Due Period.
(c) With each report of the Trustee furnished pursuant to this
Section 3.05 following any Payment Date, the Trustee shall enclose a copy of the
relevant Servicing Report.
(d) Upon request of a Noteholder, the Trustee will provide
information as to the Outstanding Principal Amount of each Class of Notes to
such Noteholder.
SECTION 3.06. Trustee May Rely on Certain Information from Servicer.
-----------------------------------------------------
Pursuant to Sections 5.01, 6.01 and 6.02 of the Assignment and
Servicing Agreement and Sections 3.02 through 3.05 hereof, the Servicer is
required to furnish to the Trustee and/or the Insurer from time to time certain
information and make various calculations which are relevant to the performance
of the Trustee's duties in this Article III and in Article IV of this Indenture.
The Trustee and the Insurer shall be entitled to
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rely in good faith on such information or calculations unless and until the
Insurer or a Responsible Officer of the Trustee, as the case may be, has actual
knowledge, or is advised by any Noteholder or the Insurer (either in writing or
orally with prompt written or telecopied confirmation), that such information or
calculations is or are incorrect.
SECTION 3.07. Optional Deposits by the Insurer; Notice of Waivers.
---------------------------------------------------
(a) The Insurer shall at any time, and from time to time, with
respect to a Payment Date, have the option (but shall not be required, except as
provided in Article IV) to deliver amounts to the Trustee for deposit into the
Collection Account for any of the following purposes: (i) to provide funds in
respect of the payment of fees or expenses of any provider of services to the
Issuer with respect to such Payment Date, or (ii) to include such amount as part
of the Available Funds for such Payment Date to the extent that without such
amount a draw would be required to be made on the Policy. Any amounts so
delivered by the Insurer shall be included in Reimbursement Amounts.
(b) If the Insurer waives any event that might trigger an event of
default under the Insurance Agreement and so notifies the Trustee in writing,
the Trustee shall notify the Rating Agencies of such waiver.
SECTION 3.08. The Security Deposit Account
----------------------------
(a) On the Issuance Date, the Issuer has made an initial deposit into
the Security Deposit Account of $369,442.91 representing security deposits in
respect of the Leases as of the Issuance Date. The Servicer on behalf of the
Issuer shall within two Business Days of receipt thereof deposit into the
Security Deposit Account all additional security deposits received in respect of
the Leases from time to time in the Asset Pool.
(b) Prior to each Payment Date, the Trustee shall transfer from the
Security Deposit Account to the Collection Account the amounts specified by the
Servicer in the related Servicing Report representing (a) investment earnings on
amounts held in the Security Deposit Account as of the related Determination
Date and (b) Retainable Deposits.
(c) The Servicer shall be responsible for the payment of all amounts
held from time to time in the Security Deposit Account not required to be
transferred to the Collection Account in accordance with Section 3.08(b) to the
Lessees or other Persons entitled thereto in accordance with the related Lease
documentation. From time to time, upon written request of the Servicer, the
Trustee shall release from the Security Deposit Account and from the Lien of
this Indenture such amounts as the Servicer shall determine to be necessary for
application as provided in the immediately preceding sentence.
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ARTICLE IV
THE POLICY
SECTION 4.01. Claims Under Policy.
-------------------
(a) On each Determination Date, the Trustee shall determine from the
related Servicer Report with respect to the immediately following Payment Date
the Deficiency Amount, if any. If the Trustee determines that a Deficiency
Amount would exist, the Trustee shall complete a Notice in the form of Exhibit A
to the Policy and submit such Notice to the Insurer no later than 12:00 noon New
York City time on the third Business Day preceding such Payment Date as a claim
for payment in an amount equal to the Deficiency Amount. Amounts paid by the
Insurer pursuant to a claim submitted under this Section 4.01, shall be
deposited by the Trustee into the Collection Account for payment to Noteholders
on the related Payment Date pursuant to Section 3.03(b).
(b) Any notice delivered by the Trustee to the Insurer pursuant to
Section 4.01(a) shall specify the Deficiency Amount claimed under the Policy and
shall constitute a "Notice" (as defined in the Policy) under the Policy. In
accordance with the provisions of the Policy, the Insurer is required to pay to
the Trustee the Deficiency Amount properly claimed thereunder by 12:00 noon, New
York City time, on the later of (i) the third Business Day (as defined in the
Policy) following receipt on a Business Day of the Notice of Claim, and (ii) the
applicable Payment Date. Any payment made under the Policy by the Insurer shall
be applied solely to the payment of the Notes as set forth in the Policy, and
for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Noteholder any Deficiency Amount from the Insurer and (ii) deposit the same in
the Collection Account for payment to Noteholders as provided in Section
3.03(b). For the purposes of clause (d) below, any Deficiency Amount disbursed
by the Trustee from claims made under the Policy shall not be considered payment
by the Issuer with respect to such Notes, and shall not discharge the
obligations of the Issuer with respect thereto. The Insurer shall be entitled to
receive the related Reimbursement Amount pursuant to Section 3.03(b) with
respect to each Insured Payment made by the Insurer.
(d) The Insurer shall, to the extent it makes any payment with
respect to the Notes, become subrogated to the rights of the recipients of such
payments to the extent of such payments. Subject to and conditioned upon any
payment with respect to the Notes by or on behalf of the Insurer, the Trustee
and the Noteholders shall assign to the Insurer all rights to the payment of
interest or principal with respect to the Notes which are then due for payment
to the extent of all payments made by the Insurer, and the Insurer may exercise
any option, vote, right, power or the like with respect to the Notes to the
extent that it has made payment pursuant to the Policy. To evidence such
subrogation, the Note Registrar (as defined in this Indenture) shall note the
Insurer's rights as subrogee upon the register of Noteholders upon receipt from
the Insurer of proof of payment by the Insurer of any Insured Payment (as
defined in the Policy). The
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foregoing subrogation shall in all cases be subject to the rights of the
Noteholders to receive all Insured Payments (as defined in the Policy) in
respect of the Notes.
(e) The Trustee shall keep a complete and accurate record of all
Policy proceeds deposited into the Collection Account and the allocation of such
funds to payment of interest on and principal paid in respect of any Note. The
Insurer shall have the right to inspect such records at reasonable times upon
one Business Day's prior notice to the Trustee.
(f) The Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Insurer under the Policy. Notwithstanding any
other provision of this Indenture or any Transaction Documents, the Noteholders
are not entitled to make any claims under the Policy or institute proceedings
directly against the Insurer.
SECTION 4.02. Preference Claims.
-----------------
(a) In the event that the Trustee has received a certified copy of an
order of the appropriate court that any amount previously distributed to a
Noteholder in respect of any Note has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Trustee shall so notify
the Insurer, shall comply with the provisions of the Policy to obtain payment by
the Insurer of such avoided payment, and shall, at the time it provides notice
to the Insurer, notify Holders of the Notes by mail that, in the event that any
Noteholder's payment is so recoverable, such Noteholder will be entitled to
payment pursuant to the terms of the Policy. The Trustee shall furnish to the
Insurer its records evidencing the payments of principal of and interest on the
Notes, if any, which have been made by the Trustee and subsequently recovered
from Noteholders, and the dates on which such payments were made. Pursuant to
the terms of the Policy, the Insurer will make such payment on behalf of the
Noteholder to the receiver or trustee in bankruptcy named in the final order of
the court exercising jurisdiction on behalf of the Noteholder and not to any
Noteholder directly (unless a Noteholder has returned principal or interest on
the Notes to such receiver or trustee in bankruptcy, in which case the Insurer
will make such payment to the Trustee for payment to such Noteholder upon proof
of such payment reasonably satisfactory to the Insurer).
(b) The Trustee shall promptly notify the Insurer of any proceeding
or the institution of any action (of which the Trustee has actual knowledge)
seeking the avoidance as a preferential transfer under applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (a "Preference Claim")
of any payment made with respect to the Notes. Each Holder, by its purchase of
Notes, and the Trustee hereby agrees that so long as an Insurer Default shall
not have occurred and be continuing, the Insurer may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim, including, without limitation, (i) the
direction of any appeal of any order relating to any Preference Claim and (ii)
the posting of any surety, supersedeas or performance bond pending any such
appeal. In addition, and without limitation of the foregoing, as set forth in
Section 4.01(d), the Insurer shall be subrogated to, and each Noteholder and the
Trustee hereby delegate and assign, to the fullest extent permitted by law, the
rights of the Trustee and
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each Noteholder in the conduct of any proceeding with respect to a Preference
Claim, including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Preference Claim.
SECTION 4.03. Surrender of Policy.
--------------------
The Trustee shall surrender the Policy to the Insurer for cancellation
upon the expiration of the Policy in accordance with the terms thereof.
ARTICLE V
RELEASE OF LEASES AND INTERESTS IN EQUIPMENT
SECTION 5.01. Release of Equipment.
--------------------
Subject to the satisfaction of the provisions of Section 5.02, the
Trustee shall release the Trustee's security interest in the Issuer's interest
in the Equipment from the Lien of the Indenture upon receipt from the Servicer
of written certification of the occurrence of: (a) the sale of such Equipment
pursuant to Section 4.03(b) of the Assignment and Servicing Agreement, or (b)
the release of the related Lease from the Lien of this Indenture.
SECTION 5.02. Release of Leases Upon Final Lease Payment.
------------------------------------------
In the event that the Trustee shall have received notice (either in
writing or orally with prompt written or telecopied confirmation) from the
Servicer that the Trustee has received with respect to any Lease (i) the final
Lease Payment due and payable under such Lease, (ii) a Termination Payment in
respect of such Lease, (iii) a Lease Purchase Amount in respect of such Lease,
(iv) a Casualty Payment under such Lease (and, following such final Lease
Payment, Casualty Payment, Lease Purchase Amount or Termination Payment, no
further payments (other than Other Lease Payments) on or in respect of such
Lease are or will be due and payable), or (iv) the full amount of any recoveries
with respect to any such Lease that is a Non-Performing Lease, such Lease shall
be released from the lien of this Indenture and returned to the Issuer.
SECTION 5.03. Execution of Documents.
----------------------
The Trustee shall promptly execute and deliver such documents,
including without limitation partial releases and termination statements (which
shall be furnished to the Trustee by the Issuer), and take such other actions as
the Issuer, by Issuer Request, may reasonably request (including the return of
any Lease which has been released) to fully effectuate the release from this
Indenture of any Lease and interests in the related Equipment required to be so
released pursuant to Sections 5.01 or 5.02.
SECTION 5.04. Further Release of Collateral.
-----------------------------
Notwithstanding any provision of this Indenture to the contrary, any
amounts properly retained by the Servicer pursuant to Section 4.03, 4.04 and
4.05 of the Assignment and Servicing Agreement are, without further action by
the Trustee released
41
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from the Lien of this Indenture.
42
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ARTICLE VI
SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER
SECTION 6.01. Servicer Events of Default.
--------------------------
If a Servicer Event of Default has occurred and is continuing, the
Trustee shall, upon the written request of the Insurer (so long as no Insurer
Default has occurred and is continuing ) or the holders of 66-2/3% of the then
Outstanding Principal Amount of the Notes (if an Insurer Default has occurred
and is continuing), give notice in writing to the Servicer of the termination of
all of the rights and obligations of the Servicer under the Assignment and
Servicing Agreement (but none of IOS Capital's obligations pursuant to Section 5
of the Assignment and Servicing Agreement, which shall survive such
termination). On and after the giving of such written notice, all rights and
obligations of the Servicer under the Assignment and Servicing Agreement,
including, without limitation, the Servicer's right thereunder to receive the
Servicing Fee, but none of the Servicer obligations pursuant to Section 4
thereof, shall pass to, be vested in, and be assumed by the Trustee, and the
Trustee shall be authorized to, and shall, execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such termination and of such passing,
vesting, and assumption; provided that in performing the duties of the Servicer
--------
under the Assignment and Servicing Agreement the Trustee shall at all times be
deemed to be acting as the Trustee hereunder and shall be entitled to the full
benefit of all the protections, benefits, immunities and indemnities provided in
this Indenture for or with respect to the Trustee, including without limitation
those set forth in Article VIII hereof.
SECTION 6.02. Substitute Servicer.
-------------------
Notwithstanding the provisions of Section 6.01, the Trustee may, if it
shall be unwilling to continue to act as the successor to the Servicer in
accordance with Section 6.01, or shall, if it is unable to continue to so act or
is so instructed in writing by the Insurer (if no Insurer Default has occurred
and is continuing) or the holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes (if an Insurer Default has occurred and is continuing),
appoint a successor to the Servicer in accordance with the provisions of Section
10.03 of the Assignment and Servicing Agreement.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
SECTION 7.01. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
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(a) default in the payment of any Interest Payment on any Note when
the same becomes due and payable; or
(b) default in the payment of the principal of the Notes at Stated
Maturity; or
(c) default in the observance or performance of any covenant or
agreement of the Issuer 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
Issuer made in this Indenture 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 30 days (or for such longer
period, not in excess of 90 days, as may be reasonably necessary to remedy such
default if the Servicer delivers an Officer's Certificate to the Trustee to the
effect that the Issuer has commenced, or will promptly commence and diligently
pursue, all reasonable efforts to remedy such default and such default can be
remedied in 90 days or less) after there shall have been given, by registered or
certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by
the Holders of at least 25% of the Outstanding Principal Amount of the Notes, 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; or
(d) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Issuer in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (ii) a decree or order adjudging the
Issuer a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment, or composition of or in respect
of the Issuer under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
(e) the commencement by the Issuer of a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency, reorganization, or
other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or order
for relief in respect of the Issuer in an involuntary case or proceeding under
any applicable federal or state bankruptcy, insolvency, reorganization, or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable federal or state law, or
the consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or similar official of the Issuer or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the Issuer's failure to pay its debts generally as
44
<PAGE>
they become due, or the taking of corporate action by the Issuer in furtherance
of any such action; or
(f) the occurrence and continuance of a Servicer Event of Default.
The Issuer shall deliver to the Trustee and the Insurer and the Rating
Agencies, within three days after obtaining knowledge of the occurrence thereof,
written notice in the form of an Officer's Certificate of any event which with
the giving of notice and the lapse of time would become an Event of Default
under (c), (d), (e) or (f) above, its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 7.02. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
(a) If an Event of Default occurs and is continuing, then, subject to
the provisions of Section 7.02(c) below, and in every such case, the Trustee
may, and (if so directed by holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes) shall, declare the unpaid principal amount of the Notes to
be immediately due and payable at par together with all accrued and unpaid
interest thereon, without presentment, demand, protest or notice of any kind,
all of which are hereby waived by the Issuer.
(b) Subject to Section 7.02(c) below, the holders of 66-2/3% of the
then Outstanding Principal Amount of the Notes may direct the time, method and
place of conducting any proceedings for any remedy available to the Trustee or
of exercising any trust or power conferred on it.
(c) Subject only to provisions hereof expressly stated to be
applicable notwithstanding this Section 7.02 and notwithstanding any other
contrary provision of this Indenture, so long as the Policy remains in effect
and no Insurer Default has occurred and is continuing, and irrespective of any
contrary instruction from the holders of any Notes but subject to any further
conditions or requirements of this Indenture, the Trustee (i) shall not declare
the Notes to be immediately due and payable or waive any Event of Default or
exercise any remedies upon the occurrence of an Event of Default, except at the
written direction of the Insurer, (ii) shall upon the occurrence of an Event of
Default declare the Notes to be immediately due and payable or waive any such
Event of Default upon the written direction of the Insurer, and (iii) shall upon
the occurrence and continuance of an Event of Default, exercise or refrain from
exercising available remedies in accordance with the written direction and
control of the Insurer.
(d) At any time after such an Event of Default has occurred and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Insurer (if no Insurer
Default has occurred and is continuing) or the holders of Notes evidencing 66-
2/3% of the then Outstanding Principal Amount of the Notes (if an Insurer
Default has occurred and is continuing) by written notice to the Issuer and the
Trustee, may rescind and annul such declaration and its consequences if the
Issuer has paid or deposited with the Trustee a sum sufficient to pay:
(i) all Principal Payments on any Class A Notes which have
become due otherwise than by such declaration of acceleration and
interest thereon from the date when the same first
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became due until the date of payment or deposit at the
appropriate Note Interest Rate,
(ii) all Interest Payments due with respect to any Class A
Notes and, to the extent that payment of such interest is lawful,
interest upon overdue interest from the date when the same first
became due until the date of payment or deposit at a rate per
annum equal to the appropriate Note Interest Rates, and
(iii) all sums paid or advanced by the Trustee hereunder and
all sums due to the Insurer and the reasonable compensation,
expenses, disbursements, and advances of the Trustee and the
Insurer and their respective agents and counsel;
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 7.03. Remedies.
--------
(a) If an Event of Default occurs and is continuing of which a
Responsible Officer has actual knowledge, the Trustee shall immediately give
notice to each Noteholder and the Rating Agencies as set forth in Section 8.02.
(b) Following any acceleration of the Notes, the Trustee shall have
all of the rights, powers and remedies with respect to the Asset Pool as are
available to secured parties under the Uniform Commercial Code or other
applicable law. Such rights, powers and remedies may be exercised by the Trustee
in its own name as trustee of an express trust.
(c) If an Event of Default specified in Section 7.01(a) or
7.01(b)occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Issuer for the
whole amount of principal and interest remaining unpaid.
(d) In exercising its rights and obligations under this Section 7.03,
the Trustee may sell the assets in the Asset Pool; provided that, if the Event
--------
of Default involves other than non-payment of principal or interest on the
Notes, then such sale must be for an amount greater than or equal to amounts due
under clauses first through fourth in Section 7.06 unless directed otherwise by
----- ------
the Insurer (if no Insurer Default has occurred and is continuing) or the
holders of 66-2/3% of the then Outstanding Principal Amount of the Notes (if an
Insurer Default has occurred and is continuing). None of the Trustee, the
Insurer nor any Noteholder shall have any rights against the Issuer other than
to enforce the Lien of this Indenture and to sell the assets in the Asset Pool.
SECTION 7.04. Trustee Shall File Proofs of Claim.
----------------------------------
(a) In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition,
or other judicial proceeding relative to the Issuer, the Seller, IOS Capital,
the Servicer or any
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<PAGE>
other obligor upon the Notes or the other obligations secured hereby or relating
to the property of the Issuer, the Seller, IOS Capital, the Servicer or of such
other obligor or their creditors, the Trustee (irrespective of whether the
principal of the Notes 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 on the Issuer, the Seller, IOS Capital or the Servicer for the
payment of overdue principal or interest or any such other obligation) shall by
intervention in such proceeding or otherwise,
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and any other obligation
secured hereby and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee, the Insurer (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee and the Insurer and their respective agents and counsel) and the
Noteholders allowed in such judicial proceeding, provided, however, that the
-------- -------
Trustee shall file such proof of claim on behalf of the Insurer only upon the
Insurer's written direction and on behalf of the Noteholders only at the written
direction of the holders of not less than 66-2/3% of the then Outstanding
Principal Amount of the Notes; and
(ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator, or
other similar official in any such judicial proceeding is hereby authorized by
each Noteholder and the Insurer 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 Noteholders to pay to the Trustee and the Insurer any amount due them for
the reasonable compensation, expenses, disbursements and advances of the Trustee
and the Insurer and their respective agents and counsel, and any other amounts
due the Trustee under Section 7.06.
(b) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to 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 holder thereof or to authorize the Trustee to vote in
respect of the claim of any Noteholder in any such proceeding.
SECTION 7.05. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the holders
of the Notes and the Insurer.
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SECTION 7.06. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article following
an Event of Default, and any moneys that may then be held or thereafter received
by the Trustee shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of the entire amount due
on account of principal or interest, upon presentation of the Notes and
surrender thereof:
first to the payment of all costs and expenses of collection
-----
incurred by the Trustee, the Insurer and the Noteholders (including the
reasonable fees and expenses of any counsel to the Trustee, the Insurer and
the Noteholders) and all fees and expenses (including legal fees and
expenses) owed to the Trustee under this Indenture and the Assignment and
Servicing Agreement;
second if the person then acting as Servicer under the Assignment
------
and Servicing Agreement is not IOS Capital or an Affiliate of IOS Capital,
to the payment of all Servicing Fees and unreimbursed Servicer Advances
then due to such Person;
third first, pro rata to the payment of all accrued and unpaid
-----
interest on the Outstanding Class A-1 Principal Amount, Outstanding Class
A-2 Principal Amount, Outstanding Class A-3 Principal Amount and
Outstanding Class A-4 Principal Amount, respectively, to the date of
payment thereof, including (to the extent permitted by applicable law)
interest on any overdue installment of interest and principal from the
maturity of such installment to the date of payment thereof at the rate per
annum equal to the Class A-1 Note Interest Rate, Class A-2 Note Interest
Rate and Class A-3 Note Interest Rate and Class A-4 Note Interest Rate,
respectively, second, to the payment of the Outstanding Class A-1 Principal
Amount, third, to the payment of the Outstanding Class A-2 Principal
Amount, fourth, to the payment of the Outstanding Class A-3 Principal
Amount and fifth, to the payment of the Outstanding Class A-4 Principal
Amount; provided, that the Noteholders may allocate such payments for
--------
interest, principal and premium at their own discretion, except that no
such allocation shall affect the allocation of such amounts or future
payments received by any other Noteholder;
fourth to the payment of amounts then due the Insurer under this
------
Indenture, including the Insurer Premium (other than amounts referred to in
clause fifth below);
-----
fifth to the payment to the Insurer of any Reimbursement Amounts;
-----
sixth if the Person then acting as Servicer is IOS Capital or an
-----
Affiliate of IOS Capital, to the payment of all Servicing Fees and
unreimbursed Servicer Advances then due to such Person; and
seventh to the payment of the remainder, if any, to the Issuer or any
-------
other Person legally entitled thereto.
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SECTION 7.07. Limitation on Suits.
-------------------
None of the Noteholders nor the Insurer 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 or the Insurer, as the case may be, has
previously given written notice to the Trustee of a continuing Event of Default;
(ii) the holders of not less than 66-2/3% of the then Outstanding
Principal Amount of the Notes or the Insurer, as the case may be, shall have
made written request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(iii) such Noteholder or Noteholders or the Insurer, as the case may
be, have offered to the Trustee indemnity satisfactory to it against the costs,
expenses and liabilities to be incurred in compliance with such request;
(iv) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
(v) so long as any of the Notes remain Outstanding, no direction
inconsistent with such written request has been given to the Trustee during such
30-day period by the holders of 66-2/3% of the then Outstanding Principal Amount
of the Notes or the Insurer, as the case may be; and
(vi) in the case of any proceeding instituted by any Noteholder
without the written consent of the Insurer, an Insurer Default has occurred and
is continuing;
it being understood and intended that no one or more 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 Noteholders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Noteholders. It is further understood and intended that so long as any portion
of the Notes remains Outstanding, IOS Capital shall not have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture
(other than for the enforcement of Sections 3.03(b), 3.04(b), 3.05, 3.06, 4.01
and 4.02 hereof) or for the appointment of a receiver or trustee (including,
without limitation, a proceeding under the Bankruptcy Code), or for any other
remedy hereunder. Nothing in this Section 7.07 shall be construed as limiting
the rights of otherwise qualified Noteholders to petition a court for the
removal of a Trustee pursuant to Section 8.08(h) hereof.
SECTION 7.08. Unconditional Right of Noteholders to Receive Principal
-------------------------------------------------------
and Interest.
- ------------
Notwithstanding any other provision in this Indenture, other than the
provisions hereof limiting the right to recover amounts due on the Notes to
recoveries from the property of the Asset Pool, the holder of any Note shall
have the absolute and
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unconditional right to receive payment of the principal of and interest on such
Note on the Maturities for such payments, including the Stated Maturity, and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Noteholder.
SECTION 7.09. Restoration of Rights and Remedies.
----------------------------------
If the Trustee, the Insurer 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 Trustee, the Insurer or to such Noteholder, then and
in every such case, subject to any determination in such proceeding, the Issuer,
the Trustee, the Insurer and the Noteholders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee, the Insurer and the Noteholders continue as though no
such proceeding had been instituted.
SECTION 7.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost, or stolen Notes in Section 2.04 (f), no
right or remedy herein conferred upon or reserved to the Insurer or to 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 or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 7.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee, the Insurer or of any holder of
any Note to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee, the Insurer or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee, the Insurer or by the Noteholders, as the case may be.
SECTION 7.12. Control by Noteholders.
----------------------
Except as may otherwise be provided in this Indenture regarding
control by the Insurer, until such time as the conditions specified in Section
11.01(a)(i) have been satisfied in full, the holders of 66-2/3% of the then
Outstanding Principal Amount of the Notes 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.
Notwithstanding the foregoing,
(i) no such direction shall be in conflict with any rule of law or
with this Indenture;
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(ii) the Trustee shall not be required to follow any such direction
which the Trustee reasonably believes might result in any personal liability on
the part of the Trustee for which the Trustee is not indemnified to its
satisfaction; and
(iii) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with any such direction; provided that the
--------
Trustee shall give notice of any such action to each Noteholder.
SECTION 7.13. Undertaking for Costs.
---------------------
All parties to this Indenture agree (and each holder of any Note by
its 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,
suffered 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,
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 any suit instituted by the Trustee
or the Insurer, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate more than 10% of the then Outstanding
Principal Amount of the Notes, or to any suit instituted by any Noteholder for
the enforcement of the payment of the principal of or interest on any Note on or
after the Maturities for such payments, including the Stated Maturity as
applicable.
SECTION 7.14. Waiver of Stay or Extension Laws.
--------------------------------
The Issuer 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, which may affect the covenants or the
performance of this Indenture; and the Issuer (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 Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 7.15. Sale of Asset Pool.
------------------
(a) The power to effect any sale of any portion of the Asset Pool
described pursuant to Section 7.03 shall not be exhausted by any one or more
sales as to any portion of the Asset Pool remaining unsold, but shall continue
unimpaired until the entire Asset Pool shall have been sold or all amounts
referred to in clauses first through fifth in Section 7.06 shall have been paid.
----- -----
The Trustee may from time to time, upon directions in accordance with Section
7.12, postpone any public sale by public announcement made at the time and place
of such sale. For any public sale of the Asset Pool, the Trustee shall have
provided each Noteholder with notice of such sale at least two weeks in advance
of such sale which notice shall specify the date, time and location of such
sale.
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(b) To the extent permitted by applicable law, the Trustee shall not
in any private sale sell to a third party the Asset Pool, or any portion thereof
unless,
(i) until such time as the conditions specified in Section 11.01
have been satisfied in full, the Insurer (if no Insurer Default has occurred and
is continuing) or the holders of not less than 66-2/3% of the then Outstanding
Principal Amount of the Notes (if an Insurer Default has occurred and is
continuing) consent to or direct the Trustee in writing to make such sale; or
(ii) the proceeds of such sale would be not less than the sum of all
amounts due to the Trustee hereunder and all amounts referred to in clause first
-----
through third of Section 7.06 on the Payment Date next succeeding the date of
-----
such sale.
The foregoing provisions shall not preclude or limit the ability of the Trustee
to purchase all or any portion of the Asset Pool at a private sale.
(c) In connection with a sale of all or any portion of the Asset
Pool:
(i) any one or more Noteholders or the Insurer may bid for and
purchase the property offered for sale, and upon compliance with the terms of
sale may hold, retain, and possess and dispose of such property, without further
accountability, and any Noteholder or the Insurer, as the case may be, may, in
paying the purchase money therefore, deliver in lieu of cash any Outstanding
Notes or claims for interest thereon (or, in the case of the Insurer, surrender
the Insurer's subrogation rights with respect to such Outstanding Notes or
claims for interest thereon) for credit in the amount that shall, upon
distribution of the net proceeds of such sale, be payable thereon, and the
Notes, in case the amounts so payable thereon shall be less than the amount due
thereon, shall be returned to the Noteholders after being appropriately stamped
to show such partial payment;
(ii) the Trustee shall execute and deliver an appropriate instrument
of conveyance transferring its interest, without representation, warranty or
recourse, in any portion of the Asset Pool in connection with a sale thereof;
(iii) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its interest in any
portion of the Asset Pool in connection with a sale thereof, and to take all
action necessary to effect such sale; and
(iv) no purchaser or transferee at such a sale shall be bound to
ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(d) The method, manner, time, place and terms of any sale of all or
any portion of the Asset Pool shall be commercially reasonable.
(e) The provisions of this Section 7.15 shall not be construed to
restrict the ability of the Trustee to exercise any rights and powers against
the Issuer or the Asset Pool that are vested in the Trustee by this Indenture,
including, without limitation, the power of the Trustee to proceed against the
collateral subject to the lien of
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this Indenture and to institute judicial proceedings for the collection of any
deficiency remaining thereafter.
(f) The purchase price received by the Trustee in respect of any
sale made in accordance with this Section 7.15 shall be deemed conclusive and
binding on the parties hereto, the Insurer and the Noteholders.
ARTICLE VIII
THE TRUSTEE
SECTION 8.01. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default known to
the Trustee:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and the other Transaction
Documents to which it is a party, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the 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
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) In case an Event of Default has occurred and is continuing to
the actual knowledge of a Responsible Officer of the Trustee, 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 person would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own grossly negligent action, its own grossly
negligent failure to act, or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was grossly negligent in ascertaining the pertinent facts;
(iii) 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 Noteholders
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in accordance with Section 7.12 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; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any 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 for believing that
repayment of such funds or indemnity satisfactory to it, against such risk or
liability is not assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 8.02. Notice of Defaults or Events of Default.
---------------------------------------
Within two Business Days after a Responsible Officer obtaining
knowledge of the occurrence of any Default or Event of Default hereunder, the
Trustee shall transmit, by certified mail return receipt requested, hand
delivery or overnight courier, to (a) all Noteholders, as their names and
addresses appear in the Note Register, (b) the Insurer and (c) the Rating
Agencies, notice of such Default or Event of Default hereunder known to the
Trustee, unless such Default or Event of Default shall have been cured or
waived.
SECTION 8.03. Certain Rights of Trustee.
-------------------------
(a) Subject to the provisions of Section 8.01:
(i) the Trustee may conclusively rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, note,
debenture, other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties (and the Trustee need not investigate any fact or matter stated in the
document);
(ii) any request or direction or action of the Issuer mentioned
herein shall be sufficiently evidenced by an Issuer Order;
(iii) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate;
(iv) the Trustee may consult with counsel as to legal matters and the
advice of any such counsel selected by the Trustee shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
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(v) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Noteholders or the Insurer pursuant to this Indenture, unless such
Noteholders or the Insurer shall have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
(vi) 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, direction, consent, order, note,
debenture, other evidence of indebtedness, or other paper or document, unless
requested in writing to do so by the Insurer (so long as no Insurer Default has
occurred and is continuing) and having been indemnified to its satisfaction by
the Insurer against the costs, expenses and liabilities that it may incur in
making such investigation, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Issuer, personally or by agent or attorney;
(vii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees and the Trustee shall not be
responsible for any misconduct or negligence on the part of any agent, attorney,
custodian or nominee appointed with due care by it hereunder;
(viii) the Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers;
(ix) the Trustee shall not be required to give any bond or surety
in respect of the performance of its powers and duties hereunder;
(x) the Trustee shall not be bound to ascertain or inquire as to
the performance or observance of any covenants, conditions or agreements on the
part of the Issuer;
(xi) the permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its gross negligence or willful default; and
(xii) in the event that the Trustee is also acting as paying agent
or transfer agent and registrar hereunder, the rights and protections afforded
to the Trustee pursuant to this Article VIII shall also be afforded to such
paying agent or transfer agent or registrar.
(b) The recitals contained herein and in the Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Issuer, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes, except to the extent provided by the Trustee's
certificate of authentication on the Notes. The
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Trustee shall not be accountable for the use or application by the Issuer of the
proceeds of the Notes.
SECTION 8.04. May Hold Notes.
--------------
The Trustee, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Issuer with the same
rights it would have if it were not Trustee.
SECTION 8.05. Money Held in Trust.
-------------------
Money and investments held by the Trustee shall be held in trust in
one or more trust accounts hereunder, but need not be segregated from other
funds except to the extent required by law.
SECTION 8.06. Compensation, Reimbursement, etc.
--------------------------------
The Servicer agrees:
(a) to pay to the Trustee from time to time such compensation for all
services rendered by it hereunder as the Issuer and the Trustee may agree in
writing (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust); and
(b) to reimburse the Trustee upon its request, for all reasonable
expenses, disbursements, and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement, or advance as may be attributable to its
negligence or bad faith.
SECTION 8.07. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall (a) be a
corporation organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers; (b) have a combined capital and surplus
of at least $50,000,000; (c) be subject to supervision or examination by federal
or state authority; and (d) at the time of appointment, shall have long-term
debt obligations (or, if the Trustee does not have outstanding long-term debt
obligations and is a subsidiary of a holding company, which holding company
shall have long-term obligations) having a credit rating of at least "A-" from
S&P and "Baa3" from Moody's.
If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, 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 the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
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This Indenture shall always have a Trustee who satisfies the
requirements of Section 310(a)(1) of the Trust Indenture Act. The Trustee is
subject to the provisions of Section 310(b) of the Trust Indenture Act regarding
disqualification of a trustee upon acquiring any conflicting interest.
SECTION 8.08. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 8.09.
(b) The Trustee may resign at any time by giving written notice
thereof to the Issuer, the Insurer (if no Insurer Default has occurred and is
continuing) and, if an Insurer Default has occurred and is continuing, the
Noteholders, by mailing notice of resignation by first-class mail, postage
prepaid, to the Issuer or the Insurer at their respective addresses set forth in
the Assignment and Servicing Agreement and to Noteholders at their addresses
appearing on the Note Register.
(c) The Trustee may be removed at any time by written notice of the
Insurer (if no Insurer Default has occurred and is continuing) or the holders of
not less than 66-2/3% of the then Outstanding Principal Amount of the Notes (if
an Insurer Default has occurred and is continuing) delivered to the Trustee and
the Issuer.
(d) If the Trustee shall resign, be removed, or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Issuer, with the consent of the Insurer (if no Insurer Default has occurred and
is continuing) or the holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes (if an Insurer Default has occurred and is continuing), by
an act of the Issuer, shall promptly appoint a successor Trustee.
(e) If no successor Trustee shall have been so appointed as
hereinbefore provided and accepted appointment in the manner hereinafter
provided within 30 days after any such resignation or removal, existence of
incapability, or occurrence of such vacancy, the Trustee, the Insurer (if no
Insurer Default has occurred and is continuing) or any Noteholder (if an Insurer
Default has occurred and is continuing) may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Issuer shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Insurer at its
address set forth in the Assignment and Servicing Agreement and to all
Noteholders as their names and addresses appear in the Note Register and to each
Rating Agency. Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust Office.
(g) The Issuer may remove the Trustee if the Trustee fails to comply
with Section 8.07 of this Indenture.
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(h) If the Trustee after written request by any Noteholder who has
been a Noteholder for at least six months fails to comply with Section 310(b) of
the Trust Indenture Act, such Noteholder may petition any court of competent
jurisdiction, for the removal of the Trustee and the appointment of a successor
Trustee acceptable to the Insurer.
(i) The Issuer (with the consent of the Insurer, if no Insurer
Default has occurred and is continuing) may and shall at the direction of the
Insurer (if no Insurer Default has occurred and is continuing) or the
Noteholders evidencing more than 25% of the aggregate Outstanding Principal
Amount of the Notes (if an Insurer Default has occurred and is continuing),
remove the Trustee if the Trustee ceases to be eligible to continue as such
under this Indenture and fails to resign after written request therefor.
SECTION 8.09. Acceptance of Appointment by Successor.
--------------------------------------
(a) Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer and to the retiring Trustee an instrument
accepting such appointment, 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, trusts and duties of the retiring Trustee; but, on request of the Issuer
or the successor Trustee, such retiring Trustee shall, upon payment of its
charges and expenses, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Issuer shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
(b) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 8.10. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
- --------
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such Person
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. In case any Notes shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion,
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Notes so authenticated with the same effect as if such successor
Trustee had itself authenticated such Notes. The Trustee shall provide prompt
written notice to each Rating Agency of any event referenced in this Section
8.10.
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SECTION 8.11. Co-Trustees and Separate Trustees.
---------------------------------
(a) At any time or times, if the Issuer, the Trustee or any
Noteholder determines that it is necessary for the purpose of meeting the legal
requirements of any jurisdiction in which any of the Asset Pool may at the time
be located, the Issuer and the Trustee (with the written consent of the Insurer,
if no Insurer Default has occurred and is continuing) shall have power to
appoint, and, upon the written request of the Trustee or the Insurer (if no
Insurer Default has occurred and is continuing) or the holders of a majority of
the then Outstanding Principal Amount of the Notes (if an Insurer Default has
occurred and is continuing), the Issuer shall for such purpose join with the
Trustee in the execution, delivery, and performance of all instruments and
agreements necessary or proper to appoint, one or more Persons either to act as
co-trustee, jointly with the Trustee, of all or any part of such Asset Pool, or
to act as separate trustee of any such property, in either case with such powers
as may be provided in the instrument of appointment, and to vest in such Person
or Persons in the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section. If the
Issuer does not join in such appointment within 15 days after the receipt by it
of a request so to do, or in case an Event of Default has occurred and is
continuing, the Trustee (if no Insurer Default has occurred and is continuing),
or the holders of a majority of the then Outstanding Principal Amount of the
Notes (if an Insurer Default has occurred and is continuing), alone shall have
power to make such appointment.
(b) Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Issuer.
(i) Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms:
(ii) The Notes shall be authenticated and delivered and all rights,
powers, duties, and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder, shall be exercised, solely by
the Trustee.
(iii) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such appointment
shall be conferred or imposed upon and exercised or performed by the Trustee or
by the Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate trustee,
except to the extent that, under any law of any jurisdiction in which any
particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-trustee or separate
trustee.
(iv) The Trustee at any time, by an instrument in writing executed
by it, with the concurrence of the Issuer evidenced by an Issuer Order and the
written concurrence of the Insurer (if no Insurer Default has occurred and is
continuing), may
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accept the resignation of or remove any co-trustee or separate trustee appointed
under this Section, and, in case an Event of Default has occurred and is
continuing, the Trustee shall have power to accept the resignation of, or
remove, any such co-trustee or separate trustee without the concurrence of the
Issuer (if no Insurer Default has occurred and is continuing). Upon the written
request of the Trustee, the Issuer shall join with the Trustee in the execution,
delivery and performance of all instruments and agreements necessary or proper
to effectuate such resignation or removal. A successor to any co-trustee or
separate trustee so resigned or removed may be appointed in the manner provided
in this Section.
(v) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee or any other such trustee
hereunder and the Trustee shall not be personally liable by reason of any act or
omission of any co-trustee or other such separate trustee hereunder selected by
the Trustee with due care or appointed in accordance with directions to the
Trustee pursuant to this Section 8.11.
(vi) Any Act of Noteholders delivered to the Trustee shall be deemed
to have been delivered to each such co-trustee and separate trustee.
SECTION 8.12. Acceptance by Trustee.
---------------------
The Trustee hereby acknowledges the conveyance of the Asset Pool and
the receipt of the Leases and the other assets in the Asset Pool granted by the
Issuer hereunder and declares that the Trustee, through a custodian, will hold
such Leases and other Asset Pool conveyed by the Issuer in trust, for the use
and benefit of all Noteholders and the Insurer subject to the terms and
provisions hereof.
SECTION 8.13. Preferential Collection of Claims Against the Issuer.
----------------------------------------------------
The Trustee is subject to Trust Indenture Act Section 311(a),
excluding any creditor relationship listed in Trust Indenture Act Section
311(b). A Person who has resigned or been removed as Trustee shall be subject
to Trust Indenture Act Section 311(a) to the extent indicated therein.
SECTION 8.14. Reports by Trustee to Noteholders.
---------------------------------
To the extent required by the Trust Indenture Act, within 60 days
after each May 15, following the date of this Indenture, the Trustee shall mail
to the Insurer and to Noteholders a brief report dated as of such reporting date
that complies with Trust Indenture Act Section 313(a), if such a report is
required pursuant to Trust Indenture Act Section 313(a). The Trustee also shall
comply with Trust Indenture Act Section 313(b). The Trustee shall also transmit
by mail all reports as required by Trust Indenture Act Section 313(c).
A copy of each such report required under Trust Indenture Act Section
313 shall, at the time of such transmission to Noteholders be filed with the
Commission and with each stock exchange or other market system on which the
Notes are listed. The Issuer or any other obligor upon the Notes shall notify
the Trustee in writing if the Notes become listed on any stock exchange or
market trading system.
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SECTION 8.15. No Proceedings.
--------------
The Trustee hereby agrees that it will not, with respect to its fees
and expenses, directly or indirectly institute, or cause to be instituted,
against the Issuer any proceeding of the type referred to in Section 7.01(d) or
(e) so long as there shall not have elapsed one year plus one day since the
latest maturing Notes have been paid in full in cash, provided, however that
nothing herein shall prohibit the Trustee from filing proofs of claim or
otherwise participating in any such proceeding.
SECTION 8.16. Appointment and Powers.
----------------------
Subject to the terms and conditions hereof, each of the Issuer Secured
Parties hereby appoints Harris Trust and Savings Bank as the Trustee with
respect to the Asset Pool and as initial Paying Agent, and Harris Trust and
Savings Bank hereby accepts such appointment and agrees to act as Trustee with
respect to the Asset Pool for the Issuer Secured Parties, to maintain custody
and possession of the assets in the Asset Pool (except as otherwise provided
herein and in the Assignment and Servicing Agreement) and to perform the other
duties of the Trustee in accordance with the provisions of this Indenture and
the Assignment and Servicing Agreement. Each Issuer Secured Party hereby
authorizes the Trustee to take such action on its behalf, and to exercise such
rights, remedies, powers and privileges hereunder, as the Insurer (if no Insurer
Default has occurred and is continuing) or the holders of not less than 66 2/3%
of the then Outstanding Principal Amount of the Notes (if an Insurer Default has
occurred and is continuing) may direct and as are specifically authorized to be
exercised by the Trustee by the terms hereof, together with such actions,
rights, remedies, powers and privileges as are reasonably incidental thereto.
The Trustee shall act upon and in compliance with the written instructions of
the Insurer or the Noteholders given in accordance with the provisions of this
Indenture promptly following receipt of such written instructions; provided that
the Trustee shall not act in accordance with any instructions (i) which are not
authorized by, or in violation of the provisions of, this Indenture, (ii) which
are in violation of any applicable law, rule or regulation or (iii) for which
the Trustee has not received indemnity satisfactory to it. Receipt of such
instructions shall not be a condition to the exercise by the Trustee of its
express duties hereunder, except where this Indenture provides that the Trustee
is permitted to act only following and in accordance with such instructions.
SECTION 8.17. Performance of Duties.
---------------------
The Trustee shall have no duties or responsibilities except those
expressly set forth in this Indenture and the other Transaction Documents to
which the Trustee is a party or as directed in writing by the Insurer or the
Noteholders in accordance with this Indenture. The Trustee shall not be
required to take any discretionary action hereunder except at the written
direction and with the indemnification of the Controlling Party and as provided
in Section 7.12. The Trustee shall, and hereby agrees that it will, perform all
of the duties and obligations required of it under this Indenture and the other
Transaction Documents to which it is a party.
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SECTION 8.18. Control by the Insurer.
-----------------------
The Trustee shall comply with notices and instructions given by the
Issuer only if accompanied by the written consent of the Insurer, except that if
any Event of Default has occurred and is continuing, the Trustee shall act upon
and comply with notices and instructions given by the Insurer alone in the place
and stead of the Issuer.
ARTICLE IX
COVENANTS
SECTION 9.01. Payment of Principal and Interest.
---------------------------------
The Issuer will duly and punctually pay the principal of and interest
on the Notes in accordance with the terms of the Notes and this Indenture.
SECTION 9.02. Maintenance of Office or Agency; Chief Executive
------------------------------------------------
Office.
- ------
(a) The Issuer will maintain at the Corporate Trust Office an office
or agency where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Issuer in respect of the
Notes and this Indenture may be served. The Issuer hereby appoints the Trustee
as its agent to receive all such presentations, surrenders, notices and demands.
(b) The chief executive office of each of the Issuer, the Seller and
the Servicer, and the office at which each of the Issuer, the Seller and the
Servicer maintains its records with respect to the Leases, its interests in the
Equipment, and the transactions contemplated hereby, is currently located in
Macon, Georgia. None of the Issuer, the Seller or the Servicer will change the
location of such offices without giving the Trustee and the Insurer at least 30
days prior written notice thereof.
SECTION 9.03. Money for Payments to Noteholders to be Held in Trust.
-----------------------------------------------------
(a) All payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Collection Account pursuant
to Section 3.03(b) or Section 7.06 shall be made on behalf of the Issuer by the
Trustee, and no amounts so withdrawn from the Collection Account for payments of
Notes shall be paid over to the Issuer under any circumstances except as
provided in this Section 9.03 or in Section 3.03(b), Section 3.04(b) or Section
7.06.
(b) In making payments hereunder, the Trustee will:
(i) allocate all sums received for payment to the Noteholders on
each Payment Date among such Noteholders pursuant to Section 3.03(b) or Section
7.06, as applicable, in accordance with the information known to the Trustee;
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(ii) 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; and
(iii) comply with all requirements of the Code (or any successor
statutes), and all regulations thereunder, with respect to the withholding from
any payments made by it on any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in connection
therewith.
Whenever the Issuer shall have one or more Paying Agents, it will,
prior to each due date of the principal of or interest on any Notes, deposit
with a Paying Agent a sum sufficient to pay the principal or interest so
becoming due, such sum to be held in trust for the benefit of the Noteholders
entitled to such principal or interest, and (unless such Paying Agent is the
Trustee) the Issuer will promptly notify the Trustee of its action or failure so
to act.
The Issuer will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of or
interest on 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
(2) give the Trustee notice of any default by the Issuer (or any
other obligor upon the Notes) in the making of any payment of principal or
interest.
(c) Except as required by applicable law, any money held by the
Trustee in trust for the payment of any amount due with respect to any Note and
remaining unclaimed for three years after such amount has become due and payable
to the Noteholder shall be discharged from such trust and, subject to applicable
escheat laws, paid to the Issuer upon request; and such Noteholder shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Trustee with respect to such trust money shall
thereupon cease.
SECTION 9.04. Corporate Existence; Merger; Consolidation, etc.
-----------------------------------------------
(a) The Issuer will keep in full effect its existence and rights as
a limited liability company under the laws of the State of Delaware.
(b) The Issuer shall at all times observe and comply in all material
respects with (i) all laws applicable to it, (ii) all requisite and appropriate
organizational and other formalities in the management of its business and
affairs and the conduct of the transactions contemplated hereby and by the
Underwriting Agreement and the Assignment and Servicing Agreement.
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(c) The Issuer shall not (i) consolidate or merge with or into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any other Person or (ii) commingle its assets with those of any
other Person.
SECTION 9.05. Protection of Asset Pool; Further Assurances.
--------------------------------------------
The Issuer will 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, and will take such other action as may be necessary or advisable
to:
(i) Grant more effectively all or any portion of the Asset Pool;
(ii) maintain or preserve the Lien of this Indenture or carry out
more effectively the purposes hereof;
(iii) publish notice of, or protect the validity of, any Grant made or
to be made by this Indenture and perfect the security interest contemplated
hereby in favor of the Trustee in each of the Leases, and all other property
included in the Asset Pool;
(iv) enforce or cause the Servicer to enforce any of the Leases; or
(v) preserve and defend title to the Leases (including the right to
receive all payments due or to become due thereunder), the interests in the
Equipment, or other property included in the Asset Pool and preserve and defend
the rights of the Trustee and the Noteholders in such Leases (including the
right to receive all payments due or to become due thereunder), interests in the
Equipment and other property against the claims of all Persons and parties.
The Issuer, upon the Issuer's failure to do so, hereby designates the Trustee
its agent and attorney-in-fact to execute any Financing Statement or
continuation statement required pursuant to this Section 9.05; provided,
--------
however, that such designation shall not be deemed to create a duty in the
- -------
Trustee to monitor the compliance of the Issuer with the foregoing covenants;
and provided, further, that the duty of the Trustee to execute any instrument
-------- -------
required pursuant to this Section 9.05 shall arise only if a Responsible Officer
of the Trustee has actual knowledge of any failure of the Issuer to comply with
the provisions of this Section 9.05.
SECTION 9.06. [Reserved].
----------
SECTION 9.07. Performance of Obligations; Assignment and Servicing
----------------------------------------------------
Agreement.
- ---------
(a) The Issuer will punctually perform and observe all of its
obligations and agreements contained in the Notes and the Transaction Documents.
(b) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any Lease or any other instrument included in the
Asset Pool, or which
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would result in the amendment, hypothecation, subordination, termination, or
discharge of, or impair the validity or effectiveness of, any Lease or such
other instrument, except as expressly provided in this Indenture or the
Assignment and Servicing Agreement.
(c) If any Authorized Officer shall have knowledge of the occurrence
of a default under the Assignment and Servicing Agreement, the Issuer shall
promptly notify the Trustee and the Noteholders thereof, and shall specify in
such notice the action, if any, the Issuer is taking in respect of such default.
Unless consented to by the Insurer (if no Insurer Default has occurred and is
continuing) or the holders of 66 2/3% of the then Outstanding Principal Amount
of the Notes (if an Insurer Default has occurred and is continuing), the Issuer
may not waive any default under or amend the Assignment and Servicing Agreement.
SECTION 9.08. Negative Covenants.
------------------
The Issuer will not:
(a) sell, transfer, exchange or otherwise dispose of any portion of
the Asset Pool except as expressly permitted by this Indenture;
(b) claim any credit on, or make any deduction from, the principal
of, or interest on, any of the Notes by reason of the payment of any taxes
levied or assessed upon any portion of the Asset Pool;
(c) engage in any business or activity other than in connection with,
or relating to the ownership of, the Leases and the interests in the Equipment,
the issuance of the Notes, and the specific transactions contemplated by the
Transaction Documents;
(d) become liable for, issue, incur, assume, or allow to remain
outstanding any indebtedness, or guaranty any indebtedness of any Person, other
than the Notes, except as contemplated by this Indenture, the registration
statement filed with respect to the Notes and the Assignment and Servicing
Agreement;
(e) seek dissolution or liquidation in whole or in part or
reorganization of its business or affairs;
(f) (i) permit the validity or effectiveness of this Indenture or any
Grant hereby to be impaired, or 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 to be created on or to
extend to or otherwise arise upon or burden the Asset Pool or any part thereof
or any interest therein or the proceeds thereof other than the lien of this
Indenture, or (iii) subject to Section 4.01(c) of the Assignment and Servicing
Agreement, permit the lien of this Indenture not to constitute a valid first
priority security interest in the Asset Pool; or
(g) make any loan or advance to any Affiliate of the Issuer or to any
other Person.
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SECTION 9.09. Information as to Issuer.
------------------------
The Issuer shall deliver to the Trustee and the Insurer and, the
Trustee shall deliver to each Rating Agency and to each holder of Outstanding
Notes (and, upon the request of any Noteholder, to any prospective transferee of
any Notes):
(a) Notice of Event of Default - immediately upon becoming aware of
the existence of any condition or event which constitutes a Default or an Event
of Default, a written notice describing its nature and period of existence and
what action the Issuer is taking or proposes to take with respect thereto; and
(b) Report on Proceedings - promptly upon the Issuer's becoming aware
of (i) any proposed or pending investigation of it by any Governmental Authority
or agency, or (ii) any pending or proposed court or administrative proceeding
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Issuer, a written notice specifying the nature of such
investigation or proceeding and what action the Issuer is taking or proposes to
take with respect thereto and evaluating its merits.
SECTION 9.10. Taxes.
-----
(a) The Issuer shall pay all taxes when due and payable or levied
against its assets, properties or income, including any property that is part of
the Asset Pool.
(b) The parties hereto agree that it is their mutual intent that, for
all applicable tax purposes, the Notes will constitute indebtedness. Further,
each party hereto and each Noteholder (by accepting and holding a Note) hereby
covenants to every other party hereto and to every other Noteholder to treat the
Notes as indebtedness for all applicable tax purposes in all tax filings,
reports and returns and otherwise, and further covenants that neither it nor any
of its Affiliates will take, or participate in the taking of or permit to be
taken, any action that is inconsistent with the treatment of the Notes as
indebtedness for tax purposes. All successors and assignees of the parties
hereto shall be bound by the provisions hereof.
SECTION 9.11. Indemnification.
---------------
The Issuer agrees to indemnify and hold harmless the Trustee (and its
officers, directors employees and agents), the Insurer and each Noteholder
(each an "Indemnified Party") against any and all liabilities, losses, damages,
penalties, costs and expenses (including costs of defense and legal fees and
expenses) which may be incurred or suffered by such Indemnified Party without
gross negligence or willful misconduct on the part of the Indemnified Party as a
result of claims, actions, suits or judgments asserted or imposed against it and
arising out of the transactions contemplated hereby or by the Assignment and
Servicing Agreement, including without limitation, any claims resulting from any
use, operation, maintenance, repair, storage or transportation of any item of
Equipment, whether or not in the Issuer's possession or under its control, and
any tort claims and any fines or penalties arising from any violation of the
laws or regulations of any Governmental Authority; provided that, all amounts
--------
payable pursuant to this Section
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9.11 shall be fully subordinated to amounts payable under the Notes, shall be
without recourse to the Issuer except to the extent that all amounts otherwise
due and payable under the terms of this Indenture have been fully paid and shall
not, to the extent that such amounts are unpaid, constitute a claim against the
Issuer except to the extent that all amounts otherwise due and payable under the
terms of this Indenture have been fully paid. This section shall survive the
termination of this Indenture and the earlier removal or resignation of the
Trustee.
SECTION 9.12. Commission Reports; Reports to Trustee; Reports to
--------------------------------------------------
Noteholders.
- -----------
To the extent it has not satisfied the following requirements by
reporting under Section 9.09 hereof, the Issuer shall:
(a) file with the Trustee and the Insurer, within 15 days after the
Issuer is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports which the Issuer may
be required to file with the Commission pursuant to Section 13 or Section 15(d)
of the Exchange Act (or copies of such portions thereof as may be prescribed by
rules and regulations of the Commission); or, if the Issuer is not required to
file with the Commission information, documents or reports pursuant to either
Section 13 or Section 15(d) of the Exchange Act, then the Issuer will file with
the Trustee and with the Commission, in accordance with rules and regulations
prescribed by the Commission, such of the supplementary and periodic
information, documents and reports required pursuant to Section 13 of the
Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed in such rules and regulations;
(b) file with the Trustee, the Insurer and with the Commission, in
accordance with the rules and regulations prescribed by the Commission, such
additional information, documents and reports with respect to compliance by the
Issuer with the conditions and covenants provided for in this Indenture as may
be required by such rules and regulations; and
(c) furnish to the Insurer and to the Trustee for distribution to the
Noteholders, as the names and addresses of such Noteholders appear in the Note
Register, in the manner and to the extent provided in Section 8.14 hereof, such
summaries of any information, documents and reports required to be filed with
the Trustee pursuant to the provisions of Subsections (a) and (b) of this
Section 9.12 as may be required to be provided to such Noteholders by the rules
and regulations of the Commission under the provisions of the Trust Indenture
Act.
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ARTICLE X
SUPPLEMENTAL INDENTURES
SECTION 10.01. Supplemental Indentures Without Consent of
------------------------------------------
Noteholders.
- -----------
(a) Without the consent of any Noteholders, the Issuer, by an Issuer
Order, and the Trustee, at any time and from time to time, may, with the consent
of the Insurer (if no Insurer Default has occurred and is continuing) enter into
one or more indentures supplemental hereto, for any of the following purposes:
(i) to add to the covenants of the Issuer for the benefit of the
Noteholders, or to surrender any right or power herein conferred upon the
Issuer;
(ii) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein; or
(iii) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or to better assure, convey and
confirm unto the Trustee any property subject or required to be subjected to the
lien of this Indenture; provided such action pursuant to this Section 10.01(a)
--------
shall not adversely affect the interests of the Noteholders in any respect or in
the reduction or withdrawal of the then current ratings of the Outstanding
Notes.
(b) The Trustee shall promptly deliver to each Noteholder and each
Rating Agency a copy of any supplemental indenture entered into pursuant to
Section 10.01(a).
SECTION 10.02. Supplemental Indentures with Consent of Noteholders.
---------------------------------------------------
(a) With the consent of the Insurer (if no Insurer Default has
occurred and is continuing) or the holders of not less than 66-2/3% of the then
Outstanding Principal Amount of the Notes and by Act of said Noteholders
delivered to the Issuer and the Trustee (if an Insurer Default has occurred and
is continuing), the Issuer, by an Issuer Order, and the Trustee may 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; provided, that, subject to the express rights of the Insurer
--------
under the Transaction Documents, no supplemental indenture shall be entered into
if it would result in the reduction or withdrawal of the then current ratings of
the Outstanding Notes and no supplemental indenture shall, without the consent
of the holder of each Outstanding Note affected thereby:
(i) change the Stated Maturity of any Note or the Principal
Payments or Interest Payments due or to become due on any Payment Date with
respect to any Note, or change the priority of payment thereof as set forth
herein, or reduce the principal amount thereof or the Note Interest Rate
thereon, or change the place of payment where,
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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 any such payment on
or after the Maturity thereof;
(ii) reduce the percentage of the Outstanding Principal Amount of the
Notes the consent of whose Noteholders is required for any such supplemental
indenture, for any waiver of compliance with provisions of this Indenture or
Events of Default and their consequences, or for any Act of Noteholders;
(iii) modify any of the provisions of this Section except to increase
any percentage or fraction set forth therein or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the holder of each Outstanding Note affected thereby;
(iv) modify or alter the provisions of the proviso to the definition
of the term "Outstanding"; or
(v) 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 Asset Pool or,
except as provided in Sections 5.01 or 5.02, terminate the lien of this
Indenture on any property at any time subject hereto or deprive any Noteholder
of the security afforded by the lien of this Indenture.
(b) The Trustee shall promptly deliver to the Insurer and each
Noteholder and each Rating Agency a copy of any supplemental indenture entered
into pursuant to Section 10.02.
SECTION 10.03. Execution of Supplemental Indentures.
------------------------------------
In executing any supplemental indenture or any amendment, modification
or supplement to any other Transaction Document the Trustee and the Insurer
shall be entitled to receive, and (subject to Section 8.01) shall be, fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such instrument is authorized or permitted by this Indenture or such applicable
Transaction Document. The Trustee may, but shall not be obligated to, enter
into any supplemental indenture which affects the Trustee's own rights, duties,
obligations, immunities or indemnities under this Indenture or otherwise.
SECTION 10.04. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes, and every
Noteholder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 10.05. Reference in Notes to Supplemental Indentures.
---------------------------------------------
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a
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notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer shall so determine, new Notes so modified
as to conform, in the opinion of the Issuer, to any such supplemental indenture
may be prepared and executed by the Issuer and authenticated and delivered by
the Trustee in exchange for Outstanding Notes.
SECTION 10.06. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment, supplement or waiver to this Indenture or the Notes
shall comply with the Trust Indenture Act as then in effect.
ARTICLE XI
SATISFACTION AND DISCHARGE
SECTION 11.01. Satisfaction and Discharge of Indenture.
---------------------------------------
(a) This Indenture shall cease to be of further effect (except as to
any surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Issuer, shall execute proper instruments provided to it acknowledging
satisfaction and discharge of this Indenture, when
(i) 100 days shall have elapsed since either
(A) all Notes theretofore authenticated and delivered (other
than (1) Notes which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.04 and (2) Notes
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to
the Issuer or discharged from such trust, as provided in Section
9.03(c)) have been delivered to the Trustee for cancellation; or
(B) the final installments of principal on all such Notes not
theretofore delivered to the Trustee for cancellation
(1) have become due and payable, or
(2) will become due and payable at their Stated Maturity,
as applicable, within one year,
and the Issuer has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on such Notes
not theretofore delivered to the Trustee for cancellation, for
principal and interest to the date of such deposit (in the case of
Notes which have become due and payable) or to the Stated Maturity
thereof;
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(ii) the Issuer has paid or caused to be paid all Insurer Secured
Obligations and all Trustee Secured Obligations; and
(iii) the Issuer has delivered to the Trustee and the Insurer an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
At such time, the Trustee shall deliver to the Issuer or, upon an Issuer Order,
its assignee, all cash, securities and other property held by it as part of the
Asset Pool other than funds deposited with the Trustee pursuant to Section
11.01(a)(i)(B), for the payment and discharge of the Notes.
(b) Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Issuer to the Trustee under Sections 8.06 and 9.11, and,
if money shall have been deposited with the Trustee pursuant to Section
11.01(a)(i)(B), the obligations of the Trustee under Section 11.02 and Section
9.03(c), shall survive.
(c) The Trustee shall provide prompt written notice to each Rating
Agency of any satisfaction and discharge of this Indenture pursuant to this
Article 11.
SECTION 11.02. Application of Trust Money.
--------------------------
Subject to the provisions of Section 9.03(c), all money deposited with
the Trustee pursuant to Sections 11.01 and 9.03 shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment to the Persons entitled thereto, of the principal and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by operation of Trust Indenture Act Section 318(a), the
duties imposed by Section 318(c) shall control.
SECTION 12.02. Communication by Noteholders with Other Noteholders.
---------------------------------------------------
Noteholders may communicate, pursuant to Trust Indenture Act Section
312(b), with other Noteholders with respect to their rights under this Indenture
or the Notes. The Issuer, the Trustee, the Note Registrar and all other parties
shall have the protection of Trust Indenture Act Section 312(c).
71
<PAGE>
SECTION 12.03. Location of Leases.
------------------
Subject to the provisions of Section 1.04(e) of the Assignment and
Servicing Agreement, the Servicer shall maintain the Leases at its office in
Macon, Georgia or at such other offices of the Servicer as shall from time to
time be identified by prior written notice to the Trustee and the Insurer.
Subject to the foregoing, the Servicer may temporarily move individual Leases or
any portion thereof without notice as necessary to conduct collection and other
servicing activities.
SECTION 12.04. Officers' Certificate and Opinion of Counsel as to
--------------------------------------------------
Conditions Precedent.
- --------------------
Upon any request or application by the Issuer (or any other obligor
upon the Notes) to the Trustee to take any action under this Indenture or the
other Transaction Documents, the Issuer (or such other Obligor) shall furnish to
the Trustee and the Insurer:
(a) an Officers' Certificate (which shall include the statements set
forth in Section 12.05) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements set
forth in Section 12.05) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) 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;
(c) 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
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 12.06. Nonpetition.
-----------
The Trustee shall not petition or otherwise invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or state bankruptcy, insolvency or similar
law or appointing a
72
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receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or any substantial part of its respective
property, or ordering the winding up or liquidation of the affairs of the
Issuer, provided, however, that nothing herein shall prohibit the Trustee from
filing proofs of claim or otherwise participating in any such proceedings
instituted by any other Person.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
IKON RECEIVABLES, LLC,
as Issuer
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By: /s/ Robert K. McLain
_______________________________
Name: Robert K. McLain
Title: President
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /s/ Robert D. Foltz
_______________________________
Name: Robert D. Foltz
Title: Vice President
IOS CAPITAL, INC., as Servicer
By: /s/ J.F. Quinn
_______________________________
Name: J.F. Quinn
Title: Treasurer
74
<PAGE>
CLASS A-1 NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR 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 REQUIRED 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.
IKON RECEIVABLES, LLC
5.11% CLASS A-1 LEASE-BACKED NOTE, SERIES 1999-1
CUSIP NO. _____________
No. R-1 $____________
IKON Receivables, LLC, a limited liability company duly organized and
existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________________________
($_____________), payable in monthly installments beginning on June 15, 1999, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of 5.11% per annum, until the full
amount of principal hereof is otherwise paid or made available for payment and
shall be computed on the basis of a year of 360 days and the actual number of
days in the period since the last Payment Date or with respect to the June 15,
1999 Payment Date, since May 25, 1999.
Principal and interest on this Class A-1 Note shall be paid on the
15th day of each month (or, if such day is not a Business Day, the next
succeeding Business Day), commencing June 15, 1999, either by check to the
registered address of the Holder of this Class A-1 Note as of the relevant
Record Date or by wire transfer to an account at a bank in the United States as
the Holder shall specify, as provided more fully in the Indenture; provided,
--------
that the final payment of principal and interest in respect of the Notes shall
be payable to the Holder of this Note only upon presentation and surrender of
this Note at
<PAGE>
the Corporate Trust Office of the Trustee or at the principal office of any
Paying Agent appointed pursuant to the Indenture.
This Class A-1 Note is one of a duly authorized issue of Class A Notes
of the Issuer designated as its 5.11% Class A-1 Lease-Backed Notes, Series 1999-
1" (herein called the "Class A-1 Notes") limited in aggregate principal amount
to $304,474,000, issued under the Indenture, dated as of April 1, 1999 (herein
called the "Indenture"), among the Issuer, IOS Capital Inc. as Servicer, and
Harris Trust and Savings Bank, as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Issuer, the Trustee and the Holders and of the terms upon which the Class
A-1 Notes are authenticated and delivered. Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings set forth in the
Indenture.
The Class A-1 Notes are entitled to the benefits of a financial
guarantee insurance policy issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments with respect to the Class A-1 Notes on each
Payment Date, all as more fully set forth in the Indenture.
The Stated Maturity of the Class A-1 Notes is the Payment Date in
June, 2000, on which date the Outstanding Principal Amount of the Class A-1
Notes shall be due and payable.
The Class A-1 Notes are subject to redemption, without premium, at the
option of the Issuer as of any Payment Date on which the Discounted Present
Value of the Performing Leases is less than or equal to ten percent (10%) of the
aggregate Discounted Present Value of the Leases as of the Cut-Off Date after
giving effect to all principal Payment on such Payment Date.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class A-
1 Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A-1 Note will be secured by the pledge to the Trustee of
the Asset Pool.
If an Event of Default under the Indenture occurs, the Trustee shall,
at the direction of the Insurer (if no Insurer Default has occurred and is
continuing) or of Holders of not less than 66 2/3% of the aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing), and, if an Insurer Default has occurred and is continuing,
may, declare due and payable in the manner and with the effect provided in the
Indenture, the principal of all the Class A-1 Notes (but not less than all the
Class A-1 Notes). Notice of such declaration will be given by mail to
A-1-2
<PAGE>
Holders, as their names and addresses appear in the Note Register, as provided
in the Indenture. Upon payment of such principal amount together with all
accrued interest, the obligations of the Issuer with respect to the payment of
principal and interest on this Class A-1 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Insurer (with or without the
consent of any Holder of the Notes if no Insurer Default has occurred and is
continuing) or the Holders of not less than 66-2/3% in aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing). The Indenture also contains provisions permitting the
Insurer (with or without the consent of any Holder of the Notes if no Insurer
Default has occurred and is continuing) or the Holders of not less than 66 2/3%
in aggregate principal amount of the Notes at the time Outstanding (if an
Insurer Default has occurred and is continuing), on behalf of all the Holders,
to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Insurer (with or without the consent of any Holder of
the Notes if no Insurer Default has occurred and is continuing) or the Holder of
this Class A-1 Note (if an Insurer Default has occurred and is continuing) shall
be conclusive and binding upon such Holder and upon all future Holders of this
Class A-1 Note and of any Class A-1 Note issued upon the registration of
transfer hereof or in exchange here for or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Class A-1 Note or any Class
A-1 Note.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-1 Note is registrable in the
Note Register, upon surrender of this Class A-1 Note for registration of
transfer at the office or agency of the Trustee in the City of Chicago, Illinois
and at any other office or agency maintained by the Issuer for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Class A-1
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class A-1 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000,000. As provided in the Indenture
and subject to certain limitations therein set forth, Class A-1 Notes are
exchangeable for a like aggregate principal amount of Class A-1 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Insurer and any agent of the Issuer, the
Trustee or the Insurer may treat the Person in whose name this Class A-1 Note is
registered as the
A-1-3
<PAGE>
owner hereof for all purposes, whether or not this Class A-1 Note may be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
Each Noteholder, by acceptance of this Note, covenants and agrees to
treat the Notes as indebtedness for purposes of federal income, state and local
income and franchise and any other income taxes.
The Indenture and this Class A-1 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-1-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING, INC., its Manager
By:________________________________________
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class A-1 Notes referred to in the within mentioned
Indenture.
HARRIS TRUST AND SAVINGS BANK, as Trustee
By:_______________________________________
Authorized Officer
A-1-5
<PAGE>
ASSIGNMENT FORM
---------------
If you the holder want to assign this Class A-1 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-1 Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________, agent to transfer this Class A-1 Note on
the books of the Issuer. The agent may substitute another to act for him.
Dated: ________________ Signed: ______________________________
______________________________
(sign exactly as the name appears
on the other side of this Class
A-1 Note)
Signature Guarantee_____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A-1 Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A-1 Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class
A-1 Note.
A-1-6
<PAGE>
CLASS A-2 NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR 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 REQUIRED 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.
IKON RECEIVABLES, LLC
5.60% CLASS A-2 LEASE-BACKED NOTE, SERIES 1999-1
CUSIP NO. _______________
No. R-1 $____________
IKON Receivables, LLC, a limited liability company duly organized and
existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________________________
($_____________), payable in monthly installments beginning on June 15, 1999, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of 5.60% per annum, until the full
amount of principal hereof is otherwise paid or made available for payment and
shall be computed on the basis of a year of 360 days and the actual number of
days in the period since the last Payment Date or with respect to the June 15,
1999 Payment Date, since May 25, 1999.
Principal and interest on this Class A-2 Note shall be paid on the
15th day of each month (or, if such day is not a Business Day, the next
succeeding Business Day), commencing June 15, 1999, either by check to the
registered address of the Holder of this Class A-2 Note as of the relevant
Record Date or by wire transfer to an account at a bank in the United States as
the Holder shall specify, as provided more fully in the Indenture; provided,
--------
that the final payment of principal and interest in respect of the Notes shall
be payable to the Holder of this Note only upon presentation and surrender of
this Note at the Corporate Trust Office of the Trustee or at the principal
office of any Paying Agent appointed pursuant to the Indenture.
<PAGE>
This Class A-2 Note is one of a duly authorized issue of Class A Notes
of the Issuer designated as its "5.60% Class A-2 Lease-Backed Notes, Series
1999-1" (herein called the "Class A-2 Notes") limited in aggregate principal
amount to $61,579,000, issued under the Indenture, dated as of April 1, 1999
(herein called the "Indenture"), among the Issuer, IOS Capital Inc. as Servicer,
and Harris Trust and Savings Bank, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders and of the terms upon
which the Class A-2 Notes are authenticated and delivered. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings set
forth in the Indenture.
The Class A-2 Notes are entitled to the benefits of a financial
guarantee insurance policy issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments with respect to the Class A-2 Notes on each
Payment Date, all as more fully set forth in the Indenture.
The Stated Maturity of the Class A-2 Notes is the Payment Date in May,
2005, on which date the Outstanding Principal Amount of the Class A-2 Notes
shall be due and payable.
The Class A-2 Notes are subject to redemption, without premium, at the
option of the Issuer as of any Payment Date on which the Discounted Present
Value of the Performing Leases is less than or equal to ten percent (10%) of the
aggregate Discounted Present Value of the Leases as of the Cut-Off Date after
giving effect to all principal Payment on such Payment Date.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class A-
2 Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A-2 Note will be secured by the pledge to the Trustee of
the Asset Pool.
If an Event of Default under the Indenture occurs, the Trustee shall,
at the direction of the Insurer (if no Insurer Default has occurred and is
continuing) or of Holders of not less than 66 2/3% of the aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing), and, if an Insurer Default has occurred and is continuing,
may, declare due and payable in the manner and with the effect provided in the
Indenture, the principal of all the Class A-2 Notes (but not less than all the
Class A-2 Notes). Notice of such declaration will be given by mail to Holders,
as their names and addresses appear in the Note Register, as provided in the
Indenture. Upon payment of such principal amount together with all accrued
interest, the
A-2-2
<PAGE>
obligations of the Issuer with respect to the payment of principal and interest
on this Class A-2 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Insurer (with or without the
consent of any Holder of the Notes if no Insurer Default has occurred and is
continuing) or the Holders of not less than 66-2/3% in aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing). The Indenture also contains provisions permitting the
Insurer (with or without the consent of any Holder of the Notes if no Insurer
Default has occurred and is continuing) or the Holders of not less than 66 2/3%
in aggregate principal amount of the Notes at the time Outstanding (if an
Insurer Default has occurred and is continuing), on behalf of all the Holders,
to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Insurer (with or without the consent of any Holder of
the Notes if no Insurer Default has occurred and is continuing) or the Holder of
this Class A-2 Note (if an Insurer Default has occurred and is continuing) shall
be conclusive and binding upon such Holder and upon all future Holders of this
Class A-2 Note and of any Class A-2 Note issued upon the registration of
transfer hereof or in exchange here for or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Class A-2 Note or any Class
A-2 Note.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-2 Note is registrable in the
Note Register, upon surrender of this Class A-2 Note for registration of
transfer at the office or agency of the Trustee in the City of Chicago, Illinois
and at any other office or agency maintained by the Issuer for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Class A-2
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class A-2 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000,000. As provided in the Indenture
and subject to certain limitations therein set forth, Class A-2 Notes are
exchangeable for a like aggregate principal amount of Class A-2 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Insurer and any agent of the Issuer, the
Trustee or the Insurer may treat the Person in whose name this Class A-2 Note is
registered as the owner hereof for all purposes, whether or not this Class A-2
Note may be overdue, and
A-2-3
<PAGE>
neither the Issuer, the Trustee nor any such agent shall be affected by notice
to the contrary.
Each Noteholder, by acceptance of this Note, covenants and agrees to
treat the Notes as indebtedness for purposes of federal income, state and local
income and franchise and any other income taxes.
The Indenture and this Class A-2 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-2-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING, INC., its Manager
By: __________________________________________
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class A-2 Notes referred to in the within mentioned
Indenture.
HARRIS TRUST AND SAVINGS BANK, as Trustee
By: ____________________________________
Authorized Officer
A-2-5
<PAGE>
ASSIGNMENT FORM
---------------
If you the holder want to assign this Class A-2 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-2 Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________, agent to transfer this Class A-2 Note on
the books of the Issuer. The agent may substitute another to act for him.
Dated: ________________ Signed: __________________________
__________________________
(sign exactly as the name
appears on the other side of
this Class A-2 Note)
Signature Guarantee_____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A-2 Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A-2 Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class
A-2 Note.
A-2-6
<PAGE>
CLASS A-3 NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR 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 REQUIRED 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.
IKON RECEIVABLES, LLC
5.99% CLASS A-3 LEASE-BACKED NOTE, SERIES 1999-1
CUSIP NO. _______________
No. R-1 $______________
IKON Receivables, LLC, a limited liability company duly organized and
existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________________________
($_____________), payable in monthly installments beginning on June 15, 1999, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of 5.99% per annum, until the full
amount of principal hereof is otherwise paid or made available for payment and
shall be computed on the basis of a year of 360 days and the actual number of
days in the period since the last Payment Date or with respect to the June 15,
1999 Payment Date, since May 25, 1999.
Principal and interest on this Class A-3 Note shall be paid on the
15th day of each month (or, if such day is not a Business Day, the next
succeeding Business Day), commencing June 15, 1999, either by check to the
registered address of the Holder of this Class A-3 Note as of the relevant
Record Date or by wire transfer to an account at a bank in the United States as
the Holder shall specify, as provided more fully in the Indenture; provided,
--------
that the final payment of principal and interest in respect of the Notes shall
be payable to the Holder of this Note only upon presentation and surrender of
this Note at the Corporate Trust Office of the Trustee or at the principal
office of any Paying Agent appointed pursuant to the Indenture.
<PAGE>
This Class A-3 Note is one of a duly authorized issue of Class A Notes
of the Issuer designated as its "5.99% Class A-3 Lease-Backed Notes, Series
1999-1" (herein called the "Class A-3 Notes") limited in aggregate principal
amount to $304,127,000, issued under the Indenture, dated as of April 1, 1999
(herein called the "Indenture"), among the Issuer, IOS Capital Inc. as Servicer,
and Harris Trust and Savings Bank, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders and of the terms upon
which the Class A-3 Notes are authenticated and delivered. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings set
forth in the Indenture.
The Class A-3 Notes are entitled to the benefits of a financial
guarantee insurance policy issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments with respect to the Class A-3 Notes on each
Payment Date, all as more fully set forth in the Indenture.
The Stated Maturity of the Class A-3 Notes is the Payment Date in May,
2005, on which date the Outstanding Principal Amount of the Class A-3 Notes
shall be due and payable.
The Class A-3 Notes are subject to redemption, without premium, at the
option of the Issuer as of any Payment Date on which the Discounted Present
Value of the Performing Leases is less than or equal to ten percent (10%) of the
aggregate Discounted Present Value of the Leases as of the Cut-Off Date after
giving effect to all principal Payment on such Payment Date.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class A-
3 Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A-3 Note will be secured by the pledge to the Trustee of
the Asset Pool.
If an Event of Default under the Indenture occurs, the Trustee shall,
at the direction of the Insurer (if no Insurer Default has occurred and is
continuing) or of Holders of not less than 66-2/3% of the aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing), and, if an Insurer Default has occurred and is continuing,
may, declare due and payable in the manner and with the effect provided in the
Indenture, the principal of all the Class A-3 Notes (but not less than all the
Class A-3 Notes). Notice of such declaration will be given by mail to Holders,
as their names and addresses appear in the Note Register, as provided in the
Indenture. Upon payment of such principal amount together with all accrued
interest, the
A-3-2
<PAGE>
obligations of the Issuer with respect to the payment of principal and interest
on this Class A-3 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Insurer (with or without the
consent of any Holder of the Notes if no Insurer Default has occurred and is
continuing) or the Holders of not less than 66-2/3% in aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing). The Indenture also contains provisions permitting the
Insurer (with or without the consent of any Holder of the Notes if no Insurer
Default has occurred and is continuing) or the Holders of not less than 66-2/3
in aggregate principal amount of the Notes at the time Outstanding (if an
Insurer Default has occurred and is continuing), on behalf of all the Holders,
to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Insurer (with or without the consent of any Holder of
the Notes if no Insurer Default has occurred and is continuing) or the Holder of
this Class A-3 Note (if an Insurer Default has occurred and is continuing) shall
be conclusive and binding upon such Holder and upon all future Holders of this
Class A-3 Note and of any Class A-3 Note issued upon the registration of
transfer hereof or in exchange here for or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Class A-3 Note or any Class
A-3 Note.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-3 Note is registrable in the
Note Register, upon surrender of this Class A-3 Note for registration of
transfer at the office or agency of the Trustee in the City of Chicago, Illinois
and at any other office or agency maintained by the Issuer for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Class A-3
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class A-3 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000,000. As provided in the Indenture and
subject to certain limitations therein set forth, Class A-3 Notes are
exchangeable for a like aggregate principal amount of Class A-3 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Insurer and any agent of the Issuer, the
Trustee or the Insurer may treat the Person in whose name this Class A-3 Note is
registered as the owner hereof for all purposes, whether or not this Class A-3
Note may be overdue, and
A-3-3
<PAGE>
neither the Issuer, the Trustee nor any such agent shall be affected by notice
to the contrary.
Each Noteholder, by acceptance of this Note, covenants and agrees to
treat the Notes as indebtedness for purposes of federal income, state and local
income and franchise and any other income taxes.
The Indenture and this Class A-3 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-3-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING,
INC., its Manager
By:_______________________________________
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class A-3 Notes referred to in the within mentioned
Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:_______________________________________
Authorized Officer
A-3-5
<PAGE>
ASSIGNMENT FORM
---------------
If you the holder want to assign this Class A-3 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-3 Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________, agent to transfer this Class A-3 Note on
the books of the Issuer. The agent may substitute another to act for him.
Dated: ________________ Signed:_____________________________
_____________________________
(sign exactly as the name
appears on the other side of
this Class A-3 Note)
Signature Guarantee ___________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A-3 Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A-3 Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class A-
3 Note.
A-3-6
<PAGE>
CLASS A-4 NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR 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 REQUIRED 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.
IKON RECEIVABLES, LLC
6.23% CLASS A-4 LEASE-BACKED NOTE, SERIES 1999-1
CUSIP NO. _______________
No. R-1 $____________
IKON Receivables, LLC, a limited liability company duly organized and
existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________________________
($_____________), payable in monthly installments beginning on June 15, 1999, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of 6.23% per annum, until the full
amount of principal hereof is otherwise paid or made available for payment and
shall be computed on the basis of a year of 360 days and the actual number of
days in the period since the last Payment Date or with respect to the June 15,
1999 Payment Date, since May 25, 1999.
Principal and interest on this Class A-4 Note shall be paid on the
15th day of each month (or, if such day is not a Business Day, the next
succeeding Business Day), commencing June 15, 1999, either by check to the
registered address of the Holder of this Class A-4 Note as of the relevant
Record Date or by wire transfer to an account at a bank in the United States as
the Holder shall specify, as provided more fully in the Indenture; provided,
--------
that the final payment of principal and interest in respect of the Notes shall
be payable to the Holder of this Note only upon presentation and surrender of
this Note at
<PAGE>
the Corporate Trust Office of the Trustee or at the principal office of any
Paying Agent appointed pursuant to the Indenture.
This Class A-4 Note is one of a duly authorized issue of Class A Notes
of the Issuer designated as its "6.23% Class A-4 Lease-Backed Notes, Series
1999-1" (herein called the "Class A-4 Notes") limited in aggregate principal
amount to $81,462,000, issued under the Indenture, dated as of April 1, 1999
(herein called the "Indenture"), among the Issuer, IOS Capital Inc. as Servicer,
and Harris Trust and Savings Bank, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders and of the terms upon
which the Class A-4 Notes are authenticated and delivered. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings set
forth in the Indenture.
The Class A-4 Notes are entitled to the benefits of a financial
guarantee insurance policy issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments with respect to the Class A-4 Notes on each
Payment Date, all as more fully set forth in the Indenture.
The Stated Maturity of the Class A-4 Notes is the Payment Date in May
2005, on which date the Outstanding Principal Amount of the Class A-4 Notes
shall be due and payable.
The Class A-4 Notes are subject to redemption, without premium, at the
option of the Issuer as of any Payment Date on which the Discounted Present
Value of the Performing Leases is less than or equal to ten percent (10%) of the
aggregate Discounted Present Value of the Leases as of the Cut-Off Date after
giving effect to all principal Payment on such Payment Date.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class A-
4 Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A-4 Note will be secured by the pledge to the Trustee of
the Asset Pool.
If an Event of Default under the Indenture occurs, the Trustee shall,
at the direction of the Insurer (if no Insurer Default has occurred and is
continuing) or of Holders of not less than 66-2/3% of the aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing), and, if an Insurer Default has occurred and is continuing,
may, declare due and payable in the manner and with the effect provided in the
Indenture, the principal of all the Class A-4 Notes (but not less than all the
Class A-4 Notes). Notice of such declaration will be given by mail to
A-4-2
<PAGE>
Holders, as their names and addresses appear in the Note Register, as provided
in the Indenture. Upon payment of such principal amount together with all
accrued interest, the obligations of the Issuer with respect to the payment of
principal and interest on this Class A-4 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Insurer (with or without the
consent of any Holder of the Notes if no Insurer Default has occurred and is
continuing) or the Holders of not less than 66-2/3% in aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing). The Indenture also contains provisions permitting the
Insurer (with or without the consent of any Holder of the Notes if no Insurer
Default has occurred and is continuing) or the Holders of not less than 66-2/3%
in aggregate principal amount of the Notes at the time Outstanding (if an
Insurer Default has occurred and is continuing), on behalf of all the Holders,
to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Insurer (with or without the consent of any Holder of
the Notes if no Insurer Default has occurred and is continuing) or the Holder of
this Class A-4 Note (if an Insurer Default has occurred and is continuing)
shall be conclusive and binding upon such Holder and upon all future Holders of
this Class A-4 Note and of any Class A-4 Note issued upon the registration of
transfer hereof or in exchange here for or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Class A-4 Note or any Class
A-4 Note.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-4 Note is registrable in the
Note Register, upon surrender of this Class A-4 Note for registration of
transfer at the office or agency of the Trustee in the City of Chicago, Illinois
and at any other office or agency maintained by the Issuer for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Class A-4
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class A-4 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000,000. As provided in the Indenture
and subject to certain limitations therein set forth, Class A-4 Notes are
exchangeable for a like aggregate principal amount of Class A-4 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Insurer and any agent of the Issuer, the
Trustee or the Insurer may treat the Person in whose name this Class A-4 Note is
registered as the
A-4-3
<PAGE>
owner hereof for all purposes, whether or not this Class A-4
Note may be overdue, and neither the Issuer, the Trustee nor any such agent
shall be affected by notice to the contrary.
Each Noteholder, by acceptance of this Note, covenants and agrees to
treat the Notes as indebtedness for purposes of federal income, state and local
income and franchise and any other income taxes.
The Indenture and this Class A-4 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-4-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING,
INC., its Manager
By:__________________________________
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class A-4 Notes referred to in the within mentioned
Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:_____________________________________
Authorized Officer
A-4-5
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Class A-4 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-4 Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________, agent to transfer this Class A-4 Note on
the books of the Issuer. The agent may substitute another to act for him.
Dated: ______________________ Signed: ______________________
______________________
(sign exactly as the
name appears on the
other side of
this Class A-4 Note)
Signature Guarantee ____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A-4 Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A-4 Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class A-
4 Note.
A-4-6
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.............................. 3
SECTION 1.01. General Definitions........................................................ 3
SECTION 1.02. Compliance Certificates and Opinions....................................... 18
SECTION 1.03. Form of Documents Delivered to Trustee and Insurer......................... 18
SECTION 1.04. Acts of Noteholders, etc................................................... 20
SECTION 1.05. Notices, etc., to Trustee, Servicer, Issuer, Insurer and Rating Agencies... 20
SECTION 1.06. Notice to Noteholders; Waiver.............................................. 21
SECTION 1.07. Effect of Headings and Table of Contents................................... 22
SECTION 1.08. Successors and Assigns..................................................... 22
SECTION 1.09. Benefits of Indenture...................................................... 22
SECTION 1.10. Recording of Indenture..................................................... 22
SECTION 1.11. GOVERNING LAW.............................................................. 22
SECTION 1.12. Legal Holidays............................................................. 23
SECTION 1.13. Execution in Counterparts.................................................. 23
SECTION 1.14. Inspection................................................................. 23
SECTION 1.15. Survival of Representations and Warranties................................. 23
ARTICLE II THE NOTES........................................................................... 24
SECTION 2.01. General Provisions; Optional Redemption by Issuer.......................... 24
SECTION 2.02. Execution, Authentication, Delivery, and Dating............................ 25
SECTION 2.03. Transfer and Exchange...................................................... 26
SECTION 2.04. Mutilated, Destroyed, Lost and Stolen Notes................................ 27
SECTION 2.05. Book-Entry Registration.................................................... 28
SECTION 2.06. Notice to Clearing Agency Noteholders...................................... 29
SECTION 2.07. Definitive Notes........................................................... 29
SECTION 2.08. Payment of Interest and Principal; Rights Preserved........................ 29
SECTION 2.09. Persons Deemed Owners...................................................... 30
SECTION 2.10. Cancellation............................................................... 30
SECTION 2.11. Noteholder Lists........................................................... 30
SECTION 2.12. Treasury Notes............................................................. 31
SECTION 2.13. CUSIP Numbers.............................................................. 31
ARTICLE III ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION AND APPLICATION OF MONEYS; REPORTS...... 31
SECTION 3.01. Transaction Accounts; Investments by Trustee............................... 31
SECTION 3.02. Collection of Moneys....................................................... 33
SECTION 3.03. Collection Account; Payments............................................... 34
SECTION 3.04. The Reserve Account........................................................ 36
SECTION 3.05. Reports by Trustee; Notices of Certain Payments............................ 36
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SECTION 3.06. Trustee May Rely on Certain Information from Servicer...................... 37
SECTION 3.07. Optional Deposits by the Insurer; Notice of Waivers........................ 38
SECTION 3.08. The Security Deposit Account............................................... 38
ARTICLE IV THE POLICY.......................................................................... 39
SECTION 4.01. Claims Under Policy........................................................ 39
SECTION 4.02. Preference Claims.......................................................... 40
SECTION 4.03. Surrender of Policy........................................................ 41
ARTICLE V RELEASE OF LEASES AND INTERESTS IN EQUIPMENT......................................... 41
SECTION 5.01. Release of Equipment....................................................... 41
SECTION 5.02. Release of Leases Upon Final Lease Payment................................. 41
SECTION 5.03. Execution of Documents..................................................... 41
ARTICLE VI SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER..................................... 43
SECTION 6.01. Servicer Events of Default................................................. 43
SECTION 6.02. Substitute Servicer........................................................ 43
ARTICLE VII EVENTS OF DEFAULT; REMEDIES........................................................ 43
SECTION 7.01. Events of Default.......................................................... 43
SECTION 7.02. Acceleration of Maturity; Rescission and Annulment......................... 45
SECTION 7.03. Remedies................................................................... 46
SECTION 7.04. Trustee Shall File Proofs of Claim......................................... 46
SECTION 7.05. Trustee May Enforce Claims Without Possession of Notes..................... 47
SECTION 7.06. Application of Money Collected............................................. 48
SECTION 7.07. Limitation on Suits........................................................ 49
SECTION 7.08. Unconditional Right of Noteholders to Receive Principal and Interest....... 49
SECTION 7.09. Restoration of Rights and Remedies......................................... 50
SECTION 7.10. Rights and Remedies Cumulative............................................. 50
SECTION 7.11. Delay or Omission Not Waiver............................................... 50
SECTION 7.12. Control by Noteholders..................................................... 50
SECTION 7.13. Undertaking for Costs...................................................... 51
SECTION 7.14. Waiver of Stay or Extension Laws........................................... 51
SECTION 7.15. Sale of Asset Pool......................................................... 51
ARTICLE VIII THE TRUSTEE....................................................................... 53
SECTION 8.01. Certain Duties and Responsibilities........................................ 53
SECTION 8.02. Notice of Defaults or Events of Default.................................... 54
SECTION 8.03. Certain Rights of Trustee.................................................. 54
SECTION 8.04. May Hold Notes............................................................. 56
SECTION 8.05. Money Held in Trust........................................................ 56
SECTION 8.06. Compensation, Reimbursement, etc........................................... 56
SECTION 8.07. Corporate Trustee Required; Eligibility.................................... 56
SECTION 8.08. Resignation and Removal; Appointment of Successor.......................... 57
SECTION 8.09. Acceptance of Appointment by Successor..................................... 58
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SECTION 8.10. Merger, Conversion, Consolidation or Succession to Business................ 58
SECTION 8.11. Co-Trustees and Separate Trustees.......................................... 59
SECTION 8.12. Acceptance by Trustee...................................................... 60
SECTION 8.13. Preferential Collection of Claims Against the Issuer....................... 60
SECTION 8.14. Reports by Trustee to Noteholders.......................................... 60
SECTION 8.15. No Proceedings............................................................. 61
SECTION 8.16. Appointment and Powers..................................................... 61
SECTION 8.17. Performance of Duties...................................................... 61
SECTION 8.18. Control by the Insurer..................................................... 62
ARTICLE IX COVENANTS........................................................................... 62
SECTION 9.01. Payment of Principal and Interest.......................................... 62
SECTION 9.02. Maintenance of Office or Agency; Chief Executive Office.................... 62
SECTION 9.03. Money for Payments to Noteholders to be Held in Trust...................... 62
SECTION 9.04. Corporate Existence; Merger; Consolidation, etc............................ 63
SECTION 9.05. Protection of Asset Pool; Further Assurances............................... 64
SECTION 9.06. [Reserved]................................................................. 64
SECTION 9.07. Performance of Obligations; Assignment and Servicing Agreement............. 64
SECTION 9.08. Negative Covenants......................................................... 65
SECTION 9.09. Information as to Issuer................................................... 66
SECTION 9.10. Taxes...................................................................... 66
SECTION 9.11. Indemnification............................................................ 66
SECTION 9.12. Commission Reports; Reports to Trustee; Reports to Noteholders............. 67
ARTICLE X SUPPLEMENTAL INDENTURES.............................................................. 68
SECTION 10.01. Supplemental Indentures Without Consent of Noteholders..................... 68
SECTION 10.02. Supplemental Indentures with Consent of Noteholders........................ 68
SECTION 10.03. Execution of Supplemental Indentures....................................... 69
SECTION 10.04. Effect of Supplemental Indentures.......................................... 69
SECTION 10.05. Reference in Notes to Supplemental Indentures.............................. 69
SECTION 10.06. Compliance with Trust Indenture Act........................................ 70
ARTICLE XI SATISFACTION AND DISCHARGE.......................................................... 70
SECTION 11.01. Satisfaction and Discharge of Indenture.................................... 70
SECTION 11.02. Application of Trust Money................................................. 71
ARTICLE XII MISCELLANEOUS...................................................................... 71
SECTION 12.01. Trust Indenture Act Controls............................................... 71
SECTION 12.02. Communication by Noteholders with Other Noteholders........................ 71
SECTION 12.03. Location of Leases......................................................... 72
SECTION 12.04. Officers' Certificate and Opinion of Counsel as to Conditions Precedent.... 72
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SECTION 12.05. Statements Required in Certificate or Opinion.............................. 72
SECTION 12.06. Nonpetition................................................................ 72
</TABLE>
SCHEDULES
SCHEDULE 1 Leases
EXHIBITS
EXHIBIT A Forms of Notes and Trustee's Certificate of Authentication
iv
<PAGE>
CERTIFICATE GUARANTY INSURANCE ENDORSEMENT
Attached to and forming Effective Date of Endorsement:
part of Policy #AB0254BE May 25, 1999
issued to:
Harris Trust and Savings Bank,
as Indenture Trustee for the Holders of
IKON Receivables, LLC Lease-Backed Notes
For purposes of this Policy, the following terms shall have the following
meanings:
"Certificate Insurance Policy" or "Policy" shall mean this Certificate
Guaranty Insurance Policy together with each and every endorsement hereto.
"Due for Payment" shall mean, with respect to any Insured Amount, such
amount is due and payable pursuant to the terms of the Indenture.
"First Payment Date" shall mean June 15, 1999.
"Holder" shall mean any person who is the registered owner or beneficial
owner of any Note.
"Indenture" shall mean the Indenture dated as of April 1, 1999 among IKON
Receivables, LLC, as Issuer, IOS Capital, Inc., as Servicer and Harris Trust and
Savings Bank, as Indenture Trustee, as such Indenture may be amended, modified
or supplemented from time to time as set forth in the Indenture.
"Indenture Trustee" shall mean Harris Trust and Savings Bank or its
successor-in-interest, in its capacity as trustee under the Indenture, or if any
successor trustee or any co-trustee shall be appointed as provided therein, the
"Indenture Trustee" shall also mean such successor trustee or such co-trustee,
as the case may be, subject to the provisions thereof.
"Insolvency Proceeding" means the commencement, after the date hereof, of
any bankruptcy, insolvency, readjustment or debt, reorganization, marshaling of
assets and liabilities or similar proceedings by or against the Indenture
Trustee as debtor, or the commencement, after the date hereof, of any
proceedings by or against the Indenture Trustee as debtor for the winding up or
the liquidation of its affairs, or the consent after the date hereof to the
appointment of a trustee, conservator, receiver or liquidator in any
<PAGE>
bankruptcy, insolvency, readjustment of debt, reorganization, marshaling of
assets and liabilities or similar proceedings relating to the Indenture Trustee
as debtor.
"Insurance Agreement" shall mean the Insurance and Indemnity Agreement,
dated as of May 25, 1999, among IKON Receivables, LLC, as Issuer, IKON
Receivables-I, LLC, as Seller, IOS Capital, Inc., as Originator and Servicer,
Harris Trust and Savings Bank, as Indenture Trustee and Ambac Assurance
Corporation, as Insurer, as such agreement may be amended, modified or
supplemented from time to time.
"Insured Amounts" shall mean, with respect to any Payment Date, the
Deficiency Amount for such Payment Date.
"Insured Payments" shall mean, (i) with respect to any Payment Date, the
aggregate amount actually paid by the Insurer to the Indenture Trustee in
respect of Insured Amounts for such Payment Date and (ii) Preference Amounts for
any given Business Day.
"Insurer" shall mean Ambac Assurance Corporation, a Wisconsin domiciled
stock insurance corporation, or any successor thereto, as issuer of the
Certificate Insurance Policy.
"Late Payment Rate" shall mean for any Payment Date, the greater of (i) the
rate of interest, as it is publicly announced by Citibank, N.A. at its principal
office in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 2% and (ii) the then applicable highest rate of interest on the Notes. The
- ----
Late Payment Rate shall be computed on the basis of a year of 360 days and the
actual number of days elapsed. In no event shall the Late Payment Rate exceed
the maximum rate permissible under any applicable law limiting interest rates.
"Nonpayment" shall mean, with respect to any Payment Date, an Insured
Amount is Due for Payment but has not been paid pursuant to the Indenture.
"Notice" shall mean the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A or B, as
applicable, to the Policy, the original of which is subsequently delivered by
registered or certified mail, from the Indenture Trustee specifying the amount
of any Insured Payment which shall be due and owing.
"Payment Date" shall mean the 15th day of each month (or if such day is not
a Business Day, the first Business Day immediately following) beginning with the
First Payment Date and ending on May 16, 2005.
"Preference Amount" means any payment of principal or interest on a Note
which has become Due for Payment and which was made to a Holder by or on behalf
of the
<PAGE>
Indenture Trustee which has been deemed a preferential transfer and recoverable,
or theretofore recovered, from its Holder pursuant to the United States
Bankruptcy Code in accordance with a final, nonappealable order of a court of
competent jurisdiction.
"Premium Percentage" shall have the meaning set forth in the Insurance
Agreement.
"Reimbursement Amount" shall mean, as of any date, the sum of (x) (i) all
Insured Payments paid by the Insurer, but for which the Insurer has not been
reimbursed prior to such date pursuant to Section 3.03(b)or 7.06 of the
Indenture, plus (ii) interest accrued thereon, calculated at the Late Payment
----
Rate from the date the Indenture Trustee received the related Insured Payments,
or the date such Insured Payments were made, in the case of Insured Payments
consisting of Preference Amounts not made to the Indenture Trustee and (y)
without duplication (i) any amounts then due and owing to the Insurer under the
Insurance Agreement plus (ii) interest on such amounts at the Late Payment Rate
----
from the date such amounts were due.
Capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them in the Indenture.
Notwithstanding any other provision of this Policy, the Insurer will pay
any Insured Amount payable hereunder no later than 12:00 noon, New York City
time, on the later of the Payment Date on which the related Insured Amount is
due or the third Business Day following receipt in New York, New York on a
Business Day by the Insurer of a Notice; provided that, if such Notice is
received after 12:00 noon, New York City time, on such Business Day, it will be
deemed to be received on the following Business Day. If any such Notice is not
in proper form or is otherwise insufficient for the purpose of making a claim
under the Policy, it shall be deemed not to have been received for purposes of
this paragraph, and the Insurer shall promptly so advise the Indenture Trustee
in writing and the Indenture Trustee may submit an amended Notice.
The Insurer shall pay any Preference Amount when due to be paid pursuant to
the Order referred to below, but in any event no earlier than the third Business
Day following receipt by the Insurer of (i) a certified copy of a final, non-
appealable order of a court or other body exercising jurisdiction in such
Insolvency Proceeding to the effect that the Holder is required to return such
Preference Amount paid during the term of this Policy because the payments of
such amounts were avoided as a preferential transfer or otherwise rescinded or
required to be restored by the Holder (the "Order"), (ii) a certificate by or on
behalf of the Holder that the Order has been entered and is not subject to any
stay, (iii) an assignment, in form and substance satisfactory to the Insurer,
duly executed and delivered by the Holder, irrevocably assigning to the Insurer
all rights and claims of the Holder relating to or arising under the Indenture
against the estate of the Indenture Trustee or otherwise with respect to such
Preference Amount and (iv) a Notice appropriately completed and executed by the
Indenture Trustee. Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, and not to the
Indenture Trustee or the Holder directly, unless the
<PAGE>
Indenture Trustee or the Holder has made a payment of the Preference Amount to
the court or such receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, in which case the Insurer will pay the Indenture
Trustee, subject to the delivery of (a) the items referred to in clauses (i),
(ii), (iii) and (iv) above to the Insurer and (b) evidence satisfactory to the
Insurer that payment has been made to such court or receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order.
The Insurer hereby agrees that if it shall be subrogated to the rights of
Holders by virtue of any previous payment under this Policy, no recovery of such
payment will occur unless the full amount of the Holders' allocable
distributions with respect to such payment can be made. In so doing, the Insurer
does not waive its rights to seek full payment of all Reimbursement Amounts owed
to it under the Indenture.
The terms and provisions of the Indenture constitute the instrument of
assignment referred to in the second paragraph of the face of this Policy.
A premium will be payable on this Policy on each Payment Date as provided
in Section 3.03 of the Indenture, beginning with the First Payment Date, in an
amount equal to the Premium.
THE INSURANCE PROVIDED BY THE POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
The Policy to which this Endorsement is attached and of which it forms a
part is hereby amended to provide that there shall be no acceleration payment
due under the Policy unless such acceleration is at the sole option of the
Insurer.
Nothing herein contained shall be held to vary, alter, waive or extend any
of the terms, conditions, provisions, agreements or limitations of the above
mentioned Policy other than as above stated.
This Policy is issued under the pursuant to, and shall be construed under,
the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Ambac Assurance Corporation has caused this
Endorsement to the Policy to be signed by its duly authorized officers.
Attest:
_________________________ ___________________________
Assistant Secretary Vice President
<PAGE>
A-1
EXHIBIT A
TO THE CERTIFICATE GUARANTY INSURANCE POLICY
Policy No. AB0254BE
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF INSURED AMOUNTS
Date: [_]
AMBAC ASSURANCE CORPORATION
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to Certificate Guaranty Insurance Policy No. AB0254BE
(the "Policy") issued by Ambac Assurance Corporation ("Ambac"). Terms
capitalized herein and not otherwise defined shall have the meanings specified
in the Policy and the Indenture, as the case may be, unless the context
otherwise requires.
The Indenture Trustee hereby certifies as follows:
1. The Indenture Trustee is the Indenture Trustee under the Indenture for
the Holders.
2. The relevant Payment Date is [date].
3. Payment on the Notes in respect of the Payment Date is due to be
received on _________ under the Indenture, in an amount equal to
$________.
4. There is a Deficiency Amount of $_______ in respect of the Notes,
which amount is an Insured Amount which is Due for Payment pursuant to
the terms of the Indenture.
5. The Indenture Trustee has not heretofore made a demand for the Insured
Amount in respect of the Payment Date.
6. The Indenture Trustee hereby requests the payment of the Insured
Amount that is Due for Payment be made by Ambac under the Policy and
directs that payment under the Policy be made to the following account
by bank wire transfer of federal
<PAGE>
A-2
or other immediately available funds in accordance with the terms of
the Policy to:_____________ Indenture Trustee's account number.
7. The Indenture Trustee hereby agrees that, following receipt of the
Insured Payment from Ambac, it shall (a) hold such amounts in trust
and apply the same directly to the distribution of payment on the
Notes when due; (b) not apply such funds for any other purpose; (c)
deposit such funds to the Collection Account; and (d) maintain an
accurate record of such payments with respect to each Note and the
corresponding claim on the Policy and proceeds thereof.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY
OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM
FOR EACH SUCH VIOLATION.
By: ____________________________
Indenture Trustee
Title:___________________________
(Officer)
<PAGE>
B-1
EXHIBIT B
TO THE CERTIFICATE GUARANTY INSURANCE POLICY
Policy No. AB0254BE
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF PREFERENCE AMOUNT
Date: [_]
AMBAC ASSURANCE CORPORATION
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to Certificate Guaranty Insurance Policy No. AB0254BE
(the "Policy") issued by Ambac Assurance Corporation ("Ambac"). Terms
capitalized herein and not otherwise defined shall have the meanings specified
in the Policy and the Indenture, as the case may be, unless the context
otherwise requires.
The Indenture Trustee hereby certifies as follows:
1. The Indenture Trustee is the Indenture Trustee under the Indenture for
the Holders.
2. A payment previously made on the Notes has become a Preference Amount,
as indicated by the attached Order.
3. The Holder of the applicable Notes has certified that the Order has
been entered and is not subject to stay.
4. The amount of the Preference Amount is $______, and consists of
interest on the Notes in the amount of $______ paid on _______,
_______, [and principal paid on the Notes in the amount of $______
paid on ______, _______.]
5. Neither the Indenture Trustee nor the Holder has heretofore made a
demand for such Preference Amount.
6. The Indenture Trustee hereby requests the payment of the Insured
Payment be made by Ambac under the Policy and directs that payment
under the Policy be
<PAGE>
B-2
made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the
Policy to:_______./1/
7. The Indenture Trustee hereby agrees that if such Insured Payment is
made to it, following receipt of such Insured Payment from Ambac, it
shall (a) hold such amounts in trust and apply the same directly to
the Holder for payment of the Preference Amount; (b) not apply such
funds for any other purpose; and (c) maintain an accurate record of
such payments with respect to each Note and the corresponding claim on
the Policy and proceeds thereof.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY
OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM
FOR EACH SUCH VIOLATION.
By: ____________________________
Indenture Trustee
Title:___________________________
(Officer)
___________________
/1/The account of the relevant receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Order, unless the Holder or Indenture Trustee
has already paid such Preference Amount to such party, in which case, the
account of the Indenture Trustee.
<PAGE>
Exhibit 5.1
[Letterhead of Dewey Ballantine LLP]
May 25, 1999
IKON Receivables, LLC
1738 Bass Road
P.O. Box 9115
Macon, GA 31208
Re: IKON Receivables, LLC Lease Backed Notes, Series 1999-1
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for the underwriters in connection with the
issuance of $304,474,000 aggregate principal amount of 5.11% Class A-1 Lease-
Backed Notes, Series 1999-1, $61,579,000 aggregate principal amount of 5.60%
Class A-2 Lease-Backed Notes, Series 1999-1, $304,127,000 aggregate principal
amount of 5.99% Class A-3 Lease-Backed Notes, Series 1999-1, and $81,462,000
aggregate principal amount of 6.23% Class A-4 Lease-Backed Notes, Series 1999-1
(collectively, the "Notes") by IKON Receivables, LLC (the "Issuer") pursuant to
an Indenture, dated as of April 1, 1999 (the "Indenture") among the Issuer, IOS
Capital, Inc. (the "Originator"), as servicer, and Harris Trust and Savings
Bank, as indenture trustee (the "Indenture Trustee").
In connection with this opinion we have examined (i) the Indenture;
(ii) the Assignment and Servicing Agreement, dated as of April 1, 1999 (the
"Assignment and Servicing Agreement") among the Originator, IKON Receivables-1,
LLC (the "Seller") and the Issuer; (iii) the Underwriting Agreement, dated May
19, 1999 among the Originator, the Seller, the Issuer, and Lehman Brothers,
Inc. ("Lehman Brothers"), as the representative of the underwriters; (iv) the
Registration Statement on Form S-3 (No. 333-71073) with respect to the Notes,
filed with the Securities and Exchange Commission on January 22, 1999, together
with all amendments thereto (the "Registration Statement"), the Prospectus
dated May 7, 1999 included in the Registration Statement and the Prospectus
Supplement dated May 19, 1999 relating to the Notes (such Prospectus and
Prospectus Supplement, together, the "Prospectus"); (v) the Insurance and
Indemnity Agreement, dated as of May 25, 1999 (the "Insurance and Indemnity
Agreement"), among Ambac Assurance Corporation, the Issuer, the Seller, the
Originator and the Indenture Trustee; and (vi) originals or copies, certified or
otherwise identified to our satisfaction, of all such other records of the
Originator, the Seller, the Issuer, and such other documents, certificates and
records as we have deemed necessary or appropriate as a basis for the opinions
set forth herein.
<PAGE>
In our examination, we have assumed the genuineness of all documents
submitted to us as originals, the conformity of all documents submitted to us as
certified or photostatic copies of the original documents and the authenticity
of such documents. We have assumed for purposes of our opinions hereinafter set
forth that each of the Underwriting Agreement, the Assignment and Servicing
Agreement, the Notes, the Insurance and Indemnity Agreement and the Indenture
(the "Agreements") has been duly authorized, executed and delivered by all
parties thereto, and that each signatory has full power, authority and legal
right to execute and deliver the Agreements and to perform its obligations
thereunder.
We express no opinion as to the effect of the laws of any jurisdiction
other than the laws of the State of New York and the Federal laws of the United
States of America.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. In respect of the Notes, the Indenture is a valid and legally
binding obligation of the Issuer; and
2. The Notes are legally and validly issued, fully paid and
nonassessable, and the holders of the Notes are entitled to the benefits of the
Indenture.
Our opinion contained herein is rendered only as of the date hereof,
and we undertake no obligation to update this letter or the opinions contained
herein after the date hereof.
This letter is furnished by us in connection with the issuance of the
Notes occurring on the date hereof and is solely for the benefit of the
addressee hereto, and is not to be used, circulated, quoted or otherwise
referred to for any other purpose without our express written permission.
Very truly yours,
/s/ Dewey Ballantine LLP
2
<PAGE>
Exhibit 8.1
[Letterhead of Dewey Ballantine LLP]
May 25, 1999
KON Receivables, LLC
1738 Bass Road
P.O. Box 9115
Macon, GA 31208
Re: IKON Receivables, LLC Lease Backed Notes, Series 1999-1
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel in connection with the issuance
of $304,474,000 aggregate principal amount of 5.11% Class A-1 Lease-Backed
Notes, Series 1999-1, $61,579,000 aggregate principal amount of 5.60% Class A-2
Lease-Backed Notes, Series 1999-1, $304,127,000 aggregate principal amount of
5.99% Class A-3 Lease-Backed Notes, Series 1999-1, and $81,462,000 aggregate
principal amount of 6.23% Class A-4 Lease-Backed Notes, Series 1999-1
(collectively, the "Notes") by IKON Receivables, LLC (the "Issuer") pursuant to
an Indenture, dated as of April 1, 1999 (the "Indenture") among the Issuer, IOS
Capital, Inc., as servicer and Harris Trust and Savings Bank, as indenture
trustee (the "Indenture Trustee").
As special tax counsel, we have examined such documents as we deemed
appropriate for the purposes of rendering the opinions set forth below,
including the following: (i) the Registration Statement on Form S-3 (No. 333-
71073) with respect to the Notes, filed with the Securities and Exchange
Commission on January 22, 1999, together with all amendments thereto (the
"Registration Statement"), the Prospectus and the Prospectus Supplement
relating to the Notes (the "Prospectus") and (ii) an executed copy of the
Indenture with all exhibits attached thereto.
We express no opinion as to the effect of the laws of any jurisdiction
other than the Federal laws of the United States of America.
In addition, assuming (i) the Indenture is fully executed, delivered
and enforceable against the parties thereto in accordance with its terms, (ii)
the transaction described in the Registration Statement is completed on
substantially the terms and conditions set forth therein, and (iii) no election
on IRS Form 8832 is made to the contrary, it is our opinion that:
1. the Issuer will not be treated as an association (or publicly
traded partnership) taxable as a corporation for federal income tax purposes;
<PAGE>
2. the Notes will be characterized as indebtedness for federal income
tax purposes; and
3. The statements in the Prospectus under the heading "Material
Federal Income Tax Considerations," to the extent that they constitute matters
of federal law or legal conclusions with respect thereto, have been reviewed by
us and constitute a fair and accurate summary with respect to those consequences
or aspects that are discussed.
Our opinion contained herein is rendered only as of the date hereof,
and we undertake no obligation to update this letter or the opinions contained
herein after the date hereof.
This letter is furnished by us in connection with the issuance of the
Notes occurring on the date hereof and is solely for the benefit of the
addressee hereto, and is not to be used, circulated, quoted or otherwise
referred to for any other purpose without our express written permission.
Very truly yours,
/s/ Dewey Ballantine LLP
2
<PAGE>
EXHIBIT 10.1
Execution Copy
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IOS CAPITAL, INC.,
ORIGINATOR AND SERVICER
IKON RECEIVABLES-1, LLC
SELLER
AND
IKON RECEIVABLES, LLC,
ISSUER
_________________________
ASSIGNMENT AND SERVICING AGREEMENT
Dated as of April 1, 1999
_________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ALL RIGHT, TITLE AND INTEREST OF IKON RECEIVABLES, LLC IN AND TO THIS AGREEMENT
HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF HARRIS
TRUST AND SAVINGS BANK, AS TRUSTEE, UNDER THE INDENTURE DATED AS OF APRIL 1,
1999, FOR THE BENEFIT OF THE PERSONS REFERRED TO THEREIN.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
R E C I T A L S........................................................... 1
SECTION 1. CAPITAL CONTRIBUTION.......................................... 2
1.01 Capital Contribution of Leases, Etc.............................. 2
1.02 Capital Contribution and Pledge of Equipment..................... 2
1.03 Contribution of Leases; Grant of Security Interest............... 2
1.04 Servicer to Act as Custodian..................................... 4
1.05 No Recourse to IKON or Affiliates................................ 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR.............. 5
2.01 Corporate Organization and Authority............................. 5
2.02 Business and Property............................................ 6
2.03 Financial Statements............................................. 6
2.04 Equipment and Leases............................................. 6
2.05 Payments......................................................... 10
2.06 Full Disclosure.................................................. 10
2.07 Pending Litigation............................................... 10
2.08 Title to Leases and Equipment.................................... 11
2.09 Transactions Legal and Authorized................................ 11
2.10 Governmental Consent............................................. 11
2.11 Taxes............................................................ 11
2.12 Compliance with Law.............................................. 12
2.13 ERISA............................................................ 12
2.14 Ability to Perform............................................... 13
2.15 Ordinary Course; No Insolvency................................... 13
2.16 Assets and Liabilities........................................... 13
2.17 Fair Consideration............................................... 13
2.18 Ability to Pay Debts............................................. 13
2.19 Bulk Transfer Provisions......................................... 14
2.20 Transfer Taxes................................................... 14
2.21 Principal Executive Office....................................... 14
2.22 Servicing Provisions Customary................................... 14
2.23 Nonconsolidation................................................. 14
2.24 Capital Contribution Treatment................................... 15
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER.................. 15
3.01 Corporate Organization and Authority............................. 15
3.02 Business and Property............................................ 16
3.03 Ownership and Security Interest.................................. 16
3.04 Title to Leases and Equipment.................................... 16
3.05 Transactions Legal and Authorized................................ 16
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.06 Governmental Consent............................................. 17
3.07 Compliance with Law.............................................. 17
3.08 Assets and Liabilities........................................... 17
3.09 Fair Consideration............................................... 18
3.10 Ability to Pay Debts............................................. 18
3.11 Bulk Transfer Provisions......................................... 18
3.12 Transfer Taxes................................................... 18
3.13 Principal Executive Office....................................... 18
3.14 Nonconsolidation................................................. 18
3.15 Capital Contribution Treatment................................... 19
SECTION 4. ADMINISTRATION OF LEASES...................................... 19
4.01 Servicer to Act.................................................. 19
4.02 Lease Amendments and Modifications............................... 21
4.03 Non-Performing Leases............................................ 22
4.04 Costs of Servicing; Servicing Fee; Administrative Expenses....... 23
4.05 Other Transactions............................................... 24
SECTION 5. SERVICER ADVANCES AND ORIGINATOR'S AND SELLER'S SUPPORT....... 24
5.01 Late Lease Payments.............................................. 24
5.02 Early Termination Leases......................................... 24
5.03 Indemnification.................................................. 25
5.04 Purchases; Other Payments........................................ 25
5.05 Payment Advices.................................................. 27
SECTION 6. INFORMATION TO BE PROVIDED.................................... 27
6.01 Monthly Status Reports; Servicing Reports........................ 27
6.02 Annual Independent Public Accountant's Report.................... 29
SECTION 7. THE SERVICER.................................................. 30
7.01 Merger or Consolidation of the Servicer.......................... 30
7.02 Limitation on Liability of the Servicer and Others............... 30
7.03 Servicer Not to Resign or Be Removed............................. 30
7.04 Financial and Business Information............................... 31
7.05 Officers' Certificates........................................... 32
7.06 Inspection....................................................... 32
7.07 Servicer Records................................................. 33
SECTION 8. THE ORIGINATOR................................................ 33
8.01 Merger or Consolidation of the Originator........................ 33
8.02 Control of Seller................................................ 33
8.03 Financial and Business Information............................... 33
8.04 Officers' Certificates........................................... 35
8.05 Books and Records................................................ 35
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.06 Communications.................................................. 35
SECTION 9. THE SELLER.................................................... 35
9.01 Merger or Consolidation of the Seller........................... 35
9.02 Control of Issuer............................................... 35
9.03 Information..................................................... 36
9.04 Inspection...................................................... 36
9.05 Books and Records............................................... 36
9.06 Communications.................................................. 36
SECTION 10. DEFAULT....................................................... 37
10.01 Servicer Events of Default...................................... 37
10.02 Termination..................................................... 39
10.03 Trustee to Act; Appointment of Successor........................ 39
10.04 Servicer to Cooperate........................................... 40
10.05 Notification to Noteholders..................................... 40
10.06 Remedies Not Exclusive.......................................... 41
SECTION 11. SUBSTITUTION AND ADDITION OF LEASES........................... 41
11.01 Substitution and Addition....................................... 41
11.02 Procedure....................................................... 42
11.03 Objection and Purchase.......................................... 43
11.04 Originator's, Seller's and Servicer's Subsequent Obligations.... 44
SECTION 12. ASSIGNMENT.................................................... 44
12.01 Assignment to Trustee........................................... 44
12.02 Assignment by Originator, Seller or Servicer.................... 44
SECTION 13. NATURE OF OBLIGATIONS AND SECURITY THEREFOR................... 44
13.01 Obligations Absolute............................................ 44
13.02 Security for Obligations........................................ 45
13.03 Further Assurances; Financing Statements........................ 45
SECTION 14. DEFINITIONS................................................... 46
SECTION 15. MISCELLANEOUS................................................. 52
15.01 Continuing Obligations.......................................... 52
15.02 GOVERNING LAW................................................... 52
15.03 Successors and Assigns.......................................... 52
15.04 Modification.................................................... 52
15.05 No Proceedings.................................................. 53
15.06 Notices......................................................... 53
15.07 Counterparts.................................................... 53
15.08 Nonpetition Covenant............................................ 53
</TABLE>
iii
<PAGE>
Schedule 1 - Portfolio Detail
Exhibit A - Schedule of Leases and Equipment
Exhibit B - Form of Receivables Servicing Report
iv
<PAGE>
ASSIGNMENT AND SERVICING AGREEMENT
This ASSIGNMENT AND SERVICING AGREEMENT (this "Agreement" or this
"Assignment and Servicing Agreement") is made and dated as of April 1, 1999,
among IKON RECEIVABLES, LLC, a Delaware limited liability company, as acquiror
hereunder (the "Issuer"), IOS CAPITAL, INC., a Delaware corporation, as
originator of the Leases (in such capacity, the "Originator"), contributor of
the Leases to IKON Receivables-1, LLC and servicer hereunder (in such capacity,
the "Servicer"), and IKON RECEIVABLES-1 LLC, as contributor of the Leases to the
Issuer (the "Seller").
R E C I T A L S
A. The Originator wishes to contribute, transfer, assign, set over
and convey to the Seller, and the Seller wishes to acquire from the Originator,
all right, title and interest of the Originator in, to and under the Leases and
the Equipment subject to the Leases (such terms and all other capitalized terms
used herein having the meanings ascribed thereto in Section 14 hereof unless
otherwise indicated).
B. The Seller wishes to contribute, transfer, assign, set over and
convey to the Issuer, and the Issuer wishes to acquire from the Seller, (i) all
right, title and interest of the Seller in, to and under the Leases, and (ii)
all right, title and interest of the Seller in, to and under the covenants,
representations, warranties and other obligations of the Originator (including
the Originator's Purchase Obligation) under this Assignment and Servicing
Agreement.
C. The Seller wishes to grant a security interest to the Issuer, and
the Issuer wishes to accept the Seller's grant of a security interest to the
Issuer of, all right, title and interest of the Seller in and to the Equipment
subject to the Leases as security for the performance by the Seller of certain
of its obligations hereunder.
D. Pursuant to the Indenture, the Issuer is issuing one class of
5.11% Class A-1 Lease-Backed Notes, Series 1999-1 in the aggregate principal
amount of $304,474,000 (the "Class A-1 Notes"), one class of 5.60% Class A-2
Lease-Backed Notes, Series 1999-1 in the aggregate principal amount of
$61,579,000 (the "Class A-2 Notes"), one class of 5.99% Class A-3 Lease-Backed
Notes, Series 1999-1 in the aggregate principal amount of $304,127,000 (the
"Class A-3 Notes"), and one class of 6.23% Class A-4 Lease-Backed Notes, Series
1999-1 in the aggregate principal amount of $81,462,000 (the "Class A-4 Notes"
and, together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, the "Notes"), the net proceeds of which are being used to fund the
Reserve Account established pursuant to the Indenture and to make distributions
by the Issuer to the Seller and by the Seller to the Originator.
E. Pursuant to the Indenture, the Issuer is granting, inter alia, to
----- ----
the Trustee, for the benefit of the holders from time to time of the Notes, a
security interest in all right, title and interest of the Issuer in, to and
under the Leases, the Equipment and this Assignment and Servicing Agreement.
<PAGE>
SECTION 1. CAPITAL CONTRIBUTION
1.01 Capital Contribution of Leases, Etc.
-----------------------------------
(a) By their execution and delivery of this Assignment and
Servicing Agreement, the Originator, in consideration for the membership
interests in the Seller, hereby contributes, transfers, assigns, sets over and
conveys to the Seller, and the Seller hereby acquires from the Originator,
without recourse (except to the extent of the Originator's Purchase Obligations
as set forth herein), all of the Originator's right, title and interest in and
to each of the Leases (including all Related Interests).
(b) By their execution and delivery of this Assignment and
Servicing Agreement, the Seller, in consideration for the membership interests
in the Issuer, hereby contributes, transfers, assigns, sets over and conveys to
the Issuer, and the Issuer hereby acquires from the Seller without recourse
(except to the extent of the Seller's Purchase Obligations as set forth herein),
all of the Seller's right, title and interest in and to each of (i) the Leases
(including all Related Interests), and (ii) the covenants, representations,
warranties and other obligations of the Originator (including the Originator's
Purchase Obligation) under this Assignment and Servicing Agreement.
1.02 Capital Contribution of and Grant of Security Interest in
---------------------------------------------------------
Equipment.
- ---------
(a) The Originator and the Seller each acknowledge and confirm
that the Originator, as additional consideration for the beneficial interests in
the Seller, is also contributing and transferring to the Seller, and in
connection with each transfer and assignment of Additional Leases and Substitute
Leases, the Originator will contribute and transfer to the Seller, without
recourse, all right, title and interest of the Originator in and to each item of
Equipment subject to each Lease, Additional Lease and Substitute Lease. After
such contribution and transfer by the Originator to the Seller, all right, title
and interest of the Originator in and to each item of Equipment subject to each
Lease shall be vested in the Seller.
(b) The Seller and the Issuer each acknowledge and confirm that
the Seller is granting a security interest to the Issuer, and in connection with
each transfer and assignment of Additional Leases and Substitute Leases the
Seller will grant a security interest to the Issuer, in all right, title and
interest of the Seller in and to each item of Equipment subject to each Lease,
Additional Lease and Substitute Lease, as security for the performance by the
Seller of its obligations under Section 5.05. After such grant by the Seller to
the Issuer, the Issuer shall have a security interest in all right, title and
interest of the Seller in and to each item of Equipment subject to each Lease,
Additional Lease and Substitute Lease.
1.03 Contribution of Leases; Grant of Security Interest.
--------------------------------------------------
It is the intention of the parties hereto that each transfer of
Leases, Additional Leases, Substitute Leases and Equipment by the Originator to
the Seller pursuant to Sections 1.01(a) and 1.02(a), and each transfer of
Leases, Additional Leases and Substitute Leases by the Seller to the Issuer
pursuant to Section 1.01(b), shall constitute an absolute assignment thereof by
way of capital contribution and not a loan. Neither the Originator nor the
Seller shall take any action inconsistent with the treatment of such transfers
as absolute assignments by way of capital
2
<PAGE>
contributions or with the Issuer's ownership of the Leases (including all
Related Interests). Each of the Originator, the Seller and the Issuer shall
indicate in its records that, and shall respond to any inquiries from third
parties by indicating that, (i) ownership of the Leases, Additional Leases,
Substitute Leases, including all Related Interests, is held by the Issuer and
pledged to the Trustee, pursuant to the Indenture, and (ii) ownership of each
item of Equipment subject to each Lease is held by the Seller (subject to the
security interest therein granted by the Seller to the Issuer hereunder and by
the Issuer to the Trustee pursuant to the Indenture). In the event, however,
that contrary to the expressed intentions of the parties, the transactions
evidenced by Sections 1.01(a), 1.01(b) and 1.02(a) do not constitute an absolute
transfer and assignment of assets pursuant to the provisions of such Sections,
then it is the intention of the parties hereto that this Assignment and
Servicing Agreement shall constitute a security agreement under applicable law
and that, effective as of the date hereof, the Originator shall be deemed to
have granted to the Seller, and the Seller shall be deemed to have granted to
the Issuer, first priority security interests, as follows:
(a) Originator hereby grants to Seller a security interest in
all of the Originator's right, title and interest in, to and under the
following described property, whether such property (or Originator's right,
title or interest therein) is now existing or is hereafter created,
acquired or arising, and wherever located, as security for the payment and
performance of all liabilities, indebtedness and obligations now or at any
time or times hereafter owing by Originator to Seller, whether absolute or
conditional, due or to become due, liquidated or unliquidated and arising
under the terms of this Assignment and Servicing Agreement: (i) all Leases,
including, without limitation, all Additional Leases and Substitute Leases;
(ii) all amounts due or to become due at any time or times under or with
respect to any of the Leases since the Cut-Off Date (other than any pre-
payments of rent required pursuant to the terms of any Lease at or before
the commencement of the Lease), including, without limitation, all Lease
Payments, Casualty Payments, Retainable Deposits and Termination Payments;
(iii) all rights to payment or performance under any Lease Guaranty; (iv)
all rights and interests in any collateral with respect to any Lease,
including any security deposit and any security interest in the Equipment
securing the Lessee's obligations under any Lease; (v) all of the
Originator's right, title and interest in and to any Equipment; (vi) all
rights and benefits of Originator under this Assignment and Servicing
Agreement; and (vii) all proceeds of any of the foregoing (collectively,
the "Originator Collateral").
(b) Seller hereby grants to Issuer a security interest in all of
Seller's right, title and interest in, to and under the following described
property, whether such property (or Seller's right, title or interest
therein) is now existing or is hereafter created, acquired or arising, and
wherever located, as security for the payment and performance of all
liabilities, indebtedness and obligations now or at any time or times
hereafter owing by Seller to Issuer, whether absolute or conditional, due
or to become due, liquidated or unliquidated and arising under the terms of
this Assignment and Servicing Agreement: (i) all Leases, including, without
limitation, all Additional Leases and Substitute Leases; (ii) all amounts
due or to become due at any time or times under or with respect to any
Leases since the Cut-Off Date (other than any pre-payments of rent required
pursuant to the terms of any Lease at or before the commencement of the
Lease), including, without limitation, all Lease Payments, Casualty
Payments, Retainable Deposits and Termination
3
<PAGE>
Payments; (iii) all rights to payment or performance under any Lease
Guaranty; (iv) all rights and interests in any collateral with respect to
any Lease, including any security deposit and any security interest in the
Equipment securing the Lessee's obligations under any Lease; (v) all of the
Seller's right, title and interest in and to any Equipment; (vi) all rights
and benefits of Seller under this Assignment and Security Agreement; (vii)
all interest of the Seller in any of the Originator Collateral, including,
without limitation, the security interest granted by Originator to Seller
in the Originator Collateral; and (viii) all proceeds of any of the
foregoing (collectively, the "Seller Collateral").
1.04 Servicer to Act as Custodian.
----------------------------
(a) The Servicer shall hold and acknowledges that it is holding
the Leases and all other assets in the Asset Pool that it may from time to time
receive hereunder as custodian for the Trustee, excluding any amounts
distributed to the Servicer by the Trustee in accordance with Section 3.03(b) of
the Indenture.
(b) The Servicer shall perform its duties under this Section
1.04 in accordance with the standard set forth in Section 4.01 as such standard
applies to servicers acting as custodial agents. The Servicer shall promptly
report to the Trustee any failure by it to hold the Leases as herein provided
and shall promptly take appropriate action to remedy any such failure but only
to the extent (i) any such failure is caused by the acts or omissions of the
Servicer and (ii) such remedial action is otherwise within its capabilities or
control. As custodian, the Servicer shall have the following powers and perform
the following duties:
(A) hold the Leases on behalf of the Trustee for the benefit of the
Noteholders and the Insurer, maintain accurate records pertaining to each
Lease to enable it to comply with the terms and conditions of this
Assignment and Servicing Agreement, and maintain a current inventory
thereof;
(B) implement policies and procedures in accordance with the
Servicer's normal business practices with respect to the handling and
custody of the Leases so that the integrity and physical possession of the
Leases will be maintained; and
(C) attend to all details in connection with maintaining custody of
the Leases on behalf of the Issuer and for the Trustee on behalf of the
Noteholders and the Insurer.
(c) In acting as custodian of the Leases, the Servicer agrees
further that it does not and will not have or assert any beneficial ownership
interest in such Leases. The Servicer shall mark conspicuously its master data
processing records evidencing each Lease with a legend, acceptable to the
Trustee and the Insurer, evidencing that (i) all right, title and interest in
the Leases has been contributed and transferred to the Issuer and pledged by the
Issuer to the Trustee as provided in the Indenture, and (ii) a security interest
in all right, title and interest of the Seller in and to the related Equipment
has been granted by the Seller to the Issuer hereunder and pledged by the Issuer
to the Trustee as provided in the Indenture.
(d) Subject to the provisions of this Assignment and Servicing
Agreement, the Servicer agrees to maintain the Leases at its office at 1738 Bass
Road, Macon, Georgia or at such other offices of the Servicer as shall from time
to time be identified by prior written notice to the
4
<PAGE>
Trustee and the Insurer. The Servicer shall keep the originals of the Leases and
related Lease files segregated from other leases, records and files of the
Servicer in a place where it is indicated that they are being held for the
Trustee; provided, however, that the originals of the Leases and related Lease
-------- -------
files in respect of obligors in the State of Florida need not be so segregated
provided that such Leases (and Lease files) are also retained in imaged form and
the Servicer is in compliance with the requirements of Section 1.04(c).
Notwithstanding the foregoing, the Servicer may temporarily move individual
Leases or any portion thereof and related Lease files without notice as
necessary to conduct collection and other servicing activities.
(e) Notwithstanding anything to the contrary contained herein,
in the event that the long-term debt rating assigned to the Servicer is
downgraded below BBB- by S&P or Baa3 by Moody's, the Servicer shall deliver the
originals of all of the Leases (and related Lease files), including the
originals of any Leases (and related Lease files) in imaged form, to the Trustee
within three (3) Business Days of receipt of written demand by the Insurer.
1.05 No Recourse to IKON Office Solutions, Inc. or Affiliates.
--------------------------------------------------------
Notwithstanding anything to the contrary contained here, the
contributions and transfers of the Leases and Equipment pursuant to Sections
1.01(a), 1.01(b) and 1.02(a) are without representation or warranty by, or
recourse to or against, IKON Office Solutions, Inc. or any subsidiary or
Affiliate of IKON Office Solutions, Inc. other than the Originator and the
Seller, including any right to require IKON Office Solutions, Inc. or any such
subsidiary or Affiliate other than the Originator or the Seller to purchase or
acquire any Lease or item of Equipment for any reason or to compensate the
Originator, the Seller, the Issuer or any other Person for or in respect of any
Lease or item of Equipment (whether on account of the non-payment of any lease
or rental payment or for any other reason).
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
The Originator, as Originator and Servicer, hereby represents and
warrants as follows:
2.01 Corporate Organization and Authority.
------------------------------------
The Originator:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation,
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and
to carry on its business as now conducted (except where the
failure to have such licenses and permits would not have a
material adverse effect on the Asset Pool or the business or
condition (financial or otherwise) of the Originator or
impair the enforceability of any Lease) and to enter into
and perform its obligations under this Assignment and
Servicing Agreement, and the transactions
5
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contemplated hereby, including performance of the duties of the
Servicer and the Originator's support obligations hereunder,
and
(c) has duly qualified and is authorized to do business and is in
good standing as a foreign corporation in each jurisdiction
where the character of its properties or the nature of its
activities makes such qualification necessary (except where the
failure to be so qualified or in good standing would not have a
material adverse effect on the Asset Pool or the business or
condition (financial or otherwise) of the Originator or impair
the enforceability of any Lease).
2.02 Business and Property.
---------------------
The Prospectus accurately describes in all material respects the
general nature of the business of the Originator.
2.03 Financial Statements.
--------------------
(a) The consolidated balance sheet of the Originator and its
consolidated subsidiaries for the fiscal years ended September 30, 1998 and
September 30, 1997 and the related consolidated statements of income, retained
earnings and cash flow for the respective fiscal years ended on such dates, all
accompanied by reports thereon containing opinions without qualification, except
as therein noted, by Ernst & Young, independent certified public accountants,
and the unaudited interim consolidated balance sheets of the Originator and its
consolidated subsidiaries as of December 31, 1998 and as of March 31, 1999 and
the related consolidated statements of income, retained earnings and cash flow
for the three months ended December 31, 1998 and March 31, 1999, respectively,
have been prepared in accordance with generally accepted accounting principles
consistently applied, and present fairly the financial position of the
Originator and its subsidiaries as of such dates and the results of their
operations for such periods.
(b) Except as disclosed in the Prospectus and the financial
statements referred to in the preceding Section 2.03(a), since September 30,
1998 there has been no change in the business, condition or prospects (financial
or otherwise) of the Originator except changes in the ordinary course of
business, none of which individually or in the aggregate has been materially
adverse. Neither the Originator nor any of its subsidiaries has any material
liabilities or obligations not incurred in the ordinary course of business other
than those disclosed in the financial statements referred to in Section 2.03(a)
or for which adequate reserves are reflected in such financial statements.
2.04 Equipment and Leases.
--------------------
(a) Prior to the date of each contribution and transfer of any
Leases and each contribution and transfer or grant of a security interest in the
related Equipment in accordance with Sections 1.01 and 1.02, the Originator
purchased each item of Equipment from the manufacturer or other supplier. The
Originator has paid in full, to the manufacturer or supplier, as the case may
be, the purchase price and any related charges in connection with the
acquisition of the Equipment. The contribution to the Seller and the concurrent
contribution to the Issuer of
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the Leases, the contribution of all of the Originator's right, title and
interest in each item of Equipment to the Seller and the grant of a security
interest in the Seller's interests in each item of Equipment to the Issuer, do
not violate the terms or provisions of any Lease or any other agreement to which
the Originator is a party or by which it is bound.
(b) Immediately prior to the completion of each contribution and
transfer described in Sections 1.01(a), 1.01(b) and 1.02(a), the Originator will
(i) be the legal owner of the Leases (including all Related Interests) and (ii)
have good title to each item of Equipment. Upon completion of each contribution
and transfer described in Sections 1.01(a), 1.01(b) and 1.02(a) and the grant of
the security interest described in Section 1.02(b), (i) the Issuer will be the
legal owner of the related Leases (including all Related Interests), (ii) the
Seller will have good title to each item of related Equipment, and (iii) the
Issuer will have a valid security interest in all of the Seller's right, title
and interest in and to each item of related Equipment.
(c) At the time of each transfer of a Lease hereunder, (A) each
such Lease (i) will be a triple-net lease (i.e., pursuant to which the Lessee is
- -
unconditionally responsible for the payment of insurance, maintenance and taxes
with respect to the Equipment subject to the Lease); (ii) will be a legal, valid
and binding full recourse obligation of the Lessee thereunder, enforceable by
the Issuer (and by the Trustee as assignee of the Issuer) against such Lessee in
accordance with the terms thereof, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors' rights and by general equity principles;
and (iii) provides that it is noncancellable by the Lessee; and (iv) will be in
full force and effect; (B) any and all requirements of any federal, state or
local law, including, without limitation, usury, truth-in-lending and equal
credit opportunity laws applicable to such Lease will have been complied with;
and (C) the Originator has no knowledge (after due inquiry) of any challenge,
dispute or claim by or against the Lessee under or affecting such Lease or of
the bankruptcy or insolvency of the applicable Lessee. As of the initial
Determination Date, or the effective date of the transfer of any Additional
Lease or Substitute Lease, each Lessee has paid the first scheduled installment
of rent under its respective Lease.
(d) the time that any Lease is contributed and transferred
hereunder, the Originator will have no knowledge that any item of the Equipment
subject thereto has suffered any loss or damage which has not been repaired.
(e) Each Lease requires the Lessee thereunder to maintain insurance
on the Equipment subject thereto in an amount sufficient to fully insure such
Equipment.
(f) In addition to the insurance maintained by the Lessees with
respect to the Equipment, the Originator (or an Affiliate of the Originator)
maintains (i) one or more casualty insurance policies which, in the aggregate,
are in an amount not less than the aggregate Outstanding Principal Amount of the
Notes, (ii) a general liability insurance policy in the aggregate amount of
$1,000,000 and (iii) an excess liability insurance policy in umbrella form in
the aggregate amount of $10,000,000. Each of such policies is in full force and
effect and covers all Equipment. All premiums in respect of such policies have
been paid. Each of the Trustee and the Issuer are named as loss payees and
additional insureds, as their interests may appear, on
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such casualty and liability policies maintained by the Originator and will be
provided with copies of all such policies upon written request.
(g) No Lease has outstanding rent which is 61 or more days past due
as of the Cut-Off Date.
(h) Each Lease was entered into by the Originator in accordance
with the Originator's regular credit approval process described in the
Prospectus, and no selection procedures adverse to the credit quality of the
Asset Pool were employed in selecting the Leases for contribution under this
Assignment and Servicing Agreement.
(i) Each Lease provides that the obligation of the Lessee to pay
rent thereunder throughout the term thereof is and will be unconditional without
regard to any event affecting the Equipment, the obsolescence of any Equipment,
any claim of such Lessee against the Issuer, the Originator or the Servicer or
any change in circumstance of such Lessee or any other circumstance whatsoever
except to the extent that in the event of a casualty of any item of Equipment,
the Lessee, at a minimum, is obligated to pay, in lieu of the future Lease
Payments with respect to such item, the outstanding principal or net book value
of the Leases and any applicable make whole premium.
(j) Each of the Leases provides that payments thereunder are not
subject to setoff or reduction.
(k) In the case of each Lease which consists of a master lease and
one or more exhibits or schedules thereto, the Originator has neither assigned
such master lease in its entirety, nor delivered physical possession of such
master lease, to any Person other than the Seller, the Issuer or the Trustee (or
the trustee under another indenture in a transaction substantially similar to
the transaction contemplated hereby, which other indenture provides that the
lien thereof on such master lease extends only to such master lease insofar as
it relates to lease schedules which are not part of the Asset Pool).
(l) As of the time of each contribution and transfer of Leases
hereunder, there are no facts or circumstances which give rise, or would give
rise at any time in the future, to any right of rescission, setoff, counterclaim
or defense, including the defense of usury, to obligations of any Lessee,
including the obligation of such Lessee to pay all amounts due with respect to
any Lease to which such Lessee is a party, and neither the operation of any of
the terms of any Lease or the exercise of any right thereunder will render such
Lease unenforceable in whole or in part or subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and no such
right of rescission, setoff, counterclaim or defense has been asserted with
respect thereto.
(m) As of the time of each contribution and transfer of Leases
hereunder, no Lease has been amended, altered or modified in any material
respect except in writing, and copies of all such writings are attached to the
Lease.
(n) As of the time of each contribution and transfer of Leases
hereunder, no Lessee will have been released, in whole or in part, from any of
its obligations in respect of any Lease; no Lease will have been satisfied,
cancelled or subordinated, in whole, or in part, or
8
<PAGE>
rescinded, and no Equipment covered by any Lease will have been released from
such Lease, in whole or in part, nor has any instrument been executed that would
effect any such satisfaction, release, cancellation, subordination or
rescission.
(o) As of the time of each contribution and transfer of Leases
hereunder, each Lease was originated by the Originator in the ordinary course of
its business.
(p) The Leases do not violate any U.S. or state laws and no Lease
was originated in or is subject to the laws of any jurisdiction whose laws would
make any of the transfers and contributions under this Assignment and Servicing
Agreement unlawful.
(q) All parties to each Lease had authority and capacity to execute
such Lease.
(r) None of the Leases is a consumer lease.
(s) The final Lease Payment on each Lease is due and payable on or
prior to November 15, 2004, and, as of the Cut-Off Date, the maximum remaining
term of any Lease did not exceed 68 months.
(t) Each Lease agreement is "chattel paper" within the meaning of
the Uniform Commercial Code in the states of New York and Georgia, and there is
only one original of each Lease.
(u) Each Lease provides that it is noncancellable by the Lessee and
none of the Leases contains early termination options (except for Leases which
contain early termination or prepayment clauses which require the Lessee to pay
the remainder of all remaining Lease Payments under such Lease upon such
cancellation or prepayment);
(v) None of the Leases is subject to any guaranty by the
Originator.
(w) The Leases have been transferred by the Originator to the
Seller and by the Seller to the Issuer, in each case free and clear of any liens
and are assignable without prior written consent of the Lessee.
(x) The Leases are U.S. dollar-denominated and the Lessor and each
Lessee is located in the United States.
(y) As of the Cut-Off Date, no more than two percent (2%) of the
Leases in the Asset Pool will consist of Leases with government entities as the
obligor.
(z) Each Lessee has represented to the Originator that it has
accepted the Equipment.
(aa) No Lessee is a subject of an insolvency or bankruptcy
proceeding at the time of the transfer.
(bb) No Lease is a Non-Performing Lease and each Lease is no more
than 60 days past due at the time of transfer.
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<PAGE>
(cc) Each Lease provides for periodic payments.
(dd) All the Leases were originated in the United States.
2.05 Payments.
--------
(a) The aggregate amounts of Lease Payments payable by the Lessees
under the Leases during each Due Period, together with amounts on deposit in the
Reserve Account, are sufficient to cover the Servicing Fee, the premium due in
respect of the Policy and the principal and interest on the Notes, as such
payments become due and payable.
(b) The portfolio detail set forth in Schedule 1 hereto (i)
accurately sets forth, as of the Cut-Off Date, the amount of each Lease Payment
due under each of the Leases and the month in which such Lease Payment is to be
paid in accordance with the terms of the Lease under which the same is to be
paid, (ii) accurately sets forth, as of the Cut-Off Date, the information with
respect to the other characteristics of the Leases and the Equipment described
in such portfolio detail and (iii) is otherwise true and correct in all
respects.
2.06 Full Disclosure.
---------------
The Prospectus (including, without limitation, the statistical and
descriptive information with respect to the initial Leases, Lessees and
Equipment), as of the date of the Prospectus Supplement, does not contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading; provided, however, that no representation or warranty
-------- -------
is made with respect to the information set forth in the Prospectus Supplement
under the heading "The Insurer and the Policy" (including information
incorporated by reference therein). There is no fact peculiar to the Originator
or any Affiliate of the Originator or, to the knowledge of the Originator, any
Lease, Lessee or item of Equipment, which the Originator has not or will not
disclose in the Prospectus which materially affects adversely or, so far as the
Originator can now reasonably foresee, will materially affect adversely the
ability of the Originator to perform the transactions contemplated by this
Assignment and Servicing Agreement.
2.07 Pending Litigation.
------------------
There are no proceedings or investigations pending, or to the
knowledge (after due inquiry) of the Originator threatened, against or affecting
the Originator or any subsidiary in or before any court, governmental authority
or agency or arbitration board or tribunal, including, but not limited to, any
such proceeding or investigation with respect to any environmental or other
liability resulting from the ownership or use of any of the Equipment, which,
individually or in the aggregate, involve the possibility of materially and
adversely affecting the properties, business, prospects, profits or condition
(financial or otherwise) of the Originator and its subsidiaries, or the ability
of the Originator or the Servicer to perform its obligations under this
Assignment and Servicing Agreement. The Originator is not in default with
respect to any order of any court, governmental authority or agency or
arbitration board or tribunal.
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2.08 Title to Leases and Equipment.
-----------------------------
Immediately following the transfer and contribution by the Originator
to the Seller of the Leases and the Equipment, the transfer and contribution by
the Seller to the Issuer of the Leases and the security interest granted by the
Seller to the Issuer in all of the Seller's interest in the Equipment, in each
case as contemplated in Section 1, (a) the Leases and the Equipment will be free
and clear of all Liens, except the rights of each Lessee under the related
Lease, the rights of the Seller and the Issuer hereunder and the Lien in favor
of the Trustee granted pursuant to the Indenture, and (b) there will be no
delinquent taxes or other outstanding charges affecting the Equipment which is
or may give rise to any Lien prior to, or equal or coordinate with, the Lien of
the Trustee under the Indenture.
2.09 Transactions Legal and Authorized.
---------------------------------
The contribution and transfer by the Originator to the Seller of the
Leases and the Equipment and compliance by the Originator with all of the
provisions of this Assignment and Servicing Agreement:
(a) have been duly authorized by all necessary corporate action on
the part of the Originator, and do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or obligations
of the Originator except such as have been duly obtained;
(b) are within the corporate powers of the Originator; and
(c) are legal and will not conflict with, result in any breach in
any of the provisions of, constitute a default under, or result in the creation
of any Lien upon any property of the Originator under the provisions of, any
agreement, charter instrument, by-law or other instrument to which the
Originator is a party or by which it or its property may be bound or result in
the violation of any law, regulation, rule, order or judgment applicable to the
Originator or its properties, or any order to which the Originator or its
properties is subject, of or by any government or governmental agency or
authority.
2.10 Governmental Consent.
--------------------
Except for the filing of the Required Financing Statements, no
consent, approval or authorization of, or filing, registration or qualification
with, any governmental authority is necessary or required on the part of the
Originator in connection with the execution and delivery of this Assignment and
Servicing Agreement, the contribution and transfer of the Leases and Equipment
to the Seller contemplated hereby or the performance by the Originator of its
obligations hereunder.
2.11 Taxes.
-----
(a) All tax returns required to be filed by the Originator or any
subsidiary in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon the Originator or any
subsidiary, or upon any of their respective properties, income or franchises,
shown to be due and payable on such returns have been paid. To the best of the
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Originator's knowledge all such tax returns were true and correct and neither
the Originator nor any subsidiary knows of any proposed additional tax
assessment against it in any material amount nor of any basis therefor.
(b) The provisions for taxes on the books of the Originator and
each of its subsidiaries are in accordance with generally accepted accounting
principles.
2.12 Compliance with Law.
-------------------
The Originator:
(a) is not in violation of any laws, ordinances,
governmental rules or regulations to which it is
subject;
(b) has not failed to obtain any licenses, permits,
franchises or other governmental authorizations
necessary to the ownership of its property or to the
conduct of its business; and
(c) is not in violation in any material respect of any term
of any agreement, charter instrument, by-law or other
instrument to which it is a party or by which it may be
bound,
which violation or failure to obtain might materially adversely
affect the Asset Pool or the business or condition (financial
or otherwise) of the Originator and its subsidiaries.
2.13 ERISA.
-----
(a) The present value of all benefits vested under all "employee
pension benefit plans," as such term is defined in Section 3 of ERISA,
maintained by or contributed to by the Originator and its Related Persons (other
than multi-employer plans as such term is defined in Section 3 of ERISA), as
from time to time in effect (herein called the "Pension Plans"), does not exceed
the value of the assets of the Pension Plans allocable to such vested benefits;
(b) No Prohibited Transactions, Accumulated Funding Deficiencies,
or Reportable Events have occurred with respect to any Pension Plans that, in
the aggregate, could subject the Originator to any material tax, penalty or
other liability; and
(c) No notice of intent to terminate a Pension Plan under a
distress termination has been filed, nor has the PBGC instituted proceedings to
terminate, or appoint a trustee to administer, a Pension Plan and no event has
occurred or condition exists which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan.
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2.14 Ability to Perform.
------------------
At the date hereof, the Originator does not believe, nor does it have
any reasonable cause to believe, that it cannot (a) perform each and every
covenant contained in this Assignment and Servicing Agreement or (b) perform its
obligations hereunder as Servicer.
2.15 Ordinary Course; No Insolvency.
------------------------------
The transactions contemplated by the Notes, the Indenture and this
Assignment and Servicing Agreement are being consummated by the Originator in
furtherance of the Originator's ordinary business purposes and constitute a
practical and reasonable course of action by the Originator designed to improve
the financial position of the Originator, with no contemplation of insolvency
and with no intent to hinder, delay or defraud any of its present or future
creditors. The Originator will not, either as a result of the transaction
contemplated by this Assignment and Servicing Agreement, or immediately before
or after such transaction, be insolvent or have an unreasonably small capital
for the conduct of its business and the payment of existing and anticipated
obligations.
2.16 Assets and Liabilities.
----------------------
(a) Both immediately before and after any transfer and contribution
by the Originator to the Seller of Leases and Equipment contemplated by this
Assignment and Servicing Agreement, the present fair salable value of the
Originator's assets was or will be in excess of the amount that will be required
to pay the Originator's probable liabilities as they then exist and as they
become absolute and matured; and
(b) Both immediately before and after any transfer and contribution
by the Originator to the Seller of Leases and Equipment contemplated by this
Assignment and Servicing Agreement, the sum of the Originator's assets was or
will be greater than the sum of the Originator's debts, valuing the Originator's
assets at a fair salable value.
2.17 Fair Consideration.
------------------
The consideration received by the Originator, in exchange for the
contribution and transfer of the Leases and Equipment pursuant to this
Agreement, is fair consideration having value equivalent to or in excess of the
value of the assets being contributed by the Originator.
2.18 Ability to Pay Debts.
--------------------
The Originator does not believe that it will incur debts beyond its
ability to pay or which would be prohibited by its charter documents or by-laws
as a result of the transactions contemplated by this Assignment and Servicing
Agreement or otherwise. The Originator's assets and cash flow enable it to meet
its present obligations in the ordinary course of business as they become due.
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2.19 Bulk Transfer Provisions.
------------------------
The contribution and transfer of the Leases and Equipment by the
Originator to the Seller, the contribution and transfer of the Leases by the
Seller to the Issuer and the grant of the security interest in the Seller's
interest in the Equipment by the Seller to the Issuer, in each case as
contemplated in Section 1, are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction.
2.20 Transfer Taxes.
--------------
The contribution and transfer of the Leases and Equipment by the
Originator to the Seller, the contribution and transfer by the Seller to the
Issuer of the Leases and the grant by the Seller to the Issuer of a security
interest in the Seller's interest in the Equipment, in each case as contemplated
in Section 1, are not subject to and will not result in any tax, fee or
governmental charge payable by the Originator to any federal, state or local
government ("Transfer Taxes"). In the event that the Seller or the Issuer
receives actual notice of any Transfer Taxes arising out of any such
contribution and transfer or grant, on written demand by the Issuer, or upon the
Originator otherwise being given notice thereof, the Originator shall pay, and
otherwise indemnify and hold the Issuer, the Seller, the Trustee and the holders
of the Notes harmless, on an after-tax basis, from and against any and all such
Transfer Taxes (it being understood that the Seller, the Issuer, the holders of
the Notes and the Trustee shall have no obligation to pay such Transfer Taxes).
2.21 Principal Executive Office.
--------------------------
The principal executive office of each of the Originator and the
Servicer is located at 1738 Bass Road, Macon, Georgia 31210.
2.22 Servicing Provisions Customary.
------------------------------
The servicing arrangements hereunder, including without limitation the
terms and conditions pursuant to which the Originator will act as Servicer and
the Servicing Fee to be paid to the Originator, are consistent with the
arrangements and customary practices of the Originator when providing comparable
services to non-affiliated entities and of other servicers in the equipment
leasing industry.
2.23 Nonconsolidation.
----------------
The Originator is and at all times since its incorporation has been
operated in such a manner that it would not be substantively consolidated with
either the Seller or the Issuer and such that the separate existence of any of
the Originator, the Seller or the Issuer would not be disregarded in the event
of a bankruptcy or insolvency of the Originator or the Seller or the Issuer, and
in such regard:
(a) Originator is not involved in the day-to-day management of the
Seller or the Issuer;
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(b) the Originator maintains separate corporate records and books
of account from the Seller and the Issuer and otherwise observes corporate
formalities and has a separate business office from the Seller and the Issuer;
(c) the financial statements and books and records of the
Originator prepared after the Issuance Date will reflect the separate existence
of the Seller and the Issuer;
(d) the Originator maintains its assets separately from the assets
of the Seller and the Issuer (including through the maintenance of a separate
bank account), the Originator's funds and assets, and records relating thereto,
have not been and are not commingled with those of the Seller and the Issuer and
the separate creditors of the Seller and the Issuer will be entitled to be
satisfied out of the Seller's and the Issuer's respective assets prior to any
value in the Seller or the Issuer becoming available to the Seller's or the
Issuer's equityholders or the Originator's creditors;
(e) all business correspondence of the Originator and other
communications are conducted in the Originator's own name and on its own
stationery; and
(f) neither the Seller nor the Issuer acts as an agent of the
Originator in any capacity and the Originator does not act as agent for the
Seller or the Issuer, but instead presents itself to the public as a corporation
separate from the Seller and the Issuer; provided that the Originator is the
--------
Servicer hereunder and under agreements similar in nature to this Agreement.
2.24 Capital Contribution Treatment.
------------------------------
The Originator will treat the contribution and transfer to the Seller
of the Leases and the Equipment as a capital contribution for financial
accounting and reporting purposes.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants as follows:
3.01 Corporate Organization and Authority.
------------------------------------
The Seller:
(a) is a limited liability company duly organized, validly
existing and in good standing under the laws of its
jurisdiction of organization,
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and
to carry on its business as now conducted and to enter
into and perform its obligations under this Assignment and
Servicing Agreement, and the transactions contemplated
hereby including its obligations under Section 5.05, and
(c) has duly qualified and is authorized to do business and is
in good standing as a foreign limited liability company in
each jurisdiction
15
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where the character of its properties or the nature of its
activities makes such qualification necessary.
3.02 Business and Property.
---------------------
The Prospectus accurately describes, in all material respects, the
general nature of the business of the Seller.
3.03 Ownership and Security Interest.
-------------------------------
Upon completion of each contribution and transfer described in
Sections 1.01(a), 1.01(b) and 1.02(a) and the grant of the security interest
described in Section 1.02(b), (i) the Issuer will be the legal owner of the
related Leases (including all Related Interests), (ii) the Seller will have good
title to each item of related Equipment, and (iii) the Issuer will have a valid
security interest in all of the Seller's right, title and interest in and to in
each item of related Equipment.
3.04 Title to Leases and Equipment.
-----------------------------
Immediately following the transfer and contribution by the Originator
to the Seller of the Leases and the Equipment, the transfer and contribution by
the Seller to the Issuer of the Leases and the grant by the Seller to the Issuer
of the security interest in the Seller's interests in the Equipment, in each
case as contemplated in Section 1, (a) the Leases and the Equipment will be free
and clear of all Liens, except the rights of each Lessee under the related
Lease, the rights of the Seller and the Issuer hereunder and the Lien in favor
of the Trustee granted pursuant to the Indenture, and (b) there will be no
delinquent taxes or other outstanding charges affecting the Equipment which have
given or may give rise to any Liens prior to, or equal or coordinate with, the
Lien of Trustee under the Indenture.
3.05 Transactions Legal and Authorized.
---------------------------------
The contribution and transfer by the Seller of all of its right, title
and interest in and to the Leases and of the covenants, representations,
warranties and obligations of the Originator (including the Originator's
Purchase Obligation) under this Assignment and Servicing Agreement, the grant of
the security interest by the Seller to the Issuer in and to each item of
Equipment and compliance by the Seller with all of the provisions of this
Assignment and Servicing Agreement:
(a) have been duly authorized by all necessary action on the part of
the Seller, as a limited liability company, and do not require any member
approval, or approval or consent of any trustee or holders of any indebtedness
or obligations of the Seller except such as have been duly obtained;
(b) are within the powers of the Seller, as a limited liability
company; and
(c) are legal and will not conflict with, result in any breach in any
of the provisions of, constitute a default under, or result in the creation of
any Lien upon any property of the Seller under the provisions of, any agreement,
charter instrument, by-law or other
16
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instrument to which the Seller is a party or by which it or its property may be
bound or result in the violation of any law, regulation, rule, order or judgment
applicable to the Seller or its properties, or any order to which the Seller or
its properties is subject, of or by any government or governmental agency or
authority.
3.06 Governmental Consent.
--------------------
Except for the filing of Financing Statements in accordance with the
Filing Requirements, no consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority is necessary or
required on the part of the Seller in connection with the execution and delivery
of this Assignment and Servicing Agreement, the contribution and transfer by the
Seller to the Issuer of the Leases and the grant of the security interest by the
Seller to the Issuer in the Seller's interest in the Equipment contemplated
hereby.
3.07 Compliance with Law.
-------------------
The Seller:
(a) is not in violation of any laws, ordinances, governmental
rules or regulations to which it is subject;
(b) has not failed to obtain any licenses, permits, franchises
or other governmental authorizations necessary to the
ownership of its property or to the conduct of its business;
and
(c) is not in violation in any material respect of any term of
any agreement, charter instrument, by-law or other
instrument to which it is a party or by which it may be
bound,
which violation or failure to obtain might materially adversely
affect the Asset Pool or the business or condition (financial or
otherwise) of the Seller and its subsidiaries.
3.08 Assets and Liabilities.
----------------------
(a) Both immediately before and after any contribution and transfer
by the Seller to the Issuer of the Leases and the grant of the security interest
in the interests of the Seller in the Equipment contemplated by this Assignment
and Servicing Agreement, the present fair salable value of the Seller's assets
was or will be in excess of the amount that will be required to pay the Seller's
probable liabilities as they then exist and as they become absolute and matured;
and
(b) Both immediately before and after any contribution and transfer
by the Seller to the Issuer of the Leases and the grant of the security interest
in the interests of the Seller in the Equipment contemplated by this Assignment
and Servicing Agreement, the sum of the Seller's assets was or will be greater
than the sum of the Seller's debts, valuing the Seller's assets at a fair
salable value.
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3.09 Fair Consideration.
------------------
The consideration received by the Seller, in exchange for the
contribution and transfer of the Leases, the grant of the security interest in
the interests of the Seller in the Equipment and the assignment and contribution
of the covenants, representations, warranties and obligations of the Originator
(including the Originator's Purchase Obligation) under this Assignment and
Servicing Agreement, is fair consideration having value equivalent to or in
excess of the value of the assets being contributed by the Seller.
3.10 Ability to Pay Debts.
--------------------
The Seller does not believe that it will incur debts beyond its
ability to pay or which would be prohibited by its charter documents or limited
liability company agreement as a result of the transactions contemplated by this
Assignment and Servicing Agreement or otherwise. The Seller's assets and cash
flow enable it to meet its present obligations in the ordinary course of
business as they become due.
3.11 Bulk Transfer Provisions.
------------------------
The contribution and transfer by the Seller to the Issuer of the
Leases and the grant by the Seller to the Issuer of the security interest in the
interests of the Seller in the Equipment pursuant to this Assignment and
Servicing Agreement are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction.
3.12 Transfer Taxes.
--------------
The contribution and transfer by the Seller to the Issuer of the
Leases and the grant of the security interest by the Seller to the Issuer in the
Seller's interest in the Equipment pursuant to this Assignment and Servicing
Agreement are not subject to and will not result in any Transfer Taxes. In the
event that the Issuer receives actual notice of any Transfer Taxes arising out
of any such contribution and transfer or pledge, on written demand by the
Issuer, or upon the Seller otherwise being given notice thereof, the Seller
shall pay, and otherwise indemnify and hold the Issuer, the Trustee and the
holders of the Notes harmless, on an after-tax basis, from and against any and
all such Transfer Taxes (it being understood that the Issuer, the holders of the
Notes and the Trustee shall have no obligation to pay such Transfer Taxes).
3.13 Principal Executive Office.
--------------------------
The principal executive offices of the Seller are located at 1738 Bass
Road, Macon, Georgia 31210. The Seller has no place of business in any state
other than the State of Georgia.
3.14 Nonconsolidation.
----------------
The Seller is and at all times since its incorporation has been
operated in such a manner that it would not be substantively consolidated with
the Originator or the Issuer and such that the separate existence of any of the
Originator, the Seller or the Issuer would not be
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disregarded in the event of a bankruptcy or insolvency of the Seller or the
Issuer, and in such regard:
(a) the Seller is not involved in the day-to-day management of the
Originator or the Issuer;
(b) the Seller maintains separate corporate records and books of
account from the Originator and the Issuer and otherwise observes corporate
formalities and has a separate business office from the Originator and the
Issuer;
(c) the financial statements and books and records of the Seller
prepared after the Issuance Date will reflect the separate existence of the
Originator and the Issuer;
(d) the Seller maintains its assets separately from the assets of the
Originator and the Issuer (including through the maintenance of a separate bank
account), the Seller's funds and assets, and records relating thereto, have not
been and are not commingled with those of the Originator or the Issuer and the
separate creditors of the Originator and the Issuer will be entitled to be
satisfied out of the Originator's and the Issuer's respective assets prior to
any value in the Originator or the Issuer becoming available to the Originator's
or the Issuer's equityholders or the Seller's creditors;
(e) all business correspondence of the Seller and other
communications are conducted in the Seller's own name and on its own stationery;
and
(f) neither the Originator nor the Issuer acts as an agent of the
Seller in any capacity and the Seller does not act as agent for the Originator
or the Issuer, but instead presents itself to the public as a corporation
separate from the Originator and the Issuer.
3.15 Capital Contribution Treatment.
------------------------------
The Seller will treat the transfer to the Issuer of the Leases and
amounts owed by Lessees under the Leases and of its interests (other than its
ownership interest) in the Equipment as a capital contribution for financial
accounting and reporting purposes.
SECTION 4. ADMINISTRATION OF LEASES
4.01 Servicer to Act.
---------------
(a) Notwithstanding the contribution and transfer by the Originator
of the Leases and the Equipment contemplated hereby, the Servicer, for the
benefit of the Issuer, will service and administer each Lease in accordance with
the terms thereof and of this Assignment and Servicing Agreement. The Servicer
shall take, or cause to be taken, all such actions as may be necessary or
advisable to service, administer and collect each Lease from time to time, all
in accordance with (i) customary and prudent servicing procedures for leases of
a similar type, (ii) all applicable laws, rules and regulations, and (iii)
without limitation as to its obligations under the preceding clauses (i) and
(ii), no less a standard of care than that which it applies to leases it
services for its own account. The Servicer shall provide the Lessees with
appropriate invoices and such other notices as may be required to ensure that
all Lease Payments, Casualty Payments
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and Termination Payments on or in respect of each Lease are remitted by the
Lessees to the address specified by the Servicer. The Servicer shall deposit
such payments to the Collection Account within two Business Days of the receipt
thereof. Any other amount received by the Servicer from time to time from the
Originator, the Issuer or any Lessee which is subject to the Lien of the
Indenture shall be held in trust by the Servicer, as agent for the Trustee and
promptly turned over to the Trustee or deposited into the Collection Account for
application in accordance with the provisions of the Indenture.
(b) The Servicer shall do, and shall have full power and authority to
do, subject only to the specific requirements and prohibitions of this
Assignment and Servicing Agreement, any and all things in connection with the
servicing and administration of the Leases and the interests in the Equipment
which are consistent with the manner in which it services leases and equipment
constituting part of its own portfolio and consistent with the customary
practices of servicers in the equipment leasing industry, but in performing its
duties hereunder, the Servicer will act on behalf and for the benefit of the
Issuer, the Trustee and the holders of the Notes and the Insurer, subject at all
times to the provisions of the Indenture, without regard to any relationship
which the Servicer or any Affiliate of the Servicer may otherwise have with a
Lessee. The Servicer shall at all times act in accordance with the provisions
of each Lease, and shall observe and comply with all requirements of law
applicable to it. Except as permitted by the terms of any Lease following a
default thereunder, the Servicer shall not take any action which would result in
the interference with the Lessee's right to quiet enjoyment of the Equipment
subject to the Lease during the term thereof. The Servicer shall exercise with
respect to each item of Equipment all rights and remedies it, the Issuer or the
Trustee shall have against any vendor of the Equipment, subject to the
provisions of any Lease, and shall promptly pay all amounts realized from such
actions to the Trustee for deposit in the Collection Account, in accordance with
the terms of the Indenture.
(c) Without limiting the generality of the foregoing, the Servicer
agrees to (i) invoice each Lessee monthly (except quarterly, semi-annually or
annually in the case of Leases which provide for quarterly, semi-annual or
annual Lease Payments, respectively) for all Lease Payments required to be paid
by such Lessee in such manner and to the same extent as the Servicer does with
respect to leases held for its own account, (ii) maintain with respect to each
Lease and each item of Equipment, and with respect to each payment by each
Lessee and compliance by each Lessee with the provisions of each Lease, complete
and accurate records in the same form and to the same extent as the Servicer
does with respect to leases and equipment held for its own account (which
records shall be at least as complete and accurate as those maintained by the
Servicer as of the date of this Assignment and Servicing Agreement), and (iii)
from time to time execute, deliver and file (or cause the same to be done), and
the Servicer is hereby authorized and empowered to execute, deliver, and file on
behalf of the Originator, the Seller, the Issuer and the Trustee, any and all
tax returns with respect to sales, use, personal property and other taxes (other
than corporate income tax returns) and any and all reports or licensing
applications required to be filed in any jurisdiction with respect to any Lease
or any item of Equipment and, except as provided in the last sentence of this
Section 4.01(c), any Financing Statements and assignments of Financing
Statements and continuation statements as may from time to time be necessary
because of Lease substitutions, equipment replacements in accordance with the
provisions of any Lease or otherwise so that the transfer of the Leases and
Equipment from the Originator to the Seller, the transfer of the Leases from the
Seller to the
20
<PAGE>
Issuer, the security interest granted by the Seller to the Issuer in the
Equipment and the security interest granted by the Issuer pursuant to the
Indenture in favor of the Trustee in each of the Leases and the Issuer's
interest in the Equipment, at all times will be perfected by such filings with
the appropriate Uniform Commercial Code filing offices. The Originator, the
Seller, the Issuer and the Servicer agree to file Financing Statements on Form
UCC-1 to perfect the ownership interest of the Issuer and the security interest
of the Trustee in the Leases, the ownership interest of the Seller in the
Equipment, the security interest in favor of the Issuer in the Equipment and the
security interest of the Trustee in the Issuer's interest in the Equipment. The
parties acknowledge that the Originator has not filed, and it is not
contemplated that the Originator, the Servicer, the Seller, the Issuer or any
other party will file, Financing Statements in order to perfect or to continue
in effect any security interest in any item of Equipment securing the
obligations of the Lessee under the Lease relating to such Equipment.
(d) The Servicer will maintain, or cause to be maintained, with
respect to the Leases and the Equipment casualty and liability insurance in
amounts at least as great as those described in Section 2.04(f). Each such
casualty and liability policy (i) if maintained by the Servicer, shall name the
Issuer and Trustee as loss payees or additional insureds and (ii) if maintained
by the Lessee, shall name the Servicer or the Trustee as loss payee and
additional insured; provided that the Servicer shall cause all such policies
--------
to name the Trustee and the Issuer as loss payees and additional insureds if (A)
the Originator is no longer the Servicer, (B) an Event of Default shall have
occurred and be continuing or (C) a Servicer Event of Default shall have
occurred and be continuing.
(e) On or prior to the Issuance Date, the Servicer will file the
Required Financing Statements and thereafter will file such additional Financing
Statements and continuation statements and assignments with respect to the
Leases and the Equipment as may be necessary because of equipment replacements
in accordance with the provisions of any Lease, purchases of Additional Leases
in accordance with Section 11 and Lease substitutions pursuant to Section 11
hereof or otherwise so that (i) the ownership interest and security interest
contemplated by this Agreement in favor of the Issuer, and the security interest
contemplated by the Indenture in favor of the Trustee, in the Leases will be
perfected by such filings with the appropriate Uniform Commercial Code filing
offices and (ii) the ownership interest contemplated by this Agreement in favor
of the Seller, and the security interest contemplated by this Agreement in favor
of the Issuer and by the Indenture in favor of the Trustee, in the Equipment,
will be perfected by such filings with the appropriate Uniform Commercial Code
filing offices.
(f) The Servicer shall pay Excess Copy Charges and Maintenance
Charges, if any, owing to IKON Office Solutions, Inc. in a timely fashion.
4.02 Lease Amendments and Modifications.
----------------------------------
In performing its obligations hereunder, the Servicer may, acting in
the name of the Issuer and without the necessity of obtaining the prior consent
of the Issuer, the Insurer or the Trustee, enter into and grant modifications,
waivers and amendments to the terms of any Lease except for modifications,
waivers or amendments that (a) are inconsistent with the servicing standards set
forth in Section 4.01 above, (b) would reduce the amount or extend the time for
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<PAGE>
payment of any Lease Payment, Casualty Payment or Termination Payment to be made
under a Lease (other than to permit termination of a Lease which does not
otherwise provide for termination by requiring the payment, in lieu of all
future Lease Payments with respect to the Lease or Equipment subject thereto, an
amount which equals or exceeds the Lease Purchase Amount for such Lease as of
such date) or the Lessee's absolute and unconditional obligation to make payment
of the same, (c) would reduce or adversely affect the Lessee's obligation to
maintain, service, insure and care for the Equipment or would permit the
alteration of any item of Equipment in any way which could adversely affect its
present or future value or (d) otherwise could adversely affect the interests of
any of the Seller, the Issuer, the Trustee, the Insurer or the holders of the
Notes.
In addition, following the transfer of any Lease to the Issuer in
accordance herewith, the Servicer may make adjustments to such Lease which
modify one or more terms of such Lease, such as payment amount or payment date.
Such administrative adjustments may result in a re-booking of such Lease and the
assignment of a new Lease number, but will not be considered to be a
substitution or prepayment of such Lease. Except to the extent the Originator
substitutes a Substitute Lease therefor in accordance with Section 11 hereof,
the Servicer may permit such adjustments so long as the following conditions
precedent have been satisfied:
(i) after giving effect to such adjustment and any additions
and substitutions pursuant to Section 11, the final payment on such Lease must
be on or prior to November 15, 2004;
(ii) after giving effect to such adjustments and any additions
and substitutions pursuant to Section 11 the aggregate amount of Lease Payments
through the term of the Leases (including the Substitute Leases and the
Additional Leases) will not be materially less than the aggregate scheduled
Lease Payments of the Leases prior to such adjustment, substitution or addition;
(iii) after giving effect to such adjustments, additions and
substitutions pursuant to Section 11, the Discounted Present Value of the
Performing Leases must not be less than the Discounted Present Value of the
Performing Leases prior to such adjustment, addition and substitution; and
(iv) after giving effect to such adjustments, additions, and
substitutions pursuant to Section 11, the weighted average remaining term of the
Performing Leases must not be greater than the weighted average remaining term
of the Performing Leases prior to such adjustment, addition, and substitution.
4.03 Non-Performing Leases.
---------------------
(a) Upon receipt of notice from the Issuer, the Trustee or any other
Person, or if the Servicer otherwise learns that any Lease is a Non-Performing
Lease, the Servicer will take such action as is appropriate, consistent with the
Servicer's administration of leases in its own portfolio and consistent with the
customary practices of servicers in the office equipment leasing industry,
including such action as may be necessary to cause, or attempt to cause, the
Lessee thereunder to cure such non-performance (if the same may be cured) or to
terminate or attempt to
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<PAGE>
terminate such Lease and to recover, or attempt to recover, all damages
resulting from such default.
(b) The Servicer will use its best efforts to sell or lease any
Equipment that is subject to a Non-Performing Lease in a timely manner and upon
the most favorable terms and conditions available at the time. In the event of
an Early Lease Termination, any Substitute Leases in respect thereof must have a
Discounted Present Value equal to or greater than that of the Early Termination
Lease, monthly payments at least equal to those of the Early Termination Lease
through the remaining term of such Early Termination Lease and a remaining term
less than or equal to that of the Early Termination Lease.
(c) In the event that the Servicer is required to sell or lease any
item of Equipment pursuant to the provisions of this Section 4.03 at a time when
the Servicer has other similar items of equipment available to it, the Servicer
will not favor any such other item in its remarketing efforts.
(d) All amounts realized by the Servicer in the performance of its
duties under this Section 4.03 with respect to any Lease remaining subject to
the Lien of the Indenture and related Equipment (net of the Servicer's actual
out-of-pocket expenses reasonably incurred in such realization), including
amounts received by the Servicer pursuant to the provisions of Section 5.05,
shall be held in trust by the Servicer, as agent for the Trustee and deposited
into the Collection Account for application in accordance with the provisions of
the Indenture; provided that, to the extent that (i) the Servicer has made any
--------
advances pursuant to Section 5.01 hereof with respect to any Lease which
thereafter became a Non-Performing Lease, and (ii) the Servicer has not
otherwise been fully reimbursed for such advances or payments, the Servicer
shall reimburse itself for such advances or payments from any amounts recovered
with respect to such Non-Performing Lease before depositing any such amounts
pursuant to this Section 4.03(d). Any amounts properly retained by the Servicer
pursuant to this Section are, without further action by the Trustee, released
from the Lien of the Indenture.
4.04 Costs of Servicing; Servicing Fee; Administrative Expenses.
----------------------------------------------------------
(a) All costs of servicing each Lease in the manner required by this
Section 4 shall be borne by the Servicer, but the Servicer shall be entitled to
retain, out of any amounts actually recovered by the Servicer in the performance
of its obligations under Section 4.03 hereof with respect to any Lease or the
interests in the Equipment subject thereto, the Servicer's actual out-of-pocket
expenses reasonably incurred in the course of such performance with respect to
such Lease or the interests in the Equipment. (For all purposes of this Section
4 the Servicer's "out-of-pocket expenses" means only those expenses incurred to
third parties (e.g., reasonable fees of outside counsel in a collection suit)
and not salaries, operating costs, overtime wages and other such "overhead"
costs or expenses of the Servicer.) In addition, the Servicer shall be entitled
to receive on each Payment Date following the Issuance Date a servicing fee with
respect to the Notes (the "Servicing Fee"). Any amounts properly retained by
the Servicer pursuant to this Section are, without further action by the
Trustee, released from the Lien of the Indenture.
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(b) The amount of the Servicing Fee which the Servicer shall be
entitled to receive on each Payment Date following the original issuance of the
Notes shall be determined by multiplying one-twelfth of 0.75% by the lesser of
(i) the Discounted Present Value of the Performing Leases or (ii) the
Outstanding Principal Amount of the Notes, in each case at the Determination
Date for such Payment Date before application of payments with respect thereto.
(c) The Servicer agrees to pay, out of the Servicing Fee, all Trustee
Fees and expenses of the Trustee in connection with the Notes (including the
expenses relating to the preparation and delivery of reports to Noteholders) and
all fees of accountants in connection with the Notes.
4.05 Other Transactions.
------------------
Nothing in this Assignment and Servicing Agreement shall preclude the
Originator or the Servicer from entering into other leases or other financial
transactions with any Lessee or selling or discounting any such lease with any
Person.
SECTION 5. SERVICER ADVANCES AND ORIGINATOR'S AND SELLER'S SUPPORT
5.01 Late Lease Payments.
-------------------
On each Determination Date, the Servicer may, but will not be required
to, advance and remit to the Trustee for deposit in the Collection Account, in
such manner as will ensure that the Trustee will have immediately available
funds on account thereof by 11:00 A.M. New York City time on the second Business
Day prior to the next succeeding Payment Date, an amount (a "Servicer Advance")
equal to any Lease Payment due during the prior Due Period but unpaid prior to
such Determination Date with respect to any Lease. In consideration of each
Servicer Advance the Servicer will be entitled to retain any late payment fees
recovered from the Lessee with respect to any Lease Payment covered by a
Servicer Advance. In addition, the Servicer will be reimbursed for Servicer
Advances from Available Funds in the Collection Account in accordance with the
Indenture on the following Payment Date. Any amounts properly retained by the
Servicer pursuant to this Section are, without further action by the Trustee,
released from the Lien of the Indenture.
5.02 Early Termination Leases.
------------------------
Following the Determination Date as of which any Lease first becomes
an Early Termination Lease the Originator may, but shall have no obligation to,
either (a) substitute one or more Eligible Leases and the Equipment subject
thereto for such Lease and the Equipment subject thereto pursuant to Section 11
hereof (if the Originator is then entitled to substitute Leases and Equipment in
accordance with the provisions of Section 11.01 hereof) on or before the second
Business Day prior to the next succeeding Payment Date, (b) purchase from the
Issuer such Lease and the Issuer's interest in the related Equipment by
remitting to the Trustee an amount equal to the Lease Purchase Amount in such
manner as will ensure that the Trustee will have immediately available funds
therefor by 11:00 A.M. New York City time on the second Business Day prior to
the next succeeding Payment Date or (c) transfer to the Issuer one or more
Additional Leases in consideration of the proceeds thereof in accordance with
Section 11 hereof.
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Unless the Originator takes one of the actions set forth in the prior sentence,
the Servicer will not permit a voluntary termination of a Lease prior to its
stated maturity unless it receives a payment in connection with such termination
equal to at least the Lease Purchase Amount. Any Early Termination Lease and the
Issurer's interest in the Equipment subject thereto which is purchased, or for
which Additional Leases have been acquired or Substitute Leases transferred,
pursuant to this Section 5.02 shall nevertheless remain subject to the Lien of
the Indenture until such time as an Additional Lease or Additional Leases have
been acquired or Substitute Lease or Substitute Leases have been transferred in
accordance with the provisions of Section 11 hereof or the Lease Purchase Amount
has been paid.
5.03 Indemnification.
---------------
Subject to the provisions of Section 7.02, the Originator, in its
capacity as Servicer, agrees to indemnify and hold harmless the Issuer, the
Trustee (its officers, directors, employees and agents) and each holder of the
Notes (each an "Indemnified Party") against any and all liabilities, losses,
damages, penalties, costs and expenses (including costs of defense and legal
fees and expenses) which may be incurred or suffered by such Indemnified Party
(except to the extent arising out of the gross negligence or willful misconduct
on the part of the Indemnified Party) as a result of claims, actions, suits or
judgments asserted or imposed against it and arising out of the transactions
contemplated hereby or by the Indenture, including, without limitation, any
claims resulting from any use, operation, maintenance, repair, storage or
transportation of any item of Equipment, whether or not in the Servicer's
possession or under its control pursuant to this Assignment and Servicing
Agreement, and any tort claims and any fines or penalties arising from any
violation of the laws or regulations of the United States or any state or local
government or governmental authority; provided that the foregoing indemnity
--------
shall in no way be deemed to impose on the Originator any obligation, other than
to the extent specifically set forth in this Agreement or the Indenture, to make
any payment with respect to any Lease or Equipment or principal or interest on
the Notes, to pay or reimburse the Insurer in respect of any amount paid by the
Insurer on or in respect of the Notes or to reimburse the Issuer for any
payments on account of the Notes. This Section 5.03 shall bind any successor
Servicer hereunder. Nothing in this indemnification shall be construed as a
guaranty of any Lease or any Equipment by the Originator. The obligations of
the Servicer hereunder shall survive the satisfaction and discharge of the
Indenture or the earlier resignation or removal of the Trustee thereunder.
5.04 Purchases; Other Payments.
-------------------------
(a) In the event that (i) any of the representations or warranties
made by the Originator in Sections 2.04, 2.05(b) and 2.08 hereof with respect to
any of the Leases or the Equipment subject thereto proves at any time to have
been inaccurate in any material respect as of the Issuance Date or related
transfer date, as the case may be, or (ii) any Lease shall be terminated in
whole or in part by a Lessee, or any amounts due with respect to any Lease shall
be reduced or impaired, as a result of (x) any action or inaction by the
Originator (other than any such action or inaction of the Originator, when
acting as Servicer, in connection with the enforcement of any Lease in a manner
consistent with the provisions of this Assignment and Servicing Agreement) or
(y) any claim by any Lessee against the Originator and, in any such case, the
event or condition causing such inaccuracy, termination, reduction, impairment
or claim
25
<PAGE>
shall not have been cured or corrected within 30 days after the earlier of the
date on which the Originator is given notice thereof by the Issuer or the
Trustee or the date on which the Originator otherwise first has notice thereof,
the Originator will purchase such Lease and related Equipment interests by
paying to the Servicer for deposit into the Collection Account, not later than
the second Business Day after the Determination Date next following the
expiration of such 30-day period with respect to the events referenced in
Section 5.04(a)(i) and (ii), an amount equal to the Lease Purchase Amount, and
simultaneously with such purchase, the Originator shall reimburse the Servicer
for all amounts, if any, theretofore advanced by the Servicer pursuant to
Section 5.01 with respect to such Lease. Without limiting the generality of the
foregoing, it is agreed and understood that for purposes of this Section 5.04,
any inaccuracy in any representation or warranty with respect to (i) the
priority of the Lien of the Indenture with respect to any Lease or (ii) the
amount (if less than represented) of the Lease Payments, Casualty Payments or
Termination Payments under any Lease shall be deemed to be material.
(b) By the Issuance Date, the Originator and the Seller agree to
obtain and provide to the Trustee UCC searches against each of them from the
appropriate filing offices in Georgia confirming the absence of any UCC filings
(other than those in the process of being released pursuant to releases
delivered on the Issuance Date) against either of them with respect to the
Leases (including the right to receive all payments due or to become due
thereunder) and the Equipment, other than those naming the Seller or the Issuer
as the owner of the Leases or the Trustee as secured party. In the event the
Originator and Seller fail to provide any such searches required by the
preceding sentence of this Section 5.04(b) within the required time period or
any search reveals the existence of any conflicting Liens (which are not removed
within 30 days of receipt of such search), the Originator shall be required to
purchase not later than the third Business Day after the Determination Date
following the expiration of the time period during which such search was to be
obtained or such Lien released, as the case may be, any Lease as to which such
searches are not provided or with respect to which conflicting Liens with
respect thereto or any related Equipment are found to exist at the Lease
Purchase Amount for such Lease.
(c) The Originator's obligations under this Section 5.04 are the full
recourse obligations of the Originator and shall in no way be limited or
discharged by the application of any funds constituting part of the Asset Pool.
(d) In connection with any purchase of Leases and Equipment interests
pursuant to this Section 5.04, the Originator may reacquire from the Seller the
ownership interest of the Seller in such Equipment.
5.05 Seller's Obligation in Respect of Non-Performing Leases.
-------------------------------------------------------
In the event that any Lease shall become a Non-Performing Lease, and
the Originator shall not have substituted one or more Substitute Leases therefor
in accordance with the provisions of Section 11, the Seller shall pay to the
Issuer in the manner provided in the next sentence an amount equal to the lesser
of (i) the amount of all recoveries by the Seller in respect of the sale, re-
lease or other disposition of any item of Equipment subject to such Non-
Performing Lease and (ii) the Discounted Present Value of such Non-Performing
Lease (the "Recourse Amount"). The amount of any such recoveries, up to the
Recourse Amount, shall be
26
<PAGE>
deposited into the Collection Account within two Business Days of the receipt
thereof by the Seller or the Servicer. The Seller's obligations under this
Section 5.05 are secured by a security interest from the Seller to the Issuer in
all right, title and interest of the Seller in and to the Equipment subject to
the Leases (whether or not constituting Non-Performing Leases).
5.06 Payment Advices.
---------------
Each payment to the Servicer pursuant to any of the provisions of this
Assignment and Servicing Agreement shall be accompanied by written advice
containing sufficient information to identify the Lease and/or Equipment to
which such payment relates, the Section of this Assignment and Servicing
Agreement pursuant to which such payment is made, and the proper application
pursuant to the provisions of this Assignment and Servicing Agreement or the
Indenture of the amounts being paid.
SECTION 6. INFORMATION TO BE PROVIDED
6.01 Monthly Status Reports; Servicing Reports.
-----------------------------------------
(a) Within five Business Days following each Payment Date, the
Servicer will send to the Issuer, the Trustee and the Insurer a written report,
signed by one of the Servicer's financial officers, (i) identifying each Lease
with respect to which any Lease Payment was 90 or more days overdue as of the
end of the immediately preceding Due Period, the Discounted Present Value of
such Lease as of such Payment Date, the amount advanced by the Servicer with
respect to such Lease pursuant to Section 5.01 hereof since the Servicer's
previous monthly report (or, in the case of the first such report, since the
Cut-Off Date), (ii) identifying each Lease with respect to which any Lease
Payment was 60 or more days overdue as of the end of the immediately preceding
Due Period, the Discounted Present Value of such Lease as of such Payment Date,
and the amount advanced by the Servicer with respect to such Lease pursuant to
Section 5.01 hereof since the Servicer's previous monthly report (or, in the
case of the first such report, since the Issuance Date), (iii) identifying each
Lease which became a Non-Performing Lease as of the preceding Determination Date
and specifying the Discounted Present Value of such Lease as of such
Determination Date (or, in the case of the first such report, subsequent to the
Cut-Off Date) and the aggregate Discounted Present Value of all such Non-
Performing Leases, and (iv) indicating the aggregate amount recovered by the
Servicer subsequent to the preceding Payment Date (or, in the case of the first
Payment Date, subsequent to the Cut-Off Date) and on or prior to such Payment
Date with respect to Lease Delinquency Payments and Lease Payments in respect of
Non-Performing Leases previously made by the Servicer (and the specific amounts
so recovered with respect to any Non-Performing Lease) as of the related
Determination Date. Each such report shall also describe generally what action
or actions the Servicer is then taking or proposes to take to recover from the
appropriate Lessees any amounts previously paid by the Servicer to the Trustee
pursuant to Section 5.01 hereof.
(b) On the Determination Date, the Servicer shall deliver to the
Trustee, each Rating Agency and the Insurer a servicing report signed by an
Authorized Officer of the Servicer (the "Servicing Report") duly completed and
dated, in substantially the form of Exhibit B hereto.
27
<PAGE>
(c) The Servicing Report shall include, among other items, the total
amount of all Lease Payments, Casualty Payments, Retainable Deposits,
Termination Payments, Lease Purchase Amounts, recoveries related to Non-
Performing Leases and other payments received by the Servicer and deposited in
the Collection Account prior to the related Determination Date and on or
subsequent to the Determination Date preceding such Determination Date (or, in
the case of the first Determination Date, on or subsequent to the Cut-Off Date).
Such report shall indicate the amount of all Lease Payments received by the
Servicer and deposited in the Collection Account which are for any Due Period
other than the Due Period for such Determination Date and shall identify each
Lease with respect to which a Casualty Payment, Retainable Deposit, Termination
Payment or Lease Purchase Amount was made during such time period. Such report
shall also indicate (i) the aggregate amount paid by the Servicer on or
subsequent to the most recent Determination Date pursuant to Section 5.01
hereof, and (ii) the aggregate amount reimbursed to the Servicer prior to the
most recent Determination Date and on or subsequent to the Determination Date
preceding such Determination Date (or, in the case of the first Determination
Date, on or subsequent to the Cut-Off Date) for any Servicer Advances made by
the Servicer pursuant to Section 5.01 hereof. Such report shall also include the
amount of the distribution with respect to each class of Notes to be made on the
related Payment Date, the amount of such distribution allocable to principal,
the amount of such distribution allocable to interest, the Asset Pool balance as
of the close of business on the last day of the related Due Period, the
aggregate outstanding principal balance and the Pool Factor for each class of
Notes after giving effect to all distributions allocable to principal on such
Payment Date, the amounts paid to or retained by the Servicer, if any, with
respect to the related Due Period, and the amount of the aggregate Purchase
Amounts in respect of Leases that have been reacquired, if any, for such Due
Period. The Servicer hereby represents and warrants that such calculations will
be correct and accurate, and the Servicer shall be fully responsible for, and
shall reimburse and indemnify each Indemnified Party for, any loss resulting
from such Indemnified Party's reliance on any such calculations which are not
correct.
(d) The Servicer shall deliver to the Issuer and the Trustee, with a
copy to each Rating Agency and the Insurer, within 135 days following the end of
each fiscal year of the Servicer, beginning with the Servicer's fiscal year
ending September 30, 1999, an Officers' Certificate stating that the Servicer
has fulfilled its obligations under the Assignment and Servicing Agreement in
all material respects throughout the preceding twelve (12) months (or, in the
case of the first such certificate, the period from the Issuance Date) or if
there has been any material default under the Assignment and Servicing Agreement
or the Indenture, describing such default.
(e) The Servicer shall deliver to the Issuer and the Trustee, with a
copy to each Rating Agency and the Insurer, within 120 days following the end of
each fiscal year of the Servicer, beginning with the Servicer's fiscal year
ending September 30, 1999, a report (the "Supplementary Report") signed by an
Authorized Officer on behalf of the Servicer and dated as of the last day of
such fiscal year, stating that (a) a review of the activities of the Servicer
and the Servicer's performance under the Assignment and Servicing Agreement and
the Indenture for the previous 12-month period (or, in the case of the first
such report, the period from the Issuance Date) has been made under such
officer's supervision and (b) nothing has come to such officer's attention to
indicate that a Servicer Event of Default has occurred, or, if any Servicer
Event of
28
<PAGE>
Default has occurred and is continuing, specifying each such event known to the
officer, the nature and status thereof and the steps necessary to remedy such
event.
(f) If any funds are to be withdrawn from the Collection Account
other than as provided in Section 3.03(b) of the Indenture, the Servicer shall
submit with the related Servicing Report the certificate required by Section
3.03(d) of the Indenture.
(g) Within the prescribed period of time for tax reporting purposes
after the end of each calendar year, the Servicer on behalf of the Issuer, will
provide to the Noteholders a statement containing the distribution amount with
respect to each class of Notes and the distribution amount allocable to interest
for that calendar year and any other information required by applicable tax
laws, for the purpose of the Noteholders' preparation of federal income tax
returns.
(h) The Servicer shall deliver to the Trustee and the Insurer and
each of the Rating Agencies, within three days after obtaining knowledge of the
occurrence thereof, written notice of any event which with the giving of notice
or the lapse of time would become an Event of Default under any of clauses (c),
(d), (e) or (f) of Section 7.01 of the Indenture, its status and what action the
Issuer or the Servicer is taking or proposes to take with respect thereto.
6.02 Annual Independent Public Accountant's Report.
---------------------------------------------
The Servicer shall cause a firm of independent public accountants (who
may also render other services to the Servicer, the Seller or the Originator) to
deliver to the Trustee, with a copy to the Insurer and each Rating Agency,
within 135 days following the end of each fiscal year of the Servicer, beginning
with the Servicer's fiscal year ending September 30, 1999, a written statement
to the effect that such firm has (a) obtained from the Servicer a copy of the
monthly status report pursuant to Section 6.01 for each of three months during
the previous calendar year, such three months to be selected at random by such
firm of independent public accountants; (b) compared the information contained
in such monthly status report and in the monthly summaries prepared by the
Servicer in support of such monthly status report to the computer printouts and
accounts prepared by the Servicer and supporting such reports; and (c) selected,
at random, 100 Leases included in the Asset Pool and compared the activity in
the files maintained by the Servicer for such Leases to the activity as reported
for those Leases to the monthly summaries prepared by the Servicer and
supporting the monthly status report, and that, on the basis of such examination
and comparison, such firm is of the opinion that the Servicer has prepared such
monthly status report and summaries in agreement with the computer printouts,
accounts and individual Lease files, except in each case for (x) such exceptions
as such firm shall believe to be immaterial and (y) such other exceptions as
shall be set forth in such statement. In the event such firm of independent
public accountants requires the Trustee to agree to the procedures performed by
such firm, the Servicer shall direct the Trustee in writing to so agree; it
being understood and agreed that the Trustee shall deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and the
Trustee makes no independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures.
29
<PAGE>
SECTION 7. THE SERVICER
7.01 Merger or Consolidation of the Servicer.
---------------------------------------
So long as the Notes remain outstanding, the Servicer will keep in
full force and effect its existence, rights and franchise as a corporation under
the laws of its jurisdiction of incorporation and will preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is necessary to protect the validity and enforceability
of any of the Leases or to permit performance of the Servicer's duties under
this Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Servicer shall not merge
or consolidate with any other Person unless (i) the entity surviving such merger
or consolidation is a corporation organized under the laws of the United States
or any jurisdiction thereof and (ii) the surviving entity, if not the Servicer,
shall execute and deliver to the Issuer, the Servicer and the Trustee, in form
and substance satisfactory to each of them, (a) an instrument expressly assuming
all of the obligations of the Servicer hereunder and (b) an opinion of counsel
to the effect that (i) such Person is a corporation of the type described in the
preceding clause (i); (ii) such Person has effectively assumed the obligations
of the Servicer hereunder and (iii) all conditions precedent to such action have
been satisfied. Upon the occurrence of any such merger or consolidation, the
Servicer shall give notice promptly to the Rating Agencies.
7.02 Limitation on Liability of the Servicer and Others.
--------------------------------------------------
Neither the Servicer nor any of the directors, officers, employees or
agents of the Servicer shall incur any liability to the Issuer, the Trustee, the
Insurer or the holders of the Notes for any action taken or not taken in good
faith pursuant to the terms of this Assignment and Servicing Agreement with
respect to any Lease (including any Non-Performing Lease) or the Equipment
subject thereto; provided, however, that this provision shall not protect the
-------- -------
Servicer or any such person against any breach of warranties, representations or
covenants made by it herein or in any certificate delivered in conjunction with
the purchase of the Notes or for any liability which would otherwise be imposed
for any action or inaction resulting from willful misconduct or bad faith or for
negligence in the performance or nonperformance of its duties hereunder.
7.03 Servicer Not to Resign or Be Removed.
------------------------------------
The Servicer shall not resign from the servicing obligations and
duties hereby imposed on it except upon determination that such duties hereunder
are no longer permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced by an opinion of
independent counsel to the Servicer, in form and substance satisfactory to the
Insurer (so long as the Policy is outstanding) or the Trustee (if the Policy is
not outstanding), to such effect delivered to the Trustee and the Insurer with a
copy to each Rating Agency.
Except as provided in Section 10.02 hereof, the Servicer shall not be
removed or be replaced as Servicer with respect to any Lease or any of the
Equipment.
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<PAGE>
No resignation or removal of the Servicer shall in any event (i)
become effective until the Trustee or a successor servicer shall have assumed
the Servicer's servicing responsibilities and obligations in accordance with
Section 10.02 hereof, or (ii) affect the Originator's obligations pursuant to
Section 5 hereof.
7.04 Financial and Business Information.
----------------------------------
The Servicer will deliver to the Issuer and the Trustee, and the
Trustee upon receipt thereof shall deliver to the Insurer and each Rating Agency
and upon request, to any holder of outstanding Notes evidencing not less than
25% of the Outstanding Principal Amount of the Notes (and, upon the request of
any holder of Outstanding Notes evidencing not less than 25% of the Outstanding
Principal Amount of the Notes, to any prospective transferee of any Notes):
(a) Quarterly Statements - within 45 days after the end of each of
--------------------
the first three quarterly fiscal periods in each fiscal year of the Servicer, a
copy of:
(1) a consolidated balance sheet of the Servicer (or its parent) and
its consolidated subsidiaries at the end of such quarter, and
(2) consolidated statements of income, retained earnings and cash
flow of the Servicer (or its parent) and its consolidated subsidiaries for
that quarter and for the portion of the fiscal year ending with such
quarter,
accompanied by a certificate signed by a principal financial officer of the
Servicer stating that such financial statements present fairly the financial
condition of the Servicer and its consolidated subsidiaries and have been
prepared in accordance with generally accepted accounting principles
consistently applied;
(b) Annual Statements - within 135 days after the end of each fiscal
-----------------
year of the Servicer, a copy of:
(1) a consolidated balance sheet of the Servicer (or its parent) and
its consolidated subsidiaries, at the end of that year, and
(2) consolidated statements of income, retained earnings and cash
flow of the Servicer (or its parent) and its consolidated subsidiaries for
that year, setting forth in each case in comparative form the figures for
the previous fiscal year,
all in reasonable detail and accompanied by an opinion of a firm of independent
certified public accountants of recognized national standing stating that such
financial statements present fairly the financial condition of the Servicer and
its consolidated subsidiaries and have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur and footnote), and that
the examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
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<PAGE>
(c) Notice of Servicer Event of Default - immediately upon the
-----------------------------------
Servicer's becoming aware of the existence of any condition or event which
constitutes a Servicer Event of Default, a written notice, by certified mail
return receipt requested, hand delivery or overnight courier, describing its
nature and period of existence and what action the Servicer is taking or
proposes to take with respect thereto;
(d) SEC and Other Reports - promptly upon their becoming available,
---------------------
one copy of each report (including the Servicer's annual report to shareholders
and reports on Form 8-K, 10-K, and 10-Q), proxy statement, registration
statement, prospectus and notice filed with or delivered to any securities
exchange, the Securities and Exchange Commission or any successor agencies; and
(e) Report on Proceedings - promptly upon the Servicer becoming
---------------------
aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or conditions (financial
or otherwise) of the Servicer, a written notice specifying the nature of such
investigation or proceeding and what action the Servicer is taking or proposes
to take with respect thereto and evaluating its merits.
7.05 Officers' Certificates.
----------------------
With each set of financial statements delivered pursuant to Section
7.04, the Servicer will deliver an Officers' Certificate stating (i) that the
officers signing such Officers' Certificate have reviewed the relevant terms of
this Assignment and Servicing Agreement and have made, or caused to be made
under such officers' supervision, a review of the activities of the Servicer
during the period covered by the statements then being furnished, (ii) that the
review has not disclosed the existence of any Servicer Event of Default or, if a
Servicer Event of Default exists, describing its nature and what action the
Servicer has taken and is taking with respect thereto, and (iii) that on the
basis of such review the officers signing such certificate are of the opinion
that during such period the Servicer has serviced the Leases in compliance with
the procedures hereof except as described in such certificate.
7.06 Inspection.
----------
The Servicer will permit, on reasonable prior notice, the
representatives of the Issuer, the Trustee, the Insurer (so long as the Policy
is outstanding) and, if the Policy is no longer outstanding, the holder of any
Notes evidencing not less than 25% of the Outstanding Principal Amount of the
Notes to inspect the servicing operations and discuss the servicing operations
of the Servicer with any of its officers or employees all at such reasonable
times and as often as may be reasonably requested for the purpose of reviewing
the Servicer or the Servicer's performance of its duties and obligations
hereunder. Any expense incident to the exercise by the Issuer, the Trustee, the
Insurer, or any holder of the Notes during the continuance of any Servicer Event
of Default, or any event or condition which with the giving of notice or the
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lapse of time or both would become a Servicer Event of Default, of any right
under this Section 7.06 shall be borne by the Servicer.
7.07 Servicer Records.
----------------
The Servicer will indicate in its records that it is servicing and
administering each Lease in its capacity as Servicer hereunder, and to the
extent it is in possession of any original Lease agreement, will hold such
Lease, subject to the provisions of the Indenture as custodian for the Trustee.
SECTION 8. THE ORIGINATOR
8.01 Merger or Consolidation of the Originator.
-----------------------------------------
So long as the Notes remain outstanding, the Originator will keep in
full force and effect its existence, rights and franchise as a corporation under
the laws of its jurisdiction of incorporation and will preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is necessary to protect the validity and enforceability
of any of the Leases or to permit performance of the Originator's duties under
this Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Originator shall not
merge or consolidate with any other Person unless (i) the entity surviving such
merger or consolidation is a corporation organized under the laws of the United
States or any jurisdiction thereof and (ii) the surviving entity, if not the
Originator, shall execute and deliver to the Seller, the Issuer, the Servicer,
the Trustee and the Insurer (so long as the Policy is outstanding), in form and
substance satisfactory to each of them, (a) an instrument expressly assuming all
of the obligations of the Originator hereunder and (b) an Opinion of Counsel to
the effect that such Person is a corporation of the type described in the
preceding clause (i) and has effectively assumed the obligations of the
Originator hereunder.
8.02 Control of Seller.
-----------------
So long as the Notes remain outstanding, the Originator will not (i)
sell, pledge or otherwise transfer any membership interest in the Seller held by
the Originator or any capital stock of IKON Receivables Funding Inc. (the
manager of the Seller and the Issuer) held by the Originator or (ii) vote such
membership interests in the Seller in favor of any amendment to or alteration of
the certificate of formation or limited liability company agreement of the
Seller or any such capital stock of IKON Receivables Funding Inc. in favor of
any amendment to or alteration of the certificate of incorporation or by-laws of
the Manager.
8.03 Financial and Business Information.
----------------------------------
The Originator will deliver to the Issuer, the Trustee and the Insurer
(so long as the Policy is outstanding):
(a) Notice of Servicer Event of Default - immediately upon the
-----------------------------------
Originator becoming aware of the existence of any condition or event which
constitutes a Servicer Event of
33
<PAGE>
Default, a written notice (with a copy to each Rating Agency) describing its
nature and period of existence and what action the Originator is taking or
proposes to take with respect thereto;
(b) SEC and Other Reports - promptly upon their becoming available,
---------------------
one copy of each report (including the Originator's annual report to
shareholders and reports on Form 8-K, 10-K, and 10-Q), proxy statement,
registration statement, prospectus, prospectus supplement and notice filed with
or delivered to any securities exchange, the Securities and Exchange Commission
or any successor agencies;
(c) Report on Proceedings - promptly upon the Originator becoming
---------------------
aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding,
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Originator, a written notice specifying the nature of such
investigation or proceeding and what action the Originator is taking or proposes
to take with respect thereto and evaluating its merits;
(d) ERISA - (i) promptly and in any event within ten days after the
-----
Originator knows or has reason to know of the occurrence of a Reportable Event
with respect to a Pension Plan with regard to which notice must be provided to
the PBGC, a copy of such materials required to be filed with the PBGC with
respect to such Reportable Event and in each such case a statement of the chief
financial officer of the Originator setting forth details as to such Reportable
Event and the action which the Originator proposes to take with respect thereto;
(ii) at least ten days prior to the filing by any plan administrator of a
Pension Plan of a notice of intent to terminate such Pension Plan, a copy of
such notice; (iii) upon request of the Issuer and the Trustee, and in no event
more than ten days after such request, copies of each annual report which is
filed on Form 5500, together with certified financial statements for the Pension
Plan (if any) as of the end of such year and actuarial statements on Schedule B
to such Form 5500; (iv) promptly and in any event within ten days after it knows
or has reason to know of any event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan, a statement of the chief financial
officer of the Originator describing such event or condition; (v) promptly and
in no event more than ten days after receipt thereof by the Originator or any
Related Person, each notice received by the Originator or any Related Person
concerning the imposition of any withdrawal liability under Section 4202 of
ERISA; and (vi) promptly after receipt thereof a copy of any notice the
Originator or any Related Person may receive from the PBGC or the Internal
Revenue Service with respect to any Pension Plan; provided, however, that this
-------- -------
subsection (vi) shall not apply to notices of general application promulgated by
the PBGC or the Internal Revenue Service or notices which would not require any
material payment by the Originator or any Related Person; and
(e) Requested Information - with reasonable promptness, any other
---------------------
data and information which may be reasonably requested by such parties from time
to time.
34
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Compliance by the Servicer with the requirements of Sections 7.04(c),
7.04(d) or 7.04(e) shall be deemed to be compliance by the Originator with the
corresponding requirements of Section 8.03(a), 8.03(b) or 8.03(c), as the case
may be, and vice versa, so long as IOS Capital is the Servicer hereunder.
---- -----
8.04 Officers' Certificates.
----------------------
With each set of financial statements delivered pursuant to Section
8.03, the Originator will deliver an Officers' Certificate stating that the
officers signing such Certificate have reviewed the relevant terms of this
Assignment and Servicing Agreement and have made, or caused to be made under
such officers' supervision, a review of the activities of the Originator during
the period covered by the income statements then being furnished and, so long as
the Originator is Servicer hereunder, that the review has not disclosed the
existence of any Servicer Event of Default or, if a Servicer Event of Default
exists, describing its nature and what action the Originator has taken and is
taking with respect thereto.
8.05 Books and Records.
-----------------
The Originator will clearly mark its books and records to reflect the
contributions of Leases and Equipment pursuant to this Agreement.
8.06 Communications.
--------------
The Originator will reply to all inquiries by third parties with
respect to the transactions contemplated by this Agreement by indicating that it
has transferred the Leases and its right, title and interest in the related
Equipment and that the Issuer now holds title to the Leases and such interests
(other than ownership interests) in the Equipment.
SECTION 9. THE SELLER
9.01 Merger or Consolidation of the Seller.
-------------------------------------
So long as the Notes remain outstanding, the Seller will keep in full
force and effect its existence, rights and franchise as a limited liability
company under the laws of its jurisdiction of organization and will preserve its
qualification to do business as a foreign limited liability company in each
jurisdiction in which such qualification is necessary to protect the validity
and enforceability of any of the Leases or to permit performance of the Seller's
duties under this Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Seller shall not merge or
consolidate with any other Person.
9.02 Control of Issuer.
-----------------
So long as any of the Notes remain outstanding, the Seller will not
(i) sell, pledge or otherwise transfer any of its membership interests in the
Issuer or (ii) vote such beneficial interests in favor of any amendment to or
alteration of the certificate of formation or limited liability company
agreement of the Issuer.
35
<PAGE>
9.03 Information.
-----------
The Seller will deliver to the Issuer, the Trustee and the Insurer (so
long as the Policy is outstanding):
(a) Notice of Servicer Event of Default - immediately upon becoming
----------------------------------
aware of the existence of any condition or event which constitutes a Servicer
Event of Default, a written notice (with a copy to each Rating Agency)
describing its nature and period of existence and what action the Seller is
taking or proposes to take with respect thereto;
(b) Report on Proceedings - promptly upon the Seller's becoming
---------------------
aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding,
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Seller, a written notice specifying the nature of such
investigation or proceeding and what action the Seller is taking or proposes to
take with respect thereto and evaluating its merits;
(c) Requested Information - with reasonable promptness, any other
---------------------
data and information which may be reasonably requested by such parties from time
to time.
9.04 Inspection.
----------
The Seller will permit, on reasonable prior notice, the
representatives of the Issuer, the Servicer, the Trustee, the Insurer (so long
as no Insurer Default has occurred and is continuing), or, if an Insurer Default
has occurred and is continuing, any holder of the Notes evidencing not less than
25% of the Outstanding Principal Amount of any class of Notes to examine and
discuss the operations of the Seller with any of its officers or employees all
at such reasonable times and as often as may be reasonably requested for the
purpose of reviewing Seller's performance of its duties and obligations
hereunder. Any expense incident to the exercise by the Issuer, the Trustee or
any holder of the Notes during the continuance of any default by the Seller in
any of its obligations hereunder of any right under this Section 9.04 shall be
borne by the Seller.
9.05 Books and Records.
-----------------
The Seller will clearly mark its books and records to reflect each
contribution of a Lease and of its right, title, and interest (other than its
ownership interest) in the Equipment subject thereto to the Issuer.
9.06 Communications.
--------------
The Seller will reply to all inquiries by third parties with respect
to the transactions contemplated by this Agreement by indicating that it has
contributed to the Issuer
36
<PAGE>
the Leases and its right, title and interest (other than its ownership interest)
in the related Equipment.
SECTION 10.01 DEFAULT
10.01 Servicer Events of Default.
---------------------------
The following events and conditions shall constitute Servicer Events
of Default hereunder:
(i) failure on the part of the Servicer to deposit to the
Collection Account, or other applicable account in accordance with the
terms of the Indenture within three Business Days following the
receipt thereof any monies received by the Servicer (including,
without limitation, any Lease Payments on Performing Leases or Non-
Performing Leases) and required to be deposited thereunder and
hereunder;
(ii) failure on the part of the Servicer to pay to the Trustee
on the date when due in accordance with the terms hereof, any payment
required to be made by the Servicer pursuant to Section 5 hereof;
(iii) failure on the part of either the Servicer or (so long
as the Originator is the Servicer) the Originator to observe or
perform in any material respect any other of their respective
covenants or agreements in this Assignment and Servicing Agreement
which failure continues unremedied for a period of 30 days after the
earlier of (A) the date it first becomes known to any officer of the
Originator or the Servicer, as the case may be, and (B) the date on
which written notice thereof requiring the same to be remedied shall
have been given to the Originator or the Servicer, as the case may be,
by the Trustee, or to the Originator or the Servicer, as the case may
be, and the Trustee by the Seller, the Issuer, the Insurer or any
holder of the Notes;
(iv) if any representation or warranty made by the Originator
in this Assignment and Servicing Agreement or in any certificate or
other writing delivered pursuant hereto or made by any successor
Servicer in connection with such successor Servicer's assumption of
the duties of the Servicer shall prove to be incorrect in any material
respect as of the time when the same shall have been made; provided,
--------
however, that the breach of any representation or warranty made by the
-------
Originator or Servicer in this Assignment and Servicing Agreement will
be deemed to be "material" only if it affects the Noteholders, the
Insurer or the enforceability of the Indenture or of the Notes; and
provided, further, that a material breach of any representation or
-------- -------
warranty made by the Originator in this Assignment and Servicing
Agreement with respect to any of the Leases or the Equipment subject
thereto will not constitute a Servicer Event of Default if the
Originator purchases such Lease and the Issuer's interest in the
Equipment in accordance with this Assignment and Servicing Agreement;
37
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(v) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Servicer in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or (B) a
decree or order adjudging the Servicer bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment, or composition of or in respect of the
Servicer under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or
other similar official of the Servicer or of any substantial part of
its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or
any such other decree or order unstayed and in effect for a period of
60 consecutive days;
(vi) the commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect
of the Servicer in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization, or
other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable federal or state law, or the consent by it to the
filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator,
or similar official of the Servicer or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the failure by the Servicer to pay its debts generally
as they become due, or the taking of corporate action by the Servicer
in furtherance of any such action;
(vii) the failure of the Servicer to make one or more
payments due with respect to aggregate recourse debt or other
obligations exceeding $5,000,000, or the occurrence of any event or
the existence of any condition, the effect of which event or condition
is to cause (or permit one or more Persons to cause) more than
$5,000,000 of aggregate recourse debt or other obligations of the
Servicer to become due before its (or their) stated maturity or before
its (or their) regularly scheduled dates of payment so long as such
failure, event or condition shall be continuing and shall not have
been waived by the Person or Persons entitled to performance;
(viii) a final judgment or judgments (or decrees or orders)
for the payment of money aggregating in excess of $5,000,000 and any
one of such judgments (or decrees or orders) has remained unsatisfied
and in effect for any period of 60 consecutive days without a stay of
execution;
(ix) so long as IOS Capital is the Servicer, a downgrading of
the long-term debt rating assigned by Moody's or S&P to IOS Capital to
Ba2 or below or BB or below, respectively;
38
<PAGE>
(x) for any three consecutive Due Periods, the average of the
Annualized Default Rates for such Due Periods shall be greater than
8.00%; or
(xi) for any three consecutive Due Periods, the average of the
Delinquency Rates for such Due Periods shall be greater than 10.00%.
10.02 Termination.
-----------
So long as a Servicer Event of Default shall be continuing, the
Trustee (with the written consent of the Insurer, if no Insurer Default has
occurred and is continuing) may, and, upon the written instructions of the
Insurer (if no Insurer Default has occurred and is continuing) or the holders of
66-2/3% in Outstanding Principal Amount of the Notes (if an Insurer Default has
occurred and is continuing), shall, by notice in writing to the Servicer
terminate all of the rights and obligations of the Servicer (but not the
Originator's obligations which shall survive any such termination) under this
Assignment and Servicing Agreement. On the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Assignment
and Servicing Agreement to take any action with respect to any Lease or
Equipment shall cease and the same shall pass to and be vested in the Trustee or
other successor Servicer appointed pursuant to and under this Section and the
Indenture; and, without limitation, the Trustee or such successor Servicer is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and assignment of any Lease and the related
Equipment, or otherwise.
10.03 Trustee to Act; Appointment of Successor.
----------------------------------------
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 10.02 hereof, the Trustee or other successor
Servicer, subject to the terms of Section 6.01 of the Indenture, shall be the
successor in all respects to the Servicer in its capacity as servicer of the
Leases under this Assignment and Servicing Agreement and, to such extent, shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof (but not the
obligations of the Originator contained in Section 5 hereof which shall survive
any such termination as above provided) and shall be entitled to receive from
the Issuer the Servicing Fee provided for in Section 4.04 hereof; provided that
--------
the Trustee shall in no way be responsible or liable for any action or actions
of the Servicer before the time the Servicer receives such a notice of
termination.
(b) Notwithstanding the above, the Trustee (with the written
consent of the Insurer, if no Insurer Default has occurred and is continuing)
may, if it shall be unwilling to so act, or shall, if it is unable to so act,
give notice of such fact to the Insurer (if no Insurer Default has occurred and
is continuing) or to each holder of the Notes (if an Insurer Default has
occurred and is continuing) and (i) appoint an established institution
satisfactory to the Insurer (if no Insurer Default has occurred and is
continuing) or to the holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes (if an Insurer Default has occurred and is continuing) as
the successor to the Servicer hereunder to assume all of the rights and
obligations of the Servicer hereunder, including, without limitation, the
Servicer's right hereunder to receive the Servicing Fee (but not the obligations
of the Originator contained in Section 5 hereof), or (ii) if
39
<PAGE>
no such institution satisfactory to the Insurer (if no Insurer Default has
occurred and is continuing) or to the holders of 66-2/3% of the then Outstanding
Principal Amount of the Notes (if an Insurer Default has occurred and is
continuing) is so appointed within 60 days following the giving of such notice,
appoint a bank or other established institution, which has experience in
servicing lease contracts and equipment similar to the Leases and Equipment and
as to which each of S&P and Moody's has indicated in writing that the
appointment of such Person, as the successor to the Servicer hereunder will not
result in the reduction or withdrawal of such Rating Agency's then-current
rating of the Notes, or (iii) if no such institution is so appointed, petition a
court of competent jurisdiction to appoint an institution meeting such criteria
as the Servicer hereunder. Pending appointment of a successor to the Servicer
hereunder, the Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trustee shall cause such
successor to the Servicer to enter into a servicing agreement substantially in
the form of this Assignment and Servicing Agreement except that such agreement
shall not include any of the Originator's representations, warranties or
obligations and the Trustee may make arrangements for the compensation of such
successor out of payments on Leases as it and such successor shall agree;
provided, however, that no such compensation shall be in excess of that provided
- -------- -------
for a successor to the Servicer in Section 4.04 hereof. In no event shall the
Trustee be liable for any servicing fee or for any difference in the amount of
the servicing fee payable hereunder and the amount necessary to induce any
successor Servicer to act as successor Servicer under this Agreement and the
transactions set forth or provided for herein. The Trustee shall provide the
Rating Agencies with prior written notice of the appointment of any successor to
the Servicer.
10.04 Servicer to Cooperate.
---------------------
The Servicer hereby agrees to cooperate with the Trustee and any
successor to the Servicer appointed in accordance with Section 10.03 hereof, as
applicable, in effecting the termination and transfer of the responsibilities
and rights of the Servicer hereunder to the Trustee or any successor to the
Servicer, including, without limitation, the execution and delivery of
assignments of Financing Statements, and the transfer to the Trustee or the
successor to the Servicer for administration by it of all amounts which shall at
the time be held by the Servicer or thereafter received with respect to the
Leases. The Servicer hereby agrees to transfer to any successor to the Servicer
its electronic records and all other records, correspondence and documents
relating to the Leases and Equipment in the manner and at such times as the
successor to the Servicer shall reasonably request. The Servicer hereby
designates the Trustee and any successor to the Servicer its agent and attorney-
in-fact to execute transfers of Financing Statements and any other filings or
instruments which may be necessary or advisable to effect such transfer of the
Servicer's responsibilities and rights hereunder.
10.05 Notification to Noteholders.
---------------------------
Upon any such termination or appointment of a successor to the
Servicer, the Issuer shall cause the Trustee to give prompt written notice
thereof to each Rating Agency and to each holder of the Notes in the manner
provided in the Indenture.
40
<PAGE>
10.06 Remedies Not Exclusive.
----------------------
Nothing in the preceding provisions of this Section 10 shall be
interpreted as limiting or restricting any rights or remedies which the Issuer,
the Trustee or any other Person would otherwise have at law or in equity on
account of the breach or violation of any provision of this Assignment and
Servicing Agreement by the Servicer, including, without limitation, the right to
recover full and complete damages on account thereof to the extent not
inconsistent with Section 7.02 hereof.
SECTION 11. SUBSTITUTION AND ADDITION OF LEASES
11.01 Substitution and Addition.
-------------------------
(a) Subject to the satisfaction of the requirements set forth in
Section 11.01(b) hereof, the Originator will have the right (but not the
obligation) at any time to substitute one or more Eligible Leases and the
Equipment subject thereto (each, a "Substitute Lease") for a Lease (for purposes
of this Section 11 referred to as a "Predecessor Lease") and the Equipment
subject thereto if:
(i) the Predecessor Lease became (A) a Non-Performing Lease,
(B) a Warranty Lease or (C) an Adjusted Lease during the immediately
preceding Due Period;
(ii) the aggregate Discounted Present Value of the Non-
Performing Leases that have become Predecessor Leases during the term
of this Agreement shall not in the aggregate exceed 10% of the
Discounted Present Value of the Leases on the Cut-Off Date; and
(iii) the aggregate Discounted Present Value of the Adjusted
Leases and Warranty Leases that have become Predecessor Leases during
the term of this Agreement shall not exceed 10% of the Discounted
Present Value of the Leases on the Cut-off Date.
Subject to the satisfaction of the requirements set forth in Section 5 and
Section 11.01(b) hereof, in the event of an Early Lease Termination resulting in
the prepayment in full of the related Early Termination Lease, the Seller will
have the option to transfer to the Issuer an additional Eligible Lease (each, an
"Additional Lease"), together with all right, title and interest in and to the
Equipment (other than the Seller's ownership interests therein).
(b) Each transfer of Substitute Leases and addition of Additional
Leases will be subject to the satisfaction of the following conditions
precedent:
(i) the final payment on such Substitute Lease or Additional
Lease must be on or prior to November 15, 2004.
(ii) after giving effect to such additions and substitutions
and any adjustments pursuant to Section 5.02 hereof the aggregate
amount of Lease Payments through the term of the Leases (including the
Substitute Leases and the
41
<PAGE>
Additional Leases) will not be materially less than the aggregate
Lease Payments of the Leases prior to such substitution or addition or
adjustment; and
(iii) after giving effect to such adjustments, additions and
substitutions, the Discounted Present Value of the Performing Leases
must not be less than the Discounted Present Value of the Performing
Leases prior to such adjustment, substitution or addition.
(iv) after giving effect to such adjustments, additions, and
substitutions pursuant to Section 11, the weighted average remaining
term of the Performing Leases must not be greater than the weighted
average remaining term of the Performing Leases prior to such
adjustment, addition, and substitution.
(c) Each addition and substitution pursuant to this Section 11.01
shall include the right to all Related Interests in respect of each Substitute
Lease being substituted or Additional Leases being transferred. At the time of
each such addition or substitution, all Lease Payments with respect to the
related Substitute Leases and/or Additional Leases actually received by the
Originator or the Seller which became due during the then current Due Period
shall be transferred to the Collection Account and all security deposits with
respect thereto shall be transferred to the Security Deposit Account.
(d) To the extent the Originator does not substitute a Substitute
Lease for Leases for which any of the representations and warranties made by the
Originator in Sections 2.04, 205(b) and 2.08 are breached, the Originator shall
purchase such Leases pursuant to the provisions of Section 5.04.
11.02 Procedure.
---------
(a) By 11:00 A.M. on the third Business Day following each
Determination Date, the Originator or the Seller, as the case may be, shall give
written notice to the Servicer of any substitution pursuant to Section 11.01 of
Substitute Leases for Predecessor Leases or addition of Additional Leases for
Early Termination Leases which have been prepaid in full during the preceding
Due Period. By 11:00 A.M. on the fourth Business Day following each Payment
Date, the Originator or the Seller, as the case may be, shall deliver to the
Servicer and the Trustee and, to the extent not included in the Servicer Report,
the Trustee shall promptly deliver to the Insurer and each Rating Agency (i) a
supplement to Exhibit A hereto setting forth the information shown thereon for
each such Substitute Lease and Additional Lease, (ii) an Officer's Certificate
(A) certifying that each such Substitute Lease and Additional Lease is an
"Eligible Lease", (B) specifying each Predecessor Lease for which a substitution
has been made and each Early Termination Lease which is being replaced by an
Additional Lease and the amount of each periodic Lease Payment under each such
Predecessor Lease and Early Termination Lease and the amount of each periodic
Lease Payment under each Additional Lease and Substitute Lease being transferred
thereby and (C) that all conditions precedent to such addition or substitution
have been satisfied and (iii) such additional information concerning such
Additional Leases, Substitute Leases, Early Termination Leases or Predecessor
Leases as may be needed for the Servicer to prepare its monthly reports pursuant
to Section 6.01 hereof and to otherwise carry out its duties as Servicer
hereunder.
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<PAGE>
(b) Subject to the provisions of Section 11.03, the delivery of any
Officer's Certificate and supplement to Exhibit A pursuant to Section 11.02(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Due Period (i) the Originator contributed as a
contribution to capital to the Seller pursuant to Section 11.01 hereof all of
the Originator's right, title and interest in and to the Substitute Leases and
Additional Leases identified in such supplement, and the related rights
described in Section 11.01 hereof, and contemporaneously the Seller contributed
as a contribution to capital to the Issuer pursuant to Section 11.01 hereof all
of the Seller's right, title and interest in and to the Substitute Leases and
Additional Leases identified in such supplement, and the related rights
described in Section 11.01 hereof, (ii) the Originator transferred to the
Seller, as a contribution of capital, all of the Originator's right, title and
interest in and to the Equipment subject to such Substitute Leases and
Additional Leases and contemporaneously the Seller pledged to the Issuer all of
the Seller's right, title and interest in and to the Equipment subject to such
Substitute Leases and Additional Leases, and (iii) the Issuer assigned and
transferred to the Seller, without representation or warranty, all of the
Issuer's right, title and interest in and to the Predecessor Leases and Early
Termination Leases identified in such Officer's Certificate and released its
security interest in the Equipment relating thereto and contemporaneously the
Seller assigned to the Originator, without representation or warranty, all of
the Seller's right, title and interest in and to the Predecessor Leases and
Early Termination Leases identified in such Officer's Certificate and all the
Seller's right, title and interest in and to the related Equipment. The
Originator shall promptly deliver to the Servicer (or, if the Originator is the
Servicer, retain in accordance with this Assignment and Servicing Agreement in
its capacity as Servicer) the original executed copy of each Substitute Lease
and Early Termination Lease assigned to the Issuer pursuant to Section 11.01
hereof and the Issuer shall promptly request the Trustee (or, if the Servicer is
acting as the custodian, the Servicer) in writing to deliver to or upon the
order of the Seller the original executed counterpart of each Predecessor Lease
for which substitution has been made pursuant to Section 11.01 hereof and
contemporaneously the Seller shall promptly deliver to the Originator the
original executed counterpart of each Predecessor Lease for which substitution
has been made pursuant to Section 11.01 hereof.
11.03 Objection and Purchase.
----------------------
If the Insurer (if no Insurer Default has occurred and is continuing)
or any holder of the Notes (if an Insurer Default has occurred and is
continuing) objects to any substitution of Leases within ten days of receipt of
the Servicer's monthly report providing notice thereof pursuant to Section 6.01
above, on the grounds either that any Substitute Lease or Additional Lease is
not an Eligible Lease within the meaning of the definition thereof or that such
substitution or addition is otherwise not permitted under the provisions of
Section 11.01 hereof, the Originator shall be entitled to present such
additional information as it deems appropriate in an effort to demonstrate that
such Lease is an Eligible Lease and that such substitution is permitted under
the provisions of Section 11.01 hereof. Following such presentation, the
substitution shall remain effective if each person originally objecting to the
substitution withdraws the objection. If the conditions specified in the
preceding sentence are not satisfied, or if at any time it is established that
any lease was not, at the time of substitution, an Eligible Lease, then the
Originator shall be required to purchase such Lease in accordance with the
provisions of Section 5.04 hereof.
43
<PAGE>
11.04 Originator's, Seller's and Servicer's Subsequent Obligations.
------------------------------------------------------------
Upon any substitution or addition of Leases in accordance with the
provisions of this Section 11, the Originator's, Seller's and the Servicer's
obligations hereunder with respect to the Predecessor Lease or the applicable
Early Termination Lease shall cease but the Originator, Seller and the Servicer
shall each thereafter have the same obligations with respect to the Substitute
Lease or Additional Lease substituted or added as it has with respect to all
other Leases subject to the terms hereof.
SECTION 12. ASSIGNMENT
12.01 Assignment to Trustee.
---------------------
It is understood that this Assignment and Servicing Agreement and all
rights of the Issuer hereunder, but none of its duties or obligations, will be
assigned by the Issuer to the Trustee pursuant to the Indenture, for the benefit
of the holders from time to time of the Notes and the Insurer as provided in the
Indenture, and may be subsequently assigned by the Trustee to any successor
Trustee or as otherwise provided in the Indenture. Each of the Originator, the
Seller and the Servicer hereby expressly agrees to each such assignment and
agrees that all of its duties, obligations, representations and warranties
hereunder shall be for the benefit of, and may be enforced by, the Trustee, the
Insurer, the holders from time to time of the Notes, and any successor to or
assignee of any thereof.
12.02 Assignment by Originator, Seller or Servicer.
--------------------------------------------
None of the respective rights or obligations of the Originator, the
Seller or the Servicer hereunder may be assigned (other than the assignment by
the Seller to the Issuer of the covenants, representations, warranties and
obligations of the Originator pursuant to Section 12.01 and the assignment by
the Issuer to the Trustee of the rights of the Issuer hereunder pursuant to the
Indenture as contemplated in Section 12.01) without the prior written consent of
the Issuer and the Trustee (acting upon the written instructions of the Insurer
(if no Insurer Default has occurred and is continuing) or the holders of 66-2/3%
of the then aggregate unpaid Outstanding Principal Amount of the Notes (if an
Insurer Default has occurred and is continuing); provided, that nothing herein
--------
shall preclude the Servicer from performing its duties hereunder through the use
of agents to the extent that such use is consistent with the Servicer's business
practices in dealing with leases and equipment for its own account.
SECTION 13. NATURE OF OBLIGATIONS AND SECURITY THEREFOR
13.01 Obligations Absolute.
--------------------
The obligations of the Originator and Seller hereunder, and the rights
of the Trustee, as assignee of the Issuer, in and to all amounts payable by the
Originator or the Seller hereunder, shall be absolute and unconditional and
shall not be subject to any abatement, reduction, setoff, defense, counterclaim
or recoupment whatsoever, including, without limitation, abatements, reductions,
setoffs, defenses, counterclaims or recoupments due or alleged to be due to, or
by reason of, any past, present or future claims which the Originator or the
Seller may have against the Servicer, the Issuer, the Insurer, the Trustee, and
any holder of the Notes or any other
44
<PAGE>
Person for any reason whatsoever; nor, except as otherwise expressly provided
herein, shall this Assignment and Servicing Agreement terminate, or the
respective obligations of the Issuer, the Originator, the Seller or the Servicer
be otherwise affected, by reason of any defect in any Lease or in any unit of
Equipment or in the respective rights and interests of the Issuer, the
Originator, the Seller, the Insurer and the Trustee therein, or by reason of any
Liens with respect to any Lease or any unit of Equipment, or any failure by the
Issuer or the Servicer to perform any of its obligations herein contained, or by
reason of any other indebtedness or liability, howsoever and whenever arising,
of the Issuer, the Servicer, the Trustee, the Insurer, or any holder of the
Notes to the Originator, the Seller or any other Person or by reason of any
insolvency, bankruptcy, or similar proceedings by or against the Originator, the
Seller, the Servicer, the Issuer, the Insurer, the Trustee or any other Person
or for any other cause whether similar or dissimilar to the foregoing, any
present or future law to the contrary notwithstanding, it being the intention of
the parties hereto that all obligations of the Originator or the Seller
hereunder and all amounts payable by the Originator or the Seller hereunder
shall continue to be due and payable in all events and in the manner and at the
times herein provided unless and until the obligation to perform or pay the same
shall be terminated or limited pursuant to the express provisions of this
Assignment and Servicing Agreement.
13.02 Security for Obligations.
------------------------
As security for the full and timely performance by the Originator, the
Seller and the Servicer of each of their respective obligations hereunder, and
by the Issuer of each of its obligations hereunder and under the Notes and the
Indenture, each of the Originator and the Seller hereby pledges and grants to
the Trustee (as a precaution in the event that, contrary to the intent of the
parties to the transactions contemplated hereby, it is contended that either has
any continuing interest in any Lease, that the Originator has any continuing
interest in any Equipment or that the security interest granted to the Issuer by
the Seller in the Seller's interest in the Equipment is invalid or ineffective
in whole or in part) a first priority Lien on and security interest in all
right, title and interest of the Originator or the Seller now or hereafter
acquired in and to each Lease (including all Related Interests) and the
Originator's and the Seller's interests in each item of Equipment at any time
subject to the Indenture. The foregoing security interest is granted upon and
is subject to the same terms and provisions as are set forth in the Indenture
and shall continue in full force and effect until the Indenture is discharged in
accordance with the terms thereof, notwithstanding any waiver or modification of
any of the terms hereof or thereof or of any of the Notes, whether with or
without the consent of the Originator or the Seller.
13.03 Further Assurances; Financing Statements.
----------------------------------------
Each of the Originator, the Seller and the Servicer severally agrees
that at any time and from time to time, at its expense, it shall promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable or that the Issuer, the Trustee or
the Insurer may request to perfect and protect the assignments and security
interests granted or purported to be granted herein with respect to the Leases
and the Lease Payments or to enable the Issuer, the Trustee or the Insurer to
exercise and enforce its rights and remedies under this Agreement with respect
to any Leases and the Lease Payments and, subject to the penultimate sentence of
Section 1.04(d), the Equipment. Without limiting the generality of the
foregoing, each of the Originator and the Seller shall execute and file such
45
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financing or continuation statements, or amendments thereto, and such other
instruments or notices as may be necessary or desirable or that the Issuer, the
Trustee or the Insurer may request to protect and preserve the assignments and
security interests granted by this Agreement with respect to the Leases and,
subject to the penultimate sentence of Section 1.04(d), the Equipment.
SECTION 14. DEFINITIONS
As used in this Assignment and Servicing Agreement, the following
terms have the respective meanings set forth below or set forth in the Section
hereof or in any other agreement indicated:
Accumulated Funding Deficiency - a funding deficiency described in
------------------------------
Section 302 of ERISA.
Additional Lease - Section 11.01(a) hereof.
----------------
Adjusted Lease - a Lease which has had one or more non-credit related
--------------
terms adjusted or modified by the Servicer.
Affiliate - Section 1.01 of the Indenture.
---------
Annualized Default Rate - for any Due Period, the sum of the
-----------------------
Discounted Present Value as of the related Determination Date of all Leases that
became Non-Performing Leases during such Due Period minus the sum of the
recoveries on Non-Performing Leases received during such Due Period, divided by
the Discounted Present Value of the Leases on the Determination Date immediately
preceding such Determination Date, multiplied by twelve.
Asset Pool - Section 1.01 of the Indenture.
----------
Authorized Officer - in respect of the Servicer, any officer of or
------------------
other Person representing the Servicer who is authorized to act for the
Servicer.
Available Funds - Section 1.01 of the Indenture.
---------------
Base Prospectus - the prospectus, dated May 7, 1999, included in the
---------------
Registration Statement.
Business Day - any day that is not a Saturday, Sunday or other day on
------------
which commercial banking institutions in the city in which the Corporate Trust
Office or the Servicer is located are authorized or obligated by law or
executive order to remain closed.
Casualty Payment - any payment pursuant to a Lease on account of the
----------------
loss, theft, condemnation, governmental taking, destruction, or damage beyond
repair of any item of Equipment subject thereto which results, in accordance
with the terms of the Lease, in a reduction in the number or amount of any
future Lease Payments due thereunder or in the termination of the Lessee's
obligation to make future Lease Payments thereunder.
46
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Class A-1 Notes - the Issuer's 5.11% Class A-1 Lease-Backed Notes,
---------------
Series 1999-1.
Class A-2 Notes - the Issuer's 5.60% Class A-2 Lease-Backed Notes,
---------------
Series 1999-1.
Class A-3 Notes - the Issuer's 5.99% Class A-3 Lease-Backed Notes,
---------------
Series 1999-1.
Class A-4 Notes - the Issuer's 6.23% Class A-4 Lease-Backed Notes,
---------------
Series 1999-1.
Code - the Internal Revenue Code of 1986, as amended.
----
Collection Account - Section 1.01 of the Indenture.
------------------
Corporate Trust Office - Section 1.01 of the Indenture.
----------------------
Cut-Off Date - the opening of business on April 1, 1999.
------------
Delinquency Rate - for any Due Period, the sum of the Discounted
----------------
Present Value as of the related Determination Date of all Leases that are 61 or
more days delinquent, as of such Determination Date, divided by the Discounted
Present Value of the Leases on such Determination Date.
Determination Date - Section 1.01 of the Indenture.
------------------
Discounted Present Value of the Leases - Section 1.01 of the
--------------------------------------
Indenture.
Discounted Present Value of the Performing Leases - Section 1.01 of
-------------------------------------------------
the Indenture.
Due Period - with respect to any Payment Date and the related
----------
Determination Date with respect thereto, the calendar month prior to the month
in which such Payment Date and Determination Date occur.
Early Lease Termination - the termination of a Lease by reason of the
-----------------------
prepayment in full thereof prior to its original stated maturity.
Early Termination Lease - a Lease as to which there has been an Early
-----------------------
Lease Termination.
Eligible Lease - a Lease that satisfies the representations and
--------------
warranties set forth in Section 2.04, 2.05(b) and 2.08 and, in the case of a
Substitute Lease or Additional Lease, the applicable requirements of Section 11.
Equipment - all units or items of equipment and related property from
---------
time to time subject to any Lease.
47
<PAGE>
ERISA - the Employee Retirement Income Security Act of 1974, as
-----
amended.
Event of Default - Section 1.01 of the Indenture.
----------------
Excess Copy Charges - Section 1.01 of the Indenture.
-------------------
Filing States - (a) in the case of the Financing Statements referred
-------------
to in clauses (i) and (ii) of the definition of Required Financing Statements,
each of the fifty states of the United States, and (b) in the case of the
Financing Statements referred to in clause (iii) of the definition of Required
Financing Statements, the State of Georgia.
Financing Statement - a statement filed pursuant to the UCC which
-------------------
evidences a perfected security interest in an asset.
Governmental Authority: - any court or federal or state regulatory
----------------------
body, administrative agency or other tribunal or other governmental
instrumentality.
Indemnified Party - Section 5.03 hereof.
-----------------
Indenture - the Indenture dated as of April 1, 1999, between the
---------
Issuer and the Trustee, as the same may be supplemented, modified or amended
from time to time in accordance with the terms thereof.
Insurer - Ambac Assurance Corporation, a Wisconsin stock insurance
-------
corporation, and any successor.
Issuance Date - May 25, 1999.
-------------
Issuer - IKON Receivables, LLC , a Delaware special purpose limited
------
liability company, and any successor.
Leases - collectively, (i) each lease agreement, conditional sale
------
contract and other agreement creating a contractual obligation to which the
Originator is a party, to the extent that such lease agreement, conditional sale
contract or other agreement is described in Exhibit A hereto (as such Exhibit A
--------- ---------
may be amended from time to time in accordance with this Assignment and
Servicing Agreement), including, without limitation, each Additional Lease and
Substitute Lease; (ii) each schedule or supplement to each such lease agreement,
conditional sale contract or other agreement (and each master lease agreement
insofar as it relates to any such schedule or supplement); and (iii) any and all
amendments or modifications from time to time to each such lease agreement,
conditional sale contract or other agreement, or to any schedule or supplement,
in accordance with this Assignment and Servicing Agreement.
Lease Delinquency Payment - Section 1.01 of the Indenture.
-------------------------
Lease Guaranty - with respect to any Lease, any guaranty of payment or
--------------
performance of the whole or any part of the liabilities or obligations of the
Lessee under such Lease.
48
<PAGE>
Lease Payment - Section 1.01 of the Indenture.
-------------
Lease Purchase Amount - Section 1.01 of the Indenture.
---------------------
Lessee - each lessee under a Lease.
------
Lien - means a security interest, lien, charge, pledge, equity (except
----
the Seller's equity in any Equipment), or encumbrance of any kind other than tax
liens, mechanics liens, and any liens that attach to a Lease or any item of
Equipment by operation of law.
Maintenance Charges - Section 1.01 of the Indenture.
-------------------
Non-Performing Lease - Section 1.01 of the Indenture.
--------------------
Noteholder - at any time, any Person in whose name a note is
----------
registered in the Note Register (as defined in the Indenture).
Notes - the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
-----
and the Class A-4 Notes issued pursuant to the Indenture and all notes issued in
exchange therefor pursuant to the Indenture.
Officers' Certificate - with respect to the Seller, Servicer or
---------------------
Originator, a certificate signed by the Chairman, the President or a Vice
President, and by at least one other Person who is a Vice President, the
Treasurer, an Assistant Treasurer, the Secretary, or an Assistant Secretary, of
the Seller, Servicer or Originator, as the case may be.
Originator - IOS Capital, Inc. and any successor thereto in accordance
----------
with the provisions hereof.
Originator Collateral - Section 1.03 hereof.
---------------------
Originator's Purchase Obligation - the obligation of the Originator to
--------------------------------
purchase Leases and Equipment interests pursuant to Section 5.04.
Other Lease Payments - Section 1.01 of the Indenture.
--------------------
Outstanding - Section 1.01 of the Indenture.
-----------
Outstanding Principal Amount - Section 1.01 of the Indenture.
----------------------------
Payment Date - the 15th day of each calendar month (or the next
------------
Business Day thereafter if such day is not a Business Day).
PBGC - the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA.
Pension Plan - Section 2.13 hereof.
------------
49
<PAGE>
Person - an individual, partnership, corporation, joint venture,
------
association, limited liability company, trust (including any beneficiary
thereof) or unincorporated organization, or a government or agency or political
subdivision thereof.
Policy - Section 1.01 of the Indenture.
-------
Pool Factor - a seven-digit decimal, which the Servicer will compute
-----------
on each Determination Date, for each class of Notes, indicating the remaining
outstanding principal balance of such class of Notes as of the applicable
Payment Date, as a fraction of the initial outstanding principal balance of such
class of Notes. Each Pool Factor will be initially 1.0000000, and thereafter
will decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes
Predecessor Lease - Section 11.01 hereof.
-----------------
Prohibited Transaction - any transaction described in Section 406 of
----------------------
ERISA which is not exempt by reason of Section 408 of ERISA or the transitional
rules set forth in Section 414(c) of ERISA and any transaction described in
Section 4975(c) of the Code which is not exempt by reason of Section 4975(c)(2)
or Section 4975(d) of the Code, or the transitional rules of Section 2003(c) of
ERISA.
Prospectus - the form of final prospectus (including the Base
----------
Prospectus and Prospectus Supplement) to be used in connection with the public
offering of the Notes as filed with the Securities and Exchange Commission
pursuant to Rule 424(b).
Prospectus Supplement - the prospectus supplement relating to the
---------------------
offering of the Notes, dated May 19, 1999, accompanying the Base Prospectus.
Purchase Obligation - the Originator's obligation to purchase any
-------------------
Lease pursuant to the provisions of Section 5.04 hereof.
Rating Agency - Standard & Poor's Ratings Services, a division of the
-------------
McGraw-Hill Companies or Moody's Investors Service Inc. and their respective
successors.
Registration Statement - the Registration Statement (File No. 333-
----------------------
71073), as amended and supplemented from time to time, relating to the offering
from time to time of up to $1,825,000,000 aggregate principal amount of the
Issuer's Lease-Backed Notes.
Related Interests - with respect to any Lease, (i) all Lease Payments,
-----------------
Casualty Payments, Retainable Deposits and Termination Payments in respect of
such Lease, (ii) all rights under any Lease Guarantees with respect to such
Lease, (iii) all rights and interests in any collateral with respect to such
Lease, including any security deposit (whether or not such security deposit
shall have become a Retainable Deposit) and any security interest in the
Equipment securing the obligations of the related Lessee under such Lease, and
(iii) all other amounts due or becoming due with respect to such Lease or any of
the foregoing, except Maintenance Charges and Excess Copy Charges.
50
<PAGE>
Related Person - any Person (whether or not incorporated) which is
--------------
under common control with the Originator or the Seller within the meaning of
Section 414(c) of the Internal Revenue Code of 1986, as amended, or of Section
4001(b) of ERISA.
Reportable Event - any of the events set forth in Section 4043(c) of
----------------
ERISA or the regulations thereunder, a withdrawal from a Pension Plan described
in Section 4063 of ERISA, or a cessation of operations described in Section
4062(e) of ERISA.
Required Financing Statements - Financing Statements filed in the
-----------------------------
appropriate UCC filing offices in the Filing States (i) naming the Originator as
debtor and the Seller as secured party and the Originator Collateral as the
collateral, (ii) naming the Seller as debtor, the Issuer as secured party, the
Trustee as assignee and the Seller Collateral as the collateral, and (iii)
naming the Issuer as debtor and the Trustee as secured party and the assets
comprising the Asset Pool as the collateral.
Reserve Account - Section 1.01 of the Indenture.
---------------
Seller - IKON Receivables-1 LLC, a Delaware limited liability company,
------
and any successor.
Seller Collateral - Section 1.03 hereof.
-----------------
Servicer - the corporation so identified in the first paragraph of
--------
this Assignment and Servicing Agreement and any successor thereto in accordance
with the provisions hereof.
Servicer Event of Default - Section 10.01 hereof.
-------------------------
Servicing Fee - Section 4.04(a) hereof.
-------------
Servicing Report - Section 6.01(b) hereof.
----------------
Substitute Lease - Section 11.01(a) hereof.
----------------
Supplementary Report - Section 6.01(e) hereof.
--------------------
Terminated Lease - a lease that is terminated prior to its original
----------------
stated maturity (but not on account of casualty or a Lease default).
Termination Payment - a payment payable by a Lessee under a Lease upon
-------------------
the early termination of such Lease (but not on account of a casualty or a Lease
default) which may be agreed upon by the Servicer, acting in the name of the
Issuer, and the Lessee in accordance with the provisions of Section 5.02 of this
Assignment and Servicing Agreement.
Transaction Payment Amount - Section 1.01 of the Indenture.
--------------------------
Transfer Taxes - Section 2.20 hereof.
--------------
Trustee - Harris Trust and Savings Bank, and any successor thereto, as
-------
Trustee under the Indenture.
51
<PAGE>
Trustee Fee - the fixed, scheduled fees and expenses from time to time
-----------
payable to the Trustee pursuant to the fee agreement between the Issuer and the
Trustee.
Underwriting Agreement - the Underwriting Agreement dated May 19, 1999
----------------------
among the Issuer, IOS Capital and the several Underwriters named therein for the
purchase and sale of the Notes.
Uniform Commercial Code or UCC - with respect to a particular
------------------------------
jurisdiction, the Uniform Commercial Code, as in effect from time to time in
such jurisdiction, or any successor statute thereto.
Warranty Lease - Section 1.01 of the Indenture.
--------------
SECTION 15. MISCELLANEOUS
15.01 Continuing Obligations.
----------------------
This Assignment and Servicing Agreement shall continue in full force
and effect until, and shall terminate when, each of the Notes and any other
amounts due to any holder of the Notes and the Insurer have been paid in full
and all other obligations, if any, secured by the Lien of the Indenture have
been fully satisfied.
15.02 GOVERNING LAW.
-------------
THIS ASSIGNMENT AND SERVICING AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK. IF ANY PROVISION OF THIS ASSIGNMENT AND
SERVICING AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE BALANCE OF THIS
ASSIGNMENT AND SERVICING AGREEMENT.
15.03 Successors and Assigns.
----------------------
This Assignment and Servicing Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the Originator,
the Issuer, the Seller, and the Servicer and shall inure to the benefit of the
successors and assigns of the holders, from time to time, of the Notes.
15.04 Modification.
------------
The terms of this Assignment and Servicing Agreement shall not be
waived, modified or amended without the written consent of the party against
whom such waiver, modification or amendment is claimed and, in any case, the
Trustee (acting upon the written instructions of the Insurer (so long as no
Insurer Default has occurred and is continuing) or the holders of 66-2/3% of the
then aggregate unpaid Outstanding Principal Amount of the Notes (if an Insurer
Default has occurred and is continuing)).
52
<PAGE>
15.05 No Proceedings.
--------------
The Originator and the Seller each hereby agrees that it will not,
directly or indirectly, or direct or cause its officers, directors, or employees
to, aid, institute, or cause to be instituted, against the Issuer, and the
Originator hereby agrees that it will not, directly or indirectly, or direct or
cause its officers, directors or employees to, aid, institute, or cause to be
instituted, against the Seller, any proceeding of the type referred to in
Section 7.01(d) or (e) of the Indenture so long as there shall not have elapsed
one year plus one day since the latest maturing Notes have been paid in full in
cash.
15.06 Notices.
-------
All notices and other communications given in connection with this
Assignment and Servicing Agreement shall be sufficient for every Person
hereunder (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid or certified mail return receipt requested, or sent
by private courier or confirmed telecopy, in case of the Originator, to 1738
Bass Road, P.O. Box 9115, Macon, Georgia 31208, Attention: Harry G. Kozee,
Vice President - Finance, with a copy to the General Counsel (telecopy: (912)
471-2375), in the case of the Seller, to 1738 Bass Road, P.O. Box 9115, Macon,
Georgia 31208, Attention: Robert McLain (telecopy: (912) 471-2375, and in the
case of the Issuer, the Servicer and the Trustee and the holders of the Notes,
to such addresses as are provided pursuant to Sections 1.05 and 1.06 of the
Indenture or to such other address as either party may specify to the other from
time to time in accordance with this Section 15.06.
15.07 Counterparts.
------------
This Assignment and Servicing Agreement may be executed in any number
of counterparts, each counterpart constituting an original, but all together
constituting only one Agreement.
15.08 Nonpetition Covenant.
--------------------
Neither the Originator nor the Seller shall petition or otherwise
invoke the process of any Governmental Authority for the purpose of commencing
or sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its respective property, or ordering the winding up or
liquidation of the affairs of the Issuer. Neither the Originator nor the Seller
shall petition or otherwise invoke the process of any Governmental Authority for
the purpose of commencing or sustaining a case against the Issuer under any
federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its respective property, or ordering
the winding up or liquidation of the affairs of the Issuer.
15.09 Benefits of Agreement.
---------------------
The Trustee and the Insurer and their respective successors and
assigns shall be third-party beneficiaries to the provisions of this Agreement,
and shall be entitled to rely upon
53
<PAGE>
and directly to enforce such provisions so long, in the case of the Insurer,
that no Insurer Default has occurred and is continuing. Nothing in this
Agreement, express or implied, shall give to any other Person any benefit or any
legal or equitable right, remedy or claim under this Agreement. The Insurer may
disclaim any of its rights and powers under this Agreement (in which case the
Trustee may exercise such rights and powers hereunder), but not its duties and
obligations under the Policy, upon delivery of a written notice to the Trustee
and the parties hereto.
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Servicing Agreement as of the date and year first written above.
IOS CAPITAL, INC., as
Originator and Servicer
By: /s/ J.F. Quinn
______________________________________
Name: J.F. Quinn
Title: Treasurer
IKON RECEIVABLES-1 LLC
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By: /s/ Robert K. McLain
____________________________________
Name: Robert K. McLain
Title: President
IKON RECEIVABLES, LLC.
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By: /s/ Robert K. McLain
_____________________________________
Name: Robert K. McLain
Title: President
The undersigned hereby acknowledges
receipt of a copy of the foregoing
Assignment and Servicing Agreement and
agrees to, and to be bound by, each of
the provisions thereof applicable to the
undersigned.
Harris Trust and Savings Bank,
not in its individual capacity, but
solely as Trustee
By: /s/ Robert D. Foltz
___________________________________
Name: Robert D. Foltz
Title: Vice President
<PAGE>
EXHIBIT A
---------
SCHEDULE OF LEASES AND EQUIPMENT
ON FILE WITH INDENTURE TRUSTEE
A-1
<PAGE>
EXHIBIT B
---------
Form of Servicing Report
[To be updated and conformed]
Line
1 Transaction Cash Flow - see computer detail
1/1 Beginning Net Present Value
1/2 Less:
- current month
1/3 Add: Actual Interest Payment (Weighted Avg. A notes)
1/4 Add: 0.75% Servicing Component
1/5 Less: Current month Non-Performing
1/5a Less: Warranty Leases
1/6 Less: Amounts on Early Terminations
1/7 Add: Amounts due to Substitutions
1/8 Add: Amounts due to Additional leases (Prepaid leases)
1/9 Ending Net Present Value
2 Overdue Lease Payments - see computer detail
2/1 Beginning Balance
2/2 (Memo) Overdue Payments Received
2/3 Less: Reimbursed Per This Report
2/4 Less: Past Dues on Disqualified Leases - Early Terminations
2/5 Less: Past Dues on Disqualified Leases - Non-Performing and Warranty
2/6 Add: Last Month's Current Payments that became Past due
2/7 Add: Received on Replacements Leases
2/8 (MEMO) Net New Advances
2/9 Ending Balance
3 Collection account-Advance Lease Payments
4/1 Beginning Balance
4/2 Less: Applied to Current from Prepaid
4/3 Less: Advance on Disqualified Leases
4/4 Add: Received This Month
4/5 Add: Received on Replacement Leases
4/6 Ending Balance
4 Cash Reserve Account
6/1 Beginning Balance
6/2 Less: New Obligations: Total Shortfall (B9)
6/3 Plus: Interest earned on Cash Reserve Acct.
6/4 Ending Balance
6/5 ___% of Outstanding Note Value
6/6 Lesser of __% of $__________ and Outstanding Note Value
6/7 Target Cash Reserve (Greater of 6/5 & 6/6)
6/8 Cash Reserve Release (6/4-6/7)
6/9 Ending Balance Cash Reserve Account
B-1
<PAGE>
5 Non-Performing Leases
8/1 Beginning Balance of Non-Performing Leases
8/2 Plus Current Month Additions
8/3 Plus Past Due Payments on Non-Performing Leases
8/4 Less Current Month Recoveries
8/5 Ending Balance
Cash Receipts
Line
A/1 Regular monthly payments
A/2 Overdue payments
A/3 Overdue Payments due on Early Termination and Termed Out Leases (From
Originator)
A/4 Advance Payments of monthly rentals
A/5 Residual Values
A/6 Recoveries on Non-Performing Leases
A/7 Proceeds from investment of Collection Accounts funds
A/8 Casualty and Termination Payments
A/9 Servicer Advances
A/10 Total Receipts
Disbursement Requirements
Line
B/1 Past Due Payments Collected, Due Servicer (COLLECTION ACCT)
B/2 Overdue Payments Advanced, on Disqualified Leases (COLLECTION ACCT)
B/3 Servicing Fee (COLLECTION ACCT)
B/4 Advanced Payments on Disqualified Leases (COLLECTION ACCT)
B/5 Total to Servicer
B/6 Collection Account - Advanced Rents (Monthly-Increase/(Decrease))
B/7 Net cash receipts
B/8 Shortfall
B/9 Draw on Cash Reserve
B/10 Total Available Funds
C Noteholders
C/1 Class [A-1] Interest Paid ____%
C/2 Class [A-2] Interest Paid ____%
C/3 Class [A-3] Interest Paid ____%
C/4 Class [A-4] Interest Paid ____%
C/9 Beginning Class [A-1] Note Balance
C/10 Class [A-1] Note Value Target (___% of 1/9)
C/11 Class [A-1] Principal Paid
C/12 Beginning Class [A-2] Note Balance
C/13 Class [A-2] Note Value
C/14 Ending Class [A-2] Note Balance
C/15 Class [A-2] Principal Paid
C/16 Beginning Class [A-3] Note Balance
C/17 Class [A-3] Note Value
C/18 Ending Class [A-3] Note Balance
C/19 Class [A-3] Principal Paid
C/20 Beginning Class [A-4] Note Balance
C/21 Class [A-4] Note Value
B-2
<PAGE>
C/22 Class [A-4] Principal Paid
C/23 Ending Class [A-4] Note Balance
C/42 Balance Available for Distribution to IOS Capital
D Miscellaneous Tracking Items
D/1 % of Total Non-Performing and Warranty substituted as per Initial Outs,
Note Value
D/2 (MEMO) Cumulative amounts on Early Lease Terminations due to modification
of leases
D/3 (MEMO) Cumulative amounts of additional leases purchased
B-3
<PAGE>
AMBAC ASSURANCE CORPORATION,
and
LEHMAN BROTHERS INC.,
CHASE SECURITIES INC.,
DEUTSCHE BANK SECURITIES INC.
AND
PNC CAPITAL MARKETS, INC.
INDEMNIFICATION AGREEMENT
$751,642,000 in aggregate principal amount of
IKON RECEIVABLES, LLC LEASE-BACKED NOTES
Dated as of May 25, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
(This Table of Contents is for convenience of reference only and shall not
be deemed to be part of this Agreement. All capitalized terms used in this
Agreement and not otherwise defined shall have the meanings set forth in Article
I of this Agreement.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Defined Terms........................................ 1
Section 2. Other Definitional Provisions........................ 1
Section 3. Representations and Warranties of the Underwriters... 1
Section 4. Representations and Warranties of the Insurer........ 2
Section 5. Indemnification...................................... 3
Section 6. Amendments, Etc...................................... 4
Section 7. Notices.............................................. 4
Section 8. Severability......................................... 5
Section 9. Governing Law........................................ 5
Section 10. Counterparts......................................... 5
Section 11. Headings............................................. 5
</TABLE>
<PAGE>
INDEMNIFICATION AGREEMENT, dated as of May 25, 1999, by and among Ambac
Assurance Corporation, as Insurer, and Lehman Brothers Inc., Chase Securities
Inc., Deutsche Bank Securities Inc. and PNC Capital Markets, Inc., as the
Underwriters.
Section 1. Defined Terms. Unless the context clearly requires otherwise,
-------------
all capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Insurance and Indemnity Agreement or the
Certificate Guaranty Insurance Policy No. AB0254BE issued by the Insurer in
favor of the Trustee (the "Policy"). For purposes of this Indemnification
Agreement, the following terms shall have the following meanings:
"Indenture" means the Indenture dated as of April 1, 1999 among the Issuer,
---------
the Indenture Trustee and the Servicer.
"Insurance and Indemnity Agreement" means the Insurance and Indemnity
---------------------------------
Agreement (as may be amended, modified or supplemented from time to time), dated
as of May 25, 1999, by and among the Insurer, the Seller, the Issuer, IOS
Capital, and the Indenture Trustee.
"Insurer" means Ambac Assurance Corporation, a Wisconsin domiciled stock
-------
insurance company, or any successor thereto, as issuer of the Policy.
"Insurer Information" has the meaning given such term in Section 4.
-------------------
"Notes" means any notes authorized by, and authenticated and delivered
-----
under the Indenture.
"Underwriter Information" has the meaning given such term in Section 3.
-----------------------
"Underwriters" means Lehman Brothers Inc., Chase Securities Inc., Deutsche
------------
Bank Securities Inc., and PNC Capital Markets, Inc.
Section 2. Other Definitional Provisions. The words "hereof," "herein" and
-----------------------------
"hereunder" and words of similar import when used in this Indemnification
Agreement shall refer to this Indemnification Agreement as a whole and not to
any particular provision of this Indemnification Agreement, and Section,
subsection, Schedule and Exhibit references are to this Indemnification
Agreement unless otherwise specified. The meanings given to terms defined herein
shall be equally applicable to both the singular and plural forms of such terms.
The words "include" and "including" shall be deemed to be followed by the phrase
"without limitation."
Section 3. Representations and Warranties of the Underwriters. Each of the
--------------------------------------------------
Underwriters, severally and not jointly, represents and warrants as of the
Closing Date as follows:
(a) Offering Document. The Underwriters will not use, or
-----------------
distribute to other broker-dealers for use, any Offering Document in
connection with the
<PAGE>
offer and sale of the Notes unless such Offering Document includes such
information relating to the Insurer as has been furnished by the Insurer
for inclusion therein and has been approved by the Insurer.
(b) Underwriter Information. As to each Underwriter, all
-----------------------
material provided in writing to the Company for inclusion in the Offering
Document (as revised from time to time,
<PAGE>
and as included in such Offering Document or any other Offering Document),
such information being the second, third, fifth and sixth paragraphs of the
section headed "Underwriting" in the Prospectus Supplement dated May 19,
1999 with respect to the Notes (the "Underwriter Information"), insofar as
such information relates to such Underwriter, shall be true and correct in
all material respects.
(c) Compliance with Laws. Each Underwriter will comply in all
--------------------
material respects with all legal requirements in connection with its offers
and sales of the Securities and will make such offers and sales in the
manner provided in the Offering Document.
Section 4. Representations and Warranties of the Insurer. The Insurer
---------------------------------------------
represents and warrants to the Underwriters as follows:
(a) Organization and Licensing. The Insurer is a duly organized
--------------------------
and validly existing Wisconsin stock insurance corporation.
(b) Corporate Power. The Insurer has the corporate power and
---------------
authority to issue the Policy and execute and deliver this Indemnification
Agreement and the Insurance Agreement and to perform all of its obligations
hereunder and thereunder.
(c) Authorization; Approvals. Proceedings legally required for
------------------------
the issuance of the Policy and the execution, delivery and performance of
this Indemnification Agreement and the Insurance and Indemnity Agreement
have been taken and licenses, orders, consents or other authorizations or
approvals of any governmental boards or bodies legally required for the
enforceability of the Policy have been obtained or are not material to the
enforceability of the Policy.
(d) Enforceability. The Policy, when issued, and this
--------------
Indemnification Agreement and the Insurance and Indemnity Agreement will
each constitute a legal, valid and binding obligation of the Insurer,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium, receivership and other similar laws
affecting creditors' rights generally and by general principles of equity
and subject to principles of public policy limiting the right to enforce
the indemnification provisions contained therein and herein, insofar as
such provisions relate to indemnification for liabilities arising under
federal securities laws.
(e) Financial Information. The balance sheet of the Insurer as
---------------------
of December 31, 1998 and the related statements of income, stockholder's
equity and cash flows for the three fiscal years ended December 31, 1998,
and the accompanying footnotes, and the unaudited balance sheet of the
Insurer as of March 31, 1999, and the unaudited related statements of
income, stockholder's equity and cash flows for the three month period
ending March 31, 1999, fairly present in all material respects the
financial condition of the Insurer as of such dates and for the periods
covered by such statements in accordance with generally accepted accounting
principles consistently applied. Any future financial
<PAGE>
statements of the Insurer incorporated by reference into the Offering
Document relating to the Notes will fairly present in all material respects
the financial condition of the Insurer as of their dated dates in
accordance with generally accepted accounting principles consistently
applied. Since March 31, 1999, there has been no change in such financial
condition of the Insurer that would materially and adversely affect its
ability to perform its obligations under the Policy.
(f) Insurer Information. The information relating to the Insurer
-------------------
in the Prospectus Supplement dated May 19, 1999 as of the date hereof under
the caption "The Insurer and the Policy" and the financial statements of
the Insurer incorporated by reference into the Offering Document (together
the "Insurer Information") are true and correct in all material respects
and do not contain any untrue statement of a material fact.
Section 5. Indemnification.
---------------
(a) Each of the Underwriters agrees, severally and not jointly,
to pay, and to protect, indemnify and save harmless, the Insurer and its
officers, directors, shareholders, employees, agents and each Person, if
any, who controls the Insurer within the meaning of either Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act, from and
against, any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or by
reason of any untrue statement of a material fact contained in the
Underwriter Information with respect to such Underwriter or a breach of any
of the representations and warranties of such Underwriter contained in
Section 3.
(b) The Insurer agrees to pay, and to protect, indemnify and
save harmless, each of the Underwriters and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls the
Underwriters within the meaning of either Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act from and against, any and all
claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including reasonable fees
and expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or by reason of any untrue
statement of a material fact contained in the Insurer Information or a
breach of any of the representations and warranties of the Insurer
contained in Section 4.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party" and, collectively, the "Indemnified
Parties") in respect of which the indemnity provided in this Section 5(a)
or (b) may be sought from the Underwriters, on the one hand, or the
Insurer, on the other (each, an "Indemnifying Party") hereunder, each such
Indemnified Party shall promptly
<PAGE>
notify the Indemnifying Party in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel
satisfactory to the Indemnified Party and the payment of all expenses. The
Indemnified Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof at the expense of the
Indemnified Party; provided, however, that the fees and expenses of such
separate counsel shall be at the expense of the Indemnifying Party if (i)
the Indemnifying Party has agreed to pay such fees and expenses, (ii) the
Indemnifying Party shall have failed to assume the defense of such action
or proceeding and employ counsel reasonably satisfactory to the Indemnified
Party in any such action or proceeding or (iii) the named parties to any
such action or proceeding (including any impleaded parties) include both
the Indemnified Party and the Indemnifying Party, and the Indemnified Party
shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Indemnifying Party (in which case, if the Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnified Party, the Indemnifying
Party shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, it being understood,
however, that the Indemnifying Party shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
Indemnified Parties, which firm shall be designated in writing by the
Indemnified Party). The Indemnifying Party shall not be liable for any
settlement of any such action or proceeding effected without its written
consent to the extent that any such settlement shall be prejudicial to the
Indemnifying Party, but, if settled with its written consent, or if there
is a final judgment for the plaintiff in any such action or proceeding with
respect to which the Indemnifying Party shall have received notice in
accordance with this subsection (c), the Indemnifying Party agrees to
indemnify and hold the Indemnified Parties harmless from and against any
loss or liability by reason of such settlement or judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party (other
than due to application of this Section), each Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis of
the relative fault of the Indemnifying Party, on the one hand, and the
Indemnified Party, on the other hand. The relative fault of each
Indemnifying Party, on the one hand, and each Indemnified Party, on the
other, shall be determined by reference to, among other things, whether the
breach of, or alleged breach of, any of its representations and warranties
set forth within the control of, the Indemnifying Party or the Indemnified
Party, and the parties relative intent, knowledge, access to information
and opportunity to correct or prevent such breach. No person guilty of
fraudulent misrepresentation (within the meaning Section (11)(f) of the
Securities Act) shall be entitled to contribution from any person who was
not
<PAGE>
guilty of such fraudulent misrepresentation. No Underwriter shall be
responsible for any amount in excess of an amount equal to the excess of
the sales price to the public of the Notes purchased by such Underwriter
over the price paid therefor by such Underwriter.
Section 6. Amendments, Etc. This Indemnification Agreement may be
---------------
amended, modified, supplemented or terminated only by written instrument or
written instruments signed by the parties hereto.
Section 7. Notices. All demands, notices and other communications to be
-------
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered and
telecopied to the recipient as follows:
(a) To the Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department
Facsimile: (212) 208-3547
(b) To the Underwriters:
c/o Lehman Brothers Inc.
3 World Financial Center
200 Vesey Street
New York, New York 10285
Attention:_______________
Facsimile:_______________
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 8. Severability. In the event that any provision of this
------------
Indemnification Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 9. Governing Law. This Indemnification Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of New York (without
giving effect to the conflict of laws provisions thereof).
<PAGE>
Section 10. Counterparts. This Indemnification Agreement may be executed
------------
in counterparts by the parties hereto, and all such counterparts shall
constitute one and the same instrument.
Section 11. Headings. The headings of Sections and the Table of Contents
--------
contained in this Indemnification Agreement are provided for convenience only.
They form no part of this Indemnification Agreement and shall not affect its
construction or interpretation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all as
of the day and year first above mentioned.
Ambac Assurance Corporation,
as Insurer
By: /s/ Nicholas G. Goumas
______________________________
Name: Nicholas G. Goumas
____________________________
Title: First Vice President
___________________________
<PAGE>
Lehman Brothers Inc.
as an Underwriter
By: /s/ Kurt A. Locher
_________________________________
Name: Kurt A. Locher
Title: Managing Director
<PAGE>
Chase Securities Inc.,
as an Underwriter
By: /s/ Brad Dansker
_________________________________
Name: Brad Dansker
Title: Vice President
<PAGE>
Deutsche Bank Securities Inc.,
as an Underwriter
By: /s/ James Rothman
_________________________________
Name: James Rothman
Title: Vice President
By: /s/ David Cobb
_________________________________
Name: David Cobb
Title: Vice President
<PAGE>
PNC Capital Markets, Inc.,
as an Underwriter
By: /s/Craig Grenci
_________________________________
Name: Craig Grenci
Title: Managing Director
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT
AMBAC ASSURANCE CORPORATION,
as Insurer,
IKON RECEIVABLES, LLC,
as Issuer,
IKON RECEIVABLES-I, LLC,
as Seller,
IOS CAPITAL, INC.,
as Originator and as Servicer,
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
IKON RECEIVABLES, LLC LEASE-BACKED NOTES
Dated as of May 25, 1999
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall not
be deemed to be part of this Agreement. All capitalized terms used in this
Agreement and not otherwise defined shall have the meanings set forth in Article
I of this Agreement.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I 1
DEFINITIONS 1
Section 1.01. Defined Terms 1
Section 1.02. Other Definitional Provisions. 4
ARTICLE II 4
REPRESENTATIONS, WARRANTIES AND COVENANTS 4
Section 2.01. Representations and Warranties of IOS Capital 4
Section 2.02. Affirmative Covenants of IOS Capital 6
Section 2.03. Negative Covenants of IOS Capital 7
Section 2.04. Representations and Warranties of the Insurer 7
Section 2.05. Representations and Warranties and Covenants of the Seller 10
Section 2.06. Representations and Warranties of the Issuer 10
Section 2.07. Affirmative Covenants of the Issuer 12
Section 2.08. Negative Covenants of the Issuer 14
ARTICLE III 15
THE POLICY; REIMBURSEMENT 15
Section 3.01. Issuance of the Policy 15
Section 3.02. Payment of Fees and Premium 17
Section 3.03. Reimbursement Obligation 18
Section 3.04. Indemnification 18
Section 3.05. Payment Procedure 21
ARTICLE IV 22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
FURTHER AGREEMENTS 22
Section 4.01. Effective Date; Term of the Insurance Agreement 22
Section 4.02. Further Assurances and Corrective Instruments 22
Section 4.03. Obligations Absolute 22
Section 4.04. Assignments; Reinsurance; Third-Party Rights 24
Section 4.05. Liability of the Insurer 25
Section 4.06. Annual Servicing Audit and Certification 25
ARTICLE V 25
DEFAULTS AND REMEDIES 25
Section 5.01. Defaults 25
Section 5.02. Remedies; No Remedy Exclusive 26
Section 5.03. Waivers 27
ARTICLE VI 27
MISCELLANEOUS 27
Section 6.01. Amendments, Etc 27
Section 6.02. Notices 28
Section 6.03. Severability 29
Section 6.04. Governing Law 29
Section 6.05. Consent to Jurisdiction 29
Section 6.06. Consent of the Insurer 30
Section 6.07. Counterparts 30
Section 6.08. Headings 30
Section 6.09. Trial by Jury Waived 31
Section 6.10. Limited Liability 31
Section 6.11. Entire Agreement 31
Section 6.12. Indenture Trustee 31
</TABLE>
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT (as it may be amended, modified or
supplemented from time to time, this "Insurance Agreement"), dated as of May 25,
1999, by and among IOS Capital, Inc., as Originator and as Servicer, Ambac
Assurance Corporation, as Insurer, IKON Receivables, LLC, as Issuer, IKON
Receivables-I, LLC, as Seller, and Harris Trust and Savings Bank, as Indenture
Trustee.
PRELIMINARY STATEMENTS
A. The Indenture, dated as of April 1, 1999, relating to the IKON
Receivables, LLC Lease-Backed Notes, Series 1999-1, by and among the Issuer, the
Servicer and the Indenture Trustee (as it may be amended, modified or
supplemented from time to time as set forth therein) provides for, among other
things, the issuance of the Notes.
B. The Insurer has issued the Policy, pursuant to which it has agreed to
pay to the Indenture Trustee for the benefit of the Holders certain payments in
respect of the Notes.
C. The Insurer shall be paid a Premium as set forth herein.
D. IOS Capital, Inc., the Issuer, the Seller and the Indenture Trustee
have undertaken certain obligations in consideration for the Insurer's issuance
of its Policy.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms. Unless the context clearly requires
otherwise, all capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Indenture or, if not defined
therein, in the Policy described below. For purposes of this Insurance
Agreement, the following terms shall have the following meanings:
"Closing Date" means May 25, 1999.
"Commission" means the Securities and Exchange Commission.
"Company Documents" means the Indenture, this Insurance Agreement, the
Notes, and the Assignment and Servicing Agreement.
"Default" means any event which results, or which with the giving of notice
or the lapse of time or both would result, in an Event of Servicing Termination.
<PAGE>
"Documents" means the Company Documents and any other information relating
to the Asset Pool, IOS Capital, the Seller or the Issuer furnished to the
Insurer by IOS Capital, the Seller or the Issuer.
"Event of Servicing Termination" means any Event of Servicing Termination
specified in Section 5.01 of this Insurance Agreement.
"Financial Statements" means, with respect to IOS Capital, the consolidated
statements of financial condition as of September 30, 1998 and the statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended September 30, 1998 and the notes thereto.
"Holder" has the meaning given such term in the Policy.
"Indemnification Agreement" means the Indemnification Agreement dated as of
April 1, 1999 between the Insurer and the Underwriters.
"Indenture Trustee" means Harris Trust and Savings Bank, as indenture
trustee under the Indenture, and any successor thereto under the Indenture.
"Insurance Agreement" has the meaning given such term in the initial
paragraph hereof.
"Insurer" means Ambac Assurance Corporation, a Wisconsin domiciled stock
insurance corporation, or any successor thereto, as issuer of the Policy.
"Insurer Information" has the meaning given such term in Section
3.04(a)(v).
"Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IOS Capital" means IOS Capital, Inc., and any successors thereto, as the
Originator and the Servicer.
"Issuer" means IKON Receivables, LLC, a Delaware limited liability company,
or any successor thereto as provided for in the Indenture.
"Late Payment Rate" means the lesser of (a) the greater of (i) the per
annum rate of interest publicly announced from time to time by Citibank, N.A. as
its prime or base lending rate (any change in such rate of interest to be
effective on the date such change is announced by Citibank, N.A.), plus 2% per
annum and (ii) the then applicable highest rate of interest on the Notes and (b)
the maximum rate permissible under applicable usury or similar laws limiting
interest rates. The Late Payment Rate shall be computed on the basis of the
actual number of days elapsed over a year of 360 days.
<PAGE>
"Material Adverse Change" means, in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person on a consolidated basis with its subsidiaries or
(ii) the ability of such Person to perform its obligations under any of the
Company Documents.
"Moody's" means Moody's Investors Service, Inc., and any successor thereto.
"Notes" has the meaning given such term in the Indenture.
"Offering Document" means the Prospectus dated May 7, 1999, the Preliminary
Prospectus Supplement dated May 11, 1999, and the Prospectus Supplement dated
May 19, 1999, each in respect of the Notes, and any amendment or supplement
thereto, and any other offering document in respect of the Notes prepared by IOS
Capital that makes reference to the Policy.
"Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, partnership or
other organization or entity (whether governmental or private).
"Policy" means the certificate guaranty insurance policy, #AB0254BE,
together with all endorsements thereto, issued by the Insurer to the Indenture
Trustee, for the benefit of the Holders of the Notes.
"Premium" means the premium payable in accordance with the Policy, with
respect to any Payment Date, the amount calculated by multiplying the Premium
Percentage by the Outstanding Principal Amount of the Notes on such Payment Date
prior to the distribution of any principal with respect to the Notes on such
Payment Date. All calculations of the Premium shall be based upon twelve 30-day
months and a 360-day year.
"Premium Percentage" shall mean 0.20% per annum.
"Registration Statement" means the registration statement on Form S-3 (No.
333-71073), including the prospectus, relating to the Notes, at the time it
became effective.
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., and any successor thereto.
<PAGE>
"Transaction" means the transactions contemplated by the Company Documents,
including the transactions described in the Offering Document.
"Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Underwriters" means, collectively, Lehman Brothers Inc., PNC Capital
Markets, Inc., Chase Securities Inc. and Deutsche Bank Securities Inc.
"Underwriting Agreement" means the Underwriting Agreement dated May 19,
1999 between Lehman Brothers Inc., as representative of the several Underwriters
named in Schedule 1 to the Underwriting Agreement, and IOS Capital with respect
to the offer and sale of the Notes, as amended, modified or supplemented from
time to time.
"Underwriters' Information" has the meaning given such term in the
Indemnification Agreement.
Section 1.02. Other Definitional Provisions. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Insurance
Agreement shall refer to this Insurance Agreement as a whole and not to any
particular provision of this Insurance Agreement, and Section, subsection,
Schedule and Exhibit references are to this Insurance Agreement unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The words
"include" and "including" shall be deemed to be followed by the phrase "without
limitation."
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of IOS Capital. IOS Capital
hereby makes to and for the benefit of the Insurer each of the representations
and warranties made by IOS Capital in the Indenture and the Assignment and
Servicing Agreement, including, but not limited to, Section 2 of the Assignment
and Servicing Agreement. Such representations and warranties are incorporated
herein by this reference as if fully set forth herein, and may not be amended
except by an amendment complying with the terms of Section 6.01. In addition,
IOS Capital represents and warrants as of the Closing Date as follows:
(a) Due Authorization. The execution, delivery and performance by IOS
Capital of the Company Documents to which it is a party, have been duly
<PAGE>
authorized by all necessary corporate action and do not require any
additional approvals or consents, or other action by or any notice to or
filing with any Person, including any governmental entity or any of the
stockholders of IOS Capital, which have not previously been obtained or
given.
(b) Noncontravention. The execution and delivery by IOS Capital of
the Company Documents to which it is a party, the consummation of the
Transaction and the satisfaction of the terms and conditions of the Company
Documents do not and will not:
(i) conflict with or result in any breach or violation of
any provision of the charter or bylaws of IOS Capital or any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to IOS
Capital or any of its respective material properties, including
regulations issued by any administrative agency or other governmental
authority having supervisory powers over IOS Capital;
(ii) constitute a default by IOS Capital under, result in
the acceleration of any obligation under, or breach any provision of
any loan agreement, mortgage, indenture or other agreement or
instrument to which IOS Capital is a party or by which any of its
properties are or may be bound or affected; or
(iii) result in or require the creation of any lien upon or
in respect of any assets of IOS Capital, except as expressly
contemplated by the Company Documents.
(c) Valid and Binding Obligations. When executed and delivered by IOS
Capital, the Company Documents to which IOS Capital is a party will
constitute the legal, valid and binding obligations of IOS Capital
enforceable in accordance with their respective terms, except as such
enforceability may be limited by insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and general
equitable principles and public policy considerations as to rights of
indemnification for violations of federal securities laws. The Notes, when
executed, authenticated and delivered in accordance with the Indenture,
will be validly issued and outstanding and entitled to the benefits of the
Indenture. IOS Capital will not at any time in the future deny that the
Company Documents constitute the legal, valid and binding obligations of
IOS Capital.
(d) Compliance With Securities Laws. The offer and sale of the Notes
comply in all material respects with all requirements of law, including all
registration requirements of applicable securities laws. The Indenture is
required to be qualified and has been qualified under the Trust Indenture
Act and the Issuer
<PAGE>
is not required to be registered as an "investment company" under the
Investment Company Act. IOS Capital will satisfy any of the information
reporting requirements of the Securities Exchange Act arising out of the
Transaction to which it, the Issuer or the Seller are subject.
Section 2.02. Affirmative Covenants of IOS Capital. IOS Capital hereby
makes, to and for the benefit of the Insurer, all of the covenants made by IOS
Capital as Originator and Servicer in the Indenture and the Assignment and
Servicing Agreement, including, but not limited to, Sections 4, 5, 6, 7 and 8 of
the Assignment and Servicing Agreement (but with respect to such covenants made
by IOS Capital as Servicer, only for so long as IOS Capital is the Servicer).
Such covenants are hereby incorporated herein by this reference as if fully set
forth herein, and may not be amended except by an amendment complying with the
terms of Section 6.01. In addition, IOS Capital hereby agrees that during the
term of this Insurance Agreement, unless the Insurer shall otherwise expressly
consent in writing:
(a) Compliance With Agreements and Applicable Laws. IOS Capital shall
comply with the terms and conditions of and perform its obligations under
the Company Documents to which it is a party in all cases in which failure
to so comply or perform would result in a default thereunder and shall
comply with all material requirements of any law, rule or regulation
applicable to it.
(b) Access to Records; Discussions with Officers and Accountants. On
an annual basis, or upon the occurrence of a Material Adverse Change, IOS
Capital shall, upon the reasonable request of the Insurer, permit the
Insurer or its authorized agents:
(i) to inspect the books and records of IOS Capital as
they may relate to the Notes, the obligations of IOS Capital under the
Company Documents and the Transaction;
(ii) to discuss the affairs, finances and accounts of IOS
Capital with the Chief Operating Officer and the Chief Financial
Officer of IOS Capital; and
(iii) with IOS Capital's consent, which consent shall not
be unreasonably withheld or delayed, to discuss the affairs, finances
and accounts of IOS Capital with IOS Capital's independent
accountants, provided that an officer of IOS Capital shall have the
right to be present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours at the Insurer's expense and shall not unreasonably disrupt
the business of IOS Capital.
<PAGE>
(c) Retirement of Notes. IOS Capital shall instruct the Indenture
Trustee in writing, upon a retirement or other payment of all of the Notes,
to surrender the Policy to the Insurer for cancellation.
(d) Disclosure Document. Each Offering Document delivered with
respect to the Notes shall clearly disclose that the Policy is not covered
by the property/casualty insurance security fund specified in Article 76 of
the New York Insurance Law.
(e) Third-Party Beneficiary. IOS Capital agrees that the Insurer
shall have all rights of a third-party beneficiary in respect of the
Indenture, and the Assignment and Servicing Agreement.
(f) Closing Documents. IOS Capital shall provide or cause to be
provided to the Insurer an executed original copy of each document executed
in connection with the Transaction within 30 Business Days after the date
of closing.
Section 2.03. Negative Covenants of IOS Capital. IOS Capital hereby
agrees that during the term of this Insurance Agreement, unless the Insurer
shall otherwise expressly consent in writing:
(a) Impairment of Rights. IOS Capital shall not take any action, or
fail to take any action, if such action or failure to take action may
result in a Material Adverse Change specified in clause (ii) of the
definition of Material Adverse Change with respect to IOS Capital, or may
not interfere with the enforcement of any rights of the Insurer under or
with respect to any of the Company Documents. IOS Capital shall give the
Insurer written notice of any such action or failure to act on the earlier
of: (i) the date upon which any publicly available filing or release is
made with respect to such action or failure to act or (ii) promptly prior
to the date of consummation of such action or failure to act. IOS Capital
shall furnish to the Insurer all information requested by it that is
reasonably necessary to determine compliance with this paragraph.
(b) Amendments, Etc. IOS Capital shall not modify or amend, or
consent to any modification or amendment of, any of the terms, provisions
or conditions of the Company Documents to which it is a party without the
prior written consent of the Insurer thereto, but excluding any amendment
to the Offering Document required by law and excluding any modifications or
amendments to which, pursuant to the terms of the Company Documents,
Insurer's consent is not required.
(c) Successors. Except as provided in Section 10.02 of the Assignment
and Servicing Agreement or Section 8.08 of the Indenture, as applicable,
neither the Indenture Trustee nor IOS Capital shall terminate or
<PAGE>
designate, or consent to the termination or designation of, any successor
Servicer or Indenture Trustee without the prior written approval of the
Insurer, which approval shall not be unreasonably withheld, conditioned or
delayed.
Section 2.04. Representations and Warranties of the Insurer. The
Insurer represents and warrants to the Indenture Trustee (on behalf of the
Noteholders), the Issuer and IOS Capital as follows:
(a) Organization and Licensing. The Insurer is a duly organized
and validly existing Wisconsin stock insurance company duly qualified to
conduct an insurance business in the State of Illinois.
(b) Corporate Power. The Insurer has the corporate power and
authority to issue the Policy and execute and deliver this Insurance
Agreement and to perform all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. All proceedings legally required
for the issuance of the Policy and the execution, delivery and performance
of this Insurance Agreement have been taken and all licenses, orders,
consents or other authorizations or approvals of the Insurer's Board of
Directors or stockholders or any governmental boards or bodies legally
required for the enforceability of the Policy have been obtained; any
proceeding not taken and any license, authorization or approvals not
obtained are not material to the enforceability of the Policy.
(d) Enforceability. The Policy, when issued, and this Insurance
Agreement will each constitute a legal, valid and binding obligation of the
Insurer, enforceable in accordance with its terms, subject to insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and subject
to principles of public policy limiting the right to enforce the
indemnification provisions contained therein and herein, insofar as such
provisions relate to indemnification for liabilities arising under federal
securities laws.
(e) Financial Information. The consolidated financial statements
of the Insurer and its subsidiaries as of December 31, 1998 and 1997, and
for the three years ended December 31, 1998, included in the Annual Report
on Form 10-K of Ambac Financial Group, Inc. (which was filed with the
Commission on March 30, 1999, Commission File Number 1-10777), and the
unaudited consolidated financial statements of the Insurer and its
subsidiaries as of March 31, 1999 and for the periods ending March 31, 1999
and March 31, 1998, included in the Quarterly Report on Form 10-Q of Ambac
Financial Group, Inc. (which was filed with the Commission on May 12,
1999), are hereby incorporated by reference into the Prospectus Supplement
dated May 19, 1999 relating to the Notes and shall be deemed to be a part
hereof. Since March 31, 1999, there has
<PAGE>
been no Material Adverse Change with respect to the financial condition of
the Insurer that would affect its ability to perform its obligations under
the Policy.
(f) Insurer Information. The Insurer Information is true and
correct in all material respects and does not contain any untrue statement
of a material fact.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would result in a Material Adverse Change or would
materially and adversely affect its ability to perform its obligations
under the Policy or this Insurance Agreement.
(h) No Conflict. The execution by the Insurer of this Insurance
Agreement will not, and the satisfaction of the terms hereof will not,
conflict with or result in a breach of any of the terms, conditions or
provisions of the Certificate of Incorporation or By-Laws of the Insurer,
or any restriction contained in any contract, agreement or instrument to
which the Insurer is a party or by which it is bound or constitute a
default under any of the foregoing.
(i) Confidential Information. The Insurer agrees that it and its
shareholders, directors, agents, accountants and attorneys shall not use or
disclose any information provided to the Insurer pursuant to or in
connection with this Insurance Agreement or the issuance of the Policy or
otherwise related to the Transactions, including any matter of which it
becomes aware during the inspections conducted or discussions had pursuant
to Section 2.02(b), unless such information is readily available from
public sources or except as may be otherwise required by regulation, law or
court order or requested by appropriate governmental authorities or as
necessary to preserve its rights or security under or to enforce the
Company Documents; provided, however, that the foregoing shall not limit
the right of the Insurer to make such information available to its
regulators, securities rating agencies, reinsurers, credit and liquidity
providers, counsel and accountants. If the Insurer is requested or required
(by oral questions, interrogatories, requests for information or documents
subpoena, civil investigative demand or similar process) to disclose any
information provided to the Insurer pursuant to or in connection with this
Insurance Agreement or the issuance of the Policy or otherwise related to
the Transactions, including any information of which it becomes aware
through such inspections or discussions, the Insurer will promptly notify
IOS Capital of such request(s) so that IOS Capital may seek an appropriate
protective order and/or waive the Insurer's compliance with the provisions
of this Insurance Agreement. If, in the absence of a protective order or
the receipt of a waiver hereunder, the Insurer is, nonetheless, in the
opinion of its counsel (which shall be delivered to IOS Capital), compelled
to disclose such information to any tribunal or else stand liable for
contempt or suffer other censure of significant penalty, the Insurer may
disclose such
<PAGE>
information to such tribunal that the Insurer is compelled to disclose,
provided that the Insurer shall promptly notify IOS Capital that the
Insurer has been compelled to so disclose and that the Insurer shall
use best efforts to provide to IOS Capital prior to disclosure a copy
of all information to be so disclosed.
(j) Rating. The Insurer is not aware of any facts that if
disclosed to Moody's or S&P would be reasonably expected to result in a
downgrade of the rating of the financial strength of the Insurer by
either of such Rating Agencies.
(k) 1933 Act Registration. The Policy is exempt from
registration under the Act.
Section 2.05. Representations and Warranties and Covenants of the
Seller. The Seller hereby makes to and for the benefit of the Insurer each of
the representations and warranties and covenants made by the Seller in the
Assignment and Servicing Agreement, including, but not limited to, Section 3 and
Section 9 of the Assignment and Servicing Agreement. Such representations,
warranties and covenants are incorporated herein by this reference as if fully
set forth herein, and may not be amended except by an amendment complying with
the terms of Section 6.01.
Section 2.06. Representations and Warranties of the Issuer. The Issuer
hereby makes, to and for the benefit of the Insurer, each of the representations
and warranties made by the Issuer in the Indenture. Such representations and
warranties are incorporated herein by this reference as if fully set forth
herein, and may not be amended except by an amendment complying with the terms
of Section 6.01. In addition, the Issuer represents and warrants as of the
Closing Date as follows:
(a) Due Organization and Qualification. The Issuer is a limited
liability company, duly organized, validly existing and in good
standing under the laws of Delaware and the United States of America.
The Issuer is duly qualified to do business, is in good standing and
has obtained all necessary licenses, permits, charters, registrations
and approvals (together, "approvals") necessary for the conduct of its
business as currently conducted and as described in the Offering
Document and the performance of its obligations under the Company
Documents in each jurisdiction in which the failure to be so qualified
or to obtain such approvals would render any Company Document
unenforceable in any respect or would have a material adverse effect
upon the Transaction.
(b) Power and Authority. The Issuer has all necessary limited
liability company power and authority to conduct its business as
currently conducted and as described in the Offering Document, to
execute, deliver and perform its obligations under the Company
Documents and to consummate the Transaction.
<PAGE>
(c) Due Authorization. The execution, delivery and performance
of the Company Documents by the Issuer has been duly authorized by all
necessary limited liability company action and does not require any
additional approvals or consents, or other action by or any notice to
or filing with any Person, including any governmental entity or any
beneficial owner of the Trust, which have not previously been obtained
or given by the Trust.
(d) Noncontravention. The execution and delivery by the Issuer
of the Company Documents to which it is a party, the consummation of
the Transaction and the satisfaction of the terms and conditions of the
Company Documents do not and will not:
(i) conflict with or result in any breach or
violation of any provision of the Amended and Restated Limited
Liability Company Agreement of the Issuer or any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability
to the Issuer or any of its respective material properties,
including regulations issued by any administrative agency or
other governmental authority having supervisory powers over the
Issuer;
(ii) constitute a default by the Issuer under, result
in the acceleration of any obligation under, or breach any
provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Issuer either is a party or
by which any of their properties are or may be bound or affected;
or
(iii) result in or require the creation of any lien
upon or in respect of any assets of the Issuer, except as
otherwise expressly contemplated by the Company Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting the Issuer, any properties or
rights of the Issuer or any of the Asset Pool pending or threatened,
which, in any case, if decided adversely to the Issuer could result in
a Material Adverse Change with respect to the Issuer.
(f) Valid and Binding Obligations. The Company Documents, when
executed and delivered by the Issuer, will constitute the legal, valid
and binding obligations of the Issuer, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable principles and public
policy considerations as to rights of indemnification for violations of
federal securities laws. The Notes, when executed, authenticated and
delivered in accordance with the Indenture, will be validly issued and
outstanding and entitled to the benefits of the Indenture.
<PAGE>
(g) Compliance with Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Issuer in the conduct of
its business violates any law, regulation, judgment, agreement, order
or decree applicable to the Issuer that, if enforced, could result in a
Material Adverse Change with respect to the Issuer.
(h) Accuracy of Information. None of the Documents, as amended,
supplemented or superseded, furnished to the Insurer by the Issuer
contains any statement of a material fact which was untrue or
misleading in any material respect when made. Since the furnishing of
the Documents, there has been no change nor any development or event
involving a prospective change known to the Issuer that would render
any of the Documents untrue or misleading in any material respect.
(i) Compliance With Securities Laws. The offer and sale of the
Notes comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws.
Without limiting the foregoing, the Offering Document does not contain
any untrue statement of a material fact and does not omit to state a
material fact necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading;
provided, however, that no representation is made with respect to the
Insurer Information or with respect to the Underwriters' Information.
Neither the offer nor sale of the Notes by the Issuer has been or will
be in violation of the Securities Act or any other federal or state
securities laws. The Indenture is required to be qualified under the
Trust Indenture Act. The Issuer is not required to be registered as an
"investment company" under the Investment Company Act. The Issuer will
satisfy any of the information reporting requirements of the Securities
Exchange Act arising out of the Transaction to which it or the Trust
are subject.
(j) Solvency; Fraudulent Conveyance. The Issuer is solvent and
will not be rendered insolvent by the Transaction and, after giving
effect to the Transaction, the Issuer will not be left with an
unreasonably small amount of capital with which to engage in its
business, and the Issuer does not intend to incur, or believe that it
has incurred, debts beyond its ability to pay as they mature. The
Issuer does not contemplate the commencement of insolvency, liquidation
or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the
Issuer or any of their assets. The Issuer is not pledging the Asset
Pool under the Indenture with any intent to hinder, delay or defraud
any of the Issuer's creditors.
(k) Principal Place of Business. The principal place of business
of the Issuer is 1738 Bass Road, Macon, Georgia 31210.
<PAGE>
Section 2.07. Affirmative Covenants of the Issuer. The Issuer hereby
makes, to and for the benefit of the Insurer, all of the covenants of the Issuer
set forth in the Indenture, including, but not limited to, Section 9 of the
Indenture. Such covenants are incorporated herein by this reference, and may not
be amended except by an amendment complying with the terms of Section 6.01. In
addition, the Issuer hereby agrees that during the term of this Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Issuer
shall comply with the terms and conditions of and perform its
respective obligations under the Company Documents to which it is a
party in all cases in which failure to so comply or perform would
result in a default thereunder and shall comply with all material
requirements of any law, rule or regulation applicable to it.
(b) Existence. The Issuer and its successors and permitted
assigns shall maintain its existence as a limited liability company and
shall at all times continue to be duly organized under the laws of the
State of Delaware and duly qualified and duly authorized (as described
in subsections 2.06(a), (b) and (c) hereof) and shall conduct its
business in accordance with the terms of its Amended and Restated
Limited Liability Company Agreement.
(c) Access to Records; Discussions with Officers and
Accountants. On an annual basis, or upon the occurrence of a Material
Adverse Change, the Issuer shall, upon the reasonable request of the
Insurer, permit the Insurer or its authorized agents:
(i) to inspect the books and records of the Issuer as
they may relate to the Notes, the obligations of the Issuer under
the Company Documents and the Transaction;
(ii) to discuss the affairs, finances and accounts of
the Issuer with IOS Capital on behalf of the Issuer; and
(iii) with the Issuer's consent, which consent shall
not be unreasonably withheld or delayed, to discuss the affairs,
finances and accounts of the Issuer with the Issuer's independent
accountants, provided that an officer of the Issuer and IOS
Capital shall have the right to be present during such
discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the
Issuer.
<PAGE>
(d) Notice of Material Events. The Issuer shall be obligated
promptly to inform the Insurer in writing of the occurrence of any of
the following:
(i) the submission of any claim or the initiation or
threat of any legal process, litigation or administrative or
judicial investigation, or rule making or disciplinary proceeding
by or against the Issuer that (A) could reasonably be required to
be disclosed to the Commission or (B) would likely result in a
Material Adverse Change with respect to the Issuer, or the
promulgation of any proceeding or any proposed or final ruling in
connection with any such litigation, investigation or proceeding
which would likely result in a Material Adverse Change with
respect to the Issuer;
(ii) any change in the location of the principal
office of the Issuer;
(iii) the occurrence of any Default or Event of
Servicing Termination, or any Material Adverse Change in respect
of the Issuer;
(iv) the commencement of any proceedings by or against
the Issuer under any applicable reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter
in effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may
be, appointed or requested for the Issuer or any of their assets;
or
(v) the receipt of notice that (A) any license,
permit, charter, registration or approval necessary for the
conduct of the Issuer's business are to be, or may be suspended
or revoked or (B) the Issuer is to cease and desist any practice,
procedure or policy employed by the Issuer in the conduct of its
business, and such cessation may result in a Material Adverse
Change with respect to the Issuer.
(e) Financing Statements and Further Assurances. The Issuer
shall, upon the request of the Insurer, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, within ten days of such request, such amendments hereto and
such further instruments and take such further action as may be
reasonably necessary to effectuate the intention, performance and
provisions of the Company Documents. In addition, the Issuer agrees to
cooperate with S&P and Moody's in connection with any review of the
Transaction, conducted during normal business hours and in a manner
that does not unreasonably disrupt the business of IOS Capital, that
may be undertaken by S&P and Moody's after the date hereof upon
reasonable notice.
<PAGE>
(f) Maintenance of Licenses. The Issuer shall maintain all
licenses, permits, charters and registrations which are material to the
conduct of their business.
(g) Third-Party Beneficiary. The Issuer agrees that the Insurer
shall have all rights of a third-party beneficiary in respect of the
Indenture.
Section 2.08. Negative Covenants of the Issuer. The Issuer hereby
agrees that during the term of this Insurance Agreement, unless the Insurer
shall otherwise expressly consent in writing:
(a) Impairment of Rights. The Issuer shall not take any action,
or fail to take any action, if such action or failure to take action
may result in a Material Adverse Change specified in clause (ii) of the
definition of Material Adverse Change with respect to the Issuer or may
not interfere with the enforcement of any rights of the Insurer under
or with respect to any of the Company Documents. The Issuer shall give
the Insurer written notice of any such action or failure to act on the
earlier of: (i) the date upon which any publicly available filing or
release is made with respect to such action or failure to act or (ii)
promptly prior to the date of consummation of such action or failure to
act. The Issuer shall furnish to the Insurer all information requested
by it that is reasonably necessary to determine compliance with this
paragraph.
(b) Amendments, Etc. The Issuer shall not modify or amend, or
consent to any modification or amendment of, any of the terms,
provisions or conditions of the Company Documents to which it is a
party without the prior written consent of the Insurer thereto, but
excluding any amendment to the Offering Document required by law and
excluding any modifications or amendments to which, pursuant to the
terms of the Company Documents, Insurer's consent is not required.
(c) Limitation on Mergers, Etc. The Issuer shall not consolidate
with or merge with or into any Person or transfer all or substantially
all of its assets to any Person or liquidate or dissolve except as
provided in the Indenture or as permitted hereby. The Issuer shall
furnish to the Insurer all information requested by it that is
reasonably necessary to determine compliance with this paragraph.
(d) Successors. Except as provided in Section 10.02 of the
Assignment and Servicing Agreement or Section 8.08 of the Indenture, as
applicable, neither the Trustee nor IOS Capital shall terminate or
designate, or consent to the termination or designation of, any
successor Servicer or Trustee without the prior written approval of the
Insurer, which approval shall not be unreasonably withheld, conditioned
or delayed.
<PAGE>
ARTICLE III
THE POLICY; REIMBURSEMENT
Section 3.01. Issuance of the Policy. The Insurer agrees to issue the
Policy on the Closing Date subject to satisfaction of the conditions precedent
set forth below:
(a) Payment of Initial Premium and Expenses. The applicable
parties shall have been paid by IOS Capital their related fees and
expenses payable in accordance with Section 3.02 within 5 Business Days
of receipt of the related invoice;
(b) Company Documents. The Insurer shall have received a copy of
each of the Company Documents, in form and substance reasonably
satisfactory to the Insurer, duly authorized, executed and delivered by
each party thereto;
(c) Certified Documents and Resolutions. The Insurer shall have
received a copy of the charter and bylaws of IOS Capital and the
limited liability company agreement and certificate of each of Seller
and Issuer, and (ii) a certificate of the Secretary or Assistant
Secretary of IOS Capital stating that attached thereto is a true,
complete and correct copy of resolutions duly adopted by the Board of
Directors or a duly authorized committee of IOS Capital, or the
Managing Member of the Seller and the Issuer, as the case may be,
authorizing the execution, delivery and performance by IOS Capital, the
Seller or the Issuer, as the case may be, of the Company Documents to
which it is a party and the consummation of the Transaction and that
such charter, bylaws, limited liability company agreements,
certificates of formation and resolutions are in full force and effect
without amendment or modification on the Closing Date;
(d) Incumbency Certificate. The Insurer shall have received a
certificate of the Secretary or an Assistant Secretary of each of IOS
Capital, the Seller and the Issuer certifying the names and signatures
of the officers of such entity authorized to execute and deliver the
Company Documents to which it is a party;
(e) Representations and Warranties; Certificate. The
representations and warranties of IOS Capital, the Seller and the
Issuer set forth or incorporated by reference in this Insurance
Agreement shall be true and correct on and as of the Closing Date as if
made on the Closing Date, and the Insurer shall have received a
certificate of appropriate officers of IOS Capital, the Seller and the
Issuer to that effect;
<PAGE>
(f) Opinions of Counsel. The Insurer shall have received all
opinions of counsel addressed to any of Moody's, S&P, the Indenture
Trustee, IOS Capital, the Issuer, the Seller, or the Underwriters in
respect of the Transaction, in form and substance reasonably
satisfactory to the Insurer, addressed to the Insurer and addressing
such matters as the Insurer may reasonably request, and the counsel
providing each such opinion shall have been instructed by its client to
deliver such opinion to the addressees thereof;
(g) Approvals, Etc. The Insurer shall have received true and
correct copies of all approvals, licenses and consents, if any,
including any required approval of the shareholders of IOS Capital,
required in connection with the Transaction;
(h) No Litigation, Etc. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, shall
be pending or threatened before any court, governmental or
administrative agency or arbitrator in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with any
of the Company Documents or the consummation of the Transaction;
(i) Legality. No statute, rule, regulation or order shall have
been enacted, entered or deemed applicable by any government or
governmental or administrative agency or court that would make the
Transaction illegal or otherwise prevent the consummation thereof;
(j) Satisfaction of Conditions of the Underwriting Agreement.
All conditions in the Underwriting Agreement relating to the
Underwriters' obligation to purchase the Notes shall have been
satisfied, without taking into account any waiver by any Underwriter of
any condition unless such waiver has been approved by the Insurer. The
Insurer shall have received copies of each of the documents, and shall
be entitled to rely on each of the documents, required to be delivered
to any Underwriter pursuant to the Underwriting Agreement;
(k) Issuance of Ratings. The Insurer shall have received
confirmation that the risk secured by the Policy constitutes a "BBB"
risk by S&P and a "Baa2" risk by Moody's and that the Notes, when
issued, will be rated "AAA" by S&P and "Aaa" by Moody's (or A-1+ by S&P
and P-1 by Moody's in the case of the Class A-1 Notes);
(1) No Default. No Default or Event of Servicing Termination
shall have occurred;
<PAGE>
(m) Additional Items. The Insurer shall have received such other
documents, instruments, approvals or opinions reasonably requested by
the Insurer as may be reasonably necessary to effect the Transaction,
including evidence reasonably satisfactory to the Insurer that the
conditions precedent, if any, in the Company Documents have been
satisfied; and
(n) Satisfactory Documentation. The Insurer and its counsel
shall have determined that all documents, Notes and opinions to be
delivered in connection with the Notes conform to the terms of the
Indenture, the Registration Statement, the Offering Document and this
Insurance Agreement.
Section 3.02. Payment of Fees and Premium.
(a) Legal and Accounting Fees. IOS Capital shall pay or cause to
be paid, within 5 Business Days of receipt of the related invoice,
reasonable legal fees, auditors' fees in connection with the provision
of information or any consent in connection with the Offering Document
and disbursements incurred by the Insurer in connection with the
issuance of the Policy. Any reasonable additional fees of the Insurer's
counsel or auditors payable in respect of any amendment or supplement
to the Offering Document incurred after the Closing Date shall be paid
by IOS Capital on demand.
(b) Rating Agency Fees. IOS Capital shall promptly pay the
initial fees of S&P and Moody's with respect to the Notes and the
transactions contemplated hereby following receipt of a statement with
respect thereto. IOS Capital shall pay any subsequent fees of S&P or
Moody's with respect to, and directly allocable to, the Notes to the
extent that such fees and expenses result from actions of S&P or
Moody's that are requested by IOS Capital. The Insurer shall not be
responsible for any fees or expenses of S&P or Moody's. The fees for
any other rating agency shall be paid by the party requesting such
other agency's rating.
(c) Premium.
(i) In consideration of the issuance by the Insurer of the
Policy, the Insurer shall be entitled to receive the Premium as
and when due in accordance with and from the funds specified by
Section 3.03 of the Indenture.
(ii) The Premium paid under the Indenture shall be
nonrefundable without regard to whether any Notice for Payment is
delivered to the Insurer requiring the Insurer to make any
payment under the Policy or any
<PAGE>
other circumstances relating to the Notes or provision being made
for payment of the Notes prior to maturity.
Section 3.03. Reimbursement Obligation.
(a) As and when due, from, and only from, the funds specified in
Section 3.03 of the Indenture, the Insurer shall be entitled to
reimbursement for any payment made by the Insurer under the Policy,
which reimbursement shall be due and payable on the date that any
amount is paid thereunder, in an amount equal to the amount so paid and
all amounts previously paid that remain unreimbursed, together with
interest on any and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect of any unreimbursed amounts
representing interest) from the date such amounts became due until paid
in full (after as well as before judgment), at a rate of interest equal
to the Late Payment Rate.
(b) IOS Capital agrees to pay to the Insurer, within 5 Business
Days of receipt of an invoice, as follows: any and all charges, fees,
costs and expenses that the Insurer may reasonably pay or incur,
including reasonable attorneys' and accountants' fees and expenses, in
connection with (i) the enforcement, defense or preservation of any
rights in respect of any of the Company Documents, including defending,
monitoring or participating in any litigation or proceeding (including
any insolvency proceeding in respect of any Transaction participant or
any affiliate thereof) relating to any of the Company Documents, any
party to any of the Company Documents (in its capacity as such a party)
or the Transaction, or (ii) any amendment, waiver or other action with
respect to, or related to, any Company Document, whether or not
executed or completed.
(c) IOS Capital agrees to pay to the Insurer, within 5 Business
Days of receipt of an invoice, as follows: interest on any and all
amounts described in subclause (b) of this Section 3.03 from the date
payable or paid by such party until payment thereof in full, and
interest on any and all amounts described in Section 3.02 (a) from the
date due until payment thereof in full and interest on any and all
amounts described in Section 3.04 from the date due until payment
thereof in full, in each case, payable to the Insurer at the Late
Payment Rate.
Section 3.04. Indemnification.
(a) In addition to any and all of the Insurer's rights of
reimbursement, indemnification, subrogation and to any other rights of
the Insurer pursuant hereto or under law or in equity, IOS Capital
agrees to pay, and to protect, indemnify and save harmless, the Insurer
and its officers, directors, shareholders, employees, agents and each
Person, if any, who controls the Insurer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act from and against, any and all claims, losses, liabilities
<PAGE>
(including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any
nature arising out of or relating to the transactions contemplated by
the Company Documents by reason of:
(i) any omission or action (other than of or by the
Insurer (including any Insurer Information, as defined below) or
the Underwriters) by IOS Capital in connection with the offering,
issuance, sale or delivery of any of the Notes prior to the
completion of the initial offering and distribution of the Notes;
(ii) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of IOS Capital in connection with any
Transaction arising from or relating to the Company Documents;
(iii) the violation by IOS Capital of any domestic or
foreign law, rule or regulation, or any judgment, order or decree
applicable to it;
(iv) the breach by IOS Capital of any representation,
warranty or covenant under any of the Company Documents or the
occurrence, in respect of IOS Capital, under any of the Company
Documents of any Event of Servicing Termination or any event
which, with the giving of notice or the lapse of time or both,
would constitute any Event of Servicing Termination (exclusive of
clause (c) of Section 5.01 hereof); or
(v) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document or the
Registration Statement or any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except
insofar as such claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or
expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations)
arise out of or are based upon any untrue statement or omission
in the an Offering Document other than the Underwriters'
Information and information furnished by the Insurer in writing
expressly for use therein (all such information so furnished
being referred to herein as "Insurer Information"), it being
understood that, in respect of the initial Offering Document, the
Insurer Information is limited to the information with
<PAGE>
respect to the Insurer included under the caption "THE INSURER
AND THE POLICY."
(b) The Insurer agrees to pay, and to protect, indemnify and
save harmless, IOS Capital and its respective officers, directors,
shareholders, employees, agents and each Person, if any, who controls
IOS Capital within the meaning of either Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act from and against, any
and all claims, losses, liabilities (including penalties), actions,
suits, judgments, demands, damages, costs or expenses (including
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or by
reason of any untrue statement or alleged untrue statement of a
material fact contained in the Insurer Information in any Offering
Document or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading or a breach of any of the representations and
warranties of the Insurer contained in Section 2.04.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") in respect of which the indemnity provided in
Section 3.04(a) or (b) may be sought from IOS Capital, on the one hand,
or the Insurer, on the other (each, an "Indemnifying Party") hereunder,
each such Indemnified Party shall promptly notify the Indemnifying
Party in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel satisfactory to the
Indemnified Party and the payment of all expenses. The Indemnified
Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof at the expense of the
Indemnified Party; provided, however, that the fees and expenses of
-------- -------
such separate counsel shall be at the expense of the Indemnifying Party
if (i) the Indemnifying Party has agreed to pay such fees and expenses,
(ii) the Indemnifying Party shall have failed to assume the defense of
such action or proceeding and employ counsel reasonably satisfactory to
the Indemnified Party in any such action or proceeding or (iii) the
named parties to any such action or proceeding (including any impleaded
parties) include both the Indemnified Party and the Indemnifying Party,
and the Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different
from or additional to those available to the Indemnifying Party (in
which case, if the Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such action or proceeding
or separate but substantially similar or related actions or proceedings
in the same jurisdiction arising out of the
<PAGE>
same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any
time for the Indemnified Parties, which firm shall be designated in
writing by the Indemnified Party). The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected
without its written consent to the extent that any such settlement
shall be prejudicial to the Indemnifying Party, but, if settled with
its written consent, or if there is a final judgment for the plaintiff
in any such action or proceeding with respect to which the Indemnifying
Party shall have received notice in accordance with this subsection
(c), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party
(other than due to application of this Section), each Indemnifying
Party shall contribute to the losses incurred by the Indemnified Party
on the basis of the relative fault of the Indemnifying Party, on the
one hand, and the Indemnified Party, on the other hand. The relative
fault of each Indemnifying Party, on the one hand, and each Indemnified
Party, on the other, shall be determined by reference to, among other
things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth are within the control of, the
Indemnifying Party or the Indemnified Party, and the parties relative
intent, knowledge, access to information and opportunity to correct or
prevent such breach.
No Person guilty of fraudulent misrepresentation (within the
meaning of Section (11)f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
Section 3.05. Payment Procedure. In the event of any payment to
the Insurer, the Indenture Trustee and IOS Capital agree to accept the voucher
or other evidence of payment as prima facie evidence of the propriety thereof
and the liability, if any, described in Section 3.03 therefor to the Insurer.
All payments to be made to the Insurer under this Insurance Agreement shall be
made to the Insurer in lawful currency of the United States of America in
immediately available funds at the notice address for the Insurer as specified
in the Indenture on the date when due or as the Insurer shall otherwise direct
by written notice to the other parties hereto. In the event that the date of any
payment to the Insurer or the expiration of any time period hereunder occurs on
a day that is not a Business Day, then such payment or expiration of time period
shall be made or occur on the next succeeding Business Day with the same force
and effect as if such payment was made or time period expired on the scheduled
date of payment or expiration date.
<PAGE>
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of the Insurance Agreement. This
Insurance Agreement shall take effect on the Closing Date and shall remain in
effect until the later of (a) such time as the Insurer is no longer subject to a
claim under the Policy and the Policy shall have been surrendered to the Insurer
for cancellation and (b) all amounts payable to the Insurer by IOS Capital and
the Issuer hereunder or from any other source hereunder or under the Company
Documents and all amounts payable under the Notes have been paid in full;
provided, however, that the provisions of Sections 3.02, 3.03 and 3.04 hereof
- -------- -------
shall survive any termination of this Insurance Agreement.
Section 4.02. Further Assurances and Corrective Instruments.
(a) Except at such times as an Insurer Default (as defined in
the Indenture) shall exist or shall have occurred, neither IOS Capital
nor the Indenture Trustee shall grant any waiver of rights under any of
the Company Documents to which any of them is a party without the prior
written consent of the Insurer, which shall not be unreasonably
withheld, conditioned or delayed and any such waiver without prior
written consent of the Insurer shall be null and void and of no force
or effect.
(b) To the extent permitted by law, IOS Capital agrees that
it will, from time to time, execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, such supplements hereto and
such further instruments as the Insurer may reasonably request and as
may be required in the Insurer's reasonable judgment to effectuate the
intention of or facilitate the performance of this Insurance Agreement.
(c) IOS Capital will not cause or permit (i) the Seller to
assign or transfer any of its assets to any party, other than the
transfers to the Issuer in connection with the Transaction, or to issue
<PAGE>
any notes or other evidences of indebtedness, or to otherwise incur
any indebtedness, or (ii) the Issuer to issue any notes or other
evidences of indebtedness, or to otherwise incur any indebtedness,
other than the indebtedness represented by the Notes, and the Issuer
agrees that it will not issue any notes or other evidences of
indebtedness, or otherwise incur any indebtedness, other than the
indebtedness represented by the
<PAGE>
Notes, in any such case, without the prior written consent of the
Insurer, such consent not to be unreasonably withheld.
Section 4.03. Obligations Absolute.
(a) The obligations of IOS Capital, the Seller and the
Issuer hereunder shall be absolute and unconditional and shall be paid
or performed strictly in accordance with this Insurance Agreement under
all circumstances irrespective of:
(i) any lack of validity or enforceability of,
or any amendment or other modifications of, or waiver, with
respect to any of the Company Documents or the Notes;
(ii) any exchange or release of any other
obligations hereunder;
(iii) the existence of any claim, setoff,
defense, reduction, abatement or other right that IOS Capital
may have at any time against the Insurer or any other Person;
(iv) any document presented in connection with
the Policy proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(v) any payment by the Insurer under the
Policy against presentation of a certificate or other document
that does not strictly comply with the terms of the Policy;
(vi) any failure of IOS Capital to receive the
proceeds from the sale of the Notes; and
(vii) any other circumstances, other than
payment in full, that might otherwise constitute a defense
available to, or discharge of, IOS Capital in respect of any
Company Document.
<PAGE>
(b) IOS Capital, the Seller and the Issuer and any and all
others who are now or may become liable for all or any part of the
obligations of IOS Capital, the Seller and the Issuer under this
Insurance Agreement (including any successor to IOS Capital as
Servicer) agree to be bound by this Insurance Agreement and (i) to the
extent permitted by law, waive and renounce any and all redemption and
exemption rights and the benefit of all valuation and appraisement
privileges against the indebtedness and obligations evidenced by any
Company Document or by any extension or renewal thereof; (ii) waive
presentment and demand for payment, notices of nonpayment and of
dishonor, protest of dishonor and notice of protest; (iii) waive all
notices in connection with the delivery and acceptance hereof and all
other notices in connection with the performance, default or
enforcement of any payment hereunder, except as required by the
Company Documents; (iv) waive all rights of abatement, diminution,
postponement or deduction, or to any defense other than payment, or to
any right of setoff or recoupment arising out of any breach under any
of the Company Documents, by any party thereto or any beneficiary
thereof, or out of any obligation at any time owing to IOS Capital;
(v) agree that its liabilities hereunder shall, except as otherwise
expressly provided in this Section 4.03, be unconditional and without
regard to any setoff, counterclaim or the liability of any other
Persons for the payment hereof, (vi) agree that any consent, waiver or
forbearance hereunder with respect to an event shall operate only for
such event and not for any subsequent event; (vii) consent to any and
all extensions of time that may be granted by the Insurer with respect
to any payment hereunder or other provisions hereof and to the release
of any security at any time given for any payment hereunder, or any
part thereof, with or without substitution, and to the release of any
Person or entity liable for any such payment; and (viii) consent to
the addition of any and all other makers, endorsers, guarantors and
other obligors for any payment hereunder, and to the acceptance of any
and all other security for any payment hereunder, and agree that the
addition of any such obligors or security shall not affect the
liability of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting IOS
Capital or the Indenture Trustee from pursuing any rights or remedies
it may have against any Person in a separate legal proceeding.
Section 4.04. Assignments; Reinsurance; Third-Party Rights.
(a) This Insurance Agreement shall be a continuing
obligation of the parties hereto and shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and permitted assigns. None of IOS Capital, the Seller or the Issuer
may assign its rights under this Insurance Agreement, or delegate any
of its duties hereunder, without the prior written consent of the
Insurer. Any assignments made in violation of this Insurance Agreement
shall be null and void.
<PAGE>
(b) The Insurer shall have the right to give participations
in its rights under this Insurance Agreement and to enter into
contracts of reinsurance with respect to the Policy upon such terms and
conditions as the Insurer may in its discretion determine; provided,
--------
however, that no such participation or reinsurance agreement or
-------
arrangement shall relieve the Insurer of any of its obligations
hereunder or under the Policy and provided further that any reinsurer
or participant will not have any rights against IOS Capital, the
Noteholders or the Indenture Trustee and that IOS Capital, the
Noteholders and the Indenture Trustee shall have no obligation to have
any communication or relationship with any reinsurer or participant in
order to enforce the obligations of the Insurer hereunder and under the
Policy.
(c) Except as provided herein with respect to participants
and reinsurers, nothing in this Insurance Agreement shall confer any
right, remedy or claim, express or implied, upon any Person, including,
particularly, any Holder, other than the Insurer against IOS Capital or
IOS Capital against the Insurer and all the terms, covenants,
conditions, promises and agreements contained herein shall be for the
sole and exclusive benefit of the parties hereto and their successors
and permitted assigns. Neither the Indenture Trustee nor any Holder
shall have any right to payment from any Premiums paid or payable
hereunder or under the Indenture or from any amounts paid by IOS
Capital pursuant to Sections 3.02 or 3.03 hereof.
Section 4.05. Liability of the Insurer. Unless the Insurer shall have
been grossly negligent or guilty of wrongful misconduct, neither the Insurer nor
any of its officers, directors or employees shall be liable or responsible for:
(a) the use that may be made of the Policy by the Trust or for any acts or
omissions of the Trust in connection therewith; or (b) the validity,
sufficiency, accuracy or genuineness of documents delivered to the Insurer in
connection with any claim under the Policy, or of any signatures thereon, even
if such documents or signatures should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged (unless the Insurer shall
have actual knowledge thereof). In furtherance and not in limitation of the
foregoing, the Insurer may accept documents that appear on their face to be in
order, without responsibility for further investigation.
Section 4.06. Annual Servicing Audit and Certification. The annual
servicing audit required pursuant to Section 6.02 of the Servicing Agreement
shall be performed by an independent third party acceptable to the Insurer. Any
one of the five major nationally recognized firms of independent public
accountants is deemed to be acceptable.
ARTICLE V
DEFAULTS AND REMEDIES
<PAGE>
Section 5.01. Defaults. The occurrence of any of the following events
shall constitute an Event of Servicing Termination hereunder:
(a) Any representation or warranty made by IOS Capital, the
Seller or the Issuer hereunder or under the Company Documents, or in any
certificate furnished hereunder or under the Company Documents, shall prove
to be untrue or incomplete in any material respect; provided, however, that
-------- -------
if IOS Capital, the Seller or the Issuer effectively cures any such defects
in any representation or warranty under any Transaction Document or
certificate or report furnished under any Company Document, within the time
period specified in the related document as the cure period therefor, such
defect shall not in and of itself constitute an Event of Servicing
Termination;
(b) (i) IOS Capital shall fail to pay when due any amount
payable by IOS Capital unless such amounts are paid in full within the cure
period therefor, respectively, hereunder or (ii) a legislative body has
enacted any law that declares or a court of competent jurisdiction shall
find or rule that this Insurance Agreement or the Indenture is not valid
and binding on IOS Capital or the Issuer;
(c) The occurrence and continuance of a Servicer Event of
Default under the Assignment and Servicing Agreement;
(d) Any failure on the part of IOS Capital, the Seller or the
Issuer duly to observe or perform in any material respect any other of the
covenants or agreements on the part of IOS Capital, the Seller or the
Issuer contained in this Insurance Agreement or in any other Company
Document which continues unremedied beyond any cure period provided
therein, or, in the case of this Insurance Agreement, for a period of 30
days after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to IOS Capital by the Insurer
(with a copy to the Indenture Trustee) or by the Indenture Trustee (with a
copy to the Insurer); provided, further, that if such failure shall be of a
nature that it cannot be cured within 30 days, such failure shall not
constitute an Event of Servicing Termination hereunder, if within such 30-
day period IOS Capital, the Seller or the Issuer, as the case may be, shall
have given written notice to the Insurer and the Indenture Trustee of
corrective action it proposes to take, which corrective action is agreed in
writing by the Insurer to be satisfactory and IOS Capital, the Seller or
the Issuer shall thereafter pursue such corrective action diligently until
such default is cured;
(e) A decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under
any present or future federal or state insolvency or similar law or the
appointment of a conservator or receiver or liquidator or other similar
official in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against
<PAGE>
IOS Capital, the Seller or the Issuer and such decree or order shall
have remained in force undischarged or unstayed for a period of 90
consecutive days;
(f) IOS Capital, the Seller or the Issuer shall consent to the
appointment of a conservator or receiver or liquidator or other
similar official in any involuntary insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to IOS Capital, the Seller or the Issuer or of or relating to
all or substantially all of their respective property and if IOS
Capital, the Seller or the Issuer shall fail to take appropriate
action resulting in the withdrawal or dismissal of such proceeding
within 30 Business Days; or
(g) IOS Capital, the Seller or the Issuer shall admit in writing
its inability to pay their debts generally as they become due, file a
petition to take advantage of or otherwise voluntarily commence a case
or proceeding under any applicable insolvency, reorganization or other
similar statute, make an assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations.
Section 5.02. Remedies; No Remedy Exclusive.
(a) Upon the occurrence of an Event of Servicing Termination,
the Insurer may take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the amounts, if any,
then due under this Insurance Agreement, the Assignment and Servicing
Agreement or the Indenture or to enforce performance and observance of
any obligation, agreement or covenant of IOS Capital, the Seller or
the Issuer under this Insurance Agreement, the Assignment and
Servicing Agreement or the Indenture.
(b) Unless otherwise expressly provided, no remedy herein
conferred or reserved is intended to be exclusive of any other
available remedy, but each remedy shall be cumulative and shall be in
addition to other remedies given under this Insurance Agreement, the
Assignment and Servicing Agreement the Indenture or existing at law or
in equity. No delay or omission to exercise any right or power
accruing under this Insurance Agreement, the Assignment and Servicing
Agreement or the Indenture upon the happening of any event set forth
in Section 5.01 shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient.
In order to entitle the Insurer to exercise any remedy reserved to the
Insurer in this Article, it shall not be necessary to give any notice,
other than such notice as may be required by this Article.
Section 5.03. Waivers.
(a) No failure by the Insurer to exercise, and no delay by the
Insurer in exercising, any right hereunder shall operate as a waiver
thereof. The
<PAGE>
exercise by the Insurer of any right hereunder shall not preclude the
exercise of any other right, and the remedies provided herein to the
Insurer are declared in every case to be cumulative and not exclusive
of any remedies provided by law or equity.
(b) The Insurer shall have the right, to be exercised in its
complete discretion, to waive any Event of Servicing Termination
hereunder, by a writing setting forth the terms, conditions and extent
of such waiver signed by the Insurer and delivered to IOS Capital and
the Indenture Trustee. Unless such writing expressly provides to the
contrary, any waiver so granted shall extend only to the specific
event or occurrence which gave rise to the Event of Servicing
Termination so waived and not to any other similar event or occurrence
which occurs subsequent to the date of such waiver.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc. This Insurance Agreement may be
amended, modified, supplemented or terminated only by written instrument or
written instruments signed by the parties hereto. No consent of any re-insurer
or participant contracted with by the Insurer pursuant to Section 4.04(b) hereof
shall be required for any amendment, modification, supplement or termination
hereof. IOS Capital agrees to provide a copy of any amendment to this Insurance
Agreement promptly to the Indenture Trustee and the rating agencies maintaining
a rating on any of the Notes at the request of IOS Capital. The Insurer agrees
to provide reasonable notice to the rating agencies maintaining a rating on any
of the Notes with respect to any proposed amendment. No act or course of dealing
shall be deemed to constitute an amendment, modification, supplement or
termination hereof.
Section 6.02. Notices. All demands, notices and other communications
to be given hereunder shall be in writing (except as otherwise specifically
provided herein) and shall be mailed by registered mail or personally delivered
and telecopied to the recipient as follows:
(a) To the Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department - ABS
Telecopy No.: 212-208-3547
Confirmation: 212-668-0340
(in each case in which notice or other communication to the
Insurer refers to an Event of Servicing Termination, a claim
on the Policy
<PAGE>
or with respect to which failure on the part of the Insurer
to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other
communication should also be sent to the attention of the
general counsel of each of the Insurer and the Trustee and
shall be marked to indicate "URGENT MATERIAL ENCLOSED.")
(b) To IOS Capital:
IOS Capital, Inc.
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31210
Attention: Harry G. Kozee
Vice President - Finance,
with a copy to the General Counsel
Facsimile: (912) 471-2375
<PAGE>
(c) To the Issuer:
IKON Receivables, LLC
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31210
Attention: Robert McLain
Facsimile: (912) 471-2375
(d) To the Seller:
IKON Receivables-I, LLC
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31210
Attention: Robert McLain
Facsimile: (912) 471-2375
(e) To the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Facsimile: (312) 461-3525
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. Severability. In the event that any provision of this
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 6.04. Governing Law. This Insurance Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
Section 6.05. Consent to Jurisdiction.
<PAGE>
(a) The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of the United States District Court for the Southern District
of New York and any court in the State of New York located in the City and
County of New York, and any appellate court from any thereof, in any
action, suit or proceeding brought against it and to or in connection with
any of the Company Documents or the Transaction or for recognition or
enforcement of any judgment, and the parties hereto hereby irrevocably and
unconditionally agree that all claims in respect of any such action or
proceeding may be heard or determined in such New York state court or, to
the extent permitted by law, in such federal court. The parties hereto
agree that a final unappealable judgment in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. To the
extent permitted by applicable law, the parties hereto hereby waive and
agree not to assert by way of motion, as a defense or otherwise in any such
suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such courts, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that the related documents or the subject matter
thereof may not be litigated in or by such courts.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of
any such court by any court of any other nation or jurisdiction which may
be called upon to grant an enforcement of such judgment.
(c) Service on IOS Capital may be made by mailing or delivering
copies of the summons and complaint and other process which may be served
in any suit, action or proceeding to the Servicer at the related addresses
listed in Section 6.02(b) and (c) herein. Such address may be changed by
the applicable party or parties, with the prior written consent of the
Insurer, by written notice to the other parties hereto.
(d) Nothing contained in this Insurance Agreement shall limit or
affect any party's right to serve process in any other manner permitted by
law or to start legal proceedings relating to any of the Company Documents
against any other party or its properties in the courts of any
jurisdiction.
Section 6.06. Consent of the Insurer. In the event that the consent of
the Insurer is required under any of the Company Documents, the determination
whether to grant or withhold such consent shall be made by the Insurer in its
sole discretion without any implied duty towards any other Person, except as
otherwise expressly provided therein.
Section 6.07. Counterparts. This Insurance Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 6.08. Headings. The headings of Articles and Sections and the
Table of Contents contained in this Insurance Agreement are provided for
convenience only. They
<PAGE>
form no part of this Insurance Agreement and shall not affect its construction
or interpretation.
Section 6.09. Trial by Jury Waived. Each party hereby waives, to the
fullest extent permitted by law, any right to a trial by jury in respect of any
litigation arising directly or indirectly out of, under or in connection with
any of the Company Documents or any of the transactions contemplated thereunder.
Each party hereto (A) certifies that no representative, agent or attorney of any
party hereto has represented, expressly or otherwise, that it would not, in the
event of litigation, seek to enforce the foregoing waiver and (B) acknowledges
that it has been induced to enter into the Company Documents to which it is a
party by, among other things, this waiver.
Section 6.10. Limited Liability. No recourse under any Company Document
or the Underwriting Agreement shall be had against, and no personal liability
shall attach to, any officer, employee, director, affiliate or shareholder of
any party hereto, as such, by the enforcement of any assessment or by any legal
or equitable proceeding, by virtue of any statute or otherwise in respect of any
of the Company Documents or the Underwriting Agreement, the Notes or the Policy,
it being expressly agreed and understood that each Company Document or the
Underwriting Agreement is solely a corporate obligation of each party hereto,
and that any and all personal liability, either at common law or in equity, or
by statute or constitution, of every such officer, employee, director, affiliate
or shareholder for breaches of any party hereto of any obligations under any
Company Document or the Underwriting Agreement is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Insurance Agreement.
Section 6.11. Entire Agreement. This Insurance Agreement and the Policy
set forth the entire agreement between the parties with respect to the subject
matter hereof and thereof, and this Insurance Agreement supersedes and replaces
any agreement or understanding that may have existed between the parties prior
to the date hereof in respect of such subject matter.
Section 6.12. Indenture Trustee. The Indenture Trustee hereby acknowledges
and agrees to perform all its obligations and duties pursuant to the Company
Documents to which it is a party thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
all as of the day and year first above mentioned.
Ambac Assurance Corporation,
as Insurer
By: /s/ Nicholas G. Goumas
---------------------------------
Name: Nicholas G. Goumas
-------------------------------
Title: First Vice President
------------------------------
<PAGE>
IOS Capital, Inc.,
as Originator and as Servicer
By:/s/ Harry G. Kozee
---------------------------------
Name: Harry G. Kozee
-------------------------------
Title: VP - Finance
------------------------------
S-2
<PAGE>
IKON Receivables, LLC,
as Issuer
By: IKON Receivables Funding, Inc.
By: /s/Robert K. McLain
---------------------------
Name: Robert K. McLain
-------------------------
Title: President
------------------------
IKON Receivables-I, LLC,
By: IKON Receivables Funding, Inc.
By: /s/Robert K. McLain
---------------------------
Name: Robert K. McLain
-------------------------
Title: President
------------------------
S-3
<PAGE>
Harris Trust and Savings Bank, not in
its individual capacity, but solely
as Indenture Trustee
By: /s/Robert D. Foltz
--------------------------------
Name: Robert D. Foltz
------------------------------
Title: Vice President
-----------------------------
S-4
