AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON March 25, 1999
REGISTRATION STATEMENT NO. 333-71073
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IKON RECEIVABLES, LLC
(exact name of registrant as specified in charter)
Delaware 501 Silverside Road [*******]
(state or jurisdiction Suite 28 (I.R.S. Employer
of organization) Wilmington, Delaware 19809 Identification No.)
(Address, including zip code, and telephone
number, including area code, of registrants
principal executive offices)
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The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(Name, address and telephone number, including area code, of agent for service)
----------------------
Copies to:
Harry G. Kozee Carl H. Fridy, Esq. Peter Humphreys, Esq.
IOS Capital, Inc. Ballard Spahr Andrews & Dewey Ballantine LLP
1738 Bass Road Ingersoll, LLP 1301 Avenue of the Americas
P.O. Box 9115 1735 Market Street, 51st Floor
Macon, Georgia 31208 Philadelphia, PA 19103-7599 New York, New York 10019
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Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_|
If this Form is filed as a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Amount Aggregate Aggregate
Title of Securities To Be Price Offering Amount Of
Being Registered Registered Per Unit(1) Price(1) Registration Fee
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Lease-Backed Notes
(the "Notes") $825,000,000 100% $825,000,000 $229,350(2)
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) $229,072.00 is paid pursuant to this registration statement. $278.00 was
previously paid pursuant to this registration statement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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Prospectus
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$825,000,000
IKON Receivables, LLC Lease-Backed Notes
Issuer Issuable in Series
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[IKON LOGO]
You should read the section entitled "Risk Factors" starting on page 7 of this
prospectus and consider these factors before making a decision to invest in the
notes.
The notes are secured only by the pledged assets of the issuer and are not
interests in or obligations of any other person.
Retain this prospectus for future reference. This prospectus may not be used to
consummate sales of securities unless accompanied by the prospectus supplement
relating to the offering of such securities.
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From time to time the issuer may sell a series of its notes that --
o will be backed solely by a pool of office equipment leases or contracts
and related assets;
o will consist of one or more classes on terms to be determined at the time
of sale; and
o may include one or more classes or subclasses of notes that are
subordinate to one or more other classes or subclasses.
The assets backing the notes may consist of --
o any combination of leases;
o leases intended as security agreements;
o installment sale contracts;
o rental stream obligations;
o monies received relating to such leases, agreements, contracts and
obligations;
o funds on deposit in one or more accounts; and
o one or more forms of credit support.
Underwriting --
o One or more underwriters specified in the related prospectus supplement
may offer the notes.
o The plan of distribution of the notes of any series and the terms of the
underwriting arrangements will be as described in this prospectus and in
the related prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is __________ 1999.
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Table Of Contents
Page
Important Information about this Prospectus and the Accompanying
Prospectus Supplement.....................................................3
Prospectus Summary...........................................................4
Risk Factors.................................................................7
Where You Can Find More Information.........................................12
The Issuer..................................................................13
The Asset Pools.............................................................13
Management's Discussion and Analysis of Financial Condition.................15
Directors and Executive Officers of the Manager of the Issuer...............15
The Leases..................................................................16
Pool Factors................................................................18
Use Of Proceeds.............................................................18
The Originator's Leasing Business...........................................19
The Trustee.................................................................23
Description Of The Notes....................................................24
Description of the Transaction Documents....................................29
Certain Legal Aspects Of The Lease Receivables..............................34
Material Federal Income Tax Consequences....................................37
Ratings.....................................................................41
ERISA Considerations........................................................41
Plan of Distribution........................................................42
Legal Opinions..............................................................42
Experts.....................................................................42
Index To Financial Statements...............................................43
Index Of Terms..............................................................47
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Important Information about this
Prospectus and the Accompanying Prospectus Supplement
We provide information to you about the notes in two separate
documents that progressively provide more detail: (1) this prospectus, which
provides general information, some of which may not apply to a particular series
of notes, and (2) the prospectus supplement, which describes the specific terms
of your series of notes.
This prospectus does not contain complete information about the
offering of the notes. The prospectus supplement contains additional
information. You are urged to read both this prospectus and the prospectus
supplement, including the information incorporated by reference, in full. We
cannot sell the notes to you unless you have received both this prospectus and
the prospectus supplement.
If the terms of your series of notes vary between this prospectus
and the accompanying prospectus supplement, you should rely on the information
in the prospectus supplement.
The prospectus supplement for your notes will state:
o the aggregate principal amount, interest rate and authorized
denominations of the notes;
o specific information concerning the lease receivables
including any insurance related to the lease receivables;
o the terms of any credit enhancement with respect to the notes;
o information concerning any other assets backing such notes,
including any reserve fund;
o the final scheduled payment date of each class of such notes;
o how and when principal is to be paid on to the notes of each
class of such series on each payment date, the timing of the
application of principal and the order of priority of the
applications of such principal to the respective classes and
the allocation of principal to be so applied;
o additional information on the plan of distribution of the
notes;
o the federal income tax characterization of the notes;
o the terms of any subordination relating to the notes;
o the terms of any cross-collateralization relating to the
notes;
o the terms of any redemptions and the related redemption prices
relating to the notes;
o servicing terms relating to the notes;
o the presence of any prefunding feature relating to the notes;
and
o the length and terms of any revolving period relating to the
notes.
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Prospectus Summary
o This summary highlights select information from this prospectus and does
not contain all of the information that you need to consider in making
your investment decision. To understand all of the terms of the offering
of the notes, read carefully this entire prospectus and the accompanying
prospectus supplement.
o This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding. To understand all of the
terms of the offering, carefully read this entire document and, in
particular, the full description of these calculations, cash flows and
other information in this prospectus.
Lease-Backed Notes
Issuable in Series
Issuer
IKON Receivables, LLC, a Delaware limited liability company.
Originator
IOS Capital, Inc., a Delaware corporation formerly known as IKON Capital Inc.
and a wholly-owned subsidiary of IKON Office Solutions, Inc.
Seller
IKON Receivables-1, LLC, a Delaware special purpose limited liability company.
Servicer
The servicer will be IOS Capital unless otherwise specified in the related
prospectus supplement.
Trustee
For any series of notes, the trustee named in the related prospectus supplement.
The Notes
o Unless the related prospectus supplement otherwise states, the notes of each
series will be secured solely by office equipment leases or contracts and
related assets which will be pledged by the issuer to a trustee under an
indenture of trust for the benefit of noteholders of that series.
o The transaction documents relating to each series of notes will describe the
rights of each of the related classes of notes to the funds derived from the
related asset pool.
o The notes are fixed income securities. Fixed income securities are generally
styled as debt instruments, having a principal balance and a specified interest
rate.
o Each class of notes may have a different interest rate, which may be a fixed
or adjustable interest rate. The related prospectus supplement will specify the
interest rate for each series or class of notes, or the initial interest rate
and the method for determining subsequent changes to the interest rate.
o A series may include one or more classes of notes which are:
o stripped of regular interest payments and entitled only to principal
distributions, with disproportionate, nominal or no interest
distributions; or
o stripped of regular principal payments and entitled only to interest
distributions, with disproportionate, nominal or no principal
distributions.
o A series of notes may include two or more classes of notes with different
terms including
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different interest rates and different timing, sequential order or priority of
payments, amount of principal or interest or both.
o A series may provide that distributions of principal or interest or both on
any class may be made:
o upon the occurrence of specified events;
o in accordance with a schedule or formula; or
o on the basis of collections from designated portions of the related
asset pool.
o Any series may include one or more classes of notes which will not distribute
certain accrued interest but rather will add the accrued interest to the note
principal balance, or nominal balance, in the manner described in the related
prospectus supplement.
o A series may include one or more other classes of notes that are senior to one
or more other classes of notes in respect of certain distributions of principal
and interest and allocations of losses on the related asset pool.
The Asset Pools
o As specified in the related prospectus supplement, the pledged pool of assets
securing a series of notes may consist of:
o leases which may include any combination of leases, leases intended
as security agreements, installment sale contracts or rental stream
obligations, together with all monies due on such leases and
agreements;
o equipment which consists of the seller's interests (other than its
ownership interests) in the underlying equipment and related
property, together with the proceeds from disposal of the equipment;
o amounts held in any collection, reserve, prefunding or other
accounts established pursuant to the transaction documents;
o proceeds and recoveries on insurance policies and the disposition of
repossessed equipment;
o credit enhancement with respect to an asset pool or any class of
notes; and
o interest earned on certain short term investments held by issuer
o If the related prospectus supplement specifies, the trustee may acquire
additional leases and equipment during a specified pre-funding period following
the issuance of the notes from monies in a pre-funding account.
o If the related prospectus supplement specifies, the notes may have a revolving
period. During a revolving period, the issuer may acquire additional leases and
equipment from the proceeds of payments on existing lease payments. The notes
may not pay principal during this period.
The Leases
o The leases are either:
o obligations for the lease or purchase of the equipment; or
o evidence loans used to acquire or finance the equipment, which
entitle the lessor to receive a stream of payments from the lessee.
Additionally, the loans may entitle the lessor to either the return
of the equipment at the termination of the related lease or the
payment of a purchase price for the equipment at the election of the
lessee.
o The originator will transfer the leases and equipment comprising each asset
pool to the seller and the seller will transfer those leases and the seller's
interests in that equipment, other than its ownership interests, to the issuer.
The seller will not transfer equipment to the issuer. The issuer will pledge all
of its right, title and interest in and to such leases and interests in the
equipment to the trustee on behalf of noteholders.
Payment Date
As described in the related prospectus supplement, the notes will pay principal
and/or interest on specified dates. Payment dates will occur monthly, quarterly,
or semi-annually.
Remittance Period
The transaction documents will establish a period preceding each payment date
(for example, in the case of monthly-pay notes, the calendar month preceding the
month in which a payment date occurs) as the remittance period. As the related
prospectus supplement will more fully describe, the servicer will
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remit collections received during the remittance period to the trustee prior to
the related payment date. The collections may be used to fund payments to
noteholders on such payment date or to acquire additional lease receivables.
Record Date
The related prospectus supplement will describe a date preceding the payment
date, as of which the issuer or its paying agent will fix the identity of the
holders of the notes. Noteholders whose identities are fixed on this date will
receive payments on the next succeeding payment date.
Cross-Collateralization
Except as described below, the payment source for notes of each series is the
related asset pool only. To the extent the related prospectus supplement
describes, a series or class of notes may include the right to receive moneys
from a pool of credit enhancement shared with other notes.
Registration of Notes
The issuer may issue the notes as global notes registered in the name of Cede &
Co., as nominee of The Depository Trust Company, or another nominee. In such
case, noteholders will not receive definitive notes representing their
interests, except in certain limited circumstances described in the related
prospectus supplement.
Credit and Cash Flow Enhancement
o As described in the related prospectus supplement, credit enhancement with
respect to an asset pool or any class of notes may include any one or more of
the following:
o a policy issued by an insurer specified in the related prospectus
supplement;
o overcollateralization;
o subordination of certain classes of notes;
o a reserve account;
o letters of credit;
o credit or liquidity facilities;
o third party payments or other support; and
o cash deposits or other similar arrangements.
o The prospectus supplement will describe any limitations and exclusions from
coverage.
Optional or Mandatory Termination
o Under certain circumstances described in this prospectus and the related
prospectus supplement, the servicer, the seller, the issuer, or certain other
entities may, at their respective options, cause the early retirement of a
series of notes at the price or prices indicated in the related prospectus
supplement.
o The related prospectus supplement may describe certain circumstances under
which the issuer, servicer or other entities will be required to retire early
all or any portion of a series of notes. The documents may require such parties
to solicit competitive bids for the purchase of the related asset pool or
otherwise.
Tax Considerations
For federal income tax purposes, Dewey Ballantine LLP, special tax counsel to
the underwriter, will render an opinion upon issuance of a series of notes that
the Notes will be treated as debt and the issuer will not be treated as an
association (or publicly traded partnership) taxable as a corporation. You
should consult your tax advisors.
ERISA Considerations
Subject to the considerations and conditions described under "ERISA
Considerations" in this prospectus and the related prospectus supplement,
pension, profit-sharing or other employee benefit plans, as well as individual
retirement accounts and certain types of Keogh Plans may purchase the notes. You
should consult with your counsel regarding the applicability of the provisions
of ERISA before purchasing a note.
Ratings
o The issuer will not issue the notes unless a rating agency rates them in one
of the four highest rating categories.
o You must not assume that the rating agency will not lower, qualify or withdraw
its rating.
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Risk Factors
You should carefully consider, among other things, the following risk factors
before deciding to invest in the notes offered by this prospectus.
You May Not Be Able to Sell Your There is currently no public market for
Notes the notes. If no public market develops,
you may not be able to sell your notes.
The underwriters expect to make a market
in the notes but they are not required
to do so. There is no assurance that any
such market will be created or, if
created, will continue.
Prepayments and Related In the case of notes purchased at a
Reinvestment May Reduce Your Yield discount, you should consider the risk
that slower than anticipated rates of
prepayments could result in an actual
yield that is less than the anticipated
yield. Conversely, you should consider
the risk that in the case of notes
purchased at a premium, the risk that
faster than the anticipated rate of
prepayments could result in an actual
yield that is less than the anticipated
yield.
Be aware that you bear the risk of
reinvesting unscheduled distributions
resulting from prepayments of the notes.
The rate of payment of principal is
unpredictable because the rate on the
notes will depend on, among other
things, the rate of payment on the
underlying equipment leases. In addition
to the normally scheduled payments on
the leases, payments may come from a
number of different sources, including
the following:
o prepayments permitted by the servicer;
o payments as a result of leases which
are defaulted;
o payments as a result of leases
accelerated by the servicer;
o payments due to loss, theft,
destruction or other casualty; and
o payments upon repurchases by IOS
Capital, Inc. on account of a breach
of certain representations and
warranties.
Subject to certain limitations, IOS
Capital, Inc. may elect to reinvest the
proceeds of a lease which was partially
or fully repaid or upgraded in one or
more additional leases and to substitute
leases for defaulted, repurchased or
modified or adjusted leases.
Reinvestments and substitutions may
affect the rate or amount of payments on
the leases as a whole, the rate at which
funds are distributed on the notes and
the yield to noteholders.
The rate of early terminations of leases
due to prepayments and various
non-payments may be influenced by a
variety of economic and other factors.
For example, adverse economic conditions
and certain natural disasters such as
floods, hurricanes, earthquakes and
tornadoes may affect prepayments.
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No Ownership Interest in the The seller is not transferring any of
Equipment; Certain Security its ownership interest in the equipment
Interests are Not Perfected and to the issuer. Therefore, neither the
Other Creditors May Have Rights to issuer nor the trustee for the benefit
the Equipment of noteholders will have any ownership
interest in any equipment. Also,
although the issuer will pledge its
interest in the equipment as a secured
party to the trustee, neither the issuer
nor the trustee will have a perfected
security interest in the equipment. The
lack of a perfected security interest in
the equipment may adversely affect the
ability of the issuer or the trustee on
behalf of noteholders to recover any
moneys on such equipment following a
lease default. This could reduce the
funds available to pay the notes.
Because IOS Capital, Inc. and the
trustee will not have a perfected
security interest in any equipment,
other creditors of the related lessees
may acquire rights in the equipment
superior to those of the issuer or the
trustee. Additionally, because the
indenture and the assignment and
servicing agreement will only require
Uniform Commercial Code financing
statements to be filed in central
locations for any given state, security
interests in the equipment will also not
be perfected in favor of the issuer or
the trustee in any state requiring other
than central filings. Therefore, other
creditors of IOS Capital, Inc., may
acquire rights in the equipment superior
to those of the issuer or the trustee..
State Laws and Other Factors May State laws impose requirements and
Impede Recovery Efforts and Affect restrictions on foreclosure sales and
the Ability of the Issuer to Recoup obtaining deficiency judgments and may
the Full Amount Due on The Leases prohibit, limit or delay repossession
and sale of equipment to recover losses
on non-performing leases.
Additional factors that may affect the
issuer's ability to recoup the full
amount due on a lease include:
o the lack of any ownership
interest in any of the
equipment on the part of the
issuer;
o the failure to file
financing statements to
perfect the issuer's
security interest in certain
equipment against a lessee;
o depreciation;
o obsolescence;
o damage or loss of any item
or equipment; and
o the application of federal
and state bankruptcy and
insolvency laws.
As a result, the noteholders may be
subject to delays in receiving payments
and losses.
Possession of the Leases by and the Any insolvency by the issuer, the
Insolvency of the Issuer, servicer, the originator or the seller,
Originator, Seller or Servicer May while in possession of the leases may
Result in Reduced or Delayed result in competing claims to ownership
Payments to Noteholders or security interests in the leases
which could result in delays in payments
on the notes, losses to the noteholders
or an acceleration of the repayment of
the notes.
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Commingling of Funds with IOS If bankruptcy or reorganization
Capital, Inc. May Result in Reduced proceedings are commenced with respect
or Delayed Payments to Noteholders to the servicer, any funds then held by
the servicer may be unavailable to
noteholders. If those funds are not
transferred to the trustee, as required
by the Indenture, payments to
noteholders could be delayed or reduced
if the servicer becomes bankrupt or
insolvent.
Insolvency of IOS Capital, Inc. or In some circumstances, a bankruptcy of
IKON Receivables Funding, Inc. May IOS Capital or IKON Receivables-1, LLC
Reduce Payments to Noteholders may reduce payments to noteholders. IOS
Capital and IKON Receivables-1, LLC
believe that each contribution of the
leases should be treated as an absolute
and unconditional assignment.
However, in the event of an insolvency
of IOS Capital, Inc. or IKON
Receivables-1, LLC, a court or
bankruptcy trustee could attempt to:
o recharacterize the
contribution of the related
leases by IOS Capital, Inc.
to the seller as a loan from
the seller to IOS Capital,
Inc., secured by a pledge of
such leases; or
o recharacterize the
contribution of the related
leases by IKON
Receivables-1, LLC to the
issuer as a loan from the
issuer to IKON
Receivables-1, LLC, secured
by a pledge of such leases;
o consolidate the assets of
the issuer with those of IOS
Capital, Inc. since IOS
Capital, Inc. will
indirectly own all of the
membership interests in the
issuer; or
o consolidate the assets of
the issuer with those of
IKON Receivables-1, LLC
because IKON Receivables
Funding, Inc. will own all
of the membership interests
in the issuer.
If either recharacterization or
consolidation were successful, the
bankruptcy trustee could repudiate any
leases that are considered to be
operating leases for bankruptcy law
purposes and all obligations relating to
such operating leases. Either attempt,
even if unsuccessful, could result in
delays in payments to you. If such
attempts were successful, such notes
would be accelerated, and the trustee's
recovery on your behalf could be limited
to the then current value of the leases
or the underlying equipment.
Consequently, you could lose the right
to future payments and you might incur
reinvestment losses on amounts
recovered. Thus, you will not receive
your anticipated principal and interest
on the notes.
Although IOS Capital, Inc. and IKON
Receivables-1, LLC both believe that the
contribution of the leases should be
treated as an absolute and unconditional
assignment the leases will be treated as
assets of IOS Capital, Inc. for tax
purposes. Such treatment of the assets
might increase the risk of
recharacterization of the transfer.
Transfer of Servicing May Delay If IOS Capital, Inc. were to cease
Payments to Noteholders servicing the leases, delays in
processing payments on the leases and
information regarding lease payments
could occur. This could delay payments
to the noteholders.
Default or Insolvency of Lessees If lessees default on the leases, lease
May Reduce Payments to payments will decrease and funds
available for payment to you will be
reduced.
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Noteholders
No Recourse Against Affiliates of There is no recourse against any
the Issuer affiliates of the issuer. The notes
represent debt of the issuer secured
primarily by the leases. If the lease
payments and other assets pledged to
secure the notes are insufficient to pay
the notes in full, you have no rights to
obtain payment from IOS Capital, Inc. or
any of its affiliates other than the
issuer. The issuer is a limited
liability company with limited assets.
Consequently, the noteholders must rely
solely upon the related asset pool for
repayment.
Losses and Delinquencies on the We cannot guarantee that the delinquency
Lease Receivables May Differ From and loss levels of leases in the assets
the Originator's Historical Loss pools will correspond to the historical
and Delinquency Levels levels the originator experienced on its
equipment lease portfolio. There is a
risk that delinquencies and losses could
increase or decline significantly for
various reasons including:
o changes in the federal
income tax laws;
o changes in the local,
regional or national
economies; or
o other events.
Risks Associated with Year 2000 The originator is faced with the task of
Compliance completing its goals for compliance in
connection with the year 2000 issue. The
year 2000 issue is the result of certain
computer programs being written using
two digits to define the applicable
year. Any computer programs that have
time-sensitive software may recognize a
date using "00" as the year 1900 rather
than the year 2000. Any such occurrence
could result in major computer system
failure or miscalculations. Although the
originator reasonably believes that its
servicing system will be year 2000
compliant prior to the year 2000, it is
presently engaged in various procedures
to determine if its computer systems and
software, and those of its material
suppliers, customers, brokers and agents
will be year 2000 compliant.
If the originator, any affiliate or any
of their suppliers, customers, brokers
or agents do not successfully and timely
achieve year 2000 compliance, the
originator's performance of its
obligations under the transaction
documents, including servicing of the
leases could be adversely affected. This
could result in delays in processing
payments on the leases and could cause a
delay in distributions to you.
The Addition and Substitution of If a significant number of leases are
Leases May Adversely Affect added or replaced, this could affect the
Cashflow and May Decrease the Yield rate at which funds are distributed on
on the Notes the notes and decrease the yield to
noteholders. The transaction documents
will permit IOS Capital, Inc., under
certain circumstances, to substitute or
add certain qualifying leases. The
addition or substitution of leases may
include leases that have different
payment due dates, installment amounts
and maturity dates than the existing or
substituted leases.
IOS Capital, Inc. may only add or
substitute leases that meet certain
qualifying characteristics and
conditions. The ability of IOS Capital,
Inc. to acquire such leases depends upon
its ability to originate enough leases
that meet the specified eligibility
criteria. This may be affected by a
variety of social and economic factors,
including interest rates, unemployment
levels, the rate of inflation and public
perception of economic conditions
generally. The addition or substitution
of leases could increase the geographic,
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equipment or other concentrations of the
related asset pool. Consequently, any
adverse economic or social factors that
particularly affect a certain geographic
area, certain types of equipment or
other concentrations of leases in the
related asset pool may adversely affect
the performance of the asset pool.
Technological Obsolescence of If technological advances relating to
Equipment May Reduce Value of office equipment cause leased equipment
Collateral to become obsolete, the value of such
equipment will decrease. This will
reduce the amount of monies recoverable
should the equipment be sold following a
lease default and you may not recover
the full amount due on the notes.
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Where You Can Find More Information
We or the servicer will file with the SEC all required annual,
quarterly and special reports, proxy statements and other information about the
notes. You can read and copy these documents at the public reference facility
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, NW, Room 1024,
Washington, DC 20549. You can also copy and inspect such reports, proxy
statements and other information at the following regional offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. SEC filings are also available to the public on the
SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus. Information that we file later with
the SEC will automatically update the information in this Prospectus. In all
cases, you should rely on the later information over different information
included in this Prospectus or the prospectus supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy materials
filed by or on behalf the issuer until we terminate our offering of the notes.
We filed a registration statement relating to the notes with the
SEC. This Prospectus is part of the registration statement but the registration
statement includes additional information. As a recipient of this Prospectus,
you may request a copy of the registration statement and any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling
us at:
IOS Capital, Inc.
1738 Bass Road
P.O. Box 9115
Macon, GA 31208
(912) 471-2300
You should rely only on the information incorporated by reference or
provided in this prospectus or the accompanying prospectus supplement. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus is accurate as of any date
other than the date on the cover page of this prospectus or the accompanying
prospectus supplement.
You can find a listing of the pages where capitalized terms are
defined under "Index of Terms" beginning on page 47 in this prospectus.
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The Issuer
IKON Receivables, LLC (the "Issuer") is a Delaware limited liability
company all of the membership interests in which will be held by IKON
Receivables-1, LLC, a special purpose corporation (the "Seller"). All of the
membership interests in the Seller will, in turn, be held by IOS Capital, Inc.
("IOS Capital" or the "Originator"). The Issuer was organized for the limited
purpose of engaging in the transactions described herein and any activities
incidental to and necessary or convenient for the accomplishment of such
purposes and is restricted by its organizational documents and certain
agreements from engaging in other activities. In addition, its organizational
documents and certain agreements require it to operate in a manner such that it
should not be consolidated in the bankruptcy estate of the Originator or its
affiliates in the event that one of them becomes subject to bankruptcy or
insolvency proceedings. The Issuer's address is 501 Silverside Road, Suite 28,
Wilmington, Delaware 19809.
The Issuer will from time to time sell a series of its notes
("Notes") consisting of one or more classes (each a "Class") on terms to be
determined at the time of sale and described in a related prospectus supplement
(each a "Prospectus Supplement"). The Notes of each series will be secured
solely by the related Asset Pool (as defined herein). The Issuer does not have,
nor is it expected in the future to have, any significant assets other than the
Asset Pools. The servicer of any Asset Pool relating to any series of Notes may
be IOS Capital or another affiliate of the Issuer (IOS Capital or such other
servicer, in its capacity as servicer, the "Servicer").
The Issuer will pledge its interests in the Asset Pool to a trustee
(the "Trustee") in respect of the related series of Notes pursuant to an
indenture between the Issuer and such Trustee (an "Indenture").
The balance sheet of the Issuer at February 28, 1999 is attached as
Exhibit 1 hereto.
The Asset Pools
The Notes of each series will be secured by a segregated pool of
equipment leases or contracts and related assets (an "Asset Pool"). The property
comprising each Asset Pool may include (i) a pool of leases, which may include
any combination of leases, leases intended as security agreements, installment
sale contracts or rental stream obligations (each, a "Lease"), (ii) all moneys
(including accrued interest) due under the Leases on or after a specified date
(the "Cut-off Date"), (iii) moneys held from time to time in one or more
accounts established and maintained pursuant to the related Transaction
Documents (as defined herein), (iv) the Seller's interests (other than ownership
interests) in the underlying equipment and related property relating to such
pool of Leases (the "Equipment"), (v) the rights of the Issuer under certain of
the Transaction Documents relating to the Asset Pool and (vi) interest earned on
certain short-term investments held by the Issuer. The Leases and Equipment
interests comprising an Asset Pool are referred to as the "Lease Receivables".
The Issuer will not have and the Asset Pool will not include any
residual interest in any Equipment after the related Lease has been paid in
full.
The Equipment underlying the Lease Receivables included in the Asset
Pool generally will be limited to personal property which is leased or financed
by the Originator to lessees (each a "Lessee" and, collectively, "Lessees")
pursuant to Leases which either are "chattel paper" (as defined in the Uniform
Commercial Code) or are Leases that are not treated materially differently from
"chattel paper" for purposes of title transfer, security interests or remedies
on default.
The Lease Receivables will be acquired by the Seller from the
Originator pursuant to an Assignment and Servicing Agreement among the Seller,
the Originator and the Issuer (the "Assignment and Servicing Agreement").
Contemporaneously, the Lease Receivables will then be transferred from the
Seller to the Issuer pursuant to the Assignment and Servicing Agreement. The
Leases included in the Asset Pool will be selected from those Leases held by the
Originator based on the criteria in the prospectus under "The Leases--Eligible
Leases".
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On or prior to the closing date on which the Notes are delivered to
the holders of Notes (the "Noteholders"), the Issuer will form an Asset Pool by
(i) acquiring Lease Receivables pursuant to the related Assignment and Servicing
Agreement and (ii) entering into an Indenture with the Trustee, relating to the
issuance of the Notes, secured by the Lease Receivables.
The Leases comprising the Asset Pool will have been originated by
the Originator or acquired by the Originator in accordance with the Originator's
specified underwriting criteria. The material underwriting criteria applicable
to the Leases are described in this prospectus under the heading "IOS Capital's
Leasing Business".
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Lease receivables are generally evaluated by IOS Capital for
write-down when they become over 121 days delinquent. All accounts assessed over
days past due automatically become non-accruing accounts. Any subsequent
recoveries offset net losses. Historical delinquency information for Leases not
written down and charge-off information for Leases owned and serviced by IOS
Capital will be set forth in each prospectus supplement.
Management's Discussion and Analysis of Financial Condition
As of the date of this Prospectus, the Issuer has no operating
history. The net proceeds of the sale of the Notes will be distributed to the
owners of the Issuer. See "Use of Proceeds." The Issuer is prohibited by its
Limited Liability Company Agreement from engaging in business other than (i) the
purchase of equipment leases and lease receivables (including equipment) from
IOS Capital and its affiliates , (ii) the issuance of notes collateralized by
its assets and (iii) engaging in acts incidental, necessary or convenient to the
foregoing and permitted under Delaware law. The Issuer's ability to incur,
assume or guaranty indebtedness for borrowed money is also restricted by its
Limited Liability Company Agreement to only such activities that relate to the
leases and lease receivables.
Directors and Executive Officers of the Manager of the Issuer
The following table sets forth the executive officers and directors
of IKON Receivables Funding Inc., the manager of the Issuer ("Manager") and
their ages and positions as of February 28, 1999. Because the Issuer is
organized as a special purpose company and will be largely passive, it is
expected that the officers and directors of the Manager will participate in the
management of the Issuer to a limited extent. Most of the actions related to
maintaining and servicing the assets will be performed by the Servicer.
- ------------------------------------------------------------------------------
Name Age Position
- ------------------------------------------------------------------------------
Robert McLain President & Director
Patricia Donato Secretary & Director
Joseph Churchman Director
Karin M. Kinney 38 Secretary
Thomas Sheehan 39 Treasurer
Karin M. Kinney has served as Secretary of IKON Office Solutions,
Inc. since 1996 and as Corporate Counsel since 1994. From 1987 through 1994,
Ms. Kinney served as Counsel.
Thomas Sheehan has served as Director of Financial Accounting,
Planning & Analysis for IKON Office Solutions, Inc. from December 1998 to the
present. Prior to assuming his current position, Mr. Sheehan served as Director
of Operational Support, Planning & Analysis from November 1996 through December
1998, Director of Financial Accounting from March 1994 through November 1996,
and Senior Manager, Advisory Services-Domestic from November 1993 through March
1994. Before joining the company, Mr. Sheehan served as an Atlanta-Regional
Controller for Unijax Sloan, a Philadelphia-Assistant Controller for
Garrett-Buchanan Co. and a Valley Forge-Manager, Group Accounting for Paper
Corporation of America.
[Additional biographies and ages to be provided.]
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The Leases
Lease Receivables Pool
Information with respect to the Lease Receivables in each Asset Pool
will be set forth in the related Prospectus Supplement, including the
composition of such Lease Receivables and the distribution of such Lease
Receivables by equipment type, payment frequency and current principal balance
as of the applicable Cut-Off Date. As of the date Noteholders decide to purchase
Notes of any series, no more than 5% of the aggregate pool of assets comprising
the related Asset Pool will deviate from the asset characteristics described in
the related Prospectus Supplement.
Characteristics
The Leases consist of direct financing leases for accounting
purposes ("Finance Leases"), which may be either tax leases or conditional sales
contacts. In a Finance Lease, the lessor transfers substantially all benefits
and risks of ownership to the lessee. In accordance with Statement of Financial
Accounting Standards No. 13, a lease is classified as a Finance Lease if the
collectibility of lease payments are reasonably certain and it meets one of the
following criteria: (1) the lease transfers title and ownership of the equipment
to the lessee by the end of the lease term; (2) the lease contains a bargain
purchase option; (3) the lease term at inception is at least 75% of the
estimated life of the equipment; or (4) the present value of the minimum lease
payments is at least 90% of the fair market value of the equipment at inception
of the lease.
Although the Leases are Finance Leases for accounting purposes, some
or all of the Leases may be considered operating or non-finance leases for
bankruptcy law or other purposes.
The related Prospectus Supplement will further describe the type and
characteristics of the Leases included in each Asset Pool relating to the Notes
offered thereby. See "Originator's Leasing Business -- Types of Leases." [IOS to
clarify terminology]
Lease Payments and Valuation
In connection with all calculations required to be made pursuant to
the Transaction Documents with respect to the determination of the aggregate
Discounted Lease Balance (the "Aggregate Discounted Lease Balance") for all
Leases, on any Calculation Date (as defined herein) the Aggregate Discounted
Lease Balance for each Lease shall be calculated assuming:
(i) Lease Payments are due on the last day of the period from and
including the first day of each calendar month to and including the last
day of the calendar month (each such period, a "Collection Period");
(ii) Lease Payments are discounted on a monthly basis using a 30-day
month and a 360-day year; and
(iii) Lease Payments are discounted to the last day of the
Collection Period prior to the Calculation Date.
All of the Leases require the periodic, scheduled payment of rent or
other payments on a monthly, quarterly, semi-annual or annual basis, in arrears
or in advance. Such periodic payments are referred to herein as "Lease
Payments."
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Eligible Leases
All Leases have been originated in the ordinary course of the
Originator's business and comply with the Originator's credit and collections
policies. In addition, the following eligibility requirements apply or will
apply to all Leases purchased by the Issuer on or prior to the Cut-off Date and
to all leases substituted by the Originator ("Substitute Leases") (collectively,
"Eligible Leases"):
(i) The Leases are valid and enforceable, and unconditionally
obligate the Lessee to make periodic Lease Payments (including taxes);
(ii) The Leases are noncancellable by the Lessee and do not contain
early termination options (except for Leases which contain early
termination or prepayment clauses that require the Lessee to pay all
remaining scheduled payments under such Lease upon such cancellation or
prepayment);
(iii) All payments payable under the Leases are absolute,
unconditional obligations of the Lessees;
(iv) All of the Leases require the Lessee or a third party to
maintain the Equipment in good working order, to bear all the costs of
operating the Equipment, including taxes and insurance relating thereto;
(v) The Leases do not materially violate any U.S. or state laws;
(vi) The Leases provide for periodic payments;
(vii) In the event of a Casualty Loss (as defined herein), the
Lessee is required to pay at a minimum the outstanding principal or net
book value of the Leases and any applicable make-whole premium;
(viii) The Leases have been sold to the Issuer free and clear of any
liens and are assignable without prior written consent of the Lessee;
(ix) The Leases are U.S. dollar-denominated and the lessor and each
Lessee are located in the United States;
(x) The Lease is not a consumer lease;
(xi) No more than three percent (3%) of the Leases in any Asset Pool
will consist of Leases with government entities as the obligor;
(xii) The Lease is not subject to any guaranty by the Originator;
(xiii) No adverse selection was used in selecting the Lease for
transfer to the Issuer;
(xiv) The Lessee has represented to the Originator that it has
accepted the Equipment;
(xv) The Lessee is not a subject of an insolvency or bankruptcy
proceeding at the time of the transfer;
(xvi) The Leases are not Defaulted Leases (as defined herein); and
(xvii) Each Lease is not more than 60 days past due at time of
transfer to the Issuer.
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Delinquencies, Repossession and Gross Losses
Certain information relating to the Originator's delinquency,
repossession and gross loss experience with respect to Leases it has originated
or acquired will be set forth in the related Prospectus Supplement. This
information may include, among other things, the experience with respect to all
Leases in such Originator's portfolio during certain specified periods,
including Leases which may not meet the criteria for selection as a Lease
Receivable for the particular Asset Pool. There can be no assurance that the
delinquency, repossession and net loss experience on any Asset Pool will be
comparable to the Originator's prior experience.
Maturity and Prepayment Considerations
If a Lease permits a prepayment, such payment, together with
accelerated payments resulting from defaults, will, subject to the use of such
payments to acquire additional or substituted leases pursuant to the terms of
the applicable Transaction Documents, shorten the weighted average life of the
pool of Lease Receivables and the weighted average life of the Notes. The rate
of prepayments on the Lease Receivables may be influenced by a variety of
economic, financial and other factors. In addition, under certain circumstances,
the Originator will be obligated to reacquire Lease Receivables from the Issuer
pursuant to the applicable Transaction Documents as a result of breaches of
representations and warranties. Any reinvestment risks resulting from a faster
or slower amortization of the Notes which results from prepayments will be borne
entirely by the Noteholders.
Acquisition of Lease Receivables
The Lease Receivables underlying the Notes will be acquired pursuant
to an Assignment and Servicing Agreement (i) by the Seller from the Originator
and (ii) by the Issuer from the Seller.
The Issuer expects that each Lease Receivable so acquired will have
been originated or acquired by the Originator thereof in accordance with the
underwriting criteria specified herein and sold to the Seller. See "IOS
Capital's Leasing Business - Credit Policies and Loss Experience" herein. The
Originator pursuant to the Assignment and Servicing Agreement will make certain
representations and warranties to the Seller in respect of the related Lease
Receivables and the benefit of such representations and warranties will be
assigned to the Issuer pursuant to the Assignment and Servicing Agreement. The
Issuer will assign all its rights under the Assignment and Servicing Agreement
to the Trustee for the benefit of the Noteholders with the result that the
Originator will be liable to the Issuer and the Trustee for defective or missing
documents or an uncured breach of the Originator's representations or
warranties.
Pool Factors
A Noteholder's portion of the aggregate outstanding principal
balance of the related Class of Notes is the product of (i) the original
outstanding principal amount of such Noteholder's Notes and (ii) the applicable
Pool Factor. The "Pool Factor" for each Class of Notes will be a seven-digit
decimal, which the Servicer will compute prior to each distribution with respect
to such Class of Notes, indicating the remaining outstanding principal balance
of such Class of Notes as of the applicable payment date (the "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.
The Noteholders of record will receive reports on or about each
Payment Date concerning the payments received on the Lease Receivables, the
balance of the Asset Pool, the Pool Factor and various other items of
information. In addition, Noteholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest date
permitted by law.
Use Of Proceeds
The net proceeds from the sale of the Notes will be distributed by
the Issuer to the Seller and by the Seller to the Originator.
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The Originator's Leasing Business
The Originator, formerly known as IKON Capital, Inc., was formed in
1987 to provide lease financing to customers of IKON Office Solutions, Inc.
("IKON"). The Originator is a wholly-owned subsidiary of IKON. The Originator's
corporate headquarters are located at 1738 Bass Road, Macon, Georgia 31210. The
Originator's securities are registered under the Securities Exchange Act of
1934, as amended (the "1934 Act") and is subject to the reporting requirements
of the 1934 Act and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission (the "Commission"). The
Originator filed an Annual Report on Form 10-K for the fiscal year ended
September 30, 1998 and a Quarterly Report on Form 10-Q for the three-month
period ended December 31, 1998. A copy of the reports, including the exhibits
thereto, are available to the public on the SEC's web site at
http://www.sec.gov. Requests for copies or other information should be directed
to IOS Capital, Inc., 1738 Bass Road, Macon, Georgia 31210, Attn: Kim Taylor.
IKON is a public company headquartered in Malvern, Pennsylvania
operating the largest network of independent copier and office equipment
marketplaces in North America and the United Kingdom. IKON has over 800
locations in the United States, Canada, the United Kingdom, Germany, France,
Denmark and Mexico. IKON also provides equipment services and supplies,
outsourcing and imaging services, such as mailroom and copy center management,
specialized document copying services and electronic imaging and file
conversion. IKON also offers network consulting and design, hardware and
software product interfaces, computer networking, technology training and
software solutions for the networked office environment. IKON's fiscal 1998
revenues were $5.6 billion.
The Originator is engaged in the business of arranging lease
financing exclusively for office equipment marketed by IKON's office equipment
marketplaces ("IKON marketplaces"), which sell and service copier equipment and
facsimile machines. The ability to offer lease financing on this equipment
through the Originator is considered a competitive marketing advantage which
more closely ties IKON to its customer base. During the 1998 fiscal year, 69% of
new equipment sold by IKON marketplaces was financed through the Originator. The
Originator and IKON will seek to increase this percentage in the future, as
leasing enhances the overall profit margin on equipment and is considered an
important customer retention strategy. For the fiscal years ended September 30,
1997 and 1996, operating revenues totaled approximately $214 million and $151
million, respectively, with net income of approximately $43 million and $32
million, respectively. For the fiscal year ended September 30, 1998, total
operating revenue equaled $289 million with net income of approximately $63
million.
The equipment financed by the Originator consists of copiers,
facsimile machines, and related accessories and peripheral equipment, the
majority of which are produced by major office equipment manufacturers.
Currently 70% of the equipment financed by the Originator represents copiers,
17% fax machines, and 13% other equipment. Although equipment models vary, IKON
is increasingly focusing its marketing efforts on the sale of higher segment
equipment, such as copiers which produce 50 or more impressions per minute.
The Originator's customer base (which consists of the end users of
the equipment) is widely dispersed, with the ten largest customers representing
less than 2.5% of the Originator's total lease portfolio. The typical new lease
financed by the Originator during ___________ averaged $17,900 in amount and 46
months in duration. Although 97% of the leases are scheduled for regular monthly
payments, customers are also offered quarterly, semi-annual, and other
customized payment terms. In connection with its leasing activities, the
Originator performs billing, collection, property and sales tax filings, and
provides quotes on equipment upgrades and lease-end notification. The Originator
also provides certain financial reporting services to the IKON marketplaces,
such a monthly report of marketplace increases in leasing activity and related
statistics.
Types of Leases
The lease portfolio of the Originator consists of direct financing
leases and funded leases, although the Leases to be included in any Asset Pool
will consist solely of direct financing leases. Direct financing leases are
contractual obligations between the Originator and the IKON customer and
represent the majority of the Originator's lease portfolio.
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Direct financing leases are structured as either tax leases (from
the Originator's perspective) or conditional sales contracts, depending on the
customer's needs. The customer decides which of the two structures it desires.
Under either structure, the total cost of the equipment to the customer is
substantially the same (assuming the exercise of the purchase option).
Tax Leases. Tax leases represented 96% of the Originator's total
lease portfolio as of September 30, 1998. The Originator is considered to be the
owner of the equipment for tax purposes during the life of these leases and
receives the tax benefit associated with equipment depreciation. Tax leases are
structured with a fair market value purchase option. Generally, the customer may
return the equipment, continue to rent the equipment or purchase the equipment
for its fair market value at the end of the lease.
Each tax lease has an assumed equipment residual value generally
ranging from 0% to 25% of original retail price, depending on model and term. As
of September 30, 1998, the average equipment residual value for all leases in
the Originator's portfolio was 7.8%. Although an Asset Pool may include tax
leases with residual values, such residual values will not be available for the
benefit of the Noteholders of such Asset Pool.
Conditional Sales Contracts. Conditional sale contracts account for
the remaining 4% of the total leases in the Originator's portfolio. Under these
arrangements, the customer is considered to be the owner of the equipment for
tax purposes and is entitled to receive any tax benefit associated with
equipment depreciation. Each conditional sales contract has an assumed residual
value of 0%. Conditional sales contracts are customarily structured with higher
monthly lease payments than the tax leases and have a $1 purchase option for the
equipment at the end of the lease term. Thus, because of the higher monthly
payments, the after-tax cost of the equipment to the customer under a
conditional sales contract is substantially the same as under a tax lease
(assuming the exercise of the purchase option). Although the customer has the
option of returning or continuing to rent the equipment at lease-end, the
customer almost always exercises the $1 purchase option at the end of the lease
term.
Credit Policies and Loss Experience
General. Prior to January 1998, IKON maintained a decentralized
credit policy. Each IKON marketplace was responsible for developing and
maintaining a credit policy that governed credit practices and procedures. The
policies contained minimum credit standards. Credit authority levels were
established and maintained locally with ultimate authority vested in the
district presidents and district CFOs. The Originator provided credit assistance
through the support of an automated front-end lease application tracking system
("CLAS").
Beginning in January 1998, IKON centralized its credit policy.
IKON's National Risk Management Policy established minimum standards for all
IKON leasing transactions and vested all credit authority with the Originator.
The policy uses a tiered approach incorporating analyst reviews and credit
scoring based on customer exposure.
Origination. Lease packages are assembled by an IKON sales
representative and submitted to its respective IKON marketplace or district
processing center. The IKON marketplace and/or district have the responsibility
to review for accuracy and completeness prior to submission to the Originator
for funding. The marketplace and/or district administration staff enter the
lease applications into the CLAS program. The CLAS program provides both the
credit processing and lease administration module. When applications have
completed both modules, the documents have been reviewed and the invoice has
been prepared, the marketplace and/or district administration staff forward the
leasing package for funding review and transmit the CLAS application to the
Originator.
The Originator reviews all documents for completion, accuracy and
compliance. Any changes to the original document must be approved. Each
application is checked for credit approval based on a comprehensive risk
management policy. When the transaction has completed final review the CLAS
application is updated and uploaded to the mainframe for activation, funding and
invoicing.
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Credit Processing. The Originator's credit process is segmented by
transaction size and approval authority. The "High Risk Review List" lists
industries or customers which are considered volatile and require special
attention. Guidelines are also established for automatic approvals which require
minimal information.
The IKON approval process is tiered based upon credit exposure.
Requests less than $50,000 utilize the CLAS credit scorecard for approval.
Credit scoring for smaller balance exposures provides the Originator with the
ability to adjust risk scores system-wide and monitor performance. Exposures of
$50,000 to $250,000 rely on the expertise of the Originator's credit staff in
analyzing and verifying information regarding bank relationships, trade
references, D&B Business Information Reports, and audited financial statements
and/or tax returns. Exposures of more than $250,000 benefit from the combined
resources of the districts and the Originator, while maintaining local ownership
of the customer. Ideally, the process will be transparent to the customer yet
provide the necessary and timely information required to understand the risk
factors of the exposure and those in the portfolio.
Based upon the segmented approach, the following approval
authorities have been established:
o Customer Service Professional and/or Customer Service
Professional Manager
Dun & Bradstreet rated according to a decision matrix; up to
$50,000; no override authority.
o Business Credit Analysts
Up to high risk transactions.
o Senior Credit Analysts
Single signature for exposure up to $1 million; dual signature
for exposure up to $2 million.
o Director of Portfolio Quality & National Credit Coordinator
Single signature for exposure up to $2 million; dual signature
for exposure up to $5 million.
o Corporate
Exposure in excess of $5 million.
Challenges to the recommendations of the Originator's credit
analysts will be the responsibility of the IKON district presidents. In the
event the analyst does not agree with the actions recommended by the IKON
district, the Originator senior management will be requested to intervene. Sole
credit authority remains with the Originator, not IKON. The requirements for the
above approval categories for exposures under $250,000 may be overridden with
approval of a Senior Credit Analyst, National Credit Coordinator, Director of
Portfolio Quality or President of the Originator.
Justifications will be entered into CLAS.
Collections. The following minimum standards for collection activity
and contact are established for the organization. At 31 days past due the
initial collection call or letter is sent, dependent on account balance, to
inquire as to payment status, determine reason for delinquency, and attempt to
obtain payment date. At 45 days past due the first or second collection call is
made, depending on account balance. At 60 days past due the second or third
collection call is made and the contract is reviewed for guarantors or
additional avenues of collection. At this point the approach is to be firm and
the collector must obtain a full understanding of any dispute that may exist. A
Collection Manager is notified of any problems at 60 days past due. At 75 days
past due a third or fourth collection call is made and if payment arrangement is
not agreed upon, possibility of contract cancellation, supply or equipment
retrieval or foreclosure is raised. At 90 days past due the customer is advised
that the equipment/supplies will be picked up and contract canceled if payment
is not received immediately. An acceleration letter is generally sent within 10
days if payment is not received. A notice of repossession letter is sent out at
day 105 to the customer and the originating marketplace. Accounts are generally
scheduled for charge off at 120 days past due unless extenuating circumstances
(approved by a Collection Manager) warrants delay and additional collection
efforts. These actions are required during the indicated time frame, and may be
accelerated to an earlier time as deemed appropriate. All collection activities
are documented.
Delinquencies remained at a consistent level for fiscal 1998 and
1997. During this two-year period, accounts classified as current (less that 30
days past due) ranged from 85% and 91% of the total portfolio
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balance on a monthly basis. More information concerning the Originator's
delinquency and loss experience will be provided in the Prospectus Supplement.
Year 2000 Issues
State of Readiness. The Year 2000 issue is the result of computer
programs being written using two digits rather than four to define the
applicable year. Any of the Originator's computer programs or hardware that have
date-sensitive software or embedded technology may recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. The potential for a problem exists
with all computer hardware and software, as well as in products with embedded
technology; copiers and fax machines; security and HVAC systems; voice/telephone
systems; elevators, etc.
IKON has appointed a Year 2000 Corporate Compliance Team, which has
prepared a compliance program for the Originator and is responsible for
coordination and inspecting compliance activities in all business units. The
compliance program requires all business units and locations in every country to
inventory potentially affected systems and products, assess risk, take any
required corrective actions, test and certify compliance. IKON's Year 2000
Testing and Certification Guidelines delineate the Year 2000 compliance process,
testing and quality assurance guidelines, certification and reporting processes
and contingency planning. An independent consulting company has received the
compliance program and any appropriate recommendations have been implemented.
All internal information technology ("IT") systems and non-IT systems have been
inventoried. The Originator has completed the assessment phase of its Year 2000
project. The remediation phase is 69% complete and the testing phase is 40%
complete. The Originator anticipates completing the Year 2000 project no later
than October 31, 1999, which is prior to any anticipated material impact on its
operating systems.
Costs. The Originator will use both internal and external resources
to reprogram or replace, test and implement its IT and non-IT systems for Year
2000 modifications. The Originator does not separately track the internal costs
incurred on the Year 2000 project. Such costs are principally payroll and
related costs for its internal IT personnel. The total cost of the Year 2000
project, excluding these internal costs, is estimated at $1.4 million and is
being funded through operating cash flows, all of which will be expensed as
incurred. Through December, 1998, the Originator has expensed approximately
$751,000 related to its Year 2000 project.
Risk. The Issuer is advised by the Originator that the Originator
believes, based on the information currently available to the Originator, that
the most reasonable likely worst case scenario that could be caused by
technology failures relating to the Year 2000 issue could pose a significant
threat not only to the Originator, IKON, its customers and suppliers, but to all
businesses. Risks include:
o Legal risks, including customer, supplier, employee or
shareholder lawsuits over failure to deliver contracted
services, product failure, or health and safety issues.
o Loss of sales due to failure to meet customer quality
expectations or inability to ship products.
o Increased operational costs due to manual processing, date
corruption or disaster recovery.
o Inability to bill or invoice.
The cost of the Year 2000 project and the date on which IKON and the
Originator believe the Originator will complete the Year 2000 modifications are
based on management's best estimates, which were derived using numerous
assumptions of future events, including the continued availability of certain
resources and other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and costs of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.
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Contingency Plans. IKON's guidelines require that contingency plans
be developed and validated in the event that any critical system cannot be
corrected and certified before the system's failure date. The Originator and
IKON expect to have contingency plans in place by October 31, 1999. In addition,
IKON is forming a rapid response team as part of its IT group that will respond
to any operational problems during the Year 2000 date change period.
Relation to Issuer. In the event that the Originator, any affiliate
or any of their suppliers, customers, brokers or agents do not successfully and
timely achieve Year 2000 compliance, the Originator's performance of its
obligations to the Issuer under the Transaction Documents, including servicing
of the Leases, could be adversely affected. This could result in delays in
processing payments on the Leases and could cause a delay in distributions to
the Noteholders.
The Trustee
The Trustee for a series of Notes will be identified in the related
Prospectus Supplement. The Trustee's liability in connection with the issuance
and sale of the Notes will be limited solely to the express obligations of the
Trustee set forth in the Indenture. The Originator and its affiliates may from
time to time enter into normal banking and Trustee relationships with the
Trustee and its affiliates. The Trustee, the Servicer and any of their
respective affiliates may hold Notes in their own names. In addition, for
purposes of meeting the legal requirements of certain local jurisdictions, the
Trustee shall have the power to appoint a co-Trustee or a separate Trustee under
the Indenture. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the Indenture will be
conferred or imposed upon the Trustee and such separate Trustee or co-Trustee
jointly, or in any jurisdiction in which the Trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate Trustee or
co-Trustee, who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the Trustee.
No resignation or removal of the Trustee and no appointment of a
successor Trustee shall become effective until the acceptance of appointment by
the successor Trustee. The Trustee may resign at any time by giving written
notice thereof to the Issuer and by mailing notice of resignation by first-class
mail, postage prepaid, to the Noteholders of such series at their addresses
appearing on the Security Register. The Trustee may be removed at any time by
written notice of the holders of Notes evidencing more than 66% of the voting
rights thereof, delivered to the Trustee and the Issuer. If the Trustee resigns,
is removed, or becomes incapable of acting, or if a vacancy shall occur in the
office of the Trustee for any cause, the Issuer must promptly appoint a
successor Trustee. If no successor Trustee shall have been so appointed by the
Issuer or the Noteholders, or if no successor Trustee shall have accepted
appointment within 30 days after any such resignation or removal, existence of
incapability, or occurrence of such vacancy, the Trustee or any Noteholder may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
The Trustee will make no representations as to the validity or
sufficiency of the Assignment and Servicing Agreement, the Notes (other than the
authentication thereof) or of any Lease Receivable or related document and will
not be accountable for the use or application by the Servicer or the Issuer of
any funds paid to the Issuer in consideration of the sale of any Notes. If no
Event of Servicing Termination (as described herein) has occurred, then the
Trustee will be required to perform only those duties specifically required of
it under the Assignment and Servicing Agreement. However, upon receipt of the
various resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments required to be furnished to it, the Trustee will be
required to examine them to determine whether they conform as to form to the
requirements of the Assignment and Servicing Agreement.
No recourse is available based on any provision of the Assignment
and Servicing Agreement, the Notes or any Lease Receivable or assignment thereof
against the Trustee, in its individual capacity, and the Trustee shall not have
any personal obligation, liability or duty whatsoever to any Noteholder or any
other person with respect to any such claim and such claim shall be asserted
solely against the Servicer or any indemnitor, except for such liability as is
determined to have resulted from the Trustee's own negligence or willful
misconduct.
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Description Of The Notes
General
The Notes will be issued pursuant to an Indenture. The following
summaries (together with additional summaries under "Description of the
Transaction Documents" below) describe all material terms and provisions
relating to the Notes. The summaries do not contain all the terms of the Notes
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Transaction Documents and the Notes.
All of the Notes offered by this Prospectus will be rated in one of
the four highest rating categories by one or more statistical rating
organizations (each a "Rating Agency" collectively, "Rating Agencies").
The Notes will generally be styled as debt instruments, having a
principal balance and a specified interest rate. The Notes of each series will
represent debt secured by an Asset Pool.
General Payment Terms of Notes
As provided in the related Transaction Documents, Noteholders will
be entitled to receive payments on their Notes on the specified Payment Dates or
on the next day that is not a Saturday, Sunday or other day on which commercial
banking institutions located in the city or cities where the Corporate Trust
Office of the Trustee and the Servicer are located are authorized or obligated
by law or executive order to be closed (each a "Business Day").
Neither the Notes nor the underlying Lease Receivables will be
guaranteed or insured by any governmental agency or instrumentality or the
Issuer, the Servicer, the Seller, any Trustee or any of their respective
affiliates.
Collections
The Servicer shall deposit the following funds net of any amounts
which the Servicer is expressly permitted to retain by the terms of the
Assignment and Servicing Agreement into the Collection Account, (as defined
below) which funds received on or prior to the last day of the prior calendar
month will be available for distribution on the next succeeding Payment Date:
(a) Lease Payments (as defined below) due during the prior
Collection Period;
(b) recoveries from Defaulted Leases (as defined below) to the
extent the Originator has not substituted Substitute Leases for such
Defaulted Leases (except to the extent required to reimburse unreimbursed
Servicer Advances);
(c) late charges received on delinquent Lease Payments not advanced
by the Servicer;
(d) proceeds from repurchases by the Seller of Leases as a result of
breaches of representations and warranties by the Seller to the extent the
Originator has not substituted Substitute Leases for such Leases;
(e) proceeds from investment of funds in the Collection Account and
any applicable Transaction Account (as defined below);
(f) Casualty Payments (as defined below);
(g) Termination Payments (as defined below) to the extent the Issuer
does not reinvest such Termination Payments in Additional Leases;
(h) Servicer Advances (as defined below); and
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(i) payments from the Seller to effect a redemption of the Notes
pursuant to the Indenture.
A "Lease Payment" is each periodic installment of rent payable by a
Lessee under a Lease. Casualty Payments, Termination Payments, prepayments of
rent required pursuant to the terms of a Lease at or before the commencement of
the term of such Lease Payments becoming due before each Cut-Off Date and
supplemental or additional payments required by the terms of such a Lease with
respect to taxes, insurance, maintenance, or other specific charges such as
excess copy charges and fee per scan charges are not Lease Payments.
A "Casualty Payment" is 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 a
reduction in the number or amount of any future Lease Payments or in the
termination of the Lessee's obligation to make future Lease Payments.
A "Termination Payment" is a payment payable by a Lessee under a
Lease upon the early termination of such Lease (other than 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.
"Defaulted Leases" are (i) Leases that have become more than 120
days delinquent or (ii) Leases that have been charged off by the Servicer.
Distributions
Funds on deposit in the Collection Account net of any amounts which
the Servicer is expressly permitted to withdraw by the terms of the Assignment
and Servicing Agreement ("Available Funds") and any amounts to be deposited into
the Collection Account from any Reserve Account, will be withdrawn on or before
each Payment Date to make payments of principal and interest due on the Notes,
amounts owed to the Servicer, Trustee and other parties and for other purposes
as described in the related Prospectus Supplement. Available Funds do not
include cash flows realized from the sale or release of Equipment following the
expiration date of the related Lease.
Prepayment and Yield Considerations
The rate of principal payments on the Notes, the aggregate amount of
each interest payment on the Notes and the yield to maturity of the Notes are
directly related to the rate of payments on the underlying Leases. The payments
on the Leases may be in the form of scheduled payments, prepayments or
liquidations due to default, casualty and other events, which cannot be
specified at present. Any such prepayments or liquidations will result in
distributions to Noteholders of amounts which would otherwise have been
distributed over the remaining term of the Leases. In general, the rate of such
payments may be influenced by a number of other factors, including general
economic conditions. The rate of principal payments may also be affected by any
repurchase of the underlying Leases by the Originator pursuant to the Assignment
and Servicing Agreement. In such event, the application of the repurchase price
will decrease the Aggregate Discounted Lease Balance, causing the corresponding
weighted average life of the Notes to decrease.
Subject to certain limitations, the Originator will have the option
to substitute Eligible Leases having similar characteristics for (i) a Defaulted
Lease, (ii) Leases subject to repurchase as a result of a breach of a
representation and warranty by the Originator under the Transaction Documents
which breach has not been cured following discovery/notice of such breach (each,
a "Warranty Lease") and (iii) Leases following a modification or adjustment to
the terms of such Lease (each an "Adjusted Lease"). The Originator may
substitute for Defaulted Leases, Adjusted Leases or Warranty Leases in an
aggregate amount not to exceed specified percentages (to be stated in the
related prospectus supplement) of the discounted present value of the Leases as
of the Cut-off Date. In addition, in the event of a Lease that terminates early
which has been prepaid in full, the Originator will have the option to transfer
an additional lease of similar characteristics (each, an "Additional Lease").
The Substitute Leases and Additional Leases must have a Discounted Lease Balance
(as defined below) of not less than the Discounted Lease Balance of the Leases
being replaced and the monthly payments on the Substitute Leases or Additional
Leases will be at least equal to those of the replaced Leases through the term
of such replaced Leases. In the event that a Substitute Lease is not provided
for a Defaulted Lease, the Aggregate Discounted Lease Balance of the Leases in
the
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related Asset Pool will be reduced in an amount at least equal to the Discounted
Lease Balance of the Defaulted Lease, plus any delinquent payments. The
"Discounted Lease Balance" of a Lease as of any Cut-Off Date is the present
value of all of the remaining payments scheduled to be made with respect to such
lease, discounted at a rate and frequency specified in the related Prospectus
Supplement.
The effective yield to holders of the Notes will depend upon, among
other things, the rate at which principal is paid to such Noteholders. The
after-tax yield to Noteholders may be affected by lags between the time interest
income accrues to Noteholders and the time the related interest income is
received by the Noteholders.
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement,
Noteholders of a given series may hold their Notes through the Depository Trust
Company ("DTC") (in the United States) or CEDEL or Euroclear (in Europe) if they
are participants of such systems, or indirectly through organizations that are
participants in such systems.
Cede, as nominee for DTC, will hold the global Notes in respect of
given series. CEDEL and Euroclear will hold omnibus positions on behalf of the
CEDEL Participants (as defined below) and the Euroclear Participants (as defined
below) (collectively, the "Participants"), respectively, through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositories (collectively, the "Depositories") which in turn will
hold such positions in customers' securities accounts in the Depositories' names
on the books of DTC.
DTC is a limited purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of securities. Participants
include brokers and dealers, banks, trust companies and clearing corporations.
Indirect access to the DTC system also is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or indirectly through
CEDEL Participants or Euroclear Participants, on the other, will be effected in
DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depository; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depository to take action to effect final settlement on its behalf by delivering
or receiving Notes in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. CEDEL
Participants and Euroclear Participants may not deliver instructions directly to
the Depositories.
Because of time-zone differences, credits of Notes in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent Notes settlement processing, dated the Business Day
following the DTC settlement date, and such credits or any transactions in such
Notes settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such Business Day. Cash received in
CEDEL or Euroclear as a result of sales of Notes by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the Business Day following settlement
in DTC.
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Noteholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Notes may do so only through Participants and Indirect Participants. In
addition, Noteholders will receive all distributions of principal and interest
through the Participants who in turn will receive them from DTC. Under a
book-entry format, Noteholders may experience some delay in their receipt of
payments, since such payments will be forwarded by the Issuer or note paying
agent to Cede, as nominee for DTC. DTC will forward such payments to its
Participants, which thereafter will forward them to Indirect Participants or the
Noteholders. It is anticipated that the only "Noteholder" in respect of any
series will be Cede, as nominee of DTC. Noteholders will not be recognized as
Noteholders, and the Noteholders will be permitted to exercise the rights of
Noteholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting
DTC and its operations (the "Rules"), DTC is required to make book-entry
transfers of Notes among Participants on whose behalf it acts with respect to
the Notes and to receive and transmit distributions of principal of, and
interest on, the Notes. Participants and Indirect Participants with which the
Noteholders have accounts with respect to the Notes similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Noteholders. Accordingly, although such Noteholders will not
possess Notes, the Rules provide a mechanism by which Participants will receive
payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a
Noteholder to pledge Notes to persons or entities that do not participate in the
DTC system, or to otherwise act with respect to such Notes, may be limited due
to the lack of a physical certificate for such Notes.
DTC will advise the Issuer and/or Trustee in respect of each series
that it will take any action permitted to be taken by a Noteholder only at the
direction of one or more Participants to whose accounts with DTC the Notes are
credited. DTC may take conflicting actions with respect to other undivided
interests to the extent that such actions are taken on behalf of Participants
whose holdings include such undivided interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
trust depository ("Trust Depository"). CEDEL holds notes for its participating
organizations ("CEDEL Participants") and facilitates the clearance and
settlement of notes transactions between CEDEL Participants through electronic
book-entry changes in accounts of CEDEL Participants, thereby eliminating the
need for physical movement of notes. Transactions may be settled in CEDEL in any
of 28 currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities lending and
borrowing. CEDEL interfaces with domestic markets in several countries. As a
professional Trust Depository, CEDEL is subject to regulation by the Luxembourg
Monetary Institute. CEDEL Participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Indirect
access to CEDEL is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold notes for participants of the
Euroclear System ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
notes and any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 28 currencies, including United States
dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. Euroclear is operated by Morgan Guaranty Trust Company of
New York, Brussels, Belgium office, under contract with Euroclear Clearance
System, S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the "Euroclear Operator" (as defined below), and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriter. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
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The "Euroclear Operator" is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of notes and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to Notes in the Euroclear System. All notes in the Euroclear System are
held on a fungible basis without attribution of specific Notes to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants and has no record of
relationship with persons holding through Euroclear Participants.
Except as required by law, neither the Issuer nor any paying agent
will have any liability for any aspect of the records relating to or payments
made or account of beneficial ownership interests of the related Notes held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Definitive Notes
The Notes of any series will be issued in fully registered,
certificated form ("Definitive Notes") to the Noteholders or their nominees,
rather than to DTC or its nominee, only if (i) the Servicer advises in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as Trust Depository with respect to such Notes and such Issuer is unable to
locate a qualified successor, (ii) such Servicer, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence of an
"Event of Default" under the Indenture or a default by the Servicer under the
Assignment and Servicing Agreement. Noteholders representing at least a majority
of the outstanding principal amount of such Notes advise the Issuer through DTC
in writing that the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in such Noteholders' best interest.
Upon the occurrence of any event described in the immediately
preceding paragraph, the Trustee will be required to notify all such Noteholders
through Participants of the availability of Definitive Notes. Upon surrender by
DTC of the Definitive Notes representing such Notes and receipt of instructions
for reregistration, the Issuer will reissue such Notes as Definitive Notes to
such Noteholders.
Distributions of principal of, and interest on, such Notes will
thereafter be made by the Issuer in accordance with the procedures set forth in
the Indenture directly to holders of Definitive Notes in whose names the
Definitive Notes were registered at the close of business on the applicable date
preceding a Payment Date, and of which the Issuer or its paying agent fixes the
identities of Noteholders (each a "Record Date"). Such distributions will be
made by check mailed to the address of such holder as it appears on the register
maintained by the Issuer. The final payment on any such Note, however, will be
made only upon presentation and surrender of such Note at the office or agency
specified in the notice of final distribution to the applicable Noteholders.
Definitive Notes will be transferable and exchangeable at the
offices of the Issuer or respective Trustee, as applicable, or of a certificate
registrar named in a notice delivered to holders of such Definitive Notes. No
service charge will be imposed for any registration of transfer or exchange, but
the Issuer or the Trustee, as applicable, may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
Reports to Noteholders
On or prior to each Payment Date, the Servicer or the Trustee, as
applicable, will forward or cause to be forwarded to each holder of record of a
Class of Notes a statement or statements with respect to the related
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Asset Pool setting forth the information specifically described in the
Transaction Document which generally will include the following information:
(i) the amount of the distribution with respect to such Class of
Notes;
(ii) the amount of such distribution allocable to principal;
(iii) the amount of such distribution allocable to interest;
(iv) the Asset Pool balance as of the close of business on the last
day of the related Remittance Period (as defined below);
(v) the aggregate outstanding principal balance and the Pool Factor
for such Class of Notes after giving effect to all payments reported under
(ii) above on such Payment Date;
(vi) the amount paid to the Servicer, if any, with respect to the
related Remittance Period; and
(vii) the aggregate purchase amounts for Lease Receivables that have
been reacquired, if any, for such Remittance Period.
Within the prescribed period of time for tax reporting purposes
after the end of each calendar year, the Issuer or the Servicer will provide to
the Noteholders a statement containing the amounts described in (ii) and (iii)
above 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.
Description of the Transaction Documents
The following summary describes certain material terms of each
transaction document pursuant to which the Asset Pool will be created and the
Notes will be issued. For purposes of this Prospectus, the term "Transaction
Documents" as used with respect to an Asset Pool means any and all agreements
relating to the establishment of the Asset Pool, the servicing of the related
Lease Receivables and the issuance of the Notes, including, without limitation,
the related Indenture and Assignment and Servicing Agreement. Forms of the
Transaction Documents have been filed as exhibits to the Registration Statement
of which this Prospectus forms a part. This description is not a complete
summary of all the provisions of the respective transaction documents.
Assignment and Servicing Agreement
Acquisition of the Lease Receivables. On the Closing Date, the
Seller will acquire the related Lease Receivables from the Originator pursuant
to an Assignment and Servicing Agreement in which the Originator will make
certain representations and warranties concerning the Lease Receivables. The
rights and benefits of the Seller under the Assignment and Servicing Agreement
will be assigned to the Issuer by the Seller pursuant to the Assignment and
Servicing Agreement and in turn pledged to the Trustee under an Indenture.
Contemporaneously, the Issuer will acquire the related Lease
Receivables from the Seller pursuant to the Assignment and Servicing Agreement.
The Issuer will pledge the Issuer's right, title and interests in and to such
Lease Receivables to the Trustee on behalf of Noteholders pursuant to the
Indenture. Certain of the rights and benefits of the Issuer under the Assignment
and Servicing Agreement will be assigned to the Trustee on behalf of Noteholders
as collateral for the Notes by the Issuer pursuant to the Indenture.
Additions, Substitutions and Adjustments. The Originator will be
obligated to purchase from the Issuer its interest in any Lease transferred to
the Issuer or pledged to a Trustee on behalf of Noteholders that has become a
Warranty Lease unless an Eligible Lease is substituted therefor in accordance
with the related Transaction Documents.
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Pursuant to the Transaction Documents, the Originator will have the
option to substitute Eligible Leases for Defaulted Leases, Adjusted Leases,
Warranty Leases and Early Termination Leases. The percentage of Leases in any
Asset Pool that can be substituted for will be limited as described in the
related Prospectus Supplement to a percentage of the aggregate discounted
present value of the Leases in the Asset Pool as of the related Cut-off Date.
See "Description of the Notes -- Prepayment and Yield Considerations".
The Servicer. The Servicer will service the Lease Receivables
comprising an Asset Pool pursuant to an Assignment and Servicing Agreement. The
Servicer may delegate its servicing responsibilities to one or more
sub-servicers, but will not be relieved of its liabilities with respect thereto.
The Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the Assignment and Servicing Agreement. An uncured breach of
such a representation or warranty that in any respect materially and adversely
affects the interests of the Noteholders will constitute a Servicer Default by
the Servicer under the related Transaction Documents.
Servicing Procedures. The Assignment and Servicing Agreement will
provide that the Servicer will take or cause to be taken all such actions as are
necessary or advisable to service, administer and collect each Lease in
accordance with customary and prudent servicing procedures for leases of a
similar type, and in accordance with applicable laws, rules and regulations and,
in any event, according to a standard of care not less than that which it
applies to leases it services for its own account.
Advances by the Servicer. Prior to any Payment Date, with respect to
any series, the Servicer may, but will not be required to, advance (each, a
"Servicer Advance") to the Trustee an amount sufficient to cover delinquencies
on Leases with respect to the prior Collection Period. The Servicer will be
entitled to reimbursement for Servicer Advances on the second following Payment
Date.
Payments on Lease Receivables. With respect to each series of Notes,
the Servicer will deposit in the Collection Account all payments on the related
Lease Receivables (from whatever source) and all proceeds of such Lease
Receivables within two (2) Business Days of the Servicer's receipt thereof.
Servicing Compensation. The Servicer will be entitled to receive a
servicing fee for each Collection Period (the "Servicing Fee") in an amount
equal to a specified percentage per annum of the discounted present value of the
assets comprising the Asset Pool, as of the first day of such Collection Period.
The Transaction Documents will specify the priority of the Servicing Fee in
relation to payments to Noteholders and other persons. The Servicing Fee may be
paid prior to any distribution to the Noteholders.
If so provided in the related Transaction Documents, the Servicer
will also be entitled to reimbursement of out-of-pocket expenses reasonably
incurred in the course of performance of its duties as Servicer and to collect
and retain any late fees, the penalty portion of interest paid on past due
amounts and other administrative fees or similar charges allowed by applicable
law with respect to the Lease Receivables and any prepayment premiums or other
payments in excess of the present value of all outstanding amounts owed under a
Lease by a Lessee as a result of the early termination thereof, and will be
entitled to reimbursement from the Issuer for certain liabilities. Payments by
or on behalf of Lessees will be allocated to scheduled payments and late fees
and other charges in accordance with the Servicer's normal practices and
procedures.
The Servicing Fee will compensate the Servicer for performing the
functions of a third party servicer of similar types of leases as an agent for
their beneficial owner. The Servicing Fee also will compensate the Servicer for
administering the Lease Receivables, accounting for collections and furnishing
statements to the Issuer and the Trustee with respect to distributions. The
Servicing Fee also will reimburse the Servicer for certain taxes, accounting
fees, outside auditor fees, trustees fees, data processing costs and other costs
incurred in connection with administering the Lease Receivables.
Statements to Trustees and Issuer. Prior to each Payment Date with
respect to each series of Notes, the Servicer will provide to the Trustee as of
the close of business on the last day of the preceding related Collection Period
a statement setting forth substantially the same information as is required to
be provided in the periodic reports provided to Noteholders described under
"Description of the Notes--Reports to Noteholders".
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Evidence as to Compliance. The Assignment and Servicing Agreement
will provide that a firm of independent public accountants will furnish to the
Issuer and the Trustee, annually, a statement as to compliance by the Servicer
during the preceding twelve months (or, in the case of the first such
certificate, the period from the applicable Closing Date) with certain standards
relating to the servicing of the Lease Receivables.
The Assignment and Servicing Agreement will also provide for the
annual delivery to the Issuer and/or the Trustee of a certificate signed by an
officer of the Servicer stating that the Servicer either has fulfilled its
obligations under the Assignment and Servicing Agreement in all material
respects throughout the preceding 12 months (or, in the case of the first such
certificate, the period from the applicable Closing Date) or, if there has been
a default in the fulfillment of any such obligation in any material respect,
describing each such default. The Servicer also will agree to give the Trustee
notice of certain "Servicer Defaults" (as defined below) under the related
Assignment and Servicing Agreement.
Copies of such statements and certificates may be obtained by
Noteholders by a request in writing addressed to the Trustee or the Issuer.
Certain Matters Regarding the Servicer. The Assignment and Servicing
Agreement will provide that the Servicer may not resign from its obligations and
duties as Servicer thereunder, except upon determination that the performance by
the Servicer of such duties is no longer permissible under applicable law. No
such resignation will become effective until the Trustee or a successor servicer
has assumed the Servicer's servicing obligations and duties under the
Transaction Document.
The Assignment and Servicing Agreement will further provide that
neither the Servicer nor any of its directors, officers, employees, or agents
shall be under any liability to the Issuer or the Noteholders for taking any
action or for refraining from taking any action pursuant to the Assignment and
Servicing Agreement; provided, however, that neither the Servicer nor any such
person will be protected against any liability that would otherwise be imposed
based on any breach of the warranties, representations or warranties made by the
Servicer in the Assignment and Servicing Agreement or by reason of willful
misfeasance, bad faith or negligence in the performance of duties.
Under the circumstances specified in the Assignment and Servicing
Agreement, any entity into which the Servicer may be merged or consolidated, or
any entity resulting from any merger or consolidation to which the Servicer is a
party, or any entity succeeding to the business of the Servicer or, with respect
to its obligations as Servicer, which corporation or other entity in each of the
foregoing cases assumes the obligations of the Servicer, will be the successor
to the Servicer under the Assignment and Servicing Agreement.
Servicer Events of Default. The following events and conditions
shall be defined in the Assignment and Servicing Agreement as "Servicer
Events of Default":
(a) failure on the part of the Servicer to remit to the Trustee
within three Business Days following the receipt thereof any
monies received by the Servicer required to be remitted to the
Trustee under the Assignment and Servicing Agreement;
(b) so long as IOS Capital is the Servicer, failure on the part of
IOS Capital to pay to the Trustee on the date when due, any
payment required to be made by IOS Capital pursuant to the
Assignment and Servicing Agreement;
(c) default on the part of either the Servicer or (so long as IOS
Capital is the Servicer) IOS Capital in its observance or
performance in any material respect of certain covenants or
agreements in the Assignment and Servicing Agreement which
failure continues unremedied for a period of 30 days after the
earlier of (i) the date it first becomes known to any officer
of IOS Capital or the Servicer, as the case may be, and (ii)
the date on which written notice thereof requiring the same to
be remedied shall have been given to the Servicer or IOS
Capital, as the case may be, by the Trustee, or to the
Servicer or IOS Capital, as the case may be, and the Trustee
by any holder of the Notes;
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(d) if any representation or warranty of IOS Capital made in the
Assignment and Servicing Agreement shall prove to be incorrect
in any material respect as of the time made; provided,
however, that the breach of any representation or warranty
made by IOS Capital in such Assignment and Servicing Agreement
will be deemed to be "material" only if it affects the
Noteholders, the enforceability of the Indenture or of the
Notes; and provided, further, that such material breach of any
representation or warranty made by IOS Capital in such
Assignment and Servicing Agreement with respect to any of the
Lease Receivables subject thereto will not constitute a
Servicer Event of Default if IOS Capital repurchases such
Lease Receivable in accordance with the Assignment and
Servicing Agreement to the extent provided therein;
(e) certain insolvency or bankruptcy events relating to the
Servicer;
(f) 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;
(g) 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.
Rights upon Servicer Default. As long as a Servicer Default under
the Assignment and Servicing Agreement remains unremedied, the Trustee, or
holders of Notes evidencing not less than [__% of the voting rights of such then
outstanding Notes] may terminate all the rights and obligations of the Servicer,
if any, under the Assignment and Servicing Agreement, whereupon a successor
servicer appointed by such Trustee will succeed to all the responsibilities,
duties and liabilities of the Servicer under the Assignment and Servicing
Agreement and will be entitled to similar compensation arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for the
Servicer, and no Servicer Default other than such appointment has occurred, such
bankruptcy trustee or official may have the power to prevent the Trustee or the
Noteholders from effecting a transfer of servicing. In the event that the
Trustee is unwilling or unable to so act, it may, subject to certain
limitations, appoint, or petition a court of competent jurisdiction for the
appointment of, a successor. The Trustee may make arrangements for compensation
to be paid to any such successor, which in no event may be greater than the
servicing compensation payable to the Servicer under the Assignment and
Servicing Agreement.
Indenture
Accounts. The Trustee will establish and maintain with the Trustee
one or more accounts (such as the Collection Account), in the name of such
Trustee on behalf of the Noteholders, into which payments made on or with
respect to the related Lease Receivables are to be deposited as provided in the
related Transaction Documents (the "Collection Account"). Pursuant to the
Transactions Documents, the one or more other separate accounts in the name of
the Servicer, the Issuer or the Trustee on behalf of the Noteholders, may be
established (i) for the deposit of funds for distribution to the Noteholders (a
"Distribution Account"), (ii) to provide reserves to cover shortfalls in
Available Funds (a "Reserve Account"), (iii) to provide funds for the purchase
of additional Lease Receivables during any applicable pre-funding period (a
"Pre-Funding Account"), or (iv) for other purposes (an "Additional Account").
Funds in the Collection Account and any Distribution Account,
Reserve Account, Pre-Funding Account or Additional Account (collectively, the
"Transaction Accounts") shall be invested as provided in the related Transaction
Documents and Indenture in Eligible Investments. "Eligible Investments" are
generally limited to investments acceptable to the Rating Agencies as being
consistent with the rating of such Notes. Eligible
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Investments generally are limited to obligations that mature not later than the
Business Day immediately preceding the related Payment Date.
The Transaction Accounts will be maintained as Eligible Accounts.
"Eligible Account" means either (a) an account maintained with a depository
institution or trust company acceptable to each of the Rating Agencies, 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.
Distributions. Beginning on the first Payment Date, distributions of
principal and interest (or, where applicable, of principal only or interest
only) on each Class of such Notes entitled thereto will be made by the Trustee
to the Noteholders. The timing, calculation, allocation, order, source,
priorities of, distribution of, and requirements for each Class of Notes of such
series will be set forth in the related Prospectus Supplement.
Credit and Cash Flow Enhancements. The amounts and types of credit
enhancement arrangements, if any, and the provider thereof, if applicable, with
respect to each Class of Notes of a given series will be set forth in the
related Prospectus Supplement. If and to the extent provided in the related
Prospectus Supplement, credit enhancement may be in the form of an insurance
policy, subordination of one or more Classes of Notes, reserve accounts,
overcollateralization, letters of credit, credit or liquidity facilities, third
party payments or other support, surety bonds, guaranteed cash deposits or such
other arrangements as may be described in the related Prospectus Supplement or
any combination of two or more of the foregoing. If specified in the related
Prospectus Supplement, credit enhancement for a Class of Notes may cover one or
more other Classes of Notes of the same series, and credit enhancement for a
series of Notes may cover one or more other series of Notes.
The presence of credit enhancement for the benefit of any Class or
series of Notes is intended to enhance the likelihood of receipt by the
Noteholders or such Class or series of the full amount of principal and interest
due thereon and to decrease the likelihood that such Noteholders will experience
losses. As more specifically provided in the related Prospectus Supplement, the
credit enhancement for a Class or series of Notes will not provide protection
against all risks of loss and will not guarantee repayment of the entire
principal balance and interest thereon. If losses occur which exceed the amount
covered by any credit enhancement or which are not covered by any credit
enhancement, Noteholders of any Class or series will bear their allocable share
of deficiencies, as described in the related Prospectus Supplement. In addition,
if a form of credit enhancement covers more than one series of Notes,
Noteholders of any such series will be subject to the risk that such credit
enhancement will be exhausted by the claims of Noteholders of other series.
If the protection provided to the Noteholders of a given Class of
Notes by the subordination of another Class of Notes is insufficient, the Issuer
must rely solely on the payments from the Lessees on the related Leases, and the
proceeds from the sale of Equipment which secures or is leased under the
Defaulted Leases (as defined below). In such event, certain factors may affect
such Issuer's ability to realize on the Equipment securing such Leases, and thus
may reduce the proceeds to be distributed to the Noteholders.
Modification of the Indenture. With certain exceptions, under the
Indenture, the rights and obligations of the Issuer and the rights of the
Noteholders may be modified by the Issuer with the consent of the holders of not
less than 66-2/3% in aggregate principal amount of the Notes then outstanding
under the Indenture; but no such modification may be made if it would result in
the reduction or withdrawal of the then current ratings of the outstanding Notes
and no such modification may be made without the consent of the holder of each
outstanding note affected thereby if it would (a) change the fixed maturity of
any Note, or the principal amount or interest amount payable thereof, or change
the priority of payment thereof or reduce the interest rate or the principal
thereon or change the place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable, or impair the right to institute
the suit for the enforcement of any such payment on or after the maturity
thereof; or (b) reduce the above-stated percentage of Notes, without the consent
of the holders of all Notes then outstanding under such Indenture or (c) modify
the provisions of the Indenture restricting modifications on waivers of the
provisions of the Indenture except to increase any percentage or fraction set
forth therein or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the holder of each
outstanding note affected thereby; or (d) modify or alter the provisions of the
proviso to the definition of the term "Outstanding" in the Indenture; or (e)
permit the creation of any lien ranking prior to or on a parity with the lien of
the Indenture with respect to any part of the assets of any Asset Pool or,
except as provided in the Indenture,
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terminate the lien of the Indenture on any property at any time subject to the
Indenture or deprive any Noteholder of the security afforded by the lien of the
Indenture.
Events of Default. "Events of Default" under the related Indenture
will consist of: (i) a default for five days or more in the payment of any
interest on any Note; (ii) a default in the payment of the principal of or any
installment of the principal of any Note at the stated maturity or when the same
becomes due and payable; (iii) a default in the observance or performance in any
material respect of any covenant or agreement regarding the contemplated
transaction made in the Transaction Documents, or any representation or warranty
made by the Issuer in the Transaction Documents or in any certificate delivered
pursuant thereto or in connection therewith having been incorrect as of the time
made, and the continuation of any such default or the failure to cure such
breach of a representation or warranty for a period of 30 days after notice
thereof is given to the Issuer by the Trustee or the Issuer and the Trustee by
the holders of at least 25% in principal amount of the Notes then outstanding;
or (iv) certain events of bankruptcy, insolvency, receivership or liquidation
relating to the Issuer.
If an Event of Default occurs, the unpaid principal amount of the
related Notes shall automatically become due and payable together with all
accrued and unpaid interest thereon. The Trustee may, however, if the Event of
Default involves other than non-payment of principal or interest on the Notes,
not sell the related Leases and Equipment unless such sale is for an amount
greater than or equal to the outstanding principal amount of the Notes unless
directed to do so by the holders of 66-2/3% of the then outstanding principal
amount of the Notes.
Subsequent to an Event of Default and following any acceleration of
the Notes pursuant to the Indenture, any moneys that may then be held or
thereafter received by the Trustee will be applied in the order of priority set
forth in the related Prospectus Supplement 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.
The Indenture will provide that the holders of 66-2/3% in aggregate
principal amount of the Notes then outstanding will have the right to waive
certain defaults and, subject to certain limitations, to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust power conferred on the Trustee. The Indenture will
provide that in case an Event of Default shall occur (which shall not have been
cured or waived), the Trustee will be required to exercise such of its rights
and powers under such Indenture and to use the degree of care and skill in their
exercise that a prudent man would exercise or use in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under such Indenture at the request of any
of the Noteholders unless they shall have offered to the Trustee reasonable
security or indemnity. Upon request of a Noteholder, the Trustee will provide
information as to the outstanding principal amount of each Class of Notes.
Redemption. The Issuer may, at its option, redeem the Notes, as a
whole, at their principal amount, without premium, together with interest
accrued to the date fixed for redemption if on any payment date the discounted
present value of non-Defaulted Leases is less than or equal to 10% of the
discounted present value of the Leases in the related Asset Pool as of the
Cut-Off Date. The Issuer will give notice of such redemption to each Noteholder
and the Trustee at least 30 days before the Payment Date fixed for such
prepayment. Upon deposit of funds necessary to effect such redemption, the
Trustee shall pay the remaining unpaid principal amount on the Notes and all
accrued and unpaid interest as of the Payment Date fixed for redemption.
Certain Legal Aspects Of The Lease Receivables
General
The Leases will either be "chattel paper" as defined in the Uniform
Commercial Code or Leases that are not treated materially differently from
"chattel paper" for purposes of title transfer, security interests or remedies
on default. Pursuant to the UCC for most purposes, a sale of chattel paper is
treated in a manner similar to a transaction creating a security interest in
chattel paper. The Issuer, the Originator, the Servicer and/or the Seller will
cause the filing of appropriate UCC-1 financing statements with respect to the
Leases to be made with the appropriate governmental authorities. Under the
Assignment and Servicing Agreement, the Servicer will be
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obligated from time to time to take such actions as are necessary to protect,
perfect and preserve the Issuer's or the Trustee's interests in the Leases and
their proceeds, as the case may be.
The Leases are triple-net leases, requiring the Lessees to pay all
taxes, maintenance and insurance associated with the Equipment, and are
primarily non-cancelable by the Lessees.
The leases are "hell or high water" leases, under which the
obligations of the Lessee is absolute and unconditional, regardless of any
defense, setoff or abatement which the Lessee may have against IOS Capital, as
Originator or Servicer, the Issuer, or any other person or entity whatsoever.
Defaults under the Leases are generally the result of failure to pay
amounts when due, failure to observe other covenants in the Lease,
misrepresentations by, or insolvency, bankruptcy or appointment of a trustee or
receiver for, the Lessee under a Lease. The remedies of the lessor (and the
Issuer as assignee) following any applicable notice and cure period are
generally to se to enforce the performance by the Lessee of the terms and
covenants of the Lease (including the Lessee's obligations to make scheduled
payments) or recover damages of the breach thereof, to accelerate the balance of
the remaining scheduled payments paid or to terminate the rights of the Lessee
under such Lease. Although the Leases permit the lessor to repossess and dispose
of the related Equipment in the event of a lease default, and to credit such
proceeds against the Lessee's liabilities thereunder, such remedies may be
limited where the Lessee thereunder is subject to bankruptcy, or other
insolvency proceedings.
UCC and Bankruptcy Considerations
The Originator will transfer all the Originator's interest in the
Equipment to the Seller. The Seller will assign its interest as secured party in
the Equipment relating to certain of the Leases to the Issuer, which in turn
will pledge such interest to the Trustee for the benefit of the Noteholders. The
Seller will not transfer any of its ownership interests in any of the Equipment.
Because of this, the Trustee, on behalf of the Noteholders, will have no
interest in or recourse to any of the Equipment other than by virtue of the
assignment of the Seller's interest as secured party in such Equipment to the
Issuer and the Issuer's pledge of such interest to the Trustee. As a result, the
Trustee may be unable to foreclose on the Equipment in the event of a default by
a Lessee on any Lease and Noteholders may experience delays in receiving
payments and suffer a loss of their investment in the Notes. UCC financing
statements will not be filed to perfect any security interest in the Equipment.
Moreover, Equipment may be subject to a superior lien. In such case, the senior
lienholder may be entitled to be paid the full amount of the indebtedness owed
to it out of the sale proceeds before such proceeds could be applied to the
payment of claims on behalf of the Issuer or Noteholders. In addition, in the
event of bankruptcy of the Originator or the Seller, the security interest in
the Equipment of the Issuer or Trustee may be subject to avoidance under the
Bankruptcy Code of 1978, as amended (the "Bankruptcy Code").
In the event of a default by the Lessee under a Finance Lease, the
Servicer may take action to enforce such Defaulted Lease by repossession and
resale of the Equipment. Under the UCC in most states, a creditor can, without
prior notice to the debtor, repossess assets securing a defaulted contract by
the Lessee's voluntary surrender of such assets or by "self-help" repossession
that does not involve a breach of the peace or by judicial process.
In the event of a default by the Lessee under a Finance Lease, some
jurisdictions require that the Lessee be notified of the default and be given a
time period within which it may cure the default prior to repossession.
Generally, this right of reinstatement may be exercised on a limited number of
occasions in any one-year period.
The UCC and other state laws place restrictions on repossession
sales, including requirements that the secured party provide the Lessee with
reasonable notice of the date, time and place of any public sale and/or the date
after which any private sale of the collateral may be held and that any such
sale be conducted in a commercially reasonable manner. The Assignment and
Servicing Agreement may require the Servicer to sell promptly any repossessed
item of Equipment or re-lease such Equipment for the benefit of the Noteholders.
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Under most state laws, a Lessee has the right to redeem collateral
for its obligations prior to actual sale by paying to the secured party the
unpaid balance of the obligation plus reasonable expenses for repossession,
holding and preparing the collateral for disposition and arranging for its sale,
plus, to the extent provided for in the written agreement of the parties,
reasonable attorneys' fees.
In addition, because the market value of the equipment of the type
financed pursuant to the Lease Receivables generally declines with age and
because of obsolescence, the net disposition proceeds of Equipment at any time
during the term of the Lease may be less than the outstanding balance on the
Lease principal balance. Because of this, and because other creditors may have
rights in the related Equipment superior to those of the Issuer, the Servicer
may not be able to recover the entire amount due on a Defaulted Lease in the
event that the Servicer elects to repossess and sell such Equipment at any time.
Under the UCC and laws applicable in most states, a creditor is
entitled to obtain a deficiency judgment from a Lessee for any deficiency on
repossession and resale of the asset securing the unpaid balance of such
Lessee's contract. However, some states impose prohibitions or limitations on
deficiency judgments. In most jurisdictions, the courts, in interpreting the
UCC, would impose upon a creditor an obligation to repossess the equipment in a
commercially reasonable manner and to "mitigate damages" in the event of a
Lessee's failure to cure a default. The creditor would be required to exercise
reasonable judgment and follow acceptable commercial practice in seizing and
disposing of the equipment and to offset the net proceeds of such disposition
against its claim. In addition, a Lessee may successfully invoke an election of
remedies defense to a deficiency claim in the event that the Servicer's
repossession and sale of the Equipment is found to be a retention discharging
the Lessee from all further obligations under UCC Section 9-505(2). If a
deficiency judgment were granted, the judgment would be a personal judgment
against the Lessee for the shortfall, but a defaulting Lessee may have very
little capital or sources of income available following repossession. Therefore,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount or uncollectable.
Certain statutory provisions, including federal and state bankruptcy
and insolvency laws, may also limit the ability of the Servicer to repossess and
resell collateral or obtain a deficiency judgment. In the event of the
bankruptcy or reorganization of a Lessee, various provisions of the Bankruptcy
Code and related laws may interfere with or eliminate the ability of the
Servicer, the Issuer or the Trustee to enforce its rights under the Lease
Receivables. If bankruptcy proceedings were instituted in respect of a Lessee,
the Issuer and/or Trustee could be prevented from continuing to collect payments
due from or on behalf of such Lessee or exercising any remedies without the
approval of the bankruptcy court, and the bankruptcy court could permit the
Lessee to use or dispose of the Equipment and provide the Issuer and/or Trustee
with a lien on substitute collateral, so long as such substitute collateral
constituted "adequate protection" as defined under the Bankruptcy Code.
In the case of operating leases, the Bankruptcy Code grants to the
bankruptcy trustee or the debtor-in-possession a right to elect to assume or
reject any executory contract or unexpired lease. Any rejection of such a lease
or contract constitutes a breach of such lease or contract, entitling the
nonbreaching party to a claim for damages for breach of contract. The net
proceeds from any resulting judgment would be deposited by the Servicer into the
Collection Account and allocated to the Noteholders as more fully described
herein and in the related Prospectus Supplement. Upon the bankruptcy of a
Lessee, if the bankruptcy trustee or debtor-in-possession elected to reject a
Lease, the flow of scheduled payments to Noteholders would cease. In the event
that, as a result of the bankruptcy of a Lessee, the Servicer is prevented from
collecting scheduled payments with respect to Leases and such Leases become
Defaulted Leases, no recourse would be available against the Originator (except
for misrepresentation or breach of warranty) and the Noteholders could suffer a
loss with respect to the Notes. Similarly, upon the bankruptcy of the Issuer, if
the bankruptcy trustee or debtor-in-possession elected to reject a Lease, the
flow of Lease Payments to the Issuer and the Noteholders would cease. As noted
above, however, the Issuer has been structured so that the filing of a
bankruptcy petition with respect to it is unlikely. See "The Issuer."
In addition, certain of the Leases (but not in excess of 3% of the
related Asset Pool) may be with governmental entities. Payment by governmental
authorities of amounts due under such Leases may be contingent upon legislative
approval. Further, the assignment of such payment obligations may be void or
voidable if not done in compliance with applicable government rules and
regulations. Accordingly, payment delays and collection difficulties may limit
collections with respect to certain governmental Leases.
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These UCC and bankruptcy provisions, in addition to the possible
decrease in value of a repossessed item of Equipment, may limit the amount
realized on the sale of the Equipment to less than the amount due on the related
Lease.
Material Federal Income Tax Consequences
General
The following discussion sets forth the material federal income tax
consequences to the original purchasers of the Notes of the purchase, ownership
and disposition of the Notes. Tax Counsel's opinion does not purport to deal
with all federal tax considerations applicable to all categories of investors.
Certain holders, including insurance companies, tax-exempt organizations,
financial institutions or broker deals, taxpayers subject to the alternative
minimum tax, and holders that will hold the Notes as other than capital assets,
may be subject to special rules that are not discussed below. In particular,
this discussion applies only to Institutional Investors that purchase Notes
directly from the issuer and hold the Notes as capital assets.
The discussion that follows, and the opinion set forth below of
Dewey Ballantine LLP, special tax counsel to the Issuer ("Tax Counsel") are
based upon provisions of the Internal Revenue Code of 1986, as amended (the
"Code") and treasury regulations promulgated thereunder as in effect on the date
hereof and on existing judicial and administrative interpretations thereof.
These authorities are subject to change and to differing interpretations, which
could apply retroactively. The opinion of Tax Counsel is not binding on the
courts or the Internal Revenue Service (the "IRS"). Potential investors should
consult their own tax advisors in determining the federal, state, local and any
other tax consequences to them of the purchase, ownership and disposition of the
Notes.
The following discussion addresses lease backed notes such as the
Notes that are intended to be treated for federal income tax purposes as
indebtedness secured by the underlying Lease Receivables. Tax Counsel has
prepared the following discussion and is of the opinion that such discussion is
correct in all material respects.
Tax Characterization of the Issuer
Tax counsel is of the opinion that the Issuer will not be treated as
an association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes.
Tax Characterization of the Notes
In the opinion of Tax Counsel, although no transaction closely
comparable to that contemplated herein has been the subject of any treasury
regulation, revenue, ruling or judicial decision, based on the application of
existing law to the facts as set forth in the applicable agreements, the Notes
will be treated as indebtedness for federal income tax purposes. If
characterized as indebtedness, interest on the Notes will be taxable as ordinary
income for federal income tax purposes when received by Noteholders using the
cash method of accounting and when secured by Noteholders using the accrual
method of accounting. Noteholders using the accrual method of accounting may be
required to report income for tax purposes in advance of receiving a
corresponding cash distribution with which to pay the related tax. Interest
received on the Notes also may constitute "investment income" for purposes of
certain limitations of the Code concerning the deductability of investment
interest expense.
Although it is the opinion of Tax Counsel that the Notes are
properly characterized as indebtedness for federal income tax purposes, no
assurance can be given that such characterization of the Offered Notes will
prevail. If the Notes were treated as an ownership interest in the Leases, all
income on such Leases would be income to the holders of the Notes, and related
fees and expenses would generally be deductible (subject to certain limitations
on the deductability of miscellaneous itemized deductions by individuals) and
certain market discount and premium provisions of the Code might apply to a
purchase of the Notes.
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If, alternatively, the Notes were treated as an equity interest in
the Issuer, the Issuer might be classified as a partnership or as an association
taxable as a corporation or a publicly traded partnership taxable as a
corporation. If the Notes were treated as interests in a partnership, each item
of income, gain, loss, deduction and credit generated through the ownership of
the Equipment and the Leases by the partnership would be passed through to the
Holders, as partners in such a partnership according to their respective
interests therein. The timing, amount and character of the income or expenses
reportable by the Holders as partners in such a partnership could differ from
the income or expenses reportable by the Holders as holders of debt. If the
Holders were treated as partners, a cash basis Holder might be required to
report income when it accrues to the partnership rather than when it is received
by the Holder. Moreover, if Notes were treated as interests in a partnership, an
individual Holder's share of expenses of the partnership (such as Servicing
Fees) would be miscellaneous itemized deductions that in the aggregate are
allowed only to the extent they exceed two percent of the individual Holder's
adjusted gross income, meaning that the individual Holder might be taxed on a
greater amount of income than the stated interest on his or her Notes. Finally,
if a Note were treated as a partnership interest, any taxable income allocated
to a Holder that is a pension, profit sharing or employee benefit plan or other
tax-exempt, could constitute "unrelated business taxable income."
If the Notes were treated as interests in an association taxable as
a corporation or a publicly traded partnership taxable as a corporation, the
resulting entity would be subject to federal income tax at corporate tax rates
on its taxable income generated by ownership of the Lease Receivables. Moreover,
distributions by the entity on the Notes probably would not be deductible in
computing the entity's taxable income and all or part of any distributions to
Holders would probably be treated as dividend income to such Holders. Such an
entity-level tax could result in a reduced amount of cash available for
distributions to Noteholders.
Since the Issuer will treat the Notes as indebtedness for federal
income tax purposes, the Indenture Trustee (and Participants and Indirect
Participants) will not attempt to satisfy the tax reporting requirements that
would apply under these alternative characterizations of the Notes. Further, if
the IRS were to contend successfully that the Notes are interests in a publicly
traded partnership taxable as a corporation, additional tax consequences would
apply to foreign Holders. Investors are urged to consult their own tax advisors
with regard to the potential application of such provisions.
The Issuer's assets will be the assets of the partnership. The
Issuer's income will consist primarily of interest and finance charges earned on
the underlying Lease Receivables. The Issuer's deductions will consist primarily
of interest accruing with respect to any indebtedness issued by the Issuer,
servicing and other fees, and losses or deductions upon collection or
disposition of the Issuer's assets. In certain instances, the Issuer could have
an obligation to make payments of withholding tax on behalf of a beneficial
owner of a Partnership Interest. (See "Backup Withholding" and "Foreign
Investors" below).
Discount and Premium
A Note purchased for an amount other than its outstanding principal
amount will be subject to the rules governing original issue discount, market
discount or premium. In very general terms, (i) original issue discount is
treated as a form of interest and must be included in a beneficial owner's
income as it accrues (regardless of the beneficial owner's regular method of
accounting) using a constant yield method; (ii) market discount is treated as
ordinary income and must be included in a beneficial owner's income as principal
payments are made on the Note (or upon a sale of a Note); and (iii) if a
beneficial owner so elects, premium may be amortized over the life of the Note
and offset against inclusions of interest income. These tax consequences are
discussed in greater detail below. Beneficial owners who are required to include
the interest income as it accrues, may be required to report income for tax
purposes in advance of receiving a corresponding cash contribution with which to
pay the related tax.
Original Issue Discount. In general, a Note will be considered to be
issued with original issue discount equal to the excess, if any, of its "stated
redemption price at maturity" over its "issue price." The issue price of a Note
is the initial offering price to the public (excluding bond houses and brokers)
at which a substantial number of the Notes were sold. The issue price also
includes any accrued interest attributable to the period between the beginning
of the Remittance Period and the closing date relating to such series of Notes
(the "Closing Date"). The stated redemption price at maturity of a Note that has
a notional principal amount or receives principal only or that is or may provide
for accruals of interest is equal to the sum of all distributions to be made
under such Note.
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The stated redemption price at maturity of any other Note is its stated
principal amount, plus an amount equal to the excess (if any) of the interest
payable on the first Payment Date over the interest that accrues for the period
from the Closing Date to the first Payment Date. The Trustee will supply, at the
time and in the manner required by the IRS, to beneficial owners, brokers and
middlemen information with respect to the original issue discount accruing on
the Notes.
Notwithstanding the general definition, original issue discount will
be treated as zero if such discount is less than 0.25% of the stated redemption
price at maturity of the Note multiplied by its weighted average life. The
weighted average life of a Note is apparently computed for this purpose as the
sum, for all distributions included in the stated redemption price at maturity,
of the amounts determined by multiplying (i) the number of complete years
(rounding down for partial years) from the Closing Date until the date on which
each such distribution is expected to be made under the assumption that the
Lease Receivables prepay at a specified rate (the "Prepayment Assumption") by
(ii) a fraction, the numerator of which is the amount of such distribution and
the denominator of which is the Note's stated redemption price at maturity. Even
if original issue discount is treated as zero under this rule, the actual amount
of original issue discount must be allocated to the principal distributions on
the Note and, when each such distribution is received, gain equal to the
discount allocated to such distribution will be recognized.
The adjusted issue price of a Note at any time will equal the issue
price of such Note, increased by the aggregate amount of previously accrued
original issue discount with respect to such Note, and reduced by the amount of
any distributions made on such Note as of that time of amounts included in the
stated redemption price at maturity. The original issue discount accruing during
any accrual period will then be allocated ratably to each day during the period
to determine the daily portion of original issue discount.
A subsequent purchaser of a Note that purchases such Note at a cost
less than its remaining stated redemption price at maturity also will be
required to include in gross income for each day on which it holds such Note,
the daily portion of original issue discount with respect to such Note (but
reduced, if the cost of such Note to such purchaser exceeds its adjusted issue
price, by an amount equal to the product of (i) such daily portion and (ii) a
constant fraction, the numerator of which is such excess and the denominator of
which is the sum of the daily portions of original issue discount on such Note
for all days on or after the day of purchase).
Market Discount. A beneficial owner that purchases a Note at a
market discount, that is, at a purchase price less than the remaining stated
redemption price at maturity of such Note (or, in the case of a Note with
original issue discount, its adjusted issue price), will be required to allocate
each principal distribution first to accrued market discount on the Note, and
recognize ordinary income to the extent such distribution does not exceed the
aggregate amount of accrued market discount on such Note not previously included
in income. With respect to Notes that have unaccrued original issue discount,
such market discount must be included in income in addition to any original
issue discount. A beneficial owner that incurs or continues indebtedness to
acquire a Note at a market discount may also be required to defer the deduction
of all or a portion of the interest on such indebtedness until the corresponding
amount of market discount is included in income. In general terms, market
discount on a Note may be treated as accruing either (i) under a constant yield
method or (ii) in proportion to remaining accruals of original issue discount,
if any, or if none, in proportion to remaining distributions of interest on the
Note. The Trustee will make available, as required by the IRS, to beneficial
owners of Notes information necessary to compute the accrual of market discount.
Notwithstanding the above rules, market discount on a Note will be
considered to be zero if such discount is less than 0.25% of the remaining
stated redemption price at maturity of such Note multiplied by its weighted
average remaining life. Weighted average remaining life presumably would be
calculated in a manner similar to weighted average life, taking into account
payments (including prepayments) prior to the date of acquisition of the Note by
the subsequent purchaser. If market discount on a Note is treated as zero under
this rule, the actual amount of market discount must be allocated to the
remaining principal distributions on the Note and, when each such distribution
is received, gain equal to the discount allocated to such distribution will be
recognized.
Premium. A purchaser of a Note that purchases such Note at a cost
greater than its remaining stated redemption price at maturity will be
considered to have purchased such Note (a "Premium Note") at a premium. Such a
purchaser need not include in income any remaining original issue discount and
may elect, under
39
<PAGE>
section 171(c)(2) of the Code, to treat such premium as "amortizable bond
premium." If a beneficial owner makes such an election, the amount of any
interest payment that must be included in such beneficial owner's income for
each period ending on a Payment Date will be reduced by the portion of the
premium allocable to such period based on the Premium Note's yield to maturity.
Such premium amortization should be made using constant yield principles. If
such election is made by the beneficial owner, the election will also apply to
all bonds the interest on which is not excludible from gross income ("fully
taxable bonds") held by the beneficial owner at the beginning of the first
taxable year to which the election applies and to all such fully taxable bonds
thereafter acquired by it, and is irrevocable without the consent of the IRS. If
such an election is not made, (i) such a beneficial owner must include the full
amount of each interest payment in income as it accrues, and (ii) the premium
must be allocated to the principal distributions on the Premium Note and when
each such distribution is received, a loss equal to the premium allocated to
such distribution will be recognized. Any tax benefit from the premium not
previously recognized will be taken into account in computing gain or loss upon
the sale or disposition of the Premium Note.
Special Election. A beneficial owner may elect to include in gross
income all "interest" that accrues on the Note by using a constant yield method.
For purposes of the election, the term "interest" includes stated interest,
acquisition discount, original issue discount, de minimis original issue
discount, market discount, de minimis market discount and unstated interest as
adjusted by any amortizable bond premium or acquisition premium. A beneficial
owner should consult its own tax advisor regarding the time and manner of making
and the scope of the election and the implementation of the constant yield
method.
Sale or Exchange of Notes
If a Note is sold or exchanged, the seller of the Note will
recognize gain or loss equal to the difference between the amount realized on
the sale or exchange and the adjusted basis of the Note. The adjusted basis of a
Note will generally equal its cost, increased by any OID or market discount
includible in income with respect to the Note through the date of sale and
reduced by any principal payments previously received with respect to the Note,
any payments allocable to previously accrued OID or market discount and any
amortized market premium. Subject to the market discount rules, gain or loss
will generally be capital gain or loss if the Note was held as a capital asset.
Capital losses generally may be used only to offset capital gains.
Backup Withholding
Distributions of interest and principal, as well as distributions of
proceeds from the sale of Notes, may be subject to the "backup withholding tax"
under section 3406 of the Code at a rate of 31% if recipients of such
distributions fail to furnish to the payor certain information, including their
taxpayer identification numbers, or otherwise fail to establish an exemption
from such tax. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against such recipient's federal income
tax. Furthermore, certain penalties may be imposed by the IRS on a recipient of
distributions that is required to supply information but that does not do so in
the proper manner.
The Internal Revenue Service has issued final regulations (the
"Withholding Regulations"), which change certain of the rules relating to
certain presumptions currently available relating to information reporting and
backup withholding. The Withholding Regulations would provide alternative
methods of satisfying the beneficial ownership certification requirement. The
Withholding Regulations are effective for distributions made after December 31,
1999, although valid withholding certificates that are held on that date remain
valid until the earlier of December 31, 2000 or the due date of expiration of
the certificate under the rules as currently in effect.
Distributions made on a Note to, or on behalf of, a beneficial owner
that is not a U.S. Person generally will be exempt from U.S. federal income and
withholding taxes. The term "U.S. Person " means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision thereof,
an estate that is subject to U.S. federal income tax regardless of the source of
its income, or a trust if a court within the United States can exercise primary
supervision over its administration and at least one United States person has
the authority to control all substantial decisions of the trust. This exemption
is applicable provided (a) the beneficial owner is not subject to U.S. tax as a
result of a connection to the United States other than ownership of the Note,
(b) the beneficial owner signs a statement under
40
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penalties of perjury that certifies that such beneficial owner is not a U.S.
Person, and provides the name and address of such beneficial owner, and (c) the
last U.S. Person in the chain of payment to the beneficial owner receives such
statement from such beneficial owner or a financial institution holding on its
behalf and does not have actual knowledge that such statement is false.
Beneficial owners should be aware that the IRS might take the position that this
exemption does not apply to a beneficial owner that is a "controlled foreign
corporation" described in section 881(c)(3)(C) of the Tax Code.
If income or gain with respect to a Note is effectively connected
with a U.S. trade or business carried on by a Holder who or which is not a
U.S. person, the 30 percent withholding tax will not apply but such Holder
will be subject to U.S. federal income tax at graduated rates applicable to
U.S. persons.
Foreign Investors
The Withholding Regulations would require, in the case of Notes held
by a foreign partnership, that (x) the certification described above be provided
by the partners rather than by the foreign partnership and (y) the partnership
provide certain information, including a United States taxpayer identification
number. See "Backup Withholding" above. A look-through rule would apply in the
case of tiered partnerships. Non-U.S. Persons should consult their own tax
advisors regarding the application to them of the Withholding Regulations.
State and Local Tax Consequences
Investors should consult their own tax advisors regarding whether
the purchase of the Offered Notes, either alone or in conjunction with an
investor's other activities, may subject an investor to any state or local taxes
based on an assertion that the investor is either "doing business" in, or
deriving income from a source located in, any state or local jurisdiction.
Additionally, potential investors should consider the state, local and other tax
consequences of purchasing, owning or disposing of a Note. State and local tax
laws may differ substantially from the corresponding federal tax law, and the
foregoing discussion does not purport to describe any aspect of the tax laws of
any state or other jurisdiction. Accordingly, potential investors should consult
their own tax advisors with regard to such matters.
The federal and state income tax discussions set forth above are
included for general information only and may not be applicable depending upon a
noteholder's particular tax situation. Prospective purchasers should consult
their tax advisors with respect to the tax consequences to them of the purchase,
ownership and disposition of the offered notes, including the tax consequences
under state, local, foreign and other tax laws and the possible effects of
changes in federal or other tax laws or in the interpretations thereof.
Ratings
Each Class of Notes offered by this Prospectus and the related
Prospectus Supplement will be rated in one of the four highest rating categories
by one or more Rating Agencies. Such ratings will address, in the opinion of
such Rating Agencies, the likelihood that the Issuer will be able to make timely
payment of all amounts due on the related Notes in accordance with the terms
thereof. Such ratings will neither address any prepayment or yield
considerations applicable to any Notes nor constitute a recommendation to buy,
sell or hold any Notes.
ERISA Considerations
The Prospectus Supplement for each series of Notes will summarize
considerations under ERISA relevant to the purchase of such Notes by employee
benefit plans and individual retirement accounts.
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Plan of Distribution
The Notes will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices to
be determined at the time of sale or at the time of commitment therefor.
In connection with the sale of the Notes, underwriters may receive
compensation from the Issuer or from purchasers of the Notes in the form of
discounts, concessions or commissions. The underwriters and dealers
participating in the distribution of the Notes may be deemed to be underwriters
in connection with such Notes, and any discounts or commissions received by them
from the Issuer and any profit on the resale of Notes by them may be deemed to
be underwriting discounts and commissions under the Securities Act.
In connection with this offering, the underwriters may over-allot or
effect transactions which stabilize or maintain the market prices of the offered
notes at levels above those which might otherwise prevail in the open market.
Such stabilizing, if commenced, may be discontinued at any time.
The underwriting agreement pertaining to the sale of the Notes will
provide that the obligations of the underwriters will be subject to certain
conditions precedent, that the underwriters will be obligated to purchase all
such Notes if any are purchased and that, in limited circumstances, the Issuer
will indemnify the underwriters and the underwriters will indemnify the Issuer
against certain civil liabilities, including liabilities under the Securities
Act or will contribute to payments required to be made in respect thereof.
Purchasers of Notes, including dealers, may, depending on the facts
and circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
Notes. Holders of Notes should consult with their legal advisors in this regard
prior to any such reoffer or sale.
No dealer, salesman or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus and the related Prospectus Supplement in connection with the
offer made by this Prospectus and the related Prospectus Supplement and, if
given or made, such information or representations must not be relied upon.
Neither the delivery of this Prospectus nor any sale made hereunder shall under
any circumstances create an implication that there has been no change in the
affairs of the Seller or the Issuer or any affiliate thereof or the Leases since
the date hereof. This Prospectus does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so to
anyone to whom it is unlawful to make such offer or solicitation.
Legal Opinions
Certain legal matters will be passed upon in relation to the
issuance of the Notes for the Issuer by Ballard Spahr Andrews & Ingersoll, LLP,
Philadelphia, Pennsylvania and in relation to certain other matters for the
Underwriters by Dewey Ballantine LLP, New York, New York.
Experts
The balance sheet of IKON Receivables, LLC at February 28, 1999,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
42
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Index To Financial Statements
Page
----
Independent Auditors' Report 41
Balance Sheet of the Issuer at February 28, 1999 42
Notes to Balance Sheet 43
43
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Report of Independent Auditors
The Board of Directors
IKON Receivables, LLC
We have audited the accompanying balance sheet of IKON Receivables, LLC (an
indirect wholly-owned subsidiary of IOS Capital, Inc.) at February 28, 1999.
This balance sheet is the responsibility of IKON Receivables, LLC's management.
Our responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit of a balance sheet includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of IKON Receivables, LLC at February
28, 1999, in conformity with generally accepted accounting principles.
Ernst & Young LLP
__________ __, 1999
Philadelphia, Pennsylvania
44
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Exhibit 1
IKON Receivables, LLC
Balance Sheet
February 28, 1999
- --------------------------------------------------------------------
Assets
Cash ............................................. $1000.00
Total assets................................. $1000.00
========
Liabilities and Member's Equity
Liabilities....................................... $0
Total liabilities............................ $0
========
Member's equity................................... $1000.00
Total member's equity........................ $1000.00
========
Total liabilities and member's equity............. $1000.00
========
See accompanying notes to balance sheet.
45
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IKON Receivables, LLC
(an indirect wholly-owned subsidiary of IOS Capital, Inc.)
Notes to Balance Sheet
February 28, 1999
(1) Organization
IKON Receivables, LLC, an indirect wholly-owned subsidiary of IOS Capital,
Inc. ("IOS Capital"), was organized in the State of Delaware.
IKON Receivables, LLC was organized to engage exclusively in the following
business and financial activities: to acquire certain equipment leases and
installment sales contracts from IOS Capital and IKON Receivables Funding,
Inc.; to issue and sell notes collateralized by any or all of its assets
pursuant to one or more indentures between IKON Receivables, LLC and an
indenture trustee; and to engage in any lawful act or activity and to
exercise any power that is incidental and is necessary or convenient to
the foregoing and permitted under Delaware law.
(2) Capital Contribution
IKON Receivables Funding, Inc. has made an initial capital contribution
of $1,000 to IKON Receivables, LLC.
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Index Of Terms
Set forth below is a list of the defined terms used in this
Prospectus and the pages on which the definitions of such terms may be found
herein.
1934 Act....................................................................19
Additional Account..........................................................33
Additional Lease ...........................................................26
Adjusted Lease..............................................................26
Aggregate Discounted Lease Balance..........................................16
Asset Pool..................................................................13
Assignment and Servicing Agreement..........................................13
Available Funds ............................................................25
Bankruptcy Code.............................................................36
Business Day................................................................24
Casualty Payment............................................................25
Cede.........................................................................6
CEDEL Participants..........................................................27
CLAS........................................................................20
Class.......................................................................13
Closing Date................................................................39
Code .......................................................................37
Collection Account .........................................................33
Collection Period...........................................................16
Commission .................................................................19
Cooperative.................................................................28
Cut-off Date................................................................13
Defaulted Leases............................................................25
Definitive Notes............................................................28
Depositories................................................................26
Discounted Lease Balance....................................................26
Distribution Account........................................................33
DTC.........................................................................26
Eligible Account ...........................................................33
Eligible Investments........................................................33
Eligible Leases.............................................................17
Equipment...................................................................13
ERISA Considerations ........................................................6
Euroclear Operator..........................................................28
Euroclear Participants......................................................28
Event of Default............................................................28
Events of Default ..........................................................34
Finance Leases .............................................................16
Foreign Investors ..........................................................39
Fully Taxable Bonds.........................................................40
High Risk Review List ......................................................21
IKON........................................................................19
IKON marketplaces...........................................................19
Indenture...................................................................13
Index of Terms .............................................................12
47
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Indirect Participants.......................................................26
IOS Capital..............................................................13,47
IOS Capital's Leasing Business .............................................14
IRS.........................................................................37
Issuer......................................................................13
IT..........................................................................22
Lease.......................................................................13
Lease Payment...............................................................25
Lease Payments..............................................................16
Lease Receivables...........................................................13
Lessee......................................................................13
Lessees.....................................................................13
Manager.....................................................................15
Noteholder..................................................................27
Noteholders.................................................................14
Notes.......................................................................13
Originator..................................................................13
Outstanding ................................................................34
Participants................................................................26
Payment Date................................................................18
Pool Factor.................................................................18
Pre-Funding Account ........................................................33
Premium Note................................................................40
Prepayment Assumption.......................................................39
Prospectus Supplement ......................................................13
Rating Agencies.............................................................24
Record Date.................................................................29
Reserve Account ............................................................33
Rules.......................................................................27
Seller .....................................................................13
Servicer....................................................................13
Servicer Advance............................................................30
Servicer Default............................................................30
Servicer Defaults...........................................................31
Servicer Events of Default..................................................32
Servicing Fee...............................................................30
Substitute Leases...........................................................17
Tax Counsel.................................................................37
Termination Payment.........................................................25
Terms and Conditions........................................................28
The Issuer .................................................................37
Transaction Accounts........................................................33
Transaction Documents ......................................................29
Trust Depository............................................................27
Trustee.....................................................................13
U.S. Person.................................................................41
Use of Proceeds ............................................................15
Warranty Lease..............................................................26
Withholding Regulations.....................................................41
48
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the amount of fees and expenses (other
than underwriting discounts and commissions) to be incurred in connection with
the issuance and distribution of the Offered Notes.
SEC Filing Fee.................................................... $ *
Indenture Trustee's Fees and Expenses............................. *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Printing and Engraving Expenses................................... *
Blue Sky Qualification and Legal Investment Fees and Expenses..... *
Rating Agency Fees................................................ *
Miscellaneous..................................................... *
*
- ------------------------------------------------------------------ ----------
TOTAL $
* To be filed by Amendment.
- ----------------------------
Item 15. Indemnification of Managers and Officers.
Indemnification. Under the Delaware Limited Liability Company Act, the
Registrant has the power and in some instances may be required to provide an
agent, including an officer or manager, who was or is a party or is threatened
to be made a party to certain proceedings, with indemnification against certain
expenses, judgments, fines, settlements and other amounts under certain
circumstances.
Section 7.1 of the Limited Liability Company Agreement of IKON
Receivables, LLC. provides that all officers and managers of the company shall
be indemnified by the company from and against all expenses, liabilities or
other matters arising out of their status as an officer or manager for their
acts, omissions or services rendered in such capacities. IOS Capital, Inc., the
ultimate corporate parent of IKON Receivables LLC., maintains certain policies
of liability insurance coverage for the officers and managers of IOS Capital,
Inc. and certain of its subsidiaries, including IKON Receivables, LLC.
The form of the Underwriting Agreement, filed as Exhibit 1.1 to this
Registration Statement, provides that IKON Receivables, LLC will indemnify and
reimburse the underwriter(s) and each controlling person of the underwriter(s)
with respect to certain expenses and liabilities, including liabilities under
the 1933 Act or other federal or state regulations or under the common law,
which arise out of or are based on certain material misstatements or omissions
in the Registration Statement. In addition, the Underwriting Agreement provides
that the underwriter(s) will similarly indemnify and reimburse IKON Receivables,
LLC with respect to certain material misstatements or omissions in the
Registration Statement which are based on certain written information furnished
by the underwriter(s) for use in connection with the preparation of the
Registration Statement.
Insurance. As permitted under the Delaware Limited Liability Company Act,
the Registrant's Limited Liability Company Agreement permit the managers to
purchase and maintain insurance on behalf of the Registrant's
II-1
<PAGE>
agents, including its officers and managers, against any liability asserted
against them in such capacity or arising out of such agents' status as such,
whether or not such Registrant would have the power to indemnify them against
such liability under applicable law.
Item 16. Exhibits.
1.1 Form of Underwriting Agreement.
3.1 Certificate of Formation of IKON Receivables, LLC.
3.2 Limited Liability Company Agreement of IKON Receivables, LLC.*
4.1 Form of Indenture between the Issuer and the Indenture Trustee.
5.1 Opinion of Dewey Ballantine LLP with respect to validity.
8.1 Opinion of Dewey Ballantine LLP with respect to tax matters.
10.1 Form of Assignment and Servicing Agreement.
23.1 Consents of Dewey Ballantine LLP(included in Exhibit 8.1 hereto).
23.2 Consents of Dewey Ballantine LLP(included in Exhibit 5.1 hereto).
23.3 Consents of Accountants*
25.1 Form of Statement of Eligibility of Indenture Trustee*
99.1 Form of Prospectus Supplement
- --------------------------
* To be Filed by Amendment.
Item 17. Undertakings.
A. Undertaking in respect of indemnification
Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to managers, officers and controlling persons of the
Registrant pursuant to the provisions described above in Item 15, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a manager, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such manager, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by them is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
B. Undertaking pursuant to Rule 415
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which is registered) and any deviation from the low or
high end of the
II-2
<PAGE>
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) to include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change of such information in the Registration
Statement; provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in the post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
C. Undertaking pursuant to Rule 430A.
The Registrant hereby undertakes:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of a registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
D. Undertaking pursuant to the Trust Indenture Act of 1939.
The Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under section
305(b)(2) of the Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on the 25th day of
March, 1999. As of the date hereof, the Registrant reasonably believes that the
security rating requirement for asset-backed offerings on Form S-3 will be met
at the time of each sale.
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING INC.,
as Initial Manager
By: /s/ Robert K.McLain
------------------------
Name: Robert K. McLain
Title: President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert K. McLain President & Director March 25, 1999
- ----------------------------
Robert K. McLain
/s/ Patricia Donato Secretary & Director March 25, 1999
- ----------------------------
Patricia Donato
Director March __, 1999
- ----------------------------
Joseph Churchman
II-4
<PAGE>
EXHIBIT INDEX
1.1 Form of Underwriting Agreement.
3.1 Certificate of Formation of IKON Receivables, LLC.
3.2 Limited Liability Company Agreement of IKON Receivables, LLC.*
4.1 Form of Indenture between the Issuer and the Indenture Trustee.
5.1 Opinion of Dewey Ballantine LLP with respect to validity.
8.1 Opinion of Dewey Ballantine LLP with respect to tax matters.
10.1 Form of Assignment and Servicing Agreement.
23.1 Consents of Dewey Ballantine LLP(included in Exhibit 8.1 hereto).
23.2 Consents of Dewey Ballantine LLP(included in Exhibit 5.1 hereto).
23.3 Consents of Accountants*
25.1 Form of Statement of Eligibility of Indenture Trustee*
99.1 Form of Prospectus Supplement
- --------------------------
* To be Filed by Amendment.
II-5
IKON RECEIVABLES LLC
$_________ - _____% Class [A-1] Lease-Backed Notes, Series 1999-1
$_________ - _____% Class [A-2] Lease-Backed Notes, Series 1999-1
$_________ - _____% Class [A-3] Lease-Backed Notes, Series 1999-1
$_________ - _____% Class [A-4] Lease-Backed Notes, Series 1999-1
$_________ - _____% Class [B] Lease-Backed Notes, Series 1999-1
FORM OF UNDERWRITING AGREEMENT
__________, 1999
LEHMAN BROTHERS
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") 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 $___________ (the "Class [A-1] Aggregate Principal Amount") of
_____% Class [A-1] Lease-Backed Notes, Series 1999-1 (the "Class [A-1] Notes");
$___________ (the "Class [A-2] Aggregate Principal Amount") of _____% Class
[A-2] Lease-Backed Notes, Series 1999-1 (the "Class [A-2] Notes"); $___________
(the "Class [A-3] Aggregate Principal Amount") of _____% Class [A-3]
Lease-Backed Notes, Series 1999-1 (the "Class [A-3] Notes"); $__________ (the
"Class [A-4] Aggregate Principal Amount"; together with the Class [A-1]
Aggregate Principal Amount, Class [A-2] Aggregate Principal Amount and Class
[A-3] Aggregate Principal Amount, the "Class [A] Aggregate Principal Amount") of
_____% 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 "Class [A] Notes"); $___________ (the "Class [B] Aggregate Principal
Amount") of _____% Class [B] Lease-Backed Notes, Series 1999-1 (the "Class [B]
Notes"; together with the Class [A] Notes, the "Notes." The Notes will be issued
pursuant to an Indenture, dated as of _________, 1999 (the "Indenture"), between
the Issuer, IOS Capital and _______ (the "Trustee"). The Notes are more fully
described in
<PAGE>
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 business
equipment lease contracts, including all payments due thereunder (the "Leases")
and certain interests in the underlying equipment (the "Equipment"). Capitalized
terms used and not defined herein shall have the meanings specified in the
Indenture.
The Notes will be sold by the Issuer to you as underwriter in the
amount set forth on Schedule I hereto.
The terms which follow, when used in this Agreement, shall have the
meanings indicated:
"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 any prospectus delivered to
purchasers of the Notes at or before the time of confirmation of their
purchases.
"Preliminary Prospectus" means any preliminary prospectus
included in the Registration Statement, and which, as of the Effective
Date, omits Rule 430A Information.
"Registration Statement" means the registration statement
referred to in the preceding paragraph and any registration statement
required to be filed under the Securities Act or rules thereunder,
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. Such term shall include Rule 430A Information deemed to be
included therein at the Effective Date as provided by Rule 430A.
"Rule 424" and "Rule 430A" refer to such rules under the
Securities Act.
"Rule 430A Information" means information with respect to the
Notes and the offering thereof permitted, pursuant to Rule 430A, to be
omitted from the Registration Statement when it becomes effective.
"Underwriter" means Lehman Brothers.
"Underwriting Information" has the meaning given to such term
in Section 8(b) hereof.
2
<PAGE>
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 Underwriter
agrees to purchase from the Issuer the Class [A] Aggregate Principal Amount of
the Class [A] Notes and the Class [B] Aggregate Principal Amount of the Class
[B] 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.
(b) It is understood that the Underwriter proposes to offer the
Notes for sale to the public in the manner set forth in the Final Prospectus.
Section 3. Delivery and Payment.
(a) Delivery of and payment for the Notes to be purchased by the
Underwriter 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 ________,
1999 (the "Issuance Date"). The Notes shall be registered in the name of the
Underwriter against payment by the Underwriter 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
Underwriter, delivery of one or more global notes (the "Global Notes")
representing the Notes shall be made to the account of the Underwriter against
delivery to the Trustee of the originally issued Notes (the date of such
delivery being hereinafter referred to as the "Exchange Date"). 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 Underwriter 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") a
registration statement (Registration No. 333-71073), including the
Preliminary Prospectus relating to the Notes, on such Form S-3 for the
registration under the Securities Act of the Notes. The Issuer may have
filed one or more amendments thereto, including the related Preliminary
Prospectus, 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 Rules 430A and 424(b)(1),
(2) or (4). In the case of clause (B), the Issuer will include in such
3
<PAGE>
Registration Statement, as amended at the Effective Date, all information
(other than Rule 430A 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 Rule 430A Information and, 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 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 Issuer makes no representations or warranties
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, except
that the provisions hereof relating to indemnification of the Underwriter
may be subject to limitations of public policy.
(iv) Each of the Indenture and the Assignment and Servicing
Agreement has been duly authorized by the Issuer and, when executed and
delivered by the Issuer, will constitute the legal, valid and binding
obligation of the Issuer, enforceable in accordance with its terms.
(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, and entitled to the benefits of the Indenture.
(vi) The issue and contribution of the Notes and the
performance of this Agreement, the Indenture and the Assignment and
Servicing Agreement by the Issuer will (A) not conflict with or result in
a breach of, and
4
<PAGE>
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) not 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
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 Underwriter.
(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").
(b) IOS Capital hereby represents and warrants to and agrees with
the Underwriter as follows:
(i) This Agreement has been duly authorized, executed and
delivered, the Assignment and Servicing Agreement has been duly
authorized, and this Agreement constitutes, and when executed and
delivered, the Assignment and Servicing Agreement will constitute the
legal, valid and binding obligations of IOS Capital, enforceable in
accordance with their respective terms, except that the provisions hereof
relating to indemnification of the Underwriter may be subject to
limitations of public policy.
(ii) The performance of this Agreement by IOS Capital, and the
consummation by IOS Capital of the transactions herein contemplated, will
(A) not 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 or (B) not 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 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
Underwriter.
(iii) 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
5
<PAGE>
4(b), and the Underwriter may rely thereon as if such representations and
warranties were fully set forth herein.
(iv) IOS Capital represents and warrants it has delivered to
the Underwriter 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 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.
(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.
Section 5. Covenants of the Issuer and IOS Capital. The Issuer and
IOS Capital, jointly and severally, hereby covenant and agree with you as
follows:
(a) To use 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 pursuant to Rule
430A, or filing of the Final Prospectus is otherwise required under Rule 424(b),
the Issuer will file the Final Prospectus, properly completed, pursuant to Rule
424(b) within the time period prescribed and will provide evidence satisfactory
to the Underwriter of such timely filing. The Issuer will promptly advise the
Underwriter (i) when the Registration Statement shall have become effective,
(ii) when any amendment thereof shall have become effective, (iii) of any
request by the Commission for any amendment or supplement of the Registration
Statement or 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. The Issuer will not file any amendment of the Registration Statement or
supplement to the Final Prospectus to which the Underwriter reasonably objects.
The Issuer and IOS Capital will use their 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
6
<PAGE>
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, the Issuer promptly will 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, the Issuer will make generally available
to Offered Noteholders and to the Underwriter 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) The Issuer will furnish to the Underwriter and counsel for the
Underwriter, without charge, a signed copy of the Registration Statement
(including exhibits thereto) and, so long as delivery of a prospectus by any of
the Underwriter or any dealer may be required by the Securities Act, as many
copies of each Final Prospectus relating to the Notes and any supplement thereto
as the Underwriter may reasonably request.
(e) IOS Capital and the Issuer will take all reasonable actions
requested by the Underwriter to arrange for the qualification of the Notes for
sale under the laws of such jurisdictions within the United States or as
necessary to qualify for DTC and as the Underwriter may designate, will maintain
such qualifications in effect so long as required for the completion of the
distribution of the Notes; provided, in connection therewith the Issuer shall
not be required to qualify as a foreign corporation doing business in any
jurisdiction.
(f) For so long as the Notes are outstanding, the Issuer and IOS
Capital shall deliver to the Underwriter by first-class mail and as soon as
practicable a copy of all reports and notices delivered to the Trustee or the
Offered Noteholders under the Indenture.
(g) For so long as the Notes are outstanding, the Issuer and IOS
Capital will furnish to the Underwriter 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.
(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 or IOS Capital, the Issuer and IOS
Capital shall furnish such documents.
Section 6. Conditions of Underwriter's Obligation. The obligations
of the Underwriter to purchase and pay for the Notes on the Issuance Date shall
be subject to the accuracy in all material respects of the representations and
warranties of the Issuer and IOS Capital herein, in the Assignment and Servicing
Agreement and in the Indenture,
7
<PAGE>
to the performance by the Issuer and IOS Capital in all material respects of
their obligations hereunder and to the following additional conditions:
(a) The Issuer 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 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 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 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 from__________, Esq., a favorable
opinion (subject to customary and usual qualifications) with respect to IOS
Capital and an opinion from Ballard Spahr Andrews & Ingersoll, LLP, counsel to
the Issuer, dated the Issuance Date and reasonably satisfactory in form and
substance to the Underwriter and their counsel with respect to, or to the effect
that: (i) the due formation and qualification of each of the Issuer and IOS
Capital and that the Issuer and IOS Capital, as applicable, have the corporate
power and authority to perform this Agreement, the Assignment and Servicing
Agreement, the Indenture (the "Transaction Documents") and the transactions
contemplated herein and therein; (ii) the due authorization, execution, delivery
and enforceability of this Agreement and the other Transaction Documents as
applicable, by the Issuer and IOS Capital; (iii) each of this Agreement and the
other Transaction Documents are the legal, valid and binding obligation of the
Issuer 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); (iv) the Notes have been duly
authorized, executed and delivered by the Issuer and constitute the
8
<PAGE>
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;
(v) the issuance and sale of the Notes by the Issuer, the performance of this
Agreement by the Issuer and IOS Capital and the compliance by the Issuer 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 IOS Capital, or to
the best of such counsel's knowledge, any other contracts to which the Issuer or
IOS Capital is a party or by which either of them is bound; (vi) to the best of
such counsel's knowledge, there is no legal or governmental proceeding
threatened or pending against the Issuer or IOS Capital which would have a
material adverse effect on the issuance of the Notes; (vii) in the event a court
disregarded the intent of the parties and characterized the transfers as a
pledge of collateral, the Assignment and Servicing Agreement and accompanying
documentation creates a valid security interest in the Leases and the Equipment
(or interests therein) under Delaware law; (viii) assuming no prior financing
statements covering the Leases are in effect based on a review of certain UCC
searches, that financing statements covering the Leases and naming (A) the
Issuer as secured party and IOS Capital as debtor and (B) the Issuer as debtor
and the Trustee as secured party are being filed in the appropriate filing
offices of the State of Delaware, and assuming that the Trustee has taken
possession of the Leases, the Trustee has a first priority perfected security
interest in all right, title and interest of IOS Capital and the Issuer in the
Leases; and (ix) 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 Registration
Statement and the Prospectus, nothing came to such counsel's attention that
leads such counsel to believe that either the Registration Statement or the
Prospectus (as of the Effective Date or the date of the 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 rendering such
opinion, counsel may rely, to the extent deemed proper and as stated therein, as
to matters of fact on certificates of responsible officers of the Issuer 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 Underwriter.
(c) The Underwriter shall have received from Dewey Ballantine LLP,
counsel for the Underwriter, 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 and other related matters as the
Underwriter may require.
(d) At the Execution Time and at the Issuance Date, Ernst & Young
LLP shall have furnished to the Underwriter a letter or letters, dated the date
of this Agreement and the Issuance Date, respectively, in form and substance
satisfactory to the Underwriter.
9
<PAGE>
(e) The Class [A-1] Notes shall have been rated at least "__" and
"__", that the Class [A-2], [A-3] and [A-4] notes be rated at least "___" and
"___", that the Class [B] Notes be rated at least "__" and "__" 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).
(f) 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 Underwriter and
counsel for the Underwriter and to the Issuer and IOS Capital and their counsel
with respect to, or to the effect that: (i) the due incorporation and valid
existence of the Trustee and (ii) the due authorization, execution and delivery
by the Trustee of the Indenture.
(g) The Underwriter shall have received the approval of its
investment committee with respect to the execution, delivery and performance of
this Agreement.
(h) 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 special 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 the conditions set forth in Sections 6(c),
6(d), 6(e), 6(f), 6(g) and 6(h) have not been met, or (y) the Underwriter
terminates the engagement pursuant to Section 10 or because any conditions
precedent in Section 6 (other than Section 6(d)) have not been fulfilled, then
the Issuer and IOS Capital's liability to the Underwriter shall be limited to
the reimbursement of the Underwriter's 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
Underwriter 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 counsel to the Underwriter;
10
<PAGE>
(v) Trustee's fees and fees of counsel to the Trustee;
(vi) the costs and expenses of printing the Registration
Statement and the Prospectus;
(vii) 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;
(viii) all expenses in connection with the qualification of
the Notes under state securities laws as provided in section 4(a)(vi),
including the fees and disbursements of counsel in connection with the
Blue Sky Survey;
(ix) the cost of preparing the Notes;
(x) the cost or expenses of any transfer agent or registrar;
and
(xi) 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 IOS Capital does
not hereby waive any rights to reimbursement from the Underwriter in the
event of any of the Underwriter's 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 against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter 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 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 arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will promptly reimburse such
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating, preparing to defend or defending,
or appearing as a third-party witness in connection with, any such action or
claim; 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 or liability
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 (defined below).
11
<PAGE>
(b) The Underwriter agrees 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 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 arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein 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 action or claim.
The Issuer and IOS Capital acknowledge that the statements set forth in the last
paragraph of the cover page and under the heading "Underwriting" in the
Registration Statement, the Preliminary Prospectus and the Final Prospectus
constitute the only information furnished in writing by or on behalf of the
Underwriter for inclusion in the Registration Statement or the Final Prospectus
(the "Underwriting Information"), and each of you 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 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,
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 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
12
<PAGE>
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) 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 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 appropriate to reflect the relative benefits received by the Issuer and IOS
Capital on the one hand and the Underwriter 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 or IOS Capital on the one hand and the
Underwriter 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 or IOS Capital on
the one hand and the Underwriter 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 and IOS Capital bear to the total underwriting
discounts and commissions received by the Underwriter, in each case as set forth
in the table on the cover page of the Final Prospectus. 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 Underwriter 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 Underwriter agree that it
would not be just and equitable if contributions
13
<PAGE>
pursuant to this subsection (d) 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 (d). 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 (d) 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 (d), the Underwriter shall not be required to contribute any
amount in excess of the total underwriting discount as set forth on the cover
page of the Prospectus. 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.
(e) 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
person, if any, who controls the Underwriter within the meaning of the
Securities Act; and the obligations of the Underwriter under this Section 8
shall be in addition to any liability which the Underwriter may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Issuer and IOS Capital and to each person, if any, who controls
the Issuer or IOS Capital within the meaning of the Securities Act.
Section 9. Survival. The respective representations, warranties and
agreements of the Issuer, IOS Capital and the Underwriter 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,
IOS Capital or the Underwriter, and such representations, warranties and
agreements made by the Issuer 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 at any time upon the
giving of notice at any time prior to the Issuance Date: (i) if there has been,
since December 31, 1998, any material adverse change in the condition, financial
or otherwise, of IOS Capital or the Issuer, or in the earnings, business affairs
or business prospects of IOS Capital 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
14
<PAGE>
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.
(b) This Agreement may not be terminated by the Issuer or IOS
Capital, except in accordance with law, without the written consent of the
Underwriter.
(c) Notwithstanding anything herein to the contrary, in the event
the Issuer 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 Underwriter's obligations
hereunder may be immediately cancelled by the Underwriter 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 8 and 9
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 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 501 Silverside Road, Suite 28, Wilmington, Delaware 19809, or
such other address as IOS Capital or the Issuer may have designated in writing
to you.
Section 12. Successors. This Agreement will inure to the benefit of
and be binding upon the Issuer and IOS Capital and their successors and assigns
and the Underwriter and its respective successors and assigns.
Section 13. Default by the Underwriter. If the Underwriter shall
fail on the Issuance Date to purchase the Class [A] Notes or Class [B] Notes,
which it is obligated to purchase, then the Underwriter will be in default under
this Agreement.
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 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
15
<PAGE>
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 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 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 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.
If you are in agreement with the foregoing, please sign a
counterpart hereof and return the same to the Issuer or IOS Capital, whereupon
this Agreement shall become a binding agreement between the Underwriter, and the
Issuer and IOS Capital.
16
<PAGE>
Very truly yours,
IOS CAPITAL, INC.
By:
-------------------------------
Name:
Title:
IKON RECEIVABLES, LLC
By:
-------------------------------
Name:
Title:
The foregoing Agreement is
hereby accepted and entered
into as of the date hereof.
LEHMAN BROTHERS
By:
-------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
All Class [A] Notes and Class [B] Notes will be purchased by Lehman Brothers.
Principal Amount Purchase Price
Class [A-1] Notes ____________ ____________
Class [A-2] Notes ____________ ____________
Class [A-3] Notes ____________ ____________
Class [A-4] Notes ____________ ____________
Class [B] Notes ____________ ____________
CERTIFICATE OF FORMATION
OF
IKON RECEIVABLES, LLC
This Certificate of Formation of IKON Receivables, LLC (the "Company"),
dated as of January 20, 1999, is being duly executed and filed by IKON
Receivables Funding, Inc., as an authorized person, to form a limited liability
company under the Delaware Limited Liability Company Act (6 Del.C. ss.18-101, et
seq.).
FIRST. The name of the Company formed hereby is IKON Receivables, LLC.
SECOND. The address of the registered office of the Company in the State
of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801. The Company's registered agent for
service of process at that address is The Corporation Trust Company.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation as of the date first above written.
IKON Receivables Funding, Inc.,
Manager
By: /s/ Robert K. Mclain
-----------------------------------
Name: Robert McLain, President
Title: Authorized Person
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IKON RECEIVABLES LLC,
Issuer
______________,
Trustee
and
IOS CAPITAL, INC.,
Servicer
----------------------
FORM OF INDENTURE
Dated as of _________, 1999
----------------------
$_____________ in aggregate principal
amount of Notes, consisting of:
$_____________% Class [A-1] Lease-Backed Notes
$_____________% Class [A-2] Lease-Backed Notes
$_____________% Class [A-3] Lease-Backed Notes
$_____________% Class [A-4] Lease-Backed Notes
$_____________% Class [B] Lease-Backed Notes
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
IKON RECEIVABLES LLC
Reconciliation and Tie between the Indenture
dated as of______, 1999 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
ss.310 (a)(1).................. ss.7.08
(a)(2).................... 7.08
(a)(3).................... Not Applicable
(a)(4).................... Not Applicable
(b)....................... 7.08; 7.09; 6.07; 1.05; 1.06
(c)....................... Not Applicable
311 (a)....................... 7.14
(b)....................... 7.14
312 (a)....................... 2.11
(b)....................... 11.02
(c)....................... 11.02
313 (a)....................... 7.15
(b)(1).................... Not Applicable
(b)(2).................... 7.15
(c)....................... 7.15; 1.06
(d)....................... 7.15
314 (a)....................... 8.12; 8.09; 1.06
(b)....................... Not Applicable
(c)(1).................... 11.03
(c)(2).................... 11.03
(c)(3).................... 11.01
(d)....................... 11.01
(e)....................... 11.04
(f)....................... Not Applicable
315 (a)....................... 7.01(a)
(b)....................... 7.02; 1.06
(c)....................... 7.01(b)
(d)....................... 7.01(c)
(e)....................... 6.13
316 (a) (last sentence)....... 2.12
(a)(1)(A)................. 6.12
(a)(1)(b)................. 6.11
(a)(2).................... Not Applicable
317 (a)(1).................... 6.03(c)
(a)(2).................... 6.04
(b)....................... 8.03(c)
318 (a)....................... 11.01, 11.02
(c)....................... 11.01
ii
<PAGE>
INDENTURE
This INDENTURE dated as of _________, 1999, is among IKON
RECEIVABLES LLC, a Delaware limited liability company (herein called the
"Issuer"), _______________________________________, a ___________ 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 $__________ in
aggregate principal amount of its Lease-Backed Notes, consisting of $_________
aggregate principal amount of ___% Class [A-1] Lease-Backed Notes (the "Class
[A-1] Notes"), $__________ aggregate principal amount of ____% Class [A-2]
Lease-Backed Notes (the "Class [A-2] Notes"), $___________ aggregate principal
amount of ____% Class [A-3] Lease-Backed Notes (the "Class [A-3] Notes"),
$____________ aggregate principal amount of _____% 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 "Class [A] Notes"), $____________ aggregate
principal amount of _____% Class [B] Lease-Backed Notes (the " Class [B] Notes";
together with the Class [A] Notes, the "Notes"), of substantially the tenor
hereinafter set forth, and to provide therefor the Issuer has duly authorized
the execution and delivery of this Indenture. The Class [A] Notes and the Class
[B] Notes shall be entitled to payments of interest and principal as set forth
herein.
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 Noteholders, all of the Issuer's right, title
and interest in and to (a) the Leases and all Lease Payments, Casualty Payments,
Lease Repurchase 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, Lease Repurchase 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
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of the Lease and any payments due before the effective date of such addition or
substitution), (b) all rights of the Issuer to or under any guarantees of
collateral (including all rights of the Issuer in any security deposits and the
Issuer's right to repayment by IOS Capital, Inc. ("IOS Capital") of any
Inter-Company loans pursuant to Section 15.01 of the Assignment and Servicing
Agreement) for the Lessee's obligations under any Lease, (c) all interests of
the Issuer in the Equipment [which excludes ownership interests] at any time
subject to any Lease, including any security interest of IOS Capital in the
Equipment, (d) all moneys from time to time held by the Trustee pursuant to
Section 3.01(a) hereof pending deposit in one of the accounts referred to
therein, (e) all moneys from time to time on deposit in any of the Trust
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 the conversion, whether voluntary or
involuntary, of any of the foregoing into cash or other property (collectively,
the "Granted Assets"). Such Grant is made in trust to secure (i) the payment of
all amounts due on the Notes, in accordance with their terms, equally and
ratably without prejudice, priority, or distinction among any of the Notes,
respectively, by reason of differences in time of issuance or otherwise, (ii)
the payment of all other sums payable under this Indenture with respect to the
Notes and (iii) compliance with the provisions of this Indenture with respect to
the Notes.
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 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.
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 (a)
zero if the Class Target Investor Principal Amount for Class [B] exceeds its
Class Floor on such Payment Date and (b) in each other case the excess, if any,
of (i)(A) the Outstanding Principal Balance of the Notes plus the
Overcollateralization Balance as of the
2
<PAGE>
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 sum of the Class [A] Principal
Payment and the Class [B] 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 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.
Assignment and Servicing Agreement: the Assignment and Servicing
Agreement dated as of March __, 1999 between the Issuer 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 amount on
deposit in the Collection Account with respect to the immediately preceding Due
Period, including, without limitation, (a) Lease Payments due during the
immediately preceding Due Period (net of any Excess Copy Charges, Maintenance
Charges and Fee Per Scan Charges), (b) recoveries from Defaulted Leases to the
extent IOS Capital has not substituted Substitute Leases for such Defaulted
Leases (except to the extent required to reimburse unreimbursed Servicer
Advances pursuant to Section 5 of the Assignment and Servicing Agreement); (c)
proceeds from repurchases 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; (d) proceeds from the investment of funds in
the Collection Account and the Reserve Account, if any; (e) Casualty Payments;
(f) Servicer Advances; (g) Termination Payments; (h) late charges on delinquent
Lease Payments not advanced by the Servicer and (i) to the extent there occurs
an Available Funds Shortfall, funds, if any, on deposit in the Reserve Account.
Available Funds Shortfall: as defined in Section 3.04(b).
Available Reserve Amount: the amount on deposit in the Reserve
Account.
Book-Entry Class [A-1] Notes: beneficial interests in the Class
[A-1] Notes, the ownership and transfers of which shall be made through book
entries by a DTC as described in Section 2.05.
Book-Entry Class [A-2] Notes: beneficial interests in the Class
[A-2] Notes, the ownership and transfers of which shall be made through book
entries by a DTC as described in Section 2.05.
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Book-Entry Class [A-3] Notes: beneficial interests in the Class
[A-3] Notes, the ownership and transfers of which shall be made through book
entries by a DTC as described in Section 2.05.
Book-Entry Class [A-4] Notes: beneficial interests in the Class
[A-4] Notes, the ownership and transfers of which shall be made through book
entries by a DTC as described in Section 2.05.
Book-Entry Class [B] Notes: beneficial interests in the Class [B]
Notes, the ownership and transfers of which shall be made through book entries
by a DTC as described in Section 2.05.
Booked Residual Value: the estimated residual value of the Equipment
recorded on the books of the Seller as of the Cut-Off Date in the case of the
initial Leases, and as of the date of substitution in the case of a Substitute
Lease.
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 and 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.
Cede & Co.: the initial registered holder of the Class [A] Notes and
the Class [B] Notes, acting as nominee of The Depository Trust Company.
Class [A] Notes: as defined in the Recitals hereto.
Class [A] Percentage: _______% (approximately).
Class [A] Principal Payment: (a) while the Class [A-1] Notes are
outstanding, (i) on all Payment Dates prior to the _____ 1999 Payment Date, 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 previous Determination Date and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date, and (ii) on and after the ______ 1999 Payment Date, the
entire Outstanding Principal Amount on 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.
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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: $_______________.
Class [A-1] Note Interest Rate: the rate at which interest accrues
on the Class [A-1] Notes, which rate shall be equal to ___% 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 the DTC, or on the books of a Person
maintaining an account with such DTC (directly or as an indirect participant, in
accordance with the rules of such 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: $______________.
Class [A-2] Note Interest Rate: the rate at which interest accrues
on the Class [A-2] Notes, which rate shall be equal to ________% 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 the DTC, or on the books of a Person
maintaining an account with such DTC (directly or as an indirect participant, in
accordance with the rules of such 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: $____________.
Class [A-3] Note Interest Rate: the rate at which interest accrues
on the Class [A-3] Notes, which rate shall be equal to _____% 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 the DTC, or on the books of a Person
maintaining an account with such DTC (directly or as an indirect participant, in
accordance with the rules of such DTC).
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.
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Class [A-4] Initial Principal Amount: $___________.
Class [A-4] Note Interest Rate: the rate at which interest accrues
on the Class [A-4] Notes, which rate shall be equal to _____% 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 the DTC, or on the books of a Person
maintaining an account with such DTC (directly or as an indirect participant, in
accordance with the rules of such 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.
Class [B] Initial Principal Amount: $___________.
Class [B] Floor: with respect to each Payment Date, an amount equal
to the total of (a) ______% of the initial 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 Overcollateralization Balance as of the
immediately preceding Payment Date after giving effect to all principal payments
made on that day, minus (d) the amount on deposit in the Reserve Account after
giving effect to withdrawals to be made on such Payment Date.
Class [B] Note Interest Rate: the rate at which interest accrues on
the Class [B] Notes, which rate shall be ______% per annum.
Class [B] Note Owner: with respect to a Book-Entry Class [B] Note,
the Person who is the beneficial owner of such Book-Entry Class [B] Note, as
reflected on the books of the DTC, or on the books of a Person maintaining an
account with such DTC (directly or as an indirect participant, in accordance
with the rules of such DTC).
Class [B] Noteholder: Cede & Co. or a holder of a Definitive Class
[B] Note.
Class [B] Notes: as defined in the Recitals hereto.
Class [B] Percentage: _______% (approximately).
Class [B] Principal Payment: (a) while the Class [A-1] Notes are
outstanding, zero and (b) after the Outstanding Principal Amount on the Class
[A-1] Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class [B] Notes to the greater of the Class
[B] Target Investor Principal Amount and the Class [B] Floor.
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Class [B] Target Investor Principal Amount: with respect to each
Payment Date, an amount equal to the product of (a) the Class [B] Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
Class Target Investor Principal Amounts: means the Class [A] Target
Investor Principal Amount or the Class [B] Target Investor Principal Amounts.
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.
Collection Account: the account or accounts by that name established
and maintained by the Trustee pursuant to Section 3.01.
Commission: the Securities and Exchange Commission.
Corporate Trust Office: the principal corporate trust office of the
Trustee located at ______________________________, or at such other address as
the Trustee may designate from time to time by notice to the Noteholders, the
Issuer and IOS Capital.
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 for such Payment Date
remaining after the payment of amounts owing the Servicer and in respect of
interest on the Notes on such Payment Date over (b) the Discounted Present Value
of Performing Leases as of the related Determination Date.
Cut-Off Date: the close of business on _______, 1999.
Default: any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
Defaulted 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 123 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 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.
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Definitive Note: a definitive, fully registered Note issued pursuant
to Section 2.07.
Delinquent Lease: as of any Determination Date, any Lease (other
than a Lease which became a Defaulted 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, ______%,
which equals the sum of (a) the weighted-average interest rate of the Class
[A-1] Notes, the Class [A-2] Notes, the Class [A-3] Notes, the Class [A-4] Notes
and the Class [B] Notes on the Issuance Date weighted by (i) the Class [A-1]
Initial Principal Amount, the Class [A-2] Initial Principal Amount, the Class
[A-3] Initial Principal Amount, the Class [A-4] Initial Principal Amount and the
Class [B] Initial Principal Amount, as applicable, and (ii) the expected
weighted average life (under a zero prepayment and no loss scenario) of each
Class of Notes and (b) the Servicing Fee rate of 0.75% per annum.
Discounted Present Value of the Leases: with respect to any Lease as
of the Cut-Off Date or any date thereafter, an amount equal to the net present
value of all Lease Payments (not including delinquent amounts, Excess Copy
Charges, Maintenance Charges and Fee Per Scan Charges) to become due thereunder
following the Cut-Off Date or during the Due Period preceding the following
Payment Date, as the case may be (determined by discounting on a monthly basis
(assuming a calendar year consisting of twelve 30-day months)), at a rate equal
to the Discount Rate, each such Lease Payment from the Payment Date following
the date such Lease Payment was due). In determining the Discounted Present
Value of the Leases on any Determination Date or with respect to a Payment Date,
the future remaining Lease Payments will be calculated after giving effect to
any payments received prior to such date of calculation to the extent such
payments relate to Lease Payments due and payable by the Lessees 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 not Defaulted Leases as to which a Lease Payment, or any portion
thereof, was 63 or more days overdue as of the last day of the Due Period
immediately preceding such Payment Date.
Discounted Present Value of the Performing Leases: the Discounted
Present Value of the Leases, reduced by the present value of all future
remaining scheduled payments on the Defaulted Leases (not including delinquent
amounts, Excess Copy Charges, Maintenance Charges or Fee Per Scan Charges)
discounted at the Discount Rate. In determining the Discounted Present Value of
the Performing Leases
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on any Determination Date or with respect to a Payment Date, the future
remaining Lease Payments will be calculated after giving effect to any payments
received prior to such date of calculation to the extent such payments relate to
Lease Payments due and payable by the Lessees with respect to the related Due
Period and any prior Due Period.
DTC: an organization registered as a "DTC" pursuant to Section 17A
of the Securities Exchange Act of 1934, as amended.
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 occurs.
Eligible Account: either (a) an account maintained with a depository
institution or trust company acceptable to each of the Rating Agencies or (b) a
trust account or similar account maintained in the corporate trust department
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;
(c) repurchase 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;
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(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 one year 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 [___] by Moody's and
[___] by S&P;
(f) demand notes payable on demand issued by an institution rated
[___] by Moody's and [___] by S&P at the time of such investment;
(g) funding agreements or guaranteed investment contracts provided
by issuers rated [___] by Moody's and [___] 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 Moody's and S&P.
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 lien of this Indenture in
accordance with the provisions hereof.
Event of Default: as defined in Section 6.01.
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.
Fee Per Scan 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 scan amount per month.
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. The Grant of the Trust Estate 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,
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receive, and give receipts for Lease Payments in respect of the Leases and all
other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, 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 thereunder or with respect thereto.
Granted Assets: as defined in the Granting Clause.
Holder: a holder of a Note.
Indenture: this instrument as originally executed and as from time
to time supplemented or amended pursuant to the applicable provisions hereof.
Initial ADRB: the Initial Aggregate Discounted Residual Balance of
the Leases is equal to $_____________. Initial ADRB means the sum of the
discounted present value of 145% of the Booked Residual Values of all Leases, as
of the Cut-Off Date, discounted monthly at one twelfth the Residual Discount
Rate.
Initial Booked Residual Value: $___________.
Initial Payment Date: ______, 1999.
Inter-Company Loans: as defined in Section 13.01 of the Assignment
and Servicing Agreement.
Interest Payments: as defined in Section 2.01(c).
IOS Capital: As defined in the Granting Clause.
Issuance Date: __________, 1999.
Issuer: the Person named as the "Issuer" in the first paragraph of
this instrument.
Lease: at any time, each separate lease agreement and each lease
schedule or supplement (and each master lease agreement insofar as the same
relates to any such schedule or supplement) described in Schedule 1 hereto, as
the same may be amended or modified from time to time in accordance with the
provisions hereof and thereof unless and until released from the lien of this
Indenture.
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 4.01 of the Assignment and
Servicing Agreement, (b) by a transfer from the Reserve Account pursuant to
Section 3.05, or (c) by the Issuer in its sole discretion.
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Lease Payment: each periodic installment of rent payable by a Lessee
under a Lease. Casualty Payments, Termination Payments, prepayments of rent
required pursuant to the terms of a Lease, at or before the commencement of the
Lease, payments becoming due on or 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),
or other specific charges shall not be Lease Payments hereunder. For purposes of
calculating the Discounted Present Value of the Leases and the Discounted
Present Value of the Performing Leases, the amount of any Excess Copy Charges
and Fee Per Scan Charges that may be payable under such Lease shall not be
included in such calculation.
Lease Repurchase Amount: at any date of determination with respect
to any Lease, means an amount equal to the sum of (a) the sum of (i) the
Discounted Present Value of the Lease as 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 and (b) the product of (i) the Initial ADRB and
(ii) the ratio, as of the Cut-Off Date, that the Booked Residual Value of the
Lease bears to the aggregate Booked Residual Value of all Leases.
Lessee: with respect to any Lease, the lessee thereunder.
Lien: as defined in Section 12 of the Assignment and Servicing
Agreement.
Liquidity Reserve Account: the account by that name established and
maintained by the Trustee pursuant to Section 3.01.
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.
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.
Nominal Buy-Out Lease: as defined in Section 12 of the Assignment
and Servicing Agreement.
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, the Class [A-4]
Interest Rate or the Class [B] Note Interest Rate, as the case may be.
Note Owner: the owner of a Note issued hereunder.
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Note Register: as defined in Section 2.03.
Notes: any notes authorized by, and authenticated and delivered
under, this Indenture.
Officers' Certificate: a certificate delivered to the Trustee and
signed by the Chairman, the President, or a Vice President of the Issuer, and by
another Vice President, the Treasurer, and Assistant Treasurer, the Secretary,
or an Assistant Secretary of the Issuer 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, 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.
Other Lease Payments: all payments on or in respect of leases which
are not Lease Payments, Lease Delinquency Payments, Casualty Payments,
Termination Payments or Similar Transaction Payments.
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 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.
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.
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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.
Outstanding Class [A-4] Principal Amount: the aggregate principal
amount of the Class [A-4] Notes Outstanding at any time.
Outstanding Class [B] Principal Amount: the aggregate principal
amount of the Class [B] 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.
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.
Predecessor Notes: with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.04 in lieu of a lost, destroyed or
stolen Note (or a mutilated Note surrendered to the Trustee) shall be deemed to
evidence the same debt as the lost, destroyed or stolen Note (or a mutilated
Note surrendered to the Trustee).
Principal Payments: as defined in Section 2.01(b).
Rating Agency: S&P and Moody's.
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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.
Required Deposit Date: as defined in Section 3.03(a).
Required Liquidity Reserve: during the first ____ months from the
Cut-Off Date, $_________ and thereafter, $________.
Required Payment: as defined in Section 3.04(b).
Required Reserve Amount: shall equal the lesser of (a) $__________
and (b) the Outstanding Principal Amount of the Notes.
Reserve Account: the account or accounts by that name established
and maintained by the Trustee pursuant to Section 3.01.
Responsible Officer: with respect to the Trustee, any person
regularly engaged in the administration or supervision of corporate trust
accounts (including, in the case of the original Trustee hereunder, any officer
in its Corporate Trust Administration) and also, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
S&P: Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies Inc. and any successor thereto.
Securities Act: the Securities Act of 1933, as amended.
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(a) 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: with respect to any Payment Date, the Servicing Fee
payable pursuant to the Assignment and Servicing Agreement.
Servicing Report: as defined in Section 5.01(b) of the Assignment
and Servicing Agreement.
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Similar Transaction Agreement: an indenture between the Trustee and
a wholly-owned special purpose subsidiary of IOS Capital other than the Issuer,
substantially similar to this Indenture, pursuant to which notes, substantially
similar to the Notes, have been issued.
Similar Transaction Amount: for each Required Deposit Date, the
amount of all Similar Transaction Payments received by the Servicer and
deposited in the Collection Account pursuant to Section 3.02(a) and reported by
the Servicer for such Required Deposit Date pursuant to Section 5.01(a) of the
Assignment and Servicing Agreement.
Similar Transaction Payments: all payments on or in respect of
leases subject to the lien of any Similar Transaction Agreement.
Stated Maturity: The stated maturity date with respect to the Class
[A-1] Notes is the Payment Date in __________ (the "Class [A-1] Stated Maturity
Date"), the stated maturity date with respect to the Class [A-2] Notes is the
Payment Date in ____________ (the "Class [A-2] Stated Maturity Date"), the
stated maturity date with respect to the Class [A-3] Notes is the Payment Date
in ___________ (the "Class [A-3] Stated Maturity Date"), the stated maturity
date with respect to Class the [A-4] Notes is the Payment Date in _________ (the
"Class [A-4] Stated Maturity Date"), the stated maturity date with respect to
the Class [B] Notes is the Payment Date in ___________ (the " Class [B] Stated
Maturity Date"; together with the Class [A-1] Stated Maturity Date, the Class
[A-2] Stated Maturity Date, the Class [A-3] Stated Maturity Date and the Class
[A-4] Stated Maturity Date and the Class [B] Stated Maturity Date, the "Stated
Maturity Dates").
Substitute Lease: as defined in Section 12 of the Assignment and
Servicing Agreement.
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 4.02 of
the Assignment and Servicing Agreement.
Transaction Payment Amount: for each Required Deposit Date, the
amount of all Lease Payments, Lease Delinquency Payments, Defaulted Lease
Payments, Casualty Payments, Termination Payments and other payments on or in
respect of a Lease received by the Servicer and deposited in the Collection
Account pursuant to Section 3.02(a) and reported by the Servicer for such
Required Deposit Date in accordance with Section 6.01(c) of the Assignment and
Servicing Agreement.
Trust Accounts: the Collection Account, the Reserve Account and the
Liquidity Reserve Account.
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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 7.07 and
Section 8.11, 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.
Trust Estate: all money, instruments and other property subject to
or intended to be subject to the lien of this Indenture including all proceeds
thereof.
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 9.06 hereof.
Trust Order or Trust Request: a written order or request delivered
to the Trustee and signed in the name of the Issuer by an Authorized Officer.
Underwriting Agreement: the Underwriting Agreement, among the
Issuer, IOS Capital and Lehman Brothers.
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 repurchase by the Seller as a
result of a breach of a representation or warranty in accordance with the
provisions of Section 4 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 Trust 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 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.
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SECTION 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Issuer delivered to
the Trustee 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 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, 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 right to rely upon the truth and accuracy of any statement
or opinion contained in any such document as provided in Section 7.01(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
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 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
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or Servicer Event of Default. For all purposes of this Indenture, the Trustee
shall not be deemed to have knowledge of any Default or Event of Default nor
shall the Trustee have any duty to monitor or investigate to determine whether a
default has occurred (other than an Event of Default of the kind described in
Section 6.01(a)) or Servicer Event of Default unless a Responsible Officer of
the Trustee shall have actual knowledge thereof or shall have been notified in
writing thereof by the Issuer, the Servicer, or any Noteholder.
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. 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 7.01) 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.
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SECTION 1.05. Notices, etc., to Trustee, Servicer, Issuer 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 or the Servicer shall be sufficient for every purpose 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. 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________, Attention_________ (Number for
telecopy:_________), or at any other address previously furnished in writing to
the Issuer and the Servicer by the Trustee; or
(b) if to the Issuer, at IKON Receivables, LLC, 501 Silverside Road,
Suite 28, Wilmington, DE 19809, Attention: ________ (Number for telecopy: (610)
408-7022), or at any other address previously furnished in writing to the
Trustee and the Issuer by the Servicer; or
(c) if to the Servicer, at IOS Capital, Inc., 1738 Bass Road, P.O.
Box 9115, Macon, Georgia, 31208, Attention: _________(Number for telecopy: (912)
471-2375), or at any other address previously furnished in writing to the
Trustee and the Issuer by the Servicer.
(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.
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
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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 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. 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 OF 1939 AND SHALL BE GOVERNED THEREBY AND CONSTRUED IN
ACCORDANCE THEREWITH.
SECTION 1.10. 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.
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SECTION 1.11. 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 1.12. Inspection.
The Issuer agrees that, on reasonable prior notice, it will permit
the representatives of the Trustee 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 or such Noteholder, as the case may be, and to discuss
its 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 at any time or any Noteholder during the continuance
of any Default or Event of Default, of any right under this Section 1.12 shall
be borne by the Issuer.
SECTION 1.13. 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.
ARTICLE II
THE NOTES
SECTION 2.01. General Provisions.
(a) The Notes shall consist of $__________ principal amount of Class
[A-1] Notes, $___________ principal amount of Class [A-2] Notes, $___________
principal amount of Class [A-3] Notes, $___________ principal amount of Class
[A-4] Notes and $___________ principal amount of Class [B] 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 $___________ of Notes, except
for Notes
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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 9.05. The
Notes shall be issuable only in registered form and only in minimum
denominations of at least $1,000,000 with respect to the Class [A] Notes and the
Class [B] Notes; 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 $1,000,000,
or the issuance of a single Note of each Class, with a denomination less than
$1,000,000.
(b) For each Payment Date, payments of principal (the "Principal
Payments") on the Notes will be made in accordance with Sections 3.03(b),
3.04(b) or 6.06, as applicable. Except as otherwise provided in Section 6.02, 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 five percent (5%) 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 notice of any such redemption to each
Noteholder and the Trustee 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, Class [A-4] Notes and the Class [B] 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 for the Class
[A-1] Notes and_____, 1999 for all other Notes, at the Class [A-1] Interest
Rate, Class [A-2] Interest Rate, Class [A-3] Interest Rate, Class [A-4] Interest
Rate and Class [B] Interest Rate respectively, applied to the then Outstanding
Principal Amounts of the Class [A-1] Notes, Class [A-2] Notes, Class [A-3]
Notes, Class [A-4] Notes and Class [B] Notes, respectively, on the preceding
Payment Date. With respect to the Class [A-1] Notes, the 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 6.06, 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
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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.
(i) The Class [B] Notes shall be subordinated to the Class [A] Notes
to the extent set forth herein. All Class [B] 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
[B] Notes shall be made pro rata among all Outstanding Class [B] 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.
(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
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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 Issuer 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 is hereby appointed
"Note Registrar" for the purpose of registering Notes and transfers of Notes as
herein provided.
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 the Employee Retirement Income Security Act of 1974,
as amended ("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) with respect to any transfer of Class [A]
or Class [B] Note, 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 of the Issuer designated pursuant to Section
8.02 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 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.
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(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 9.05 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 there shall be delivered to the Issuer and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note and
(ii) 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 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.
SECTION 2.05. Book-Entry Registration of Class A Notes and Class [B]
Notes.
Each of the Class [A-1] Notes, Class [A-2] Notes, Class [A-3] Notes,
Class [A-4] Notes and the Class [B] Notes, upon original issuance, shall be
issued in the form attached as Exhibit A and delivered to The Depository Trust
Company, the initial
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Clearing Agency, by, or on behalf of, the Issuer. Each of the Class [A-1] Notes,
Class [A-2] Notes, Class [A-3] Notes, Class [A-4] Notes and Class [B] Notes, 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, Class [A-4] Note Owner or Class [B]
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,
Definitive Class [A-4] Notes and/or Definitive Class [B] 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, Class [A-4] Notes or the Class [B] Notes, as the case may be;
(b) the Issuer, the Servicer and the Trustee 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, Class
[A-4] Notes or Class [B] 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,
Class [A-4] Notes and Class [B] 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, Class [A-4] Notes and Class [B] 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, Class [A-4] Notes or Class
[B] 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, Class [A-4] Notes or the Class [B] 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, Class [A-4] Notes or Class [B] Notes evidencing
the requisite percentage of the Outstanding Principal Amount of such Notes,
respectively.
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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, Class [A-4]
Noteholders or Class [B] 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, Class [A-4] Note Owners or Class [B] Note Owners in accordance with its
applicable rules, regulations and procedures.
SECTION 2.07. Definitive Class A Notes and Class [B] 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 Class [A-1] Notes, Class [A-2]
Notes, Class [A-3] Notes, Class [A-4] Notes and the Class [B] 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 Class [A-1] Notes, Class [A-2] Notes, Class [A-3]
Notes, Class [A-4] Notes and the Class [B] Notes through DTC or (c) after the
occurrence of an "Event of Default" under this Indenture or a default by the
Servicer under the related Transaction Documents, Class [A-1] Note Owners, Class
[A-2] Note Owners, Class [A-3] Note Owners, Class [A-4] Note Owners and Class
[B] Note Owners with respect to the Class [A-1] Notes, Class [A-2] Notes, Class
[A-3] Notes, Class [A-4] Notes and Class [B] Notes evidencing not less than 50%
of the aggregate unpaid Outstanding Principal Amount of the Class [A-1] Notes,
Class [A-2] Notes, Class [A-3] Notes, Class [A-4] Notes and Class [B] Notes,
respectively, advise the Issuer through DTC in writing that the continuation of
a book-entry system with respect to the Class [A-1] Notes, Class [A-2] Notes,
Class [A-3] Notes, Class [A-4] Notes or Class [B] Notes, respectively, is no
longer in the best interests of the Class [A-1] Note Owners, Class [A-2] Note
Owners, Class [A-3] Note Owners, Class [A-4] Note Owners or Class [b] Note
Owners, as the case may be, the Issuer shall notify all Class [A-1] Note Owners,
Class [A-2] Note Owners, Class [A-3] Note Owners, Class [A-4] Note Owners and
Class [B] Note Owners with respect to the Class [A-1] Notes, Class [A-2] Notes,
Class [A-3] Notes, Class [A-4] Notes and Class [B] Notes, respectively, through
the DTC, of the occurrence of any such event and of the availability of
Definitive Notes, to Class [A-1] Note Owners, Class [A-2] Note Owners, Class
[A-3] Note Owners, Class [A-4] Note Owners and Class [B] Note Owners,
respectively, requesting the same. Upon surrender by DTC of the Class [A-1]
Notes, Class [A-2] Notes, Class [A-3] Notes, Class [A-4] Notes or Class [B]
Notes, as the case may be, accompanied by registration instructions from the DTC
for registration, the Issuer shall reissue such Notes as Definitive Notes to the
such 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 the DTC shall be deemed to be imposed upon and performed by the
Issuer, to the extent applicable with respect to such
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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 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, and any agent of the Issuer or the Trustee 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, nor any agent of the Issuer or the Trustee 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. All cancelled Notes held by the Trustee
may be disposed of in the normal course of its business or as directed by a
Trust Order.
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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 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 Securities.
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 knows are so owned shall be so disregarded.
ARTICLE III
ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION
AND APPLICATION OF MONEYS; REPORTS
SECTION 3.01. Trust 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 Trust to the
extent of their interests therein as provided in this Indenture and in the
Assignment and Servicing Agreement, the following accounts, which accounts shall
be Eligible Accounts maintained at the Corporate Trust Office:
(i) Collection Account;
(ii) Reserve Account;
(iii) Liquidity Reserve 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 Trust Estate 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 Trust Estate 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, Trustee nor the institution then acting as
Trustee shall have any right of set-off with respect to the Collection Account,
the Reserve Account or the Liquidity Reserve Account, or any investment therein.
(d) So long as no Event of Default shall have occurred and be
continuing, all or a portion of the amounts in the Trust Accounts, shall be
invested and reinvested by the Trustee pursuant to a Trust Order or 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 Trust Order or
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 Issuer
or the Servicer, as the case may be, identified therein, in each case in such
amounts as such Trust Order or 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 Liquidity Reserve Account. Each of the Issuer and 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 Trust Accounts are not invested,
directly or indirectly, pursuant to a Trust Order or 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 Issuer or the Servicer, as the
case may be, 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 Liquidity Reserve
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Account, as the case may be, to the fullest extent practicable in one or more
Eligible Investments. All investments made by the Trustee shall mature no later
than the 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 Trust 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 Trust Accounts shall be deposited by the
Trustee in such account immediately upon receipt.
(g) Any investment of any funds in the Trust 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 Trust
Estate;
(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 Trust
Accounts and sufficient uninvested funds are not collected and available therein
to make such disbursement, in the absence of a Trust Order or 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 Trust 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). The Trustee shall not be liable for
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.
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SECTION 3.02. Collection of Moneys.
(a) On or before the Issuance Date, the Servicer shall designate an
address for the receipt directly from Lessees of all Lease Payments, Casualty
Payments and Termination Payments on or in respect of each Lease (which payments
may be aggregated by the Lessee paying the same with Similar Transaction
Payments and Other Lease Payments and which designated address may be the same
designated address to which such Similar Transaction Payments and Other Lease
Payments may be sent). The Servicer shall, within two Business Days of receipt
of any payment at such designated address, deposit such payment in the
Collection Account. All Lease Payments, Casualty Payments, Termination Payments
and other payments relating to a Lease received at such designated address and
so deposited shall constitute part of the Trust Estate. Any Similar Transaction
Payments and Other Lease Payments from time to time received at such designated
address or otherwise received by the Servicer or deposited in the Collection
Account shall not constitute part of the Trust Estate.
(b) The Trustee shall from time to time, in accordance with
instructions of the Servicer and the provisions of the Similar Transaction
Agreements, withdraw from the Collection Account any amounts in the Collection
Account which the Servicer advises the Trustee are (i) Similar Transaction
Payments and apply such payments in accordance with the Similar Transaction
Agreements and (ii) 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 payment on or in
respect of any Lease, it shall hold such Payment in trust for the benefit of the
Trustee and the holders of the Notes, 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 (net of any Excess Copy Charges, Maintenance Charges
and Fee Per Scan Charges);
(ii) recoveries from Defaulted Leases to the extent the Originator has not
substituted Substitute Leases for such Defaulted Leases (except to the extent
required to reimburse unreimbursed Servicer Advances);
(iii) late charges received on delinquent Lease payments not advanced by
the Servicer;
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(iv) proceeds from repurchases by the Seller of Leases as a result of
breaches of representations and warranties by the Seller to the extent
Originator has not substituted Substitute Leases for such Leases;
(v) proceeds from investment of funds in the Collection Account and the
Reserve Account;
(vi) Casualty Payments;
(vii) Servicer Advances;
(viii) Termination Payments to the extent the Issuer does not reinvest
such Termination Payments in Additional Leases; and
(ix) payments from the Seller to effect a redemption of the Notes pursuant
to Section 2.01(b).
(b) Unless the Notes have been declared due and payable pursuant to
Section 6.02 or a Restricting Event has occurred and moneys collected by the
Trustee are being applied in accordance with Section 6.06, Available Funds on
deposit in the Collection Account and the amounts, if any, deposited into the
Collection Account from the Reserve Account in accordance with the provisions of
Section 3.05 shall be withdrawn by the Servicer 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:
(i) to pay the Servicing Fee;
(ii) to reimburse unreimbursed Servicer Advances in respect of a prior
Payment Date;
(iii) 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; (d) to make Interest
payments on the Class [A-4] Notes;
(iv) to make Interest Payments on the Class [B] Notes;
(v) 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;
(vi) to pay the Class [B] Principal Payment to the Class [B] Noteholders;
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(vii) 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 until the Outstanding Principal Amount as provided in clause
(viii) above on all of the Class [A] Notes has been reduced to zero, thereafter
to the Class [B] Noteholders as an additional reduction of principal until the
Outstanding Class [B] Principal Amount 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 the Issuer, the balance, if any.
(c) Notwithstanding the foregoing, the Trustee shall retain in the
Collection Account an amount equal to all Lease Payments received that were due
since the prior Due Period, and all Casualty Payments and Termination Payments
received by the Trustee after the 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.
SECTION 3.04. The Reserve Account.
(a) On the Issuance Date, the Issuer has made an initial deposit of
$____________ into the Reserve Account. On each Payment Date, the Trustee shall
transfer to the Reserve Account from the Collection Account such amounts as
shall be required by Section 3.05(b).
(b) If by 12:00 noon, New York City time, one Business Day preceding
any Payment Date, the amount of collected funds on deposit in the Collection
Account available for distribution under Section 3.03(b) is insufficient to
permit on such Payment Date all distributions required by Section 3.03(b)(i)
through 3.03(b)(xii) (such payments, the "Required Payments" and such shortfall,
an "Available Funds Shortfall"), then, to the extent of the Available Reserve
Amount on deposit in the Reserve Account, 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 termination 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.
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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 or any Noteholder, deliver to the requesting person a
written report setting forth the amounts on deposit in the Collection Account
and the Reserve Account and identifying the investments included therein.
(b) Within five Business Days following each Payment Date or as
promptly as possible thereafter but in no event later than two Business Days
following the receipt of the Monthly Report from the Servicer pursuant to
Section 5.01 of the Assignment and Servicing Agreement, the Trustee shall mail
to the Issuer, IOS Capital, each Rating Agency and the Servicer and make
available to each Noteholder the following information:
(i) the principal amount of all Outstanding Class [A-1] Notes, Class [A-2]
Notes, Class [A-3] Notes, Class [A-4] Notes and Class [B] Notes, respectively.
(ii) 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, Class [A-4] Notes and Class [B] Notes,
respectively, and with respect to the Notes held by each Noteholder;
(iii) the amount of the Servicing Fee and unreimbursed Servicer Advances
paid on such Payment Date pursuant to Section 3.03(b)(i) and Section
3.03(b)(ii); and
(iv) the amount on deposit in the Collection Account and the Reserve
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 and 3.05.;
(c) With each report of the Trustee furnished pursuant to this
Section 3.07 following any Payment Date, the Trustee shall enclose a copy of the
relevant Servicing Report and the report required to be furnished to the Trustee
by the Servicer following such Payment Date pursuant to Section 6.01 of the
Assignment and Servicing Agreement or, if such reports have not been received, a
statement to such effect.
(d) Upon request of a Noteholder, the Trustee will provide
information as to the Outstanding Principal Amount of each Class of Notes.
SECTION 3.06. Trustee May Rely on Certain Information from IOS
Capital and Servicer.
Pursuant to Sections 4.01, 4.05, 5.01 and 6.02 of the Assignment and
Servicing Agreement and Section 3.02 through 3.07 hereof, the Servicer is
required to furnish to the Trustee from time to time certain information and
make various calculations which are relevant to the performance of the Trustee's
duties in this Article Three and in Article Four of this Indenture. The Trustee
shall be entitled to rely in good faith on such information or calculations in
the performance of its duties hereunder (i)
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unless and until a Responsible Officer of the Trustee has actual knowledge, or
is advised by any Noteholder (either in writing or orally with prompt written or
telecopied confirmation), that such information or calculations is or are
incorrect, or (ii) unless there is a manifest error in any such information.
ARTICLE IV
RELEASE OF LEASES AND EQUIPMENT
SECTION 4.01. Release of Equipment.
Subject to the satisfaction of the provisions of Section 4.02, the
Trustee shall release Equipment from the Lien of the Indenture upon the
occurrence of any of the following events: (a) the sale of such Equipment
pursuant to Section 4.03(b) of the Assignment and Servicing Agreement (unless
retained by the Issuer for re-leasing), (b) the expiration of the related Lease
upon the payment of the final Lease Payment due and payable under such Lease (c)
the repurchase of the related Lease in accordance with the provisions of Section
5 of the Assignment and Servicing Agreement, (d) the addition of an Additional
Lease to the extent new Equipment is provided in replacement of such Equipment
in accordance with the provisions of Section 11 of the Assignment and Servicing
Agreement and (e) upon the substitution of a Substitute Lease related to such
Equipment in accordance with the provisions of Section 11 of the Assignment and
Servicing Agreement. The proceeds of any such sale, repurchase or releasing
shall be deposited in the Collection Account for disposition under this
Indenture.
SECTION 4.02. 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 from amounts paid by the Lessee, the
Lease Repurchase Amount, or from the proceeds of the Equipment subject 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 Repurchase Amount in
respect of such Lease, (iv) a Casualty Payment under such Lease (and, following
such final Lease Payment, Casualty Payment, Lease Repurchase Amount or
Termination Payment, no further 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 such Defaulted Lease, such Lease shall be released from the lien of this
Indenture.
SECTION 4.03. 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 Trust 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 4.01 or 4.02.
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ARTICLE V
SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER
SECTION 5.01. Servicer Events of Default.
If a Servicer Event of Default shall have occurred and be
continuing, the Trustee shall, upon the written request of the holders of
66-2/3% of the then Outstanding Principal Amount of the Notes, 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 4 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
Seven hereof.
SECTION 5.02. Substitute Servicer.
Notwithstanding the provisions of Section 5.01, the Trustee may, if
it shall be unwilling to continue to act as the successor to the Servicer in
accordance with Section 5.01, or shall, if it is unable to continue to so act or
is so instructed in writing by the holders of 66-2/3% of the then Outstanding
Principal Amount of the Notes, appoint a successor to the Servicer in accordance
with the provisions of Section 8.03 of the Assignment and Servicing Agreement.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
SECTION 6.01. 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) a default for five days or more in the payment of any interest
on the any Note;
(b) a default in making of Principal Payments at the Stated Maturity
of the relevant Notes or when such become due and payable;
(c) a default in the observance or performance in any material
respect of any covenant or agreement regarding the contemplated transaction made
in the Transaction Documents, or any representation or warranty made by the
Issuer in the Transaction Documents or in any certificate delivered pursuant
thereto or in connection therewith having been incorrect as of the time made,
and the continuation of any such default or the failure to cure such breach of a
representation or warranty for a period of 30 days after notice thereof is given
to the Issuer by the Trustee or the Issuer and the Trustee by the holders of at
least 25% in principal amount of the Notes then outstanding;
(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 they become due, or the
taking of corporate action by the Issuer in furtherance of any such action.
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SECTION 6.02. Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default occurs, the unpaid principal amount of
the Notes shall automatically become 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) 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 holders of Notes
evidencing 66-2/3% of the then Outstanding Principal Amount of the Notes 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:
(A) all Principal Payments on any Class [A] Notes and
Class [B] Notes which have become due otherwise than by such
declaration of acceleration and interest thereon from the date
when the same first became due until the date of payment or
deposit at the appropriate Note Interest Rate,
(B) all Interest Payments due with respect to any Class
[A] Notes and Class [B] 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
(C) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements, and
advances of the Trustee, its agents and counsel;
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 6.03. 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 as set forth in Section 7.02.
(b) Following any acceleration of the Notes, the Trustee shall have
all of the rights, powers and remedies with respect to the Trust Estate 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 6.01(a) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee
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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
6.03, the Trustee may sell the Trust Estate (other than the Liquidity Reserve
Account); 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 6.06 unless directed otherwise by the holders of 66-2/3% of the then
Outstanding Principal Amount of the Notes. Neither the Trustee nor any
Noteholder shall have any rights against the Issuer other than to enforce the
Lien against the Leases and the Equipment and to sell the Trust Estate.
SECTION 6.04. 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, IOS Capital, the Servicer
or any other obligor upon the Notes or the other obligations secured hereby or
relating to the property of the Issuer, 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, 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 (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and of the Noteholders allowed in such judicial proceeding, 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 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 any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07.
(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
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of any holder thereof or to authorize the Trustee to vote in respect of the
claim of any Noteholder in any such proceeding.
SECTION 6.05. 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 in respect of which such judgment has been recovered.
SECTION 6.06. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
following an Event of Default or Restricting Event, and any moneys that may then
be held or thereafter received by the Trustee (other than the Liquidity Reserve
Account) 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 and the Noteholders (including the reasonable fees
and expenses of any counsel to the Trustee and the Noteholders);
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 Servicer's Fees 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 all accrued and
unpaid interest on the Outstanding Class [B] Principal Amount 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 [B] Note Interest Rate, third, to the payment
of the Outstanding Class [A-1] Principal Amount, fourth, to the payment of
the Outstanding Class [A-2] Principal Amount,
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Outstanding Class [A-3] Principal Amount and Outstanding Class [A-4]
Principal Amount pro-rata, fifth, to the payment of the Outstanding Class
[B] Principal; 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 Trustee hereunder;
fifth if the person then acting as Servicer is IOS Capital or an
Affiliate of IOS Capital, to the payment of all Servicer's Fees then due
to such Person; and
sixth to the payment of the remainder, if any, to the Issuer or any
other Person legally entitled thereto.
On the Payment Date following an Event of Default, amounts in the
Liquidity Reserve Account shall be used to make any amounts not paid under
item fourth above and thereafter in the priority first through seventh
above.
SECTION 6.07. Limitation on Suits.
None of the Noteholders 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 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 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 have offered to the Trustee
adequate indemnity 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; and
(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;
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
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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 6.07 shall be
construed as limiting the rights of otherwise qualified Noteholders to petition
a court for the removal of a Trustee pursuant to Section 7.09(h) hereof.
SECTION 6.08. 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 Trust Estate, the holder of any Note shall
have the absolute and 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 6.09. Restoration of Rights and Remedies.
If the Trustee or any Noteholder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Noteholder, then and in every such case, subject to any
determination in such proceeding, the Issuer, the Trustee and the Noteholders
shall be restored severally and respectively to their former positions hereunder
and thereafter all rights and remedies of the Trustee and the Noteholders
continue as though no such proceeding had been instituted.
SECTION 6.10. 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 Trustee 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 6.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee 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 or to the
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Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Noteholders, as the case may be.
SECTION 6.12. Control by Noteholders.
Except as may otherwise be provided in this Indenture, until such
time as the conditions specified in Sections 10.01(i) and (ii) 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;
(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 adequately indemnified; 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 6.13. 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, 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 6.14. 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
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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 6.15. Sale of Trust Estate.
(a) The power to effect any sale of any portion of the Trust Estate
described pursuant to Section 6.03 shall not be exhausted by any one or more
sales as to any portion of the Trust Estate remaining unsold, but shall continue
unimpaired until the entire Trust Estate shall have been sold or all amounts
payable on the Notes shall have been paid. The Trustee may from time to time,
upon directions in accordance with Section 6.12, postpone any public sale by
public announcement made at the time and place of such sale. For any public sale
of the Trust Estate, 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.
(b) To the extent permitted by applicable law, the Trustee shall not
in any private sale sell to a third party the Trust Estate, or any portion
thereof unless,
(i) until such time as the conditions specified in Sections 10.01(a)(i)
and (ii) have been satisfied in full, the holders of 66-2/3% of the then
Outstanding Principal Amount of each Class of the Notes voting separately
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 the entire unpaid principal amount of
the Notes and interest due or to become due thereon in accordance with Section
6.06 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 Trust Estate at a private sale.
(c) In connection with a sale of all or any portion of the Trust
Estate:
(i) any one or more Noteholders 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 may, in paying the purchase money therefore, deliver in lieu of
cash any 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 in any portion of the Trust Estate in
connection with a sale thereof;
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(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 Trust Estate 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 Trust Estate shall be commercially reasonable.
(e) The provisions of this Section 6.16 shall not be construed to
restrict the ability of the Trustee to exercise any rights and powers against
the Issuer or the Trust Estate 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 this Indenture and to institute judicial
proceedings for the collection of any deficiency remaining thereafter.
ARTICLE VII
THE TRUSTEE
SECTION 7.01. 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 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 negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
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(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, subject to
Section 7.03(f) hereof, that the Trustee was 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 in accordance with Section 6.12 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 adequate indemnity against such risk or liability is not reasonably
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 7.02. 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 all Noteholders, as their names and addresses
appear in the Note Register, and 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 7.03. Certain Rights of Trustee.
Subject to the provisions of Section 7.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, 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;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by a Trust Request or Trust Order and any action of the
Issuer may be sufficiently evidenced by a Trust Order;
(c) 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
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omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;
(d) the Trustee may consult with counsel as to legal matters and the
written advice of any such counsel selected by the Trustee with due care 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;
(e) 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 pursuant to this Indenture, unless such Noteholders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, note,
debenture, other evidence of indebtedness, or other paper or document, 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;
and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 7.04. Not Responsible for Recitals or Issuance of Notes.
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. The Trustee shall not be accountable for the use or application by
the Issuer of the proceeds of the Notes.
SECTION 7.05. 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 7.06. 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.
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SECTION 7.07. Compensation, Reimbursement, etc.
The Issuer agrees:
(a) to pay to the Trustee from time to time, solely from and only to
the extent that amounts are available, 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) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request, solely from and only to the extent that amounts are
available to the Issuer under Section 3.03(b) or Section 3.04(b) or payable to
the Trustee under clause first of Section 6.06 or clause first of Section 6.13),
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 7.08. 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 $100,000,000; (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 [___] from S&P and [___] 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.
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.
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SECTION 7.09. 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 7.10.
(b) The Trustee may resign at any time by giving written notice
thereof to the Issuer and by mailing notice of resignation by first-class mail,
postage prepaid, to Noteholders at their addresses appearing on the Note
Register.
(c) The Trustee may be removed at any time by written notice of the
holders of Notes evidencing more than 66% of the voting rights thereof,
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 holders of 66-2/3% of the Outstanding Principal
Amount of the Notes, by an act of the Issuer, shall promptly appoint a successor
Trustee.
(e) If no successor Trustee shall have been so appointed by the
Issuer or the Noteholders 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
or any Noteholder 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 all
Noteholders, as their names and addresses appear in the Note Register and 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 7.08 of this Indenture.
(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.
(i) The Issuer may and shall at the direction of the Noteholders
evidencing more than 25% of the aggregate outstanding note principal balances of
all classes of notes (the "Percentage Interests"), 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.
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SECTION 7.10. 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 7.11. 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
7.11.
SECTION 7.12. 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 Trust Estate may at the
time be located, the Issuer and the Trustee shall have power to appoint, and,
upon the written request of the Trustee or the holders of a majority of the then
Outstanding Principal Amount of the Notes, 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
approved by the Trustee either to act as co-trustee, jointly with the Trustee,
of all or any part of such Trust Estate, or to act as separate trustee of any
such property, in either case
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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, or the holders of a majority of the
then Outstanding Principal Amount of the Notes, 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 a Trust Order, may 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. 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 Section 6.12.
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(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 7.13. Acceptance by Trustee.
The Trustee hereby acknowledges the conveyance of the Granted Assets
and the receipt of the Leases and the other Granted Assets granted by the Issuer
hereunder and declares that the Trustee, through a custodian, will hold such
Leases and other Granted Assets conveyed by the Issuer in trust, for the use and
benefit of all Noteholders subject to the terms and provisions hereof.
SECTION 7.14. 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 Trustee who has resigned or been removed shall be subject to Trust
Indenture Act Section 311(a) to the extent indicated therein.
SECTION 7.15. 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 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 if the Notes become listed on any stock exchange or market trading
system.
SECTION 7.16. 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 6.01(b) or
(c) 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.
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ARTICLE VIII
COVENANTS
SECTION 8.01. 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 8.02. 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 the Issuer, and the office at
which the Issuer maintains its records with respect to the Leases, the interests
in the Equipment, and the transactions contemplated hereby, is currently located
in Wilmington, Delaware; and records with respect to certain of the Leases are
maintained in Mt. Laurel, New Jersey. The Issuer will not change the location of
such offices without giving the Trustee at least 30 days prior written notice
thereof.
SECTION 8.03. 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 6.06 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 8.03 or in Section 3.03(b), Section 3.04(b)
or Section 6.06.
(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), Section
3.04(b), or Section 6.06, as applicable, in accordance with the information
known to the Trustee;
(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 Internal Revenue Code of 1986,
as amended (or any successor statutes), and all regulations thereunder, with
respect to the
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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 Securities) 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 8.04. 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.
(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.
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SECTION 8.05. Protection of Trust Estate; 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 Trust Estate;
(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, in the Equipment and all other
property included in the Trust Estate; provided, that the Issuer shall not be
required to file Financing Statements to perfect any security interest in the
Equipment;
(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 Trust Estate 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 8.05; 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 8.05 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 8.05.
SECTION 8.06. [Reserved].
SECTION 8.07. Performance of Obligations; Assignment and Servicing
Agreement.
(a) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Notes, the
Underwriting Agreement and the Placement Agent Agreement.
(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
Trust Estate, or
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which 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 holders of 66 2/3% of the then Outstanding Principal
Amount of the Notes, the Issuer may not waive any default under or amend the
Assignment and Servicing Agreement.
SECTION 8.08. Negative Covenants.
The Issuer will not:
(a) sell, transfer, exchange or otherwise dispose of any portion of
the Trust Estate 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 Trust Estate;
(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
hereby;
(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 Class [A] Notes and Class [B] 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, charge,
security interest, mortgage or other encumbrance to be created on or to extend
to or otherwise arise upon or burden the Trust Estate or any part thereof or any
interest therein or the proceeds thereof other than the lien of this Indenture,
or (iii) subject to Section 3.01(c) of the Assignment and Servicing Agreement,
permit the lien of this Indenture not to constitute a valid first priority
security interest in the Trust Estate; or
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(g) make any loan or advance to any Affiliate of the Issuer or to
any other Person; provided that the Issuer may from time to time make
Inter-Company Loans on the terms and conditions set forth in Section 13 of the
Assignment and Servicing Agreement.
SECTION 8.09. Information as to Issuer.
The Issuer shall deliver to the Trustee 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 8.10. Taxes.
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 Trust Estate.
SECTION 8.11. Indemnification.
The Issuer agrees to indemnify and hold harmless the Trustee 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 negligence or willful misconduct on its part 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 the United States or any state or local government or
governmental authority; provided that, all amounts payable pursuant to this
Section 8.11 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.
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SECTION 8.12. Commission Reports; Reports to Trustee; Reports to
Noteholders.
To the extent it has not satisfied the following requirements by
reporting under Section 8.09 hereof, the Issuer shall:
(a) file with the Trustee, 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 and 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 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 7.15 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 8.12 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.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of
Noteholders.
(a) Without the consent of any Noteholders, the Issuer, by a Trust
Order, and the Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto, in form satisfactory to the Trustee, 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;
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(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 9.01(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 9.01(a).
SECTION 9.02. Supplemental Indentures with Consent of Noteholders.
(a) With the consent of 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, the Issuer, by a Trust 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 no supplemental indenture
shall be entered into if it would result in the reduction or withdrawal of the
then current ratings 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, 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
61
<PAGE>
(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 Trust Estate or,
except as provided in Sections 4.01 or 4.02, 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 each Noteholder and each
Rating Agency a copy of any supplemental indenture entered into pursuant to
Section 9.02(a).
SECTION 9.03. Execution of Supplemental Indentures.
In executing any supplemental indenture (a) pursuant to Article 9.01
of this Indenture or (b) pursuant to Section 9.02 of this Indenture without the
consent of each holder of the Notes to the execution of the same, the Trustee
shall be entitled to receive, and (subject to Section 7.01) shall be, fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any supplemental
indenture which affects the Trustee's own rights, duties, projections, or
immunities under this Indenture or otherwise.
SECTION 9.04. 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 9.05. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a 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 Trustee and 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 9.06. 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.
62
<PAGE>
ARTICLE X
SATISFACTION AND DISCHARGE
SECTION 10.01. Satisfaction and Discharge of Indenture.
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 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
8.03(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;
(ii) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer for the benefit of the Noteholders; and
(iii) the Issuer has delivered to the Trustee 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 Trust Order, its
assignee, all cash, securities and other property held by it as part of the
Trust Estate other than funds deposited with the Trustee pursuant to Section
10.01(i)(b), for the payment and discharge of the Notes.
63
<PAGE>
(b) Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Issuer to the Trustee under Sections 7.07 and
8.11, and, if money shall have been deposited with the Trustee pursuant to
Section 10.01(i)(b), the obligations of the Trustee under Section 10.02 and
Section 8.03(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 10.
SECTION 10.02. Application of Trust Money.
Subject to the provisions of Section 8.03(c), all money deposited
with the Trustee pursuant to Sections 10.01 and 8.03 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 XI
MISCELLANEOUS
SECTION 11.01. 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(a) shall control.
SECTION 11.02. 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).
SECTION 11.03. Location of Leases.
The Servicer shall maintain the Leases at its office in _______ or
at such other offices of the Servicer as shall from time to time be identified
by prior written notice to the Trustee. 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.
64
<PAGE>
SECTION 11.04. 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, the
Issuer (or such other Obligor) shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements set
forth in Section 11.04) 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 11.04) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
SECTION 11.05. 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 11.06. 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 receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Trust or any substantial part of
its respective property, or ordering the winding up or liquidation of the
affairs of the Trust.
65
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and witnessed, all as of the day and year first above written.
IKON RECEIVABLES LLC,
as Issuer
By:_______________________________________
Name:
Title:
__________________________________________,
as Trustee
By:_______________________________________
Name:
Title:
IOS CAPITAL, INC., as Servicer
By:_______________________________________
Name:
Title:
66
<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
____% 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________, 1999, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of _____% 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 ____
1999 Payment Date, since _____, 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 ______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
<PAGE>
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.
The Stated Maturity of the Class [A-1] Notes is the Payment Date in
__________, on which date the Outstanding Principal Amount of the Class [A-1]
Notes shall be due and payable.
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 is one of a duly authorized issue of Class [A]
Notes of the Issuer designated as its "___% Class [A-1] Lease-Backed Notes,
Series 1999-1" (herein called the "Class [A-1] Notes") limited in aggregate
principal amount of $____________, issued under the Indenture, dated as of
________, 1999 (herein called the "Indenture"), among the Issuer, IOS Capital
Inc. as Servicer, and ________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.
This Class [A-1] Note will be secured by the pledge to the Trustee
of the Trust Estate.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class [A-1] Notes (but not less than all the
Class [A-1] Notes) may be declared due and payable in the manner and with the
effect provided in the Indenture. 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 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 Holders of 66 2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, 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 Holder of this Class [A-1] Note shall be
conclusive and binding upon such Holder and upon all future Holders of this
Class [A-1] Note and of any
A-1-2
<PAGE>
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_____, ______, 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 and any agent of the Issuer or the Trustee
may treat the Person in whose name this Class [A-1] Note is registered as the
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.
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-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES LLC
By: _______________
By:_________________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class [A-1] Notes referred to in the within
mentioned Indenture.
___________________, as Trustee
By:_________________________________
Authorized Officer
A-1-4
<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-1-5
<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
____% 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________, 1999, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of _____% 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 ____
1999 Payment Date, since _____, 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 ______15, 1999, either by check to the
registered address of the Holder of this Class 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>
The Stated Maturity of the Class [A-2] Notes is the Payment Date in
__________, on which date the Outstanding Principal Amount of the Class [A-2]
Notes shall be due and payable.
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 is one of a duly authorized issue of Class [A]
Notes of the Issuer designated as its "___% Class [A-2] Lease-Backed Notes,
Series 1999-1" (herein called the "Class [A-2] Notes") limited in aggregate
principal amount of $____________, issued under the Indenture, dated as of
________, 1999 (herein called the "Indenture"), among the Issuer, IOS Capital
Inc. as Servicer, and ________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.
This Class [A-2] Note will be secured by the pledge to the Trustee
of the Trust Estate.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class [A-2] Notes (but not less than all the
Class [A-2] Notes) may be declared due and payable in the manner and with the
effect provided in the Indenture. 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 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 Holders of 66 2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, 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 Holder of this Class [A-2] Note 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.
A-2-2
<PAGE>
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_____, ___, 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 and any agent of the Issuer or the Trustee
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 neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
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-2-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES LLC
By: _______________
By:_________________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class [A-2] Notes referred to in the within
mentioned Indenture.
___________________, as Trustee
By:_________________________________
Authorized Officer
A-2-4
<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-2-5
<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
____% 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________, 1999, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of _____% 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 ____
1999 Payment Date, since _____, 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 ______15, 1999, either by check to the
registered address of the Holder of this Class 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>
The Stated Maturity of the Class [A-3] Notes is the Payment Date in
__________, on which date the Outstanding Principal Amount of the Class [A-3]
Notes shall be due and payable.
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 is one of a duly authorized issue of Class [A]
Notes of the Issuer designated as its "___% Class [A-3] Lease-Backed Notes,
Series 1999-1" (herein called the "Class [A-3] Notes") limited in aggregate
principal amount of $____________, issued under the Indenture, dated as of
________, 1999 (herein called the "Indenture"), among the Issuer, IOS Capital
Inc. as Servicer, and ________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.
This Class [A-3] Note will be secured by the pledge to the Trustee
of the Trust Estate.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class [A-3] Notes (but not less than all the
Class [A-3] Notes) may be declared due and payable in the manner and with the
effect provided in the Indenture. 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 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 Holders of 66 2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, 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 Holder of this Class [A-3] Note 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.
A-3-2
<PAGE>
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_____, ___, 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 and any agent of the Issuer or the Trustee
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 neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
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-3-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES LLC
By: _______________
By:_________________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class [A-3] Notes referred to in the within
mentioned Indenture.
___________________, as Trustee
By:_________________________________
Authorized Officer
A-3-4
<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-3-5
<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
____% 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________, 1999, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of _____% 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 ____
1999 Payment Date, since _____, 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 ______15, 1999, either by check to the
registered address of the Holder of this Class 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
<PAGE>
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.
The Stated Maturity of the Class [A-4] Notes is the Payment Date in
__________, on which date the Outstanding Principal Amount of the Class [A-4]
Notes shall be due and payable.
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 is one of a duly authorized issue of Class [A]
Notes of the Issuer designated as its "___% Class [A-4] Lease-Backed Notes,
Series 1999-1" (herein called the "Class [A-4] Notes") limited in aggregate
principal amount of $____________, issued under the Indenture, dated as of
________, 1999 (herein called the "Indenture"), among the Issuer, IOS Capital
Inc. as Servicer, and ________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.
This Class [A-4] Note will be secured by the pledge to the Trustee
of the Trust Estate.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class [A-4] Notes (but not less than all the
Class [A-4] Notes) may be declared due and payable in the manner and with the
effect provided in the Indenture. 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 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 Holders of 66 2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, 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 Holder of this Class [A-4] Note shall be
conclusive and binding upon such Holder and upon all future Holders of this
Class [A-4] Note and of any
A-4-2
<PAGE>
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_____, ___, 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 and any agent of the Issuer or the Trustee
may treat the Person in whose name this Class [A-4] Note is registered as the
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.
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-4-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES LLC
By: _______________
By:_________________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class [A-4] Notes referred to in the within
mentioned Indenture.
___________________, as Trustee
By:_________________________________
Authorized Officer
A-4-4
<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-4-5
<PAGE>
CLASS [B] 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
____% CLASS [B] 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________, 1999, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of _____% 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 ____
1999 Payment Date, since _____, 1999.
Principal and interest on this Class [B] 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 ______15, 1999, either by check to the
registered address of the Holder of this Class 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>
The Stated Maturity of the Class [B] Notes is the Payment Date in
__________, on which date the Outstanding Principal Amount of the Class [B]
Notes shall be due and payable.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class
[B] Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class [B] Note is one of a duly authorized issue of Class [A]
Notes of the Issuer designated as its "___% Class [B] Lease-Backed Notes, Series
1999-1" (herein called the " Class [B] Notes") limited in aggregate principal
amount of $____________, issued under the Indenture, dated as of ________, 1999
(herein called the "Indenture"), among the Issuer, IOS Capital Inc. as Servicer,
and ________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 [B] Notes are
authenticated and delivered. Unless otherwise defined herein, all capitalized
terms used herein shall have the meanings set forth in the Indenture.
This Class [B] Note will be secured by the pledge to the Trustee of
the Trust Estate.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class [B] Notes (but not less than all the
Class [B] Notes) may be declared due and payable in the manner and with the
effect provided in the Indenture. 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 obligations of the Issuer with respect to the payment
of principal and interest on this Class [B] 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 Holders of 66 2/3% in aggregate
principal amount of the Notes at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, 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 Holder of this Class [B] Note shall be
conclusive and binding upon such Holder and upon all future Holders of this
Class [B] Note and of any Class [B] 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 [B] Note or any Class
[B] Note.
B-2
<PAGE>
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class [B] Note is registrable in the
Note Register, upon surrender of this Class [B] Note for registration of
transfer at the office or agency of the Trustee in the City of_____, ___, 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 [B]
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class [B] 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 [B] Notes are
exchangeable for a like aggregate principal amount of Class [B] 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 and any agent of the Issuer or the Trustee
may treat the Person in whose name this Class [B] Note is registered as the
owner hereof for all purposes, whether or not this Class [B] Note may be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture and this Class [B] 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.
B-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES LLC
By: _______________
By:_________________________________
Authorized Officer
Trustee's Certificate of Authentication
This is one of the Class [B] Notes referred to in the within
mentioned Indenture.
___________________, as Trustee
By:_________________________________
Authorized Officer
B-4
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Class [B] Note, fill in the
form below and have your signature guaranteed:
I or we assign and transfer this Class [B] 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 [B] 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 [B] 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 [B] 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 [B] Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class
[B] Note.
B-5
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION.....................................................2
SECTION 1.01. General Definitions.........................................2
SECTION 1.02. Compliance Certificates and Opinions.......................17
SECTION 1.03. Form of Documents Delivered to Trustee.....................18
SECTION 1.04. Acts of Noteholders, etc...................................19
SECTION 1.05. Notices, etc., to Trustee, Servicer, Issuer and Rating
Agencies................................................20
SECTION 1.06. Notice to Noteholders; Waiver..............................20
SECTION 1.07. Effect of Headings and Table of Contents...................21
SECTION 1.08. Successors and Assigns.....................................21
SECTION 1.09. GOVERNING LAW..............................................21
SECTION 1.10. Legal Holidays.............................................21
SECTION 1.11. Execution in Counterparts..................................22
SECTION 1.12. Inspection.................................................22
SECTION 1.13. Survival of Representations and Warranties.................22
ARTICLE II THE NOTES..........................................................22
SECTION 2.01. General Provisions.........................................22
SECTION 2.02. Execution, Authentication, Delivery, and Dating............24
SECTION 2.03. Transfer and Exchange......................................25
SECTION 2.04. Mutilated, Destroyed, Lost and Stolen Notes................26
SECTION 2.05 Book-Entry Registration of Class [A] Notes and Class [B]
Notes...................................................26
SECTION 2.06. Notice to DTC..............................................28
SECTION 2.07. Definitive Class [A] Notes and Class [B] Notes............28
SECTION 2.08. Payment of Interest and Principal; Rights Preserved........29
SECTION 2.09. Persons Deemed Owners......................................29
SECTION 2.10. Cancellation...............................................29
SECTION 2.11. Noteholder Lists...........................................30
SECTION 2.12. Treasury Securities........................................30
ARTICLE III ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION AND
APPLICATION OF MONEYS; REPORTS.................................30
SECTION 3.01. Trust Accounts; Investments by Trustee.....................30
SECTION 3.02. Collection of Moneys.......................................33
SECTION 3.03. Collection Account; Payments...............................33
SECTION 3.04. The Reserve Account........................................35
SECTION 3.05. Reports by Trustee; Notices of Certain Payments............36
SECTION 3.06. Trustee May Rely on Certain Information from IOS Capital
and Servicer............................................36
i
<PAGE>
ARTICLE IV RELEASE OF LEASES AND EQUIPMENT....................................37
SECTION 4.01. Release of Equipment.......................................37
SECTION 4.02. Release of Leases Upon Final Lease Payment.................37
SECTION 4.03. Execution of Documents.....................................37
ARTICLE V SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER.....................38
SECTION 5.01. Servicer Events of Default.................................38
SECTION 5.02. Substitute Servicer........................................38
ARTICLE VI EVENTS OF DEFAULT; REMEDIES........................................38
SECTION 6.01. Events of Default..........................................38
SECTION 6.02. Acceleration of Maturity; Rescission and Annulment.........40
SECTION 6.03. Remedies...................................................40
SECTION 6.04. Trustee Shall File Proofs of Claim.........................41
SECTION 6.05. Trustee May Enforce Claims Without Possession of Notes.....42
SECTION 6.06. Application of Money Collected.............................42
SECTION 6.07. Limitation on Suits........................................43
SECTION 6.08. Unconditional Right of Noteholders to Receive Principal
and Interest............................................44
SECTION 6.09. Restoration of Rights and Remedies.........................44
SECTION 6.10. Rights and Remedies Cumulative.............................44
SECTION 6.11. Delay or Omission Not Waiver...............................44
SECTION 6.12. Control by Noteholders.....................................45
SECTION 6.13. Undertaking for Costs......................................45
SECTION 6.14. Waiver of Stay or Extension Laws...........................45
SECTION 6.15. Sale of Trust Estate.......................................46
ARTICLE VII THE TRUSTEE.......................................................47
SECTION 7.01. Certain Duties and Responsibilities........................47
SECTION 7.02. Notice of Defaults or Events of Default....................48
SECTION 7.03. Certain Rights of Trustee..................................48
SECTION 7.04. Not Responsible for Recitals or Issuance of Notes..........49
SECTION 7.05. May Hold Notes.............................................49
SECTION 7.06. Money Held in Trust........................................49
SECTION 7.07. Compensation, Reimbursement, etc...........................50
SECTION 7.08. Corporate Trustee Required; Eligibility....................50
SECTION 7.09. Resignation and Removal; Appointment of Successor..........51
SECTION 7.10. Acceptance of Appointment by Successor.....................52
SECTION 7.11. Merger, Conversion, Consolidation or Succession to
Business................................................52
SECTION 7.12. Co-trustees and Separate Trustees..........................52
SECTION 7.13. Acceptance by Trustee......................................54
SECTION 7.14. Preferential Collection of Claims Against the Issuer.......54
SECTION 7.15. Reports by Trustee to Noteholders..........................54
SECTION 7.16. No Proceedings.............................................54
ARTICLE VIII COVENANTS........................................................55
ii
<PAGE>
SECTION 8.01. Payment of Principal and Interest..........................55
SECTION 8.02. Maintenance of Office or Agency; Chief Executive Office....55
SECTION 8.03. Money for Payments to Noteholders to be Held in Trust......55
SECTION 8.04. Corporate Existence; Merger; Consolidation, etc............56
SECTION 8.05. Protection of Trust Estate; Further Assurances.............57
SECTION 8.06. [Reserved].................................................57
SECTION 8.07. Performance of Obligations; Assignment and Servicing
Agreement...............................................57
SECTION 8.08. Negative Covenants.........................................58
SECTION 8.09. Information as to Issuer...................................59
SECTION 8.10. Taxes......................................................59
SECTION 8.11. Indemnification............................................59
SECTION 8.12. Commission Reports; Reports to Trustee; Reports to
Noteholders.............................................60
ARTICLE IX SUPPLEMENTAL INDENTURES............................................60
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.....60
SECTION 9.02. Supplemental Indentures with Consent of Noteholders........61
SECTION 9.03. Execution of Supplemental Indentures.......................62
SECTION 9.04. Effect of Supplemental Indentures..........................62
SECTION 9.05. Reference in Notes to Supplemental Indentures..............62
SECTION 9.06. Compliance with Trust Indenture Act........................62
ARTICLE X SATISFACTION AND DISCHARGE..........................................63
SECTION 10.01. Satisfaction and Discharge of Indenture...................63
SECTION 10.02. Application of Trust Money................................64
ARTICLE XI MISCELLANEOUS......................................................64
SECTION 11.01. Trust Indenture Act Controls..............................64
SECTION 11.02. Communication by Noteholders with Other Noteholders.......64
SECTION 11.03. Officers' Certificate and Opinion of Counsel as to
Conditions Precedent...................................64
SECTION 11.04. Statements Required in Certificate or Opinion.............65
SECTION 11.05. Nonpetition...............................................65
SCHEDULES
SCHEDULE 1 Leases
EXHIBITS
EXHIBIT A Forms of Notes and Form of Trustee's Certificate of
Authentication
EXHIBIT B Form of Investor Letter
iii
Exhibit 5.1
[Letterhead of Dewey Ballantine LLP]
March 25, 1999
IKON Receivables, LLC
500 Silverside Road
Suite 28
Wilmington, DE 19809
Re: Lease-Backed Notes
Ladies and Gentlemen:
We have acted as counsel to Lehman Brothers (the "Underwriter") in
connection with the preparation and filing of the registration statement on Form
S-3 (such registration statement, the "Registration Statement") being filed
today with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Act"), in respect of Lease-Backed Notes (the "Offered
Notes") which IKON Receivables, LLC (the "Issuer" or the "Registrant") plans to
offer in series, each series to be issued under a separate assignment and
servicing agreement or indenture (an "Indenture"), in substantially one of the
forms incorporated by reference as Exhibits to the Registration Statement, among
Issuer, a servicer to be identified in the prospectus supplement for such series
of Notes (the "Servicer" for such series), and a trustee to be identified in the
prospectus supplement for such series of Certificates (the "Trustee" for such
series).
We have examined and relied on the originals or copies certified or
otherwise identified to our satisfaction of all such documents and records of
Issuer and such other instruments and other certificates of public officials,
officers and representatives of Issuer and such other persons, and we have made
such investigations of law, as we have deemed appropriate as a basis for the
opinions expressed below.
The opinions expressed below are subject to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
We are admitted to the Bar of the State of New York and we express
no opinion as to the laws of any other jurisdiction except as to matters that
are governed by Federal law or the laws of the State of New York. All opinions
expressed herein are based on laws, regulations and policy guidelines currently
in force and may be affected by future regulations.
<PAGE>
Based upon the foregoing, we are of the opinion that:
1. When, in respect of a series of Offered Notes, an Indenture has
been duly authorized by all necessary action and duly executed and
delivered by Issuer, the Servicer and the Trustee for such series, such
Indenture will be a valid and legally binding obligation of the Issuer;
and
2. When an Indenture for a series of Offered Notes has been duly
authorized by all necessary action and duly executed and delivered by
Issuer, the Servicer and the Trustee for such series, and when the Offered
Notes of such series have been duly executed and authenticated in
accordance with the provisions of the Indenture, and issued and sold as
contemplated in the Registration Statement and the prospectus, as amended
or supplemented and delivered pursuant to Section 5 of the Act in
connection therewith, such Notes will be legally and validly issued, fully
paid and nonassessable, and the holders of such Notes will be entitled to
the benefits of such Indenture.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to Dewey Ballantine LLP in the
Registration Statement and in future related prospectus supplements under the
heading "Legal Matters." In giving this opinion, we do not concede that we are
experts within the meaning of the Act or the rules and regulations therewith, or
that this consent is required by Section 7 of the Act.
This opinion is furnished by us as counsel to the underwriter and is
solely for the benefit of the addressees hereof. It may not be relied upon by
any other person or for any other purpose without our prior written consent.
Very truly yours,
DEWEY BALLANTINE LLP
Exhibit 8.1
[Letterhead of Dewey Ballantine LLP]
March 25, 1999
IKON Receivables, LLC
500 Silverside Road
Suite 28
Wilmington, DE 19809
Re: Lease-Backed Notes
Ladies and Gentlemen:
We have acted as special counsel to Lehman Brothers (the
"Underwriter") in connection with the preparation and filing of a registration
statement on Form S-3 (the "Registration Statement") being filed today with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Act"), in respect of Lease-Backed Notes (the "Offered Notes")
which IKON Receivables, LLC (the "Issuer" or the "Registrant") plans to offer in
series. Our advice formed the basis for the description of federal income tax
consequences appearing under the heading "Certain Federal Income Tax
Consequences" in the prospectus contained in the Registration Statement. Such
description does not purport to discuss all possible federal income tax
consequences of an investment in the Offered Notes, but with respect to those
tax consequences which are discussed in our opinion, the description is
accurate.
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to the reference to Dewey Ballantine LLP in the
Registration Statement and in future related prospectus supplements under the
heading "Certain Federal Income Tax Consequences." In giving this opinion, we do
not concede that we are experts within the meaning of the Act or the rules and
regulations therewith, or that this consent is required by Section 7 of the Act.
Very truly yours,
DEWEY BALLANTINE LLP
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IOS CAPITAL, INC.,
ORIGINATOR AND SERVICER
IKON RECEIVABLES FUNDING, INC.,
SELLER
AND
IKON RECEIVABLES, LLC,
ISSUER
-------------------------
FORM OF ASSIGNMENT AND SERVICING AGREEMENT
Dated as of ______ __, 1999
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ALL RIGHT, TITLE AND INTEREST IN AND TO THIS AGREEMENT OF IKON RECEIVABLES, LLC
HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF [ ],
AS TRUSTEE, UNDER THE INDENTURE DATED AS OF [______ __, 1999], FOR THE BENEFIT
OF THE PERSONS REFERRED TO THEREIN.
<PAGE>
TABLE OF CONTENTS
Page
R E C I T A L S..............................................................1
A G R E E M E N T S..........................................................2
SECTION 1. CAPITAL CONTRIBUTION.............................................2
1.01 Contribution of Leases.............................................2
1.02 Capital Contribution...............................................2
1.03 Transfer of Leases; Grant of Security Interest.....................3
1.04 Servicer to Act as Custodian.......................................3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR.................4
2.01 Corporate Organization and Authority...............................4
2.02 Business and Property..............................................5
2.03 Financial Statements...............................................5
2.04 Equipment and Leases...............................................5
2.05 Payments...........................................................9
2.06 Full Disclosure....................................................9
2.07 Pending Litigation.................................................9
2.08 Title to Properties...............................................10
2.09 Transactions Legal and Authorized.................................10
2.10 Governmental Consent..............................................10
2.11 Taxes.............................................................11
2.12 Compliance with Law...............................................11
2.13 ERISA.............................................................11
2.14 Ability to Perform................................................12
2.15 Ordinary Course; No Insolvency....................................12
2.16 Assets and Liabilities............................................12
2.17 Fair Consideration................................................12
2.18 Ability to Pay Debts..............................................12
2.19 Bulk Transfer Provisions..........................................13
2.20 Transfer Taxes....................................................13
2.21 Principal Executive Office........................................13
2.22 Servicing Provisions Customary....................................13
2.23 Nonconsolidation..................................................13
2.24 Capital Contribution Treatment....................................14
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER....................14
3.01 Corporate Organization and Authority..............................14
3.02 Business and Property.............................................15
3.03 Ownership and Security Interest...................................15
i
<PAGE>
3.04 Transactions Legal and Authorized.................................15
3.05 Governmental Consent..............................................15
3.06 Compliance with Law...............................................16
3.07 Assets and Liabilities............................................16
3.08 Fair Consideration................................................16
3.09 Ability to Pay Debts..............................................16
3.10 Bulk Transfer Provisions..........................................17
3.11 Transfer Taxes....................................................17
3.12 Principal Executive Office........................................17
3.13 Nonconsolidation..................................................17
3.14 Capital Contribution Treatment....................................18
SECTION 4. ADMINISTRATION OF LEASES........................................18
4.01 Servicer to Act...................................................18
4.02 Lease Amendments and Modifications................................20
4.03 Defaulted Leases..................................................21
4.04 Costs of Servicing; Servicing Fee; Administrative Expenses........22
4.05 Other Transactions................................................22
SECTION 5. SERVICER ADVANCES AND ORIGINATOR'S SUPPORT......................22
5.01 Late Lease Payments...............................................22
5.02 Early Termination Leases..........................................23
5.03 Indemnification...................................................23
5.04 Purchases; Other Payments.........................................24
5.05 Payment Advices...................................................25
SECTION 6. INFORMATION TO BE PROVIDED......................................25
6.01 Monthly Status Reports; Servicing Reports.........................25
6.02 Annual Independent Public Accountant's Report.....................27
SECTION 7. THE SERVICER....................................................27
7.01 Merger or Consolidation of the Servicer...........................27
7.02 Limitation on Liability of the Servicer and Others................28
7.03 Servicer Not to Resign or Be Removed..............................28
7.04 Financial and Business Information................................28
7.05 Officers' Certificates............................................30
7.06 Inspection........................................................30
7.07 Servicer Records..................................................30
SECTION 8. THE ORIGINATOR..................................................31
8.01 Merger or Consolidation of the Originator.........................31
8.02 Control of Seller.................................................31
8.03 Financial and Business Information................................31
8.04 Officers' Certificates............................................32
8.05 Inspection........................................................33
ii
<PAGE>
8.06 Books and Records.................................................33
8.07 Communications....................................................33
SECTION 9. THE SELLER......................................................33
9.01 Merger or Consolidation of the Seller.............................33
9.02 Control of Issuer.................................................33
9.03 Financial and Business Information................................34
9.04 Inspection........................................................34
9.05 Books and Records.................................................34
9.06 Communications....................................................35
SECTION 10. DEFAULT........................................................35
10.01 Servicer Events of Default.......................................35
10.02 Termination......................................................37
10.03 Trustee to Act; Appointment of Successor.........................37
10.04 Servicer to Cooperate............................................38
10.05 Notification to Noteholders......................................38
10.06 Remedies Not Exclusive...........................................38
SECTION 11. SUBSTITUTION AND ADDITION OF LEASES............................38
11.01 Substitution and Addition........................................38
11.02 Procedure........................................................40
11.03 Objection and Purchase...........................................41
11.04 Originator's, Seller's and Servicer's Subsequent Obligations.....41
SECTION 12. ASSIGNMENT.....................................................42
12.01 Assignment to Trustee............................................42
12.02 Assignment by Originator, Seller or Servicer.....................42
SECTION 13. NATURE OF OBLIGATIONS AND SECURITY THEREFOR....................42
13.01 Obligations Absolute.............................................42
13.02 Security for Obligations.........................................43
13.03 Further Assurances; Financing Statements.........................43
SECTION 14. DEFINITIONS....................................................43
SECTION 15. INTER-COMPANY LOANS............................................49
15.01 Inter-Company Loans..............................................49
SECTION 16. MISCELLANEOUS..................................................50
16.01 Continuing Obligations...........................................50
16.02 GOVERNING LAW....................................................50
16.03 Successors and Assigns...........................................50
16.04 Modification.....................................................50
iii
<PAGE>
16.05 No Proceedings...................................................50
16.06 Notices..........................................................50
16.07 Counterparts.....................................................51
16.08 Nonpetition Covenant.............................................51
Schedule 1 - Subsidiaries of the Seller
Exhibit A - Schedule of Leases and Equipment
Exhibit B - Form of Inter-Company Loan Note
Exhibit C - Form of Receivables Servicing Report
iv
<PAGE>
ASSIGNMENT AND SERVICING AGREEMENT
This ASSIGNMENT AND SERVICING AGREEMENT is made and dated as of
______ __, 1999, by and between IKON RECEIVABLES, LLC, a Delaware limited
liability company, as acquiror hereunder (the "Issuer"), IOS CAPITAL, INC., a
Delaware corporation, as originator of the Leases (defined below) (in such
capacity, the "Originator") and servicer (in such capacity, the "Servicer")
hereunder, and IKON RECEIVABLES FUNDING INC., as contributor of the Leases (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 (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, all
right, title and interest of the Seller in, to and under the Leases and all
right, title and interest of the Seller in covenants, representations,
warranties and other obligations of the Originator (including the Originator's
Purchase Obligation) under this Assignment and Servicing Agreement.
C. Contemporaneously with such contribution and assignment, the
Seller wishes to contribute to the Issuer, and the Issuer wishes to acquire from
the Seller, all right, title and interest of the Seller (other than its
ownership interest) in and to each item of Equipment subject to each Lease.
D. Pursuant to the Indenture, the Issuer is issuing one class of
[ ]% Class [A-1] Lease-Backed Notes, Series 1999-A in the aggregate principal
amount of $[ ] (the "Class [A- 1] Notes"), one class of [ ]% Class
[A-2] Lease-Backed Notes, Series 1999-A in the aggregate principal amount of
$[ ] (the "Class [A-2] Notes"), one class of [ ]% Class [A-3]
Lease-Backed Notes, Series 1999-A in the aggregate principal amount of
$[ ] (the "Class [A-3] Notes"), one class of [ ]% Class [A-4]
Lease-Backed Notes, Series 1999-A in the aggregate principal amount of
$[ ] (the "Class [A-4] Notes"; together with the Class [A-1] Notes,
the Class [A-2] Notes and the Class [A-3] Notes, the "Class [A] Notes"), one
class of [ ]% Class [B] Leased-Backed Notes, Series 1999-A in the aggregate
principal amount of $[ ] (the "Class [B] Notes"; together with the
Class [A] Notes, the "Notes"),the proceeds of which are being used by the Issuer
to make payment to the Seller for the Leases.
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 the Asset
Pools, to and under the Leases, the interests in the Equipment, the property
comprising the Asset Pool and this Assignment and Servicing Agreement.
<PAGE>
A G R E E M E N T S
SECTION 1. CAPITAL CONTRIBUTION
1.01 Contribution of Leases.
(a) By their execution and delivery of this Assignment and Servicing
Agreement, the Originator 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 the right to receive all payments due or to
become due thereunder since the Cut-Off Date).
(b) By their execution and delivery of this Assignment and Servicing
Agreement, the Seller 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 the
Leases (including the right to receive all payments due or to become due
thereunder since the Cut-Off Date), the Equipment (other than the Seller's
ownership interest in the Equipment) and all right, title and interest of the
Seller in 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.
(a) The Originator and the Seller each acknowledge and confirm that
the Originator, as consideration for the equity interests in the Seller, is
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, as consideration for its membership interests in the Issuer, is
contributing and transferring to the Issuer, and in connection with each
transfer and assignment of Additional Leases and Substitute Leases the Seller
will contribute and transfer to the Issuer, without recourse, all right, title
and interest of the Seller (other than its ownership interest) in and to each
item of Equipment subject to each Lease, Additional Lease and Substitute Lease.
After such contribution and transfer by the Seller to the Issuer, all right,
title and interest of the Seller (other than its ownership interest) in and to
each item of Equipment subject to each Lease shall be vested in the Issuer. In
addition, the Seller is contributing and assigning all its interest in the
covenants, representations, warranties and other obligations of the Originator
(including the Originator's Purchase Obligation) under this Assignment and
Servicing Agreement.
2
<PAGE>
1.03 Transfer of Leases; Grant of Security Interest.
It is the intention of the parties hereto that each transfer of
Leases, Additional Leases, Substitute Leases, Lease Payments and all other
amounts due or becoming due with respect thereto and Equipment (or interests
therein) being made hereunder shall constitute a capital contribution and not a
loan. Neither the Originator nor the Seller shall take any action inconsistent
with the treatment of such transfers as capital contributions or with the
Issuer's ownership of the Leases and all other amounts due or becoming due with
respect thereto and the interests in the Equipment. Each of the Originator and
the Seller shall indicate in its records that ownership of each of the Leases
and the interests in the Equipment (other than the Seller's ownership interest)
is held by the Issuer, and each shall respond to any inquiries from third
parties by indicating that its ownership in the Leases, Additional Leases,
Substitute Leases and all other amounts due or becoming due with respect thereto
and the interests in the Equipment (other than the Seller's ownership interest)
is held by the Issuer. In the event, however, that a court of competent
jurisdiction were to hold that any transaction evidenced hereby constitutes a
loan and not a capital contribution, it is the intention of the parties hereto
that this Agreement shall constitute a security agreement under applicable law
and that the Issuer and the Trustee shall be deemed to have been granted a first
priority security interest in (a) the Leases, Equipment and all Lease Payments,
Casualty Payments, Termination Payments 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,
Termination Payments 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 of the Issuer to or under any
guarantees of or collateral (including all rights of the Issuer in any security
deposits) for the Lessee's obligations under any Lease, (c) all interests of the
Issuer in the Equipment at any time subject to any Lease including any security
interest of the Seller in the Equipment and (d) all proceeds of the conversion,
whether voluntary or involuntary, of any of the foregoing into cash or other
property.
1.04 Servicer to Act as Custodian.
(a) The Servicer shall hold and acknowledges that it is holding the
Leases and all other Granted Assets that it may from time to time receive
hereunder as custodian for the Trustee.
(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 complete 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 and perform the following powers
and duties:
3
<PAGE>
(A) hold the Leases on behalf of the Trustee for the benefit of the
Noteholders, 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 Trustee on behalf of the Noteholders.
(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 on behalf of the Noteholders shall mark
conspicuously each original contractual document with a Lessee, and its master
data processing records evidencing each Lease with a legend, acceptable to the
Trustee, evidencing that all right, title and interest in the Leases (other than
the Seller's ownership interest in the Equipment) has been granted to the
Trustee as provided in the Indenture.
(d) The Servicer agrees to maintain the Leases at either 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. 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 2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
The Originator 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 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 contemplated hereby, including performance of
the duties of the Servicer and the Originator's support
obligations hereunder, and
4
<PAGE>
(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 Trust Estate 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 and the Prospectus Supplement accurately describe 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 periods ended September 30, 1998 and
September 30, 1997 and the related consolidated statements of income, retained
earnings and cash flow for the respective period and 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
sheet of the Originator and its consolidated subsidiaries as of December 31,
1998 and the related consolidated statements of income, retained earnings and
cash flow for the three months ended on such date 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, the Prospectus Supplement
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 Equipment in accordance with Sections 1.01 and 1.02, respectively,
the Originator purchased each item of Equipment from [either (i) the
manufacturer or other supplier following receipt of an invoice from such
manufacturer or supplier or (ii) a Lessee following confirmation that such item
of Equipment was on such Lessee's premises]. The Originator has paid in full, to
the manufacturer or supplier [or Lessee], 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 contribution to the Issuer of the Leases and
the contribution of all of the Originator's right, title and interest in each
item of Equipment to the Seller and the subsequent contribution of the
5
<PAGE>
Seller's interests (other than its ownership interest) in each item of Equipment
to the Issuer, does 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) Upon completion of the transfers described in Article I hereof,
the Issuer will (i) be the legal owner of the Leases (including the right to
receive all payments due or to become due thereunder), (ii) have good title to
its interest in each item of the Equipment subject to any Lease [other than a
Nominal Buy-Out Lease], and (iii) have a valid security interest in each item of
Equipment subject to any Lease [other than a Nominal Buy-Out Lease]. At such
time, the Leases (including the right to receive all payments due or to become
due thereunder) and the Originator's interest in the Equipment will be free and
clear of all Liens other than the rights of each Lessee under the Lease to which
such Lessee is a party and the Lien created by the Indenture; and there will be
no delinquent taxes or other outstanding charges affecting the Equipment which
are or may be Liens prior to, or equal or coordinate with, the Lien of the
Trustee under the Indenture.
(c) At the time of each transfer of a Lease hereunder, each such
Lease (i) is or will be a triple-net lease; (ii) is or 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,
is noncancellable by the Lessee and is in full force and effect, and 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 each
Lease have been complied with; and (iii) the Originator has no knowledge (after
due inquiry) of any challenge, dispute or claim by or against the Lessee under
or affecting any Lease. As of the initial Determination Date, or the effective
date of the transfer of any Additional Lease or Substitute Lease, each Lessee
has paid at least one installment of rent under its respective Lease.
(d) At the time that any item of Equipment (including the
Originator's security interest in any item not owned by it) is contributed
hereunder, the Originator will have no knowledge that any item of the Equipment
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 at least equal to the fair market
value thereof.
(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 owned by the Originator and the Seller. All
premiums in respect of such policies have been paid. Each of the Trustee and the
Issuer are named as loss payees and additional
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insureds, as their interests may appear, on such casualty and liability policies
maintained by the Originator.
(g) At the time of each transfer of a Lease hereunder, no Lease had
outstanding rent which was 60 or more days past due as of the Cut-Off Date.
(h) Each Lease was entered into or acquired by the Originator in
accordance with the Originator's regular credit approval process described in
the Prospectus and the Prospectus Supplement, and no selection procedures
adverse to the credit quality of the Leases were employed in selecting the
Leases for contribution under this Assignment and Servicing Agreement.
(i) The obligation of each Lessee to pay rent under each of the
Leases throughout the term thereof is and will be unconditional, without any
right of setoff by such Lessee and 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) 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
(including 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 Trust
Estate).
(k) As of the time of each transfer of Leases and Equipment
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.
(l) As of the time of each transfer of Leases and Equipment
hereunder, no Lease has been amended, altered or modified in any respect, except
in writing and copies of all such writings are attached to the Lease delivered
to the Trustee.
(m) As of the time of each transfer of Leases and Equipment
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 rescinded, and no Equipment
covered by any Lease will have been released from such Lease, in
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whole or in part, nor has any instrument been executed that would effect any
such satisfaction, release, cancellation, subordination or rescission.
(n) As of the time of each transfer of Leases and Equipment
hereunder, each Lease was either (i) originated by the Originator in the
ordinary course of its business or (ii) acquired by the Originator for value and
taken into possession prior to the Cut-Off Date in the ordinary course of its
business.
(o) The Leases do not materially 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.
(p) All parties to each Lease had authority and capacity to execute
such Lease.
(q) None of the Leases is a consumer lease and each Lessee has
accepted the Equipment leased to it.
(r) The Booked Residual Value of the Equipment as of the Cut-Off
Date equals [$ ].
(s) All parties to each Lease had all requisite authority and
capacity to execute such Lease.
(t) As of the Cut-Off Date, the Final Lease Payment on each Lease
was due and payable on or prior to [ ].
(u) Each Lease agreement is "chattel paper" within the meaning of
The Uniform Commercial Code in the states of [New York and Georgia].
(v) Each Lease is noncancellable by the Lessee and none of the
Leases contain early termination options (except for Leases which contain early
termination or prepayment clauses, which require the Lessee to pay the remainder
of all remaining Scheduled Payments under such Lease upon such cancellation or
prepayment);
(w) None of the Leases are subject to any guaranty by the
Originator.
(x) No adverse selection was used in selecting the Lease for
transfer to the Issuer.
(y) The Leases have been sold to the Issuer free and clear of any
liens and are assignable without prior written consent of the Lessee.
(z) The Leases are U.S. dollar-denominated and the Lessor and each
Lessee are located in the United States.
(aa) No more than three percent (3%) of the Leases in any Asset Pool
will consist of Leases with government entities as the obligor.
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(bb) Each Lessee has represented to the Originator that it has
accepted the Equipment.
(cc) No Lessee is a subject of an insolvency or bankruptcy
proceeding at the time of the transfer.
(dd) No Lease is a Defaulted Lease.
(ee) The maximum remaining term of any Lease shall not exceed [ ]
months ("Maximum Lease Term").
(ff) Each Lease provides for periodic payments.
(gg) 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 lease payment period, including amounts on deposit
in the Reserve Account, are sufficient to cover the Servicing Fee and pay the
principal and interest on the Receivable Notes, as such payments become due and
payable.
(b) The portfolio detail delivered or to be delivered to the Trustee
on or prior to the Issuance Date (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 certain 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, the Prospectus Supplement (including, without
limitation, the statistical and descriptive information with respect to the
initial Leases, Lessees and Equipment), as of their respective dates, do 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. 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 nor, 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
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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.
2.08 Title to Properties.
Immediately following the transfer and contribution by the
Originator to the Seller of the Leases and the Originator's interest in the
Equipment, and then the transfer and contribution by the Seller to the Issuer of
the Leases and the Seller's interests (other than its ownership interest) in the
Equipment, the Leases (including the right to receive all payments due or to
become due thereunder) and the interest in the Equipment will be free and clear
of all Liens, except the Lien on the Trust Estate in favor of the Trustee
granted pursuant to the Indenture (or the Lien in favor of the Issuer which is
assigned to the Trustee pursuant to the Indenture).
2.09 Transactions Legal and Authorized.
The transfer and contribution by the Originator of all of its right,
title and interest in and to each item of Equipment and each Lease (including
the right to receive all payments due or to become due thereunder) 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.
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 or the contribution of the Leases and
Equipment or the performance of its obligations as Servicer.
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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
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 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,
Withdrawals 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 perform each and every
covenant contained in this Assignment and Servicing Agreement or its ability to
perform 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 anticipated obligations.
2.16 Assets and Liabilities.
(a) Both immediately before and after any transfer and contribution
of Leases (including the right to receive all payments due or to become due
thereunder) and the transfer and contribution of the interests in the 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
of Leases (including the right to receive all payments due or to become due
thereunder) and the transfer and contribution of the interests in the 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 of the Leases (including the right to receive all payments due or
to become due thereunder) and the contribution of its interests in the
Equipment, 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.
Neither as a result of the transaction contemplated by this
Assignment and Servicing Agreement nor otherwise does the Originator believe
that it will incur debts beyond its ability to pay or which would be prohibited
by its charter documents or by-laws. 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, transfer, assignment and conveyance of the Leases
and its interests in the Equipment by the Originator pursuant to this Assignment
and Servicing Agreement is not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction.
2.20 Transfer Taxes.
The contribution, transfer, assignment and conveyance of the Leases
(including all payments due or to become due thereunder) and its interests in
the Equipment by the Originator pursuant to this Assignment and Servicing
Agreement is 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 Issuer receives actual notice of any
Transfer Taxes arising out of the transfer, assignment and conveyance of the
Leases and/or its interests in the Equipment, 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 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 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, P.O. Box 9115, 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, such that the separate existence of the
Originator and the Seller or the Issuer would be disregarded in the event of a
bankruptcy or insolvency of the Originator or the Seller or the Issuer, and in
such regard:
(a) the Originator is not involved in the day-to-day management of
the Seller or the Issuer;
(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;
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(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 assets prior to any value in the
Seller or the Issuer becoming available to the Seller 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 or 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 substantially the same as this
Agreement.
2.24 Capital Contribution Treatment.
The Originator will treat the transfer to the Seller of the Leases,
the Lease Receivables and its interest in the Equipment as a capital
contribution for reporting and accounting 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 corporation 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 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.
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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 the transfers described in Article I hereof, the
Issuer will (i) be the legal owner of the Leases (including the right to receive
all payments due or to become due thereunder), (ii) have good title to its
interest in each item of the Equipment subject to any Lease [other than a
Nominal Buy-Out Lease], and (iii) have a valid security interest in each item of
Equipment subject to any Lease [other than a Nominal Buy-Out Lease]. At such
time, the Leases (including the right to receive all payments due or to become
due thereunder) and the Originator's interest in the Equipment will be free and
clear of all Liens other than the rights of each Lessee under the Lease to which
such Lessee is a party and the Lien created by the Indenture; and there will be
no delinquent taxes or other outstanding charges affecting the Equipment which
are or may be Liens prior to, or equal or coordinate with, the Lien of the
Trustee under the Indenture.
3.04 Transactions Legal and Authorized.
The contribution by the Seller of all of its right, title and
interest (other than its ownership interest) in and to each item of Equipment,
each Lease (including the right to receive all payments due or to become due
thereunder) and the contribution and assignment of the covenants,
representations, warranties and obligations of the Originator (including the
Originator's Purchase Obligation) under this Assignment and Servicing Agreement
and compliance by the Seller 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 Seller, and do not require any stockholder 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 corporate powers of the Seller; 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 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.
3.05 Governmental Consent.
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 or the contribution of the Leases and the
Equipment.
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3.06 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 business or condition
(financial or otherwise) of the Seller and its
subsidiaries.
3.07 Assets and Liabilities.
(a) Both immediately before and after any contribution of Leases
(including the right to receive all payments due or to become due thereunder)
and the contribution of the interests 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 of Leases
(including the right to receive all payments due or to become due thereunder)
and the contribution of the interests 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.
3.08 Fair Consideration.
The consideration received by the Seller, in exchange for the
contribution of the Leases (including the right to receive all payments due or
to become due thereunder) and the contribution of its interests (other than its
ownership interest) 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.
3.09 Ability to Pay Debts.
Neither as a result of the transaction contemplated by this
Assignment and Servicing Agreement nor otherwise does the Seller believe that it
will incur debts beyond its ability to pay or which would be prohibited by its
charter documents or by-laws. The Seller's
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assets and cash flow enable it to meet its present obligations in the ordinary
course of business as they become due.
3.10 Bulk Transfer Provisions.
The contribution, transfer, assignment and conveyance of the Leases
and its interests in the Equipment by the Seller pursuant to this Assignment and
Servicing Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
3.11 Transfer Taxes.
The contribution, transfer, assignment and conveyance of the Leases
(including all payments due or to become due thereunder) and its interests
(other than its ownership interest) in the Equipment by the Seller pursuant to
this Assignment and Servicing Agreement is not subject to and will not result in
any tax, fee or governmental charge payable by the Seller to any federal, state
or local government ("Transfer Taxes"). In the event that the Issuer receives
actual notice of any Transfer Taxes arising out of the contribution, assignment
and conveyance of the Leases and/or the Seller's interests (other than its
ownership interest) in the Equipment, 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 holders of the Notes and the
Trustee shall have no obligation to pay such Transfer Taxes).
3.12 Principal Executive Office.
The principal executive offices of the Originator and the Seller are located at
1738 Bass Road, P.O. Box 9115, Macon, Georgia 31208 and 501 Silverside Road,
Suite 28, Wilmington, DE 19809, respectively.
3.13 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 Issuer, such that the separate existence of the Seller and the Issuer would
be 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
Issuer;
(b) the Seller maintains separate corporate records and books of
account from the Issuer and otherwise observes corporate formalities and has a
separate business office from 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
Issuer;
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(d) the Seller maintains its assets separately from the assets of
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 Issuer and the separate creditors of the Issuer
will be entitled to be satisfied out of the Issuer's assets prior to any value
in the Issuer becoming available to 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) the Issuer does not act as an agent of the Seller in any
capacity and the Seller does not act as agent for the Issuer, but instead
presents itself to the public as a corporation separate from the Issuer.
3.14 Capital Contribution Treatment.
The Seller will treat the transfer to the Issuer of the Leases and
the Lease Receivables and of its interests (other than its ownership interest)
in the Equipment as a capital contribution for tax, reporting and accounting
purposes.
SECTION 4. ADMINISTRATION OF LEASES
4.01 Servicer to Act.
(a) Notwithstanding the contribution and assignments of the Leases
(including the right to receive all payments due or to become due thereunder)
and the related interests in 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 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, as applicable, 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 or is intended to be 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,
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the Servicer will act on behalf and for the benefit of the Issuer, the Trustee
and the holders of the Notes, 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 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 any
and all required Financing Statements and assignments of Financing Statements
and such additional Financing Statements and continuation statements with
respect thereto 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 security interest contemplated by the Indenture
in favor of the Trustee in each of the Leases, at all times will be perfected by
such filings with the appropriate Uniform Commercial Code filing offices]. The
Originator and the Servicer agree to file Financing Statements on Form UCC-1 to
perfect the security interest of the Trustee in the Leases and the Lease
Payments, and to the extent provided herein, the 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.
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(e) On or prior to the Issuance Date, the Servicer will file the
Financing Statements and assignments of Financing Statements in accordance with
the Filing Requirements and thereafter will file such additional Financing
Statements and continuation statements and assignments with respect to the
Leases 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 contemplated by this Agreement in favor of the
Issuer and the security interest contemplated by the Indenture in favor of the
Trustee in each of the Leases and the Equipment will be perfected by such
filings with the appropriate Uniform Commercial Code filing offices (to the
extent this may be achieved by central filing), and (ii) the security interest
contemplated by the Assignment and Servicing Agreement in favor of the Seller
and the Issuer in each of the Leases and Equipment will be perfected by such
filings with the appropriate Uniform Commercial Code filing offices (to the
extent this may be achieved by central filing).
(f) The Servicer shall pay the Excess Copy Charges, Maintenance
Charges and Fee Per Scan Charges, if any, owing the related vendor 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 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 payment
of any Lease Payment, Casualty Payment, 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
Issuer, the Trustee 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 adjustments and any additions
and substitutions pursuant to Section 11, the aggregate Booked Residual Value of
such Leases will not be less than 100% of the aggregate Booked Residual Value of
the Leases adjusted, replaced or substituted since the Issuance Date.]
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(ii) 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 [ ].
(iii) 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.
(iv) 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.
(v) 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 Defaulted 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 Defaulted 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 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 terminate such Lease and to recover, or attempt to
recover, all damages resulting from such default. The Servicer shall demand, on
behalf of the Issuer, that the Originator immediately repay any Inter-Company
Loan representing the advance pursuant to Section 15.01 hereof of any security
deposit with respect to any Lease which becomes a Defaulted Lease, and the
Servicer shall apply such security deposit in accordance with Section 4.03(d)
hereof.
(b) The Servicer will use its best efforts to sell or lease any
Equipment upon the expiration or early termination of a Lease or that is subject
to a Defaulted 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 Lease must have a Discounted Present Value equal to or greater
than that of the Terminated Lease, monthly payments at least equal to those of
the Terminated Lease through the remaining term of such Terminated Lease, a
remaining term less than or equal to that of the Terminated Lease and a Booked
Residual Value at least equal to that of such Terminated 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.
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(d) All amounts realized by the Servicer in the performance of its
duties hereunder with respect to any Lease or Equipment remaining subject to the
Lien of the Indenture (net of the Servicer's actual out-of-pocket expenses
reasonably incurred in such realization) 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 Defaulted 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 Defaulted Lease before
depositing any such amounts pursuant to this Section 4.03(d).
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 from the Issuer on each Payment Date following the Issuance Date a
servicing fee with respect to the Notes (the "Servicing Fee").
(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 (i) the Discounted Present Value of
Performing Leases as of the prior Payment Date times (ii) one-twelfth of [ ]%.
(c) The Servicer agrees to pay, out of the Servicing Fee, all
Trustee's Fees and expenses 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 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
Lease Payment Period but unpaid prior to such Determination Date with respect
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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 funds in the Collection Account in
accordance with the Indenture on the second following Payment Date.
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 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) offer for sale] to the Issuer one or more Additional Leases in
consideration of the proceeds thereof in accordance with Section 11 hereof.
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
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.
A Lease will be considered to be an "Eligible Lease" if on the date such Lease
is substituted for or added in replacement of an Early Termination Lease, such
Lease satisfies the representations and warranties set forth in Section 2.04(a)
through (ee) and th requirements of Section 11 hereof.
5.03 Indemnification.
The Originator and in its capacity as Servicer, agrees to indemnify
and hold harmless the Issuer, the Servicer, the Trustee 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
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specifically set forth in this Section 5, to make any payment with respect to
principal or interest on 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.
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 and 2.05 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, thus, causing a breach of such
representation or warranty to occur, as of the Issuance Date or related transfer
date, as the case may be which breach has not 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 Trustee or the date on which the Originator otherwise
first discovers such breach (each such lease a "Warranty Lease") 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 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 any claim by any Lessee against the Originator and, in
any such case, the event or condition causing such termination, reduction,
impairment or claim 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 Warranty Lease, Lease and
the Equipment subject thereto by paying to the Trustee, not later than the third
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 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, Termination Payment or
Booked Residual Value under any Lease shall be deemed to be material.
(b) By the Issuance Date, the Originator agrees to obtain and
provide to the Trustee UCC searches against it from the central 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 the Originator 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 fails 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 of Equipment in any such state for which such searches are not
provided or with respect to which conflicting Liens are found to exist at the
Lease Purchase Amount for such Lease.
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(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 Trust
Estate.
5.05 Payment Advices.
Each payment to the Trustee 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 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 Trustee (copies of which the Trustee shall send to
each Rating Agency and to each holder of the Notes as provided in the Indenture)
a written report, signed by one of the Servicer's financial officers, (i)
identifying each Lease with respect to which any Lease Payment was 30 or more
days overdue as of the end of the immediately preceding Lease Payment 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 Lease Payment 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
Issuance Date), (iii) identifying each Lease with respect to which any Lease
Payment was [93] or more days overdue as of the end of the immediately preceding
Lease Payment 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 Issuance Date), (iv)
identifying each Lease which became a Defaulted 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 CutOff Date) and the aggregate Discounted Present Value of all such
Defaulted Leases, (v) 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 Defaulted Lease Payments previously
made by the Seller and the Servicer (and the specific amounts so recovered with
respect to any Defaulted 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.
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(b) On the second Business Day preceding the Payment Date, the
Servicer shall deliver to the Trustee and to each Rating Agency a certificate
signed by an officer of the Servicer (a "Servicing Report") stating the date and
in the form of Exhibit C hereto.
(c) The Servicing Report shall include, among other items, the total
amount of all Lease Payments, Casualty Payments, Termination Payments, Lease
Purchase Amount, recoveries related to Defaulted Leases, Similar Transaction
Payments and Other Lease Payments received by the Servicer and deposited in the
Collection Account prior to such 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 Lease Payment Period other
than the Lease Payment Period for such Determination Date and shall identify
each Lease with respect to which a Casualty Payment, 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 with respect to Defaulted Leases 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 actual cash
payments made by the Servicer with respect to Defaulted Leases pursuant to
Section 5.01 hereof. Such report shall also include the amount of the
distribution with respect to each class of Notes, the amount of such
distribution allocable to principal, the amount of such distribution allocable
to interest, the Asset Pool balance, if applicable, as of the close of business
on the last day of the related Remittance 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
amount paid to the Servicer, if any, with respect to the related Remittance
Period, and the amount of the aggregate purchase amounts for Leases that have
been reacquired, if any, for such Remittance 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/or the Trustee
within [135] days following the end of each fiscal year of the Servicer,
beginning with the Servicer's fiscal year ending September 30, 1998, 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 applicable Issuance Date) or if there has been any material
default under the Assignment and Servicing Agreement, describing such default.
(e) The Servicer shall deliver to the Trustee within 120 days
following the end of each fiscal year of the Servicer, beginning with the
Servicer's fiscal year ending September 30, 1998, 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 for the previous 12-month period has been made under such
officer's supervision and (b) nothing has come to such officer's attention to
indicate that an Event of Servicing Termination has
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occurred, or, if such Event of Servicing Termination has so 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 the Servicer intends to withdraw any funds from the
Collection Account other than on a Payment Date, the Servicer shall submit with
such report a certificate (i) setting forth the amounts to be withdrawn (on an
item-by-item basis), (ii) stating that none of such amounts are all or part of
any Lease Payment, Lease Delinquency Payment, recoveries related to Defaulted
Leases, Lease Purchase Amount, Casualty Payment or Termination Payment and (iii)
identifying the lease or leases to which such amounts relate.
(g) Within the prescribed period of time for tax reporting purposes
after the end of each calendar year, the Issuer, or 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.
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 or to the Seller or
Originator) to deliver to the Trustee, with a copy to 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, 1998, 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 a single month during the previous
calendar year; (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, at least 100
Leases included in the Trust Estate 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.
SECTION 7. THE SERVICER
7.01 Merger or Consolidation of the Servicer.
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.
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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 such Person
is a corporation of the type described in the preceding clause (i) and has
effectively assumed the obligations of the Servicer hereunder. 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
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 Defaulted 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
holders of the Notes, to such effect delivered to the Trustee.
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.
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 Seller's obligations pursuant to
Section 4 hereof.
7.04 Financial and Business Information.
The Servicer will deliver to the Issuer and the Trustee upon receipt
thereof shall deliver to 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 not less than 25% of
the Outstanding Principal Amount of the Notes, to any prospective transferee of
any Notes) and, in the case of subsection (c) below:
(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:
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(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;
(c) 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, 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's becoming
aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
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(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 and the Trustee and the holder of any Notes
evidencing not less than 25% of the Outstanding Principal Amount of any class of
Notes to examine all of the books of account, records, reports and other papers
of the Servicer, to make copies and extracts therefrom, and to discuss the
Servicer's affairs, finances and accounts with its officers, employees and
independent public accountants (and by this provision the Servicer authorizes
said accountants to discuss the finances and affairs of the Servicer) 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
Servicer or the Servicer'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 Servicer Event of Default, or any
event or condition which with the giving of notice or the 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.
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SECTION 8. THE ORIGINATOR
8.01 Merger or Consolidation of the Originator.
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.
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 and the Trustee, 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 any of the Notes or the other obligations secured by the
Indenture remain outstanding, the Originator will not (i) sell, pledge or
otherwise transfer any of its stock in the or (ii) vote its shares in favor of
any amendment to or alteration of the articles of incorporation [or the bylaws
(if amending or altering such bylaws would cause a material adverse effect] of
the Seller.
8.03 Financial and Business Information.
The Originator will deliver to the Issuer and the Trustee and upon
receipt thereof the Trustee shall deliver to each Rating Agency and upon
request, to any holder of outstanding Notes evidencing not less than 25% of the
Outstanding Principal Amount of 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) 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 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's becoming
aware of
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(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 from time to time.
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.
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8.05 Inspection.
The Originator will permit, on reasonable prior notice, the
representatives of the Issuer, the Servicer, the Trustee, or any holder of the
Notes evidencing not less than 25% of the Outstanding Principal Amount of any
class of Notes to examine all of the books of account, records, reports and
other papers of the Originator, to make copies and extracts therefrom, and to
discuss the Originator's affairs, finances and accounts with its officers,
employees and independent public accountants (and by this provision the
Originator authorizes said accountants to discuss the finances and affairs of
the Originator) 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 Originator or the Originator'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
Originator in any of its obligations hereunder of any right under this Section
8.05 shall be borne by the Originator.
8.06 Books and Records.
The Originator will clearly mark its books and records to reflect
each contribution of a Lease and Equipment pursuant to this Agreement.
8.07 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 sold the Leases and contributed its right, title and interest in the related
Equipment and that the Issuer now holds title to the Leases and such interest in
the related Equipment.
SECTION 9. THE SELLER
9.01 Merger or Consolidation of the Seller.
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
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 Seller's duties under this Assignment and Servicing
Agreement.
The Seller shall not merge or consolidate with any other Person.
9.02 Control of Issuer.
So long as any of the Notes or the other obligations secured by the
Indenture remain outstanding, the Seller will not (i) sell, pledge or otherwise
transfer any of its membership interests in the Issuer or (ii) vote such
membership interests in favor of any amendment to or alteration of the
certificate of formation of the Issuer or the Operating Agreement.
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9.03 Financial and Business Information.
The Seller will deliver to the Issuer and the Trustee and upon
receipt thereof the Trustee shall deliver to 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) (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 from time to time.
9.04 Inspection.
The Seller will permit, on reasonable prior notice, the
representatives of the Issuer, the Servicer, the Trustee, or any holder of the
Notes evidencing not less than 25% of the Outstanding Principal Amount of any
class of Notes to examine all of the books of account, records, reports and
other papers of the Seller, to make copies and extracts therefrom, and to
discuss the Seller's affairs, finances and accounts with its officers, employees
and independent public accountants (and by this provision the Seller authorizes
said accountants to discuss the finances and affairs of the Seller) 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 Seller or the
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.
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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 the Leases and its right, title and interest (other
than its ownership interest) in the related Equipment.
SECTION 10. 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 and any Defaulted Lease
Payments) and required to be deposited hereunder;
(ii) so long as the Originator is the Servicer hereunder,
failure on the part of the Originator to pay to the Trustee on the
date when due in accordance with the terms hereof, any payment
required to be made by the Seller 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 90 days after the
earlier of (A) the date it first becomes known to any officer of the
Originator, the Seller 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 holders of not
less than 25% of the voting rights of such series of 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 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
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such Lease [and Equipment] in accordance with this Assignment and
Servicing Agreement or to the extent the Originator does not
purchase such Lease, if the Seller purchases such Lease in
accordance with this Assignment and Servicing Agreement.
(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; or
(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
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judgments (or decrees or orders) has remained unsatisfied and in
effect for any period of 60 consecutive days without a stay of
execution.
10.02 Termination.
So long as a Servicer Event of Default shall be continuing, the
Trustee or the holders of Notes evidencing not less than 25% of the voting
rights of such then outstanding Notes, 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
pursuant to and under this Section and the Indenture; and, without limitation,
the Trustee 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, subject to the terms
of Section 5.02 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 may, if it shall be
unwilling to so act, or shall, if it is unable to so act, give notice of such
fact to each holder of the Notes and (i) appoint an established institution
satisfactory to the holders of 66-2/3% in Outstanding Principal Amount of the
Notes 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 no such institution
satisfactory to the holders of 66-2/3% in Outstanding Principal Amount of the
Notes 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
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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.
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 or 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 cash 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.
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
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(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 Defaulted Lease, (B) a
Warranty Lease or (C) an Adjusted Lease during the immediately
preceding Due Period;
(ii) the aggregate Discounted Present Value of the Defaulted
Leases that are Predecessor Leases shall not in the aggregate exceed
[ ]% 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 are Predecessor Leases shall not
exceed [ ]% 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 which has been prepaid in full, the Originator will have the option
to transfer an additional lease of similar characteristics.
(b) Each transfer of Substitute Leases and addition of Additional
Leases will be subject to the satisfaction of the following conditions
precedent:
[(i) after giving effect to such additions and substitutions
and any adjustments pursuant to Section 4.02 thereof, the aggregate
Booked Residual Value of such Leases must be not less than 100% of
the Booked Residual Value of the Leases added, substituted or
adjusted since the Issuance Date.]
(ii) the final payment on such Substitute Lease or Additional
Lease must be on or prior to __________.
(iii) after giving effect to such additions and substitutions
and any adjustments pursuant to Section 4.02 hereof the aggregate
amount of Lease Payments through the term of the Leases (including
the Substitute Leases and the Additional Leases) and the Discounted
Present Value of the Performing Leases will not be materially less
than the aggregate scheduled Lease Payments of the Leases and the
Discounted Present Value of the Leases, respectively prior to such
substitution or addition or adjustment; and
(iv) 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.
(v) 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.
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(vi) such Additional Lease or Substitute Lease was originated
or acquired by the Originator in accordance with the Originator's
specified underwriting criteria.
(c) Each addition and substitution pursuant to this Section 11.01
shall include the right to receive all amounts due or to become due under each
Substitute Lease being substituted or Additional Leases being purchased and any
security deposits paid by the related Lessee to the Seller in connection
therewith (other than any prepayments of rent required pursuant to the terms
thereof at or before the commencement of such Lease and any payments due before
the Lease Payment Period during which such substitution or addition is made). At
the time of each such substitution and addition, the Seller shall transfer to
the Trustee all Lease Payments actually received by the Seller which became due
during the current Lease Payment Period.
(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 or the Seller are breached (such breach a "Warranty Event"), the
Seller shall purchase such Leases.
11.02 Procedure.
(a) By 11:00 A.M. on the third Business Day following each
Determination Date, the Originator 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 Lease Payment Period. By 11:00 A.M. on
the fourth Business Day following each Payment Date, the Originator shall
deliver to the Servicer and the Trustee and, to the extent not included in the
Monthly Servicer Report, the Trustee shall promptly deliver to 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
[and the Booked Residual Value] under each such Predecessor Lease and the amount
of each periodic Lease Payment [and the Booked Residual Value] 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.
(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 Lease Payment Period (i) that the Originator assigned to
the Seller pursuant to ss.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 assigned to the Issuer pursuant to Section 11.01
hereof all of the
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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 the Seller
transferred to the Issuer, as a contribution to capital, all of the Seller's
right, title and interest (other than its ownership interest) in and to the
Equipment subject to such Substitute 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 the Equipment
subject 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 the Equipment subject thereto. The
Originator shall promptly deliver to the Trustee (or a custodian on its behalf)
the original executed counterpart 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 to deliver to 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 pusuant to Section 11.01
hereof.
11.03 Objection and Purchase.
If any holder of the Notes 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 [or the
Seller] 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 his 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.
11.04 Originator's, Seller's and Servicer's Subsequent Obligations.
Upon any substitution 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 shall cease but the Originator,
Seller and the Servicer shall each thereafter have the same obligations with
respect to the Substitute Lease substituted as it has with respect to all other
Leases subject to the terms hereof.
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SECTION 12. ASSIGNMENT
12.01 Assignment to Trustee.
It is understood that this Assignment and Servicing Agreement and
all rights of the Issuer hereunder will be assigned by the Issuer to the Trustee
pursuant to the Indenture, for the benefit of the Trustee, the holders from time
to time of the Notes 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 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 and 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) without the prior written consent of the Issuer
and the Trustee (acting upon the instructions of the holders of 66-2/3% of the
then aggregate unpaid Outstanding Principal Amount of the Notes); 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
Trustee, and any holder of the Notes or any other 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 and
the Trustee therein, or by reason of any Liens, encumbrances, security interests
or rights of others 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, 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 Trustee or any other Person or for any
other cause whether similar or
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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 manne 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 its 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 or item of Equipment subject to the
Indenture) 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 the right to receive all payments due or to become due
thereunder) and 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 same is discharged in accordance with the terms therein,
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 or the Trustee 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 or the Trustee to exercise and enforce its rights and
remedies under this Agreement with respect to any Leases and the Lease Payments.
Without limiting the generality of the foregoing, each of the Originator and the
Seller shall execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be necessary or
desirable or that the Issuer or the Trustee may request to protect and preserve
the assignments and security interests granted by this Agreement with respect to
the Leases.
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.
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Additional Lease - each separate lease agreement and each lease
schedule or supplement (and each master lease agreement insofar as the same
relates to any such schedule or supplement) acquired by the Seller from the
Originator and acquired by the Issuer from the Seller with all or a portion of
the proceeds of an Early Termination Lease that has been prepaid in full
pursuant to Section 11 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.
Asset Pool - property that includes: A portfolio of chattel paper
composed of leases, leases intended as security agreements, installment sales
contracts, or rental stream obligations, together with all monies received
relating thereto; the seller's security or other interests (other than its
ownership interest) in the underlying equipment, property and proceeds relating
to the leases--however, the asset pool will not have any residual interest in
the related equipment after the related lease receivable has been paid in full;
All amounts held in accounts established by the servicer pursuant to the
transaction documents; all the rights to proceeds and recoveries on insurance
policies covering the equipment and on the disposition of repossessed equipment;
credit enhancement with respect to an asset pool or any class of notes; the
interest of the issuer in any proceeds from recourse to lessees on lease
payments; other rights of the issuer under the lease receivables transfer
agreement; and all proceeds of the foregoing.
Booked Residual Value - the estimated residual value of the
Equipment recorded on the books of the Seller.
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
Issuer 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.
Class [A] Notes - the Issuer's Class [A-1] Notes, Class [A-2] Notes,
Class [A-3] Notes and Class [A-4] Notes.
Class [A-1] Notes - the Issuer's [ ]% Class [A-1] Lease-Backed
Notes, Series 1999-A.
Class [A-2] Notes - the Issuer's [ ]% Class [A-2] Lease-Backed
Notes, Series 1999-A.
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Class [A-3] Notes - the Issuer's [ ]% Class [A-3] Lease-Backed
Notes, Series 1999-A.
Class [A-4] Notes - the Issuer's [ ]% Class [A-4] Lease-Backed
Notes, Series 1999-A.
Class [B] Notes - the Issuer's [ ]% Class [B] Lease-Backed Notes,
Series 1999-A.
Issuance Date -[April__, 1999], the date on which the Notes are
originally issued pursuant to the Prospectus.
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 - close of business on [_____ __, 1999].
Defaulted Lease - a Defaulted Lease.
Delinquent Lease - Section 1.01 of the Indenture.
Determination Date - Section 1.01 of the Indenture.
Discounted Present Value of the Leases - Section 1.01 of the
Indenture.
Early Termination Lease - a lease which has been prepaid prior to
its original stated maturity.
Eligible Lease - Section 5.02 hereof.
Equipment - all units or items of equipment from time to time
subject to any Lease and all such units or items of equipment (to the extent of
the Issuer's interest therein) remaining subject to the Lien of the Indenture
following the expiration or termination of the Lease to which the same was
previously subject.
ERISA - the Employee Retirement Income Security Act of 1974, as
amended.
Event of Default - Section 1.01 of the Indenture.
Event of Servicing Termination -[Not yet defined in Prospectus
Supplement].
Excess Copy Charges - Section 1.01 of the Indenture.
Fee Per Scan Charges - Section 1.01 of the Indenture.
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Filing Requirements - Financing Statements necessary to perfect the
ownership interest of the Issuer and the perfected security interest of the
Trustee in the Leases and the Equipment.
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.
Granted Assets - The assets of the Granting Clause of the Indenture.
Indemnified Party - Section 5.03 hereof.
Indenture - the Indenture dated as of [_____ __, 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.
[Inter-Company Loans - Section 15.01 hereof.]
Issuance Date - [_____ __, 1999.]
Issuer - IKON Receivables, LLC , a Delaware limited liability
company, and any successor.
Lease - each separate lease agreement and each lease schedule or
supplement (and each master lease agreement insofar as the same relates to any
such schedule or supplement) described on Exhibit A hereto, as the same may be
amended or modified from time to time in accordance with the provisions hereof
and thereof.
Lease Delinquency Payment - Section 1.01 of the Indenture.
Lease Payment - Section 1.01 of the Indenture.
Lease Payment Period - with respect to any Payment Date and the
Determination Date with respect thereto, the calendar month prior to the month
in which such Payment Date and Determination Date occur.
Lease Receivables - with respect to any Lease, all amounts owing by
the Lessee thereunder.
Lease Purchase Amount - at any date with respect to any Lease, an
amount equal to the sum of (i) the Discounted Present Value of the Lease as of
the prior Payment Date plus any amounts previously due and unpaid, and (ii) the
product of (x) the Initial ADRB and (y) the ratio, as of the Cut-Off Date, that
the Booked Residual Value of the Lease bears to the aggregate Booked Residual
Value of all Leases.
Lessee - each lessee under a Lease.
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Lien - means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind other than tax liens, mechanics liens, and any liens
that attach to a Lease by operation of law.
Liquidity Reserve Account - Section [1.01]of the Indenture.
Maintenance Charges - Section 1.01 of the Indenture.
[Nominal Buy-Out Lease - each Lease identified on Exhibit A hereto
as having an estimated residual value of $10 or less in the column under
the-heading "RESIDUAL".]
Nonrecoverable Advance - any advance made or to be made by the
Servicer pursuant to Section 5.01 hereof which, in the good faith judgment of
the Servicer, will ultimately not be recoverable by the Servicer under the terms
of this Assignment and Servicing Agreement and 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] Notes and Class [B] 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 delivered to the Trustee and signed by the Chairman,
the President, or a Vice President, and by another Vice President, the
Treasurer, an Assistant Treasurer, the Secretary, or an Assistant Secretary of
the Seller or Servicer, as the case may be, who is not the same person as the
other officer signing such certificate.
Original Principal Amount of the Notes - the principal amount of the
Notes originally issued on the Issuance Date.
Other Lease Payments - Section 1.01 of the Indenture.
Outstanding Principal Amount - Section 1.01 of the Indenture.
PBGC - the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
Payment Date - the 15th day of each calendar month (or the next
Business Day thereafter if such day is not a Business Day).
Predecessor Lease - Section 11.01 hereof.
Pension Plan - Section 2.13 hereof.
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.
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Pool Factor - a seven-digit decimal, which the Servicer will
compute, for each class of Notes, prior to each distribution with respect to
such 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.
Prime Rate - the prime lending rate.
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 to be used in connection
with the public offering of the Class [A] Notes and the Class [B] Notes as filed
with the Securities and Exchange Commission pursuant to Rule 424(b).
Purchase Obligation - Section 11.03 hereof.
Rating Agency - Standard & Poor's Ratings Services, a Division of
the McGraw-Hill Companies or Moody's.
Registration Statement - the registration statement (File No.
333-71073) filed with the Securities and Exchange Commission for the
registration of the Class [A] Notes and the Class [B] Notes.
Related Person - any Person (whether or not incorporated) which is
under common control with 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.
Remittance Period - the period beginning on the opening of business
on the [second] day of the immediately preceding calendar month and ending on
the close of business on the [first day] of the calendar month in which such
payment date occurs.
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.
Reserve Account - Section 1.01 of the Indenture.
Seller - IKON Receivables Funding, Inc., a Delaware special purpose
corporation, and any successor.
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.
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Servicing Fee - Section 4.04(a) hereof.
Servicing Report - Section 6.01(b) hereof.
Similar Transaction Amount - Section 1.01 of the Indenture.
Similar Transaction Payments - Section 1.01 of the Indenture.
Substitute Lease - Section 11.01(a) hereof.
Stated Maturity - Section 1.01 of the Indenture.
Termination Payment - Section 1.01 of the Indenture.
Transaction Payment Amount - Section 1.01 of the Indenture.
Trust Estate - Section 1.01 of the Indenture.
Trustee - [ ], and any successor thereto, as Trustee under
the Indenture.
Underwriting Agreement - the Underwriting Agreement dated [______
__, 1999] among the Issuer, IOS Capital and Lehman Brothers for the purchase and
sale of the Class [A] Notes and the Class [B] 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. [INTER-COMPANY LOANS
15.01 Inter-Company Loans.
With the contribution of the Leases, the Issuer has acquired the
right to hold and apply in accordance with the provisions of certain of the
Leases, security deposits. The Issuer may from time to time, to the extent
permitted by law, lend such security deposits and any amounts disbursed to the
Issuer pursuant to Sections [3.04(b), 3.05(b) or 6.06] of the Indenture to the
Originator (each such advance, an "Inter-Company Loan"). Each Inter-Company Loan
shall be on a demand basis, shall bear interest at an annual rate equal to the
Prime Rate plus one percent, shall be in the form attached hereto as Exhibit B
and shall otherwise be on such arm's-length terms and conditions as the Issuer
and the Originator may agree.]
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SECTION 16. MISCELLANEOUS
16.01 Continuing Obligations.
This Assignment and Servicing Agreement shall continue in full force
and effect until each of the Notes and any other amounts due to any holder of
the Notes have been paid in full and all other obligations, if any, secured by
the Lien of the Indenture have been fully satisfied.
16.02 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.
16.03 Successors and Assigns.
This Assignment and Servicing Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Originator, the
Issuer, the Seller, the Servicer and the Trustee and shall inure to the benefit
of the successors and assigns of the holders, from time to time, of the Notes.
16.04 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 instructions of the holders of Notes evidencing at
least a majority of the voting rights of such then outstanding Notes).
16.05 No Proceedings.
The Originator, the Seller and the Servicer, each hereby agree that
it will not, directly or indirectly, aid, or direct or cause its officers,
directors, or employees to aid, institute, or cause to be instituted, against
the Issuer any proceeding of the type referred to in Section [6.01(b) or (c)] 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.
16.06 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: [ ] with a copy
to
50
<PAGE>
the General Counsel (telecopy: [ ]) and in the case of the Seller, 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 16.06.
16.07 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.
16.08 Nonpetition Covenant.
The Originator 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 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.
51
<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:
-----------------------------------
Name:
Title:
IKON RECEIVABLES FUNDING, INC.
By:
-----------------------------------
Name:
Title:
IKON RECEIVABLES, LLC.
By: [ ]
By:
--------------------------------
Name:
Title:
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.
[ ]
as Trustee
By:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SCHEDULE OF LEASES AND EQUIPMENT
A-1
<PAGE>
EXHIBIT B
INTER-COMPANY LOAN NOTE
ALL RIGHT, TITLE AND INTEREST IN AND TO THIS PROMISSORY NOTE ON THE PART OF IKON
RECEIVABLES, LLC HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN
FAVOR OF [ ], AS TRUSTEE, UNDER AN INDENTURE DATED AS OF ______ __, 1999,
FOR THE BENEFIT OF THE PERSONS REFERRED TO THEREIN.
$[ ] ______ __, 1999]
IOS CAPITAL, INC., a Delaware corporation (the "Maker"), with its
principal office at 1738 Bass Road, P.O. Box 9115, Macon, Georgia 31208, FOR
VALUE RECEIVED, hereby promises to pay to the order of IKON Receivables, LLC, a
limited liability company with its offices located at 501 Silverside Road, Suite
28, Wilmington, Delaware 19809 or its assignee (the "Payee"), for its account,
the principal sum of [ ]($[ ]) (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Loans made by the Payee to the
Maker under the Sale Agreement (as defined below)), together with interest per
annum on the unpaid principal amount hereof at the Prime Rate plus one per cent,
in lawful money of the United States of America and in immediately available
funds immediately on the demand of the Payee.
The date, amount and interest rate, of each Loan made by the Payee
to the Maker, and each payment made on account of the principal thereof, shall
be recorded by the Payee on its books and, prior to any transfer of this Note,
endorsed by the Payee on the schedule attached hereto or any continuation
thereof.
This Note evidences certain Inter-Company Loans from Payee to Maker
pursuant to Section 15.01 of that certain Assignment and Servicing Agreement
dated as of [______ __, 1999], between the Maker and the Payee (the "Sale
Agreement"). Capitalized terms used in this Note have the respective meanings
assigned to them in the Sale Agreement.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
IOS CAPITAL, INC.
By
-------------------------------
<PAGE>
SCHEDULE OF LOANS
This Note evidences demand Loans made under the within-described
Sale Agreement to the Maker, on the date, at the interest rate, and in the
principal amounts set forth below, subject to the payments and prepayments of
principal set forth below:
- --------------------------------------------------------------------------------
Principal Amount Unpaid
Amount of Interest Paid or Principal Notation
Date Loan Rate Prepaid Amount Made By
- ---- ---- ---- ------- ------ -------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT C
Form of Servicing Report
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 & B notes)
1/4 Add: 0.75% Servicing Component
1/5 Less: Current month Defaulted
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 - Defaulted 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
5 Defaulted Leases
8/1 Beginning Balance of Defaulted Leases
C-1
<PAGE>
8/2 Plus Current Month Additions
8/3 Plus Past Due Payments on Defaulted 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
Seller)
A/4 Advance Payments of monthly rentals
A/5 Residual Values
A/6 Recoveries on Defaulted 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/5 Class [B] 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
C/22 Class [A-4] Principal Paid
C/23 Ending Class [A-4] Note Balance
C-2
<PAGE>
C/24 Beginning Class [B] Note Balance
C/25a Class [B] Note Value Target (__% of 1/9)
C/25b Class [B] Note Value Floor (__% of $__________ + Cum. Losses-C/12-6/4)
C/26 Class [B] Principal Paid
C/27 Ending Class [B] Note Balance
C/42 Balance Available for Distribution to IOS Capital
D Miscellaneous Tracking Items
D/1 % of Total Defaulted 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
D/4 (MEMO) Avg. residual realization greater than booked residual by Document
Imaging and Major Accounts division for last three months (Yes/No)
D/5 % of Total Variance of Residuals substituted for Defaulted & Prepaid
leases and residuals of Substituted leases to Initial pool booked
residuals
C-3
The information in this prospectus supplement is not complete and may be
changed. This prospectus supplement is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
(Subject to Completion dated _____________, 1999)
Prospectus supplement to prospectus dated ________, 1999
IKON Receivables, LLC $__________________
Issuer
IOS Capital, Inc. Lease Backed Notes, Series 1999-1
Originator and Servicer
- ----------
The issuer will issue the classes of notes shown in the table below.
- ------------------------------------------------------------------------------
You should read the section entitled "Risk Factors" starting on page S-__ of
this prospectus supplement and page __ of the prospectus and consider these
factors before making a decision to invest in the notes.
The notes are secured only by the pledged assets of the issuer and are not
interests in or obligations of any other person.
This Prospectus Supplement may be used to offer and sell the notes only if
accompanied by the Prospectus
- --------------------------------------------------------------------------------
The Notes --
o Are backed by a pledge of assets of the issuer. The assets of the
issuer securing the notes will include a pool of equipment leases or
contracts and related assets;
o Receive distributions beginning on [_________ __, 1999];
o Represent debt obligations of IKON Receivables, LLC; and
o Currently have no trading market.
================================================================================
Initial
Public Initial Ratings
Issuance Interest Offering -------------------
Amount Rate Price Moody's S & P
- --------------------------------------------------------------------------------
Class A-1 Notes $[ ] [ ]% [ ]%
- --------------------------------------------------------------------------------
Class A-2 Notes $[ ] [ ]% [ ]%
- --------------------------------------------------------------------------------
Class A-3 Notes $[ ] [ ]% [ ]%
- --------------------------------------------------------------------------------
Class A-4 Notes $[ ] [ ]% [ ]%
- --------------------------------------------------------------------------------
Class A-5 Notes $[ ] [ ]% [ ]%
================================================================================
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus supplement. Any representation to the
contrary is a criminal offense.
LEHMAN BROTHERS
The date of this prospectus supplement is__________ __, 1999
<PAGE>
Important Notice About the Information Presented in This Prospectus
Supplement and the Accompanying Prospectus
We provide information to you about the notes in two separate
documents that progressively provide more detail: (1) the accompanying
prospectus, which provides general information, some of which may not apply to
your series of notes, and (2) this prospectus supplement, which describes the
specific terms of your series of notes.
This prospectus supplement does not contain complete information
about the offering of the notes. Additional information is contained in the
prospectus. You are urged to read both this prospectus supplement and the
prospectus in full. We cannot sell the notes to you unless you have received
both this prospectus supplement and the prospectus.
If the prospectus contemplates different or multiple options, you
should rely on the information in this prospectus supplement as to the
application option.
The issuer has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended, with
respect to the notes offered by this prospectus supplement. This prospectus
supplement and the prospectus, which form a part of the registration statement,
omit certain information contained in such registration statement pursuant to
the rules and regulations of the Securities and Exchange Commission. You may
inspect and copy the registration statement at the Public Reference Room at the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.,
and the Commission's regional offices at Seven World Trade Center, 13th Floor,
New York, New York 10048, and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You can obtain copies of such
materials at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the
Securities and Exchange Commission maintains a site on the World Wide Web
containing reports, proxy materials, information statements and other items. The
address is http://www.sec.gov.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
S-2
<PAGE>
Table of Contents
Page
----
Summary....................................................................S-4
Risk Factors...............................................................S-7
The Issuer.................................................................S-8
The Asset Pools............................................................S-8
The Leases.................................................................S-9
Use of Proceeds...........................................................S-14
The Originator and the Servicer...........................................S-14
The Seller................................................................S-15
The Trustee...............................................................S-15
Description Of The Notes..................................................S-15
Prepayment and Yield Considerations.......................................S-16
Description Of The Transaction Documents..................................S-17
Material Federal Income Tax Consequences..................................S-21
ERISA Considerations......................................................S-21
Ratings...................................................................S-22
Plan Of Distribution......................................................S-23
Legal Opinions............................................................S-23
Index Of Principal Defined Terms..........................................S-24
S-3
<PAGE>
- --------------------------------------------------------------------------------
Summary
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need to
consider in making your investment decision. To understand all of the
terms of the offering of the notes, read carefully this entire prospectus
supplement and the accompanying prospectus.
o This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in
this prospectus supplement and the accompanying prospectus.
Lease-Backed Notes
Series 1999-1
Issuer
IKON Receivables, LLC, a Delaware limited liability company.
Originator
IOS Capital Inc., a Delaware corporation formerly known as IKON Office
Solutions.
Seller
IKON Receivables Funding-1 LLC, a Delaware special purpose limited liability
company.
Servicer
o IOS Capital, Inc.
o The servicer's principal executive offices are located at 1738 Bass Road, P.O.
Box 9115, Macon, Georgia 31208.
Trustee
o __________, a banking corporation organized under the laws of ________.
o The trustee's offices are located at _________________________________.
The Notes
o The notes will be backed solely by a pledge of a segregated pool of assets of
the issuer.
The Asset Pool
o The pledged assets will include a pool of:
o office equipment leases or contracts and related assets;
o [leases intended as security agreements];
o [installment sale contracts];
o rental stream obligations;
The Leases
o The leases are either:
o obligations for the lease or purchase of the equipment, or
o evidence loans used to acquire or refinance the equipment.
o The originator will transfer the leases and equipment comprising each asset
pool to the seller and the seller will transfer such leases and the seller's
interests in such equipment other than its ownership interests to the issuer.
The issuer will then pledge all of its right, title and interest in and to such
leases and interests in the equipment to the trustee on behalf of noteholders.
o The discounted present value of the leases will equal, at any given time, the
future remaining scheduled payments from the leases (including delinquent
leases) but excluding:
o delinquent accounts,
o excess copy charges,
o maintenance charges, and
o fee scan charges
discounted at a rate equal to ___%.
Final Scheduled Payment Date
If the notes have not already been paid in full, we will pay the outstanding
principal amount of the notes in full on the following payment dates:
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
Class [A] ___________________
Final payment on the notes will probably be earlier than the final scheduled
payment date listed above for the related class of notes.
o The aggregate initial note principal balance of the [Class A] notes
equals $[ ].
o The issuer will issue the notes in book-entry form only, through the
facilities of The Depository Trust Company.
Denominations
o The issuer will issue the notes in minimum denominations of [$1,000] and
integral multiples of [$1,000].
o [One note in each class may be issued in another denomination.]
Payments on the Notes
Each month, the issuer will distribute the amounts received on the leases and
any other collections available as property of the issuer as follows:
Interest Distributions
o On each payment date, the issuer will pay interest at the applicable interest
rate that accrued during the prior interest accrual period.
o [applicable interest rate for each class of notes to be specified]
Principal Distributions
o On each payment date, the issuer will pay principal in reduction of the
outstanding principal balance of the notes.
o Principal payments will be an amount usually equal to the decrease in the
principal value of the leases between determination dates. The issuer will pay
principal in the following priority:
o to the Class [A-1] noteholders only, until the principal amount on the
Class [A-1] Notes has been reduced to zero;
o when the Class [A-1] Notes have been paid in full:
o to the Class [A-2] noteholders, until the principal amount on the
Class A-2 Notes has been reduced to zero, an amount generally equal
to _____% of the decrease in the principal value of the leases;
o when the Class [A-2] Notes have been paid in full, to the Class [A-3]
noteholders, until the principal amount on the Class [A-3] Notes has
been reduced to zero, an amount generally equal to _____% of the
decrease in the principal value of the leases.
o when the Class [A-3] Notes have been paid in full, to the Class [A-4]
noteholders, until the principal amount on the Class [A-4] Notes has
been reduced to zero, an amount generally equal to _____% of the
decrease in the principal value of the leases.
This general description of distributions of principal to the notes is subject
to certain targets and floors. We refer you to "Descriptions of the Notes
Distributions" in this prospectus supplement for further information regarding
the payment of interest and principal on the notes.
Cut-Off Date
The cut-off date is the opening of business on _____, 1999.
Issuance Date
On or about _______, 1999.
Payment Date
The 15th day of each month if the fifteenth is a business day. If the fifteenth
is not a business day, the payment date will be the following day that is a
business day. The first payment date will be ________, 1999.
Record Date
The last business day of the month preceding the month the payment date occurs.
In the case of initial payment date, the trustee will pay as of the closing
date.
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
Remittance Period
Payments made on each payment date will relate to the collections received from
the opening of business on the [second] day of the immediately preceding
calendar month to the close of business on the [first day] of the calendar month
in which such payment date occurs.
Cross-Collateralization
o The trustee will not use payments received on leases or other assets included
in the asset pool backing the notes to pay notes or other obligations of the
issuer backed by any other asset pool.
o Certain of the notes include the right to receive monies from a common pool of
credit enhancement.
Credit Enhancement
The credit enhancement available to the noteholders will consist of [more
information will be provided upon the structuring of the transaction].
Subordination
Each class of notes provides credit enhancement for classes with a higher
priority of payment.
Optional Redemption
o The servicer may, on any payment date, redeem the notes when the total
discounted lease principal balance is less than or equal to 10% of the total
principal value of the leases as of the closing date.
o [If a redemption occurs, we will pay you a final distribution equaling the
entire unpaid principal balance of the notes plus any accrued and unpaid
interest.]
Material Federal Income Tax Consequences
For federal income tax purposes:
o Dewey Ballantine LLP, special tax counsel to the underwriters, is of the
opinion that the notes will be treated as debt and the issuer will not be
treated as an association (or publicly traded partnership) taxable as a
corporation. By your acceptance of a note, you agree to treat the notes as debt.
o Interest on the notes will be taxable as ordinary income when received by a
holder on the cash method of accounting and when accrued by a holder on the
accrual method of accounting.
o Dewey Ballantine LLP has prepared the discussion under "Material Federal
Income Tax Consequences" and is of the opinion that such discussion accurately
states all material federal income tax consequences of the purchase, ownership
and disposition of the Notes to their original purchaser.
ERISA Considerations
Subject to the considerations and conditions described under "ERISA
Considerations" in this prospectus, we expect that pension, profit-sharing or
other employee benefit plans, as well as individual retirement accounts and
certain types of Keogh Plans may purchase the notes. Investors should consult
with their counsel regarding the applicability of the provisions of ERISA before
purchasing a note.
Ratings
o The notes must receive at least the following ratings from [the rating
agencies]:
o You must not assume that the ratings will not be lowered, qualified or
withdrawn by the rating agencies.
- --------------------------------------------------------------------------------
S-6
<PAGE>
Risk Factors
In addition to the risk factors discussed in the Prospectus, prospective offered
Noteholders should consider, among other things, the following additional
factors in connection with the purchase of the notes:
Geographic Concentrations As of the statistic calculation date, obligors
of Leases May Adversely with respect to approximately [ [ ]%, [ ]% and
Affect the Leases [ %] ] of the leases were located in the following
states: [ ]. To the extent adverse events or
economic conditions were particularly severe in
such geographic regions or in the event an obligor
or group of obligors under the leases in such
geographic regions were to experience financial
difficulties due to the economic conditions, such
obligors may be unable to pay or delay payments.
If such events occurred, you may experience delays
in receiving payments and suffer loss of your
investment. The issuer is unable to determine and
has no basis to predict, whether any such events
have occurred or may occur, or to what extent any
such events may affect the leases or the repayment
of amounts due under the notes.
S-7
<PAGE>
The Issuer
IKON Receivables, LLC (the "Issuer") is a Delaware limited liability
company all of the membership interests in which will be held by IKON
Receivables Funding-1 LLC, a special purpose limited liability company (the
"Seller"). All of the membership interests in the Seller are, in turn, owned by
IOS Capital, Inc. ("IOS Capital" or the "Originator").
The notes offered hereby (the "Notes") will be secured solely by the
related Asset Pool (as defined herein). The Issuer does not have, nor is it
expected in the future to have, any significant assets available for payment of
the Notes other than the Asset Pool. The servicer of any Asset Pool with respect
to the Notes will be IOS Capital (IOS Capital, in its capacity as servicer, the
"Servicer").
The Issuer will pledge its interest in the Asset Pool to [name of
trustee], as trustee (the "Trustee") for the benefit of holders of the Notes and
issue the Notes pursuant to an indenture between the Issuer and the Trustee (the
"Indenture").
The Asset Pools
The Notes will be secured by a segregated pool (the "Asset Pool")
that consists of a portfolio of chattel paper composed of leases, leases
intended as security agreements, installment sales contracts, or rental stream
obligations, together with all monies received relating thereto (the "Leases")
(ii) all moneys (including accrued interest) due thereunder on or after the
Cut-off Date, (iii) such amounts as from time to time may be held in one or more
accounts established and maintained by IOS Capital, pursuant to the related
Transaction Document, (as defined herein), (iv) the Seller's interests (other
than its ownership interest) in the underlying equipment and related property
and proceeds relating to such pool of Leases (the "Equipment"), (v) the rights
of the Issuer under certain of the Transaction Documents (as defined herein) and
(vi) interest earned on certain short-term investments held by the Issuer. The
Leases and Equipment interests comprising an Asset Pool are hereafter referred
to as the "Lease Receivables."
The Lease Receivables will be acquired by the Seller from the
Originator pursuant to an Assignment and Servicing Agreement among the Seller,
the Originator and the Issuer (the "Assignment and Servicing Agreement").
Contemporaneously, the Lease Receivables will be transferred from the Seller to
the Issuer pursuant to the Assignment and Servicing Agreement. The Lease
Receivables included in the Asset Pool will be selected from those Lease
Receivables held by the Seller based on the criteria specified in the applicable
Transaction Document and described herein.
On or prior to the date on which the Notes are issued and delivered
to the holders of the Notes (the "Noteholders"), the Issuer will form the Asset
Pool by (i) acquiring Lease Receivables pursuant to the Assignment and Servicing
Agreement and (ii) entering into an Indenture with the Trustee.
The Lease Receivables comprising the Asset Pool have been originated
by the Originator or acquired by the Originator from sellers or other
originators of Lease Receivables in accordance with the Originator's specified
underwriting criteria. The underwriting criteria applicable to the Lease
Receivables included in the Asset Pool is described in all material respects
under the heading "IOS Capital's Leasing Business" in the Prospectus.
The Issuer will not have and the Asset Pool will not include any
residual interest in any Equipment after the related Lease Receivable has been
paid in full.
If the protection provided to the Noteholders of a given Class by
the subordination of another Class of Notes is insufficient, the Issuer must
rely solely on the payments from the Lessees on the related Leases, and the
proceeds from the sale of Equipment which secures or is leased under the Lease
that has become more than 120 days delinquent of which is charged off by the
Servicer (such Leases "Defaulted Leases"). In such event, certain factors may
affect such Issuer's ability to realize on the collateral securing such Leases,
and thus may reduce the proceeds to be distributed to the Noteholders.
S-8
<PAGE>
The Leases
Portfolio Parameters
As described below, Leases in the aggregate shall be required to
comply with certain portfolio concentration criteria: [more information will be
provided upon the structuring of the transaction]
The Lease Receivable Statistical Information
Following is certain statistical information relating to the Lease
Receivable pool, calculated as of the opening of business on ___________. 1999
(the "Cut-Off Date") and assuming a discount rate of [ ]%. Certain columns may
not total 100% due to rounding.
S-9
<PAGE>
Distribution Of Leases By Discounted Lease Balance
Sum of Percentage of
Discounted Number of Discounted Aggregate Discounted
Lease Balances Leases Lease Balances Lease Balance
-------------- ------ -------------- -------------
Greater Less Than or
Than Equal to
---- --------
$ 1 $ 5,000 $ %
5,000 10,000
10,000 15,000
15,000 20,000
20,000 25,000
25,000 30,000
30,000 35,000
35,000 40,000
40,000 45,000
45,000 50,000
50,000 55,000
55,000 60,000
60,000 65,000
65,000 70,000
70,000 75,000
75,000 80,000
80,000 85,000
85,000 90,000
90,000 95,000
95,000 100,000
100,000 150,000
150,000 200,000
200,000 250,000
250,000 300,000
300,000 350,000
350,000 400,000
400,000 450,000
450,000 500,000
500,000 600,000
600,000 750,000
- --------------------------------------------------------------------------------
Total.................... $ 100.00%
================================================================================
S-10
<PAGE>
Distribution Of The Leases By State
Sum of Percentage of
Number of Discounted Lease Aggregate Discounted
State Leases Balances Lease Balance
- ----- ------ -------- -------------
Alabama $ %
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
Washington, D.C.
West Virginia
Wisconsin
Wyoming
S-11
<PAGE>
Distribution Of Leases By Remaining Term To Maturity
Percentage of
Statistical Statistical Percentage
Discounted Discounted Aggregate of
Percentage Present Present Original Original
Remaining Number of of Number Value Value of Equipment Equipment
Term Leases of Leases of Leases Leases Cost Cost
- --------- --------- ---------- ---------- ------------ --------- ----------
1 - 12
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 84
- --------------------------------------------------------------------------------
Total.......... 100% 100.00% 100.00%
================================================================================
Distribution Of Leases By Original Term To Maturity
Percentage of
Statistical Percentage
Statistical Discounted Aggregate of
Percentage Discounted Present Original Original
Original Number of Number Present Value Value of Equipment Equipment
Term of Leases of Leases of Leases Leases Cost Cost
- -------- --------- ---------- ------------- ------------ --------- ----------
1 - 12
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 84
85 - 96
- --------------------------------------------------------------------------------
Total 100.00% 100.00% 100.00%
================================================================================
Distribution Of Leases By Classification Type
Percentage
of
Statistical Statistical Percentage
Percentage Discounted Discounted Aggregate of
Number of Present Present Original Original
of Number Value of Value of Equipment Equipment
Lease Type Leases of Leases Leases Leases Cost Cost
- -------------- ------ ---------- ---------- ----------- --------- ----------
Finance Lease
Operating Lease
- --------------------------------------------------------------------------------
Total 100.00% 100.00% 100.00%
================================================================================
S-12
<PAGE>
Distribution Of Finance Leases By Purchase Option
Percentage
of
Statistical
Statistical Discounted Percentage
Percentage Discounted Present Aggregate of
Number of Present Value Original Original
of Number Value of of Equipment Equipment
Purchase Option Leases of Leases Leases Leases Cost Cost
- --------------- ------ ---------- ----------- ----------- --------- ----------
Nominal Buyout
Fair Market Value
Fixed Purchase Option
- --------------------------------------------------------------------------------
Total 100.00% 100.00% 100.00%
================================================================================
Distribution Of Leases By Equipment Type
Percentage
of
Percentage Statistical Statistical Percentage
of Discounted Discounted Aggregate of
Number Number Present Present Original Original
of of Value of Value of Equipment Equipment
Equipment Type Leases Leases Leases Leases Cost Cost
- -------------- ------ ---------- ----------- ----------- --------- ----------
- --------------------------------------------------------------------------------
Total......... 100.00% 100.00% 100.00%
================================================================================
S-13
<PAGE>
Use of Proceeds
The proceeds from the sale of the Notes will be applied by the
Issuer to the acquisition of the related Lease Receivables from the Seller and
applied by the Seller to the acquisition thereof from the Originator.
The Originator and the Servicer
The Originator, formerly known as IKON Capital, Inc., was formed in
1987 to provide lease financing to customers of IKON Office Solutions, Inc.
("IKON"). The Originator is a wholly-owned subsidiary of IKON. The Originator's
corporate headquarters are located at 1738 Bass Road, P.O. Box 9115, Macon,
Georgia 31208. The Originator's securities are registered under the 1934 Act and
is subject to the reporting requirements of the 1934 Act and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). The Originator filed an Annual Report on Form
10-K for the fiscal year ending September 30, 1998 and a Quarterly Report on
Form 10-Q for the three-month period ending December 31, 1998. A copy of the
reports, including the exhibits thereto, will be provided without charge to any
person to whom this Offering Circular is delivered upon written request.
Requests for such copies should be directed to IOS Capital, Inc., 1738 Bass
Road, P.O. Box 9115, Macon, Georgia 31208, Attn: _______________.
[Current summary financial information re IOS Capital to be included]
Historical Delinquency Experience
IOS Capital Portfolio
<TABLE>
<CAPTION>
December 31, 1998 September 30, 1998 September 30, 1997 September 30, 1996 September 30, 1995 September 30, 1994
----------------- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Total
Receivables
Balance (1)
- ------------------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 Days+
- ------------------------------------------------------------------------------------------------------------------------------------
Total
Delinquencies
</TABLE>
(1) The Total Receivables Balance is equal to the aggregate future rent owing
on the leases.
Historical Default Experience. All accounts assessed over __ days
past due automatically become non-accruing accounts. Any subsequent recoveries
offset net losses. General charge-off information for Leases that are owned and
serviced by IOS Capital for the period __________, 199_ to _________, 199_ is
set forth below.
Historical Charge-Off Experience
(Dollars in Thousands)
IOS Capital Portfolio
<TABLE>
<CAPTION>
December 31, September 30, September 30, September 30, September 30, September 30,
1998 1998 1997 1996 1995 1994
------------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Average Receivables
Outstanding (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Losses
Net Losses as a %
of Avg. Receivables (2)
</TABLE>
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the leases.
(2) Annualized
S-14
<PAGE>
There can be no assurance that the levels of delinquency and loss
reflected in the above tables are or will be indicative of the performance of
the Leases in the future.
The Seller
The Seller is a wholly owned bankruptcy remote subsidiary of IOS
Capital, Inc. The Seller was organized for the limited purpose of engaging in
transactions described herein and any activities incidental to and necessary or
convenient for accomplishment of such purposes and is restricted by its
organizational documents and under the Assignment and Servicing Agreement from
engaging in other activities. The Seller's address is 501 Silverside Road, Suite
28, Wilmington, Delaware 19809.
The Trustee
General
The Trustee, [_________] is a banking corporation organized under
the laws of ________.
Duties and Immunities of the Trustee
The Trustee will be entitled to receive, pursuant to the priority
set forth in the Indenture, (a) reasonable compensation for its services, (b)
reimbursement for its reasonable expenses and (c) indemnification for loss,
liability or expense incurred without negligence or bad faith on its part,
arising out of performance of its duties thereunder.
Description Of The Notes
The Notes will be issued pursuant to the Indenture to be entered
into by the Issuer and the Trustee. The Servicer will provide a copy of the
Indenture to subsequent Noteholders without charge on written request addressed
to it at [1738 Bass Road, P.O. Box 9115, Macon, Georgia 31208 Attn:__________].
General
The obligations evidenced by the Notes are recourse to the assets
pledged to the relevant Asset Pool only and are not recourse to the Originator,
the Seller, the Servicer, the Trustee, the Issuer, or any other person.
The Issuer will agree in the Indenture and in the Notes to pay to
the Noteholders (i) an amount of principal equal to the aggregate initial note
principal balance (the "Initial Note Principal Balance") and (ii) monthly
interest at the times, from the sources and on the terms and conditions set
forth in the Indenture and in the Notes.
Distributions
Unless an Event of Default (as defined herein) and acceleration of
the Notes has occurred or a Restricting Event (as defined herein) has occurred,
on or before the 15th day of each month if the fifteenth is a Business Day (as
defined herein) or, if the fifteenth is not a Business Day, the following day
that is a Business Day (each a "Payment Date"), the Servicer will instruct the
Trustee to apply or cause to be applied the Available Funds (as defined herein)
to make the following payments in the following priority:
(a) [ ];
(b) [ ];
(c) [ ];
(d) [ ]; and
(e) [ ].
S-15
<PAGE>
A "Business Day" is any day that is not a Saturday, Sunday or other
day on which commercial banking institutions located in the city or cities where
the Corporate Trust Office of the Trustee and the Servicer are located are
authorized or obligated by law or executive order to be closed (each a "Business
Day").
If an Event of Default and acceleration of the Notes has occurred or
a Restricting Event has occurred, on or before each Payment Date, the Servicer
will instruct the Trustee to apply or cause to be applied the Available Funds to
make the following payments in the following priority:
(a) [ ];
(b) [ ];
(c) [ ];
(d) [ ];
(e) [ ];
(f) [ ]; and
(g) [ ].
"Restricting Events" with respect to any series include the
following:
(a) an event of default by the Servicer under the Assignment and
Servicing Agreement;
(b) Events of Default; and
(c) replacement of the Servicer.
The outstanding principal amount with respect to any Class of Notes
and any date of determination the difference between (a) the initial principal
amount of the Notes of such Class at the issuance thereof, less (b) all amounts
previously distributed with respect to such Class as principal.
Accounts
[Description of Reserve, Pre-Funding or other Accounts, as applicable]
Prepayment and Yield Considerations
General
The rate of principal payments on the Notes, the aggregate amount of
each interest payment on the Notes and the yield to maturity of the Notes are
directly related to the rate of payments on the underlying Leases. The payments
on the Leases may be in the form of scheduled payments, prepayments or
liquidations due to default, casualty and other events, which cannot be
specified at present. Any such prepayments or liquidations will result in
distributions to Noteholders of amounts which would otherwise have been
distributed over the remaining term of the Leases. In general, the rate of such
payments may be influenced by a number of other factors, including general
economic conditions. The rate of principal payments with respect to any series
may also be affected by any purchase of the underlying Leases by the Originator
and by the substitution or addition of Substitute Leases (as defined herein) or
Additional Leases. For a description of additional factors potentially affecting
the yield to Noteholders, see "Risk Factors" and "Description of the
Notes--Prepayment and Yield Considerations" in the Prospectus.
Weighted Average Lives of the Notes
The scheduled final payment date for the Notes is [ ]. This
date is the date on which the note principal balance would be reduced to zero,
assuming, among other things, (i) prepayments with respect to the Leases are
received at a rate of [ ]% CPR and (ii) the modeling assumptions apply. The
Weighted Average Life of the Notes is likely to be shorter than would be the
case if payments actually made on the Leases conformed to the foregoing
assumptions, and the final Payment Date with respect to the Notes could occur
significantly earlier than such final scheduled Payment Dates due to defaults,
and because the Originator is obligated to purchase Leases in the event of
breaches of representations and warranties.
"Weighted Average Life or Weighted Average Lives" refers to the
average amount of time from the date of issuance of a security or securities
until each dollar of principal of such security or securities will be repaid to
the investor. The Weighted Average Lives of the Notes will be influenced by the
rate at which principal payments (including Lease payments and prepayments) on
the Leases are made. Principal payments on Leases may
S-16
<PAGE>
be in the form of scheduled amortization or prepayments (for this purpose, the
term "prepayment" includes prepayments and liquidations due to a default or
other dispositions of the Leases). The Weighted Average Lives of the Notes will
also be influenced by delays associated with realizing on Defaulted Leases. The
prepayment model used in this Prospectus Supplement, the "Conditional Prepayment
Rate" or "CPR", represents an assumed annualized rate of prepayment relative to
the then outstanding balance on a pool of Leases. The CPR assumes that a
fraction of the outstanding Lease Pool is prepaid on each Payment Date, which
implies that each Lease in the Lease Pool is equally likely to prepay. This
fraction, expressed as a percentage, is annualized to arrive at the CPR for the
Lease Pool. The CPR measures prepayments based on the outstanding principal on
the previous Payment Date. The CPR further assumes that all Leases are the same
size and amortize at the same rate and that each Lease will be either paid as
scheduled or prepaid in full.]
The following table sets forth the percentages of the initial
principal amount of the Notes that would be outstanding after each of the dates
shown, assuming a CPR of [ ]%.
Percentage Of Initial Note
Principal Balance Outstanding
Notes
Prepayment Speed (CPR)
----------------------
- -----------------------------------------------------------------------
Payment 0% 2% 4% 6% 8%
Date
- -----------------------------------------------------------------------
Closing Date
- -----------------------------------------------------------------------
Weighted Average
Life (years)
The Leases will not have the characteristics assumed above, and
there can be no assurance that (i) the Leases will prepay at any of the rates
shown in the tables or at any other particular rate or will prepay
proportionately or (ii) the Weighted Average Lives of the Notes will be as
calculated above. Because the rate of distributions of principal of the Notes
will be a result of the actual amortization (including prepayments) of the
Leases, which will include Leases that have remaining terms to stated maturity
shorter or longer than those assumed, the Weighted Average Lives of the Notes
will differ from those set forth above, even if all of the Leases prepay at the
indicated constant prepayment rates.
The effective yield to Noteholders will depend upon, among other
things, the price at which such Notes are purchased, and the amount of and rate
at which principal, including both scheduled and lease payments thereof, is paid
to the Noteholders. See "Special Considerations -- Maturity and Prepayment
Considerations" in the Prospectus.
Description Of The Transaction Documents
The following summary describes certain terms of each Transaction
Document pursuant to which the Asset Pool will be created and the Notes will be
issued. For purposes of this Prospectus Supplement, the term "Transaction
Document" as used with respect to an Asset Pool means, collectively, and except
as otherwise specified, any and all agreements relating to the establishment of
the Asset Pool, the servicing of the related Lease Receivables and the issuance
of the Notes, including, without limitation, the Indenture, pursuant to which
any Notes shall be issued. The summary does not purport to be complete. It is
qualified in its entirety by reference to the provisions in each respective
Transaction Document.
Assignment and Servicing Agreement.
The Servicer and the Issuer will enter into the Assignment and
Servicing Agreement on or prior to _______ ___, 1999 (the "Closing Date") that
will further detail the procedures for collecting lease payments and Equipment
remarketing. In general, the Servicer in accordance with the Servicer's policies
and procedures will manage, service, administer, collect and enforce the Leases
on behalf of the Issuer in accordance with its customary
S-17
<PAGE>
procedures, and shall have full power and authority to do any and all things in
connection with such managing, servicing, administration, and collection that it
deems necessary or desirable. The Servicer's duties will include collection and
posting of all payments, responding to inquiries of obligors regarding the
Leases, investigating delinquencies and making required advances, remitting
payments to the Collection Account (as defined herein) in a timely manner,
furnishing monthly and annual statements with respect to collections and
payments, using commercially reasonable efforts to dispose of any related
Equipment that has been pledged to the Trustee upon the expiration or
termination of a Lease, and using its best efforts to maintain the perfected
security interest of the Trustee on behalf of the Noteholders and their
respective interests, if any, in the related Equipment to the extent required
herein.
Acquisition of the Lease Receivables. On the Closing Date, the
Seller will acquire the related Lease Receivables from the Originator pursuant
to the Assignment and Servicing Agreement in which the Originator will make
certain representations and warranties concerning the Lease Receivables.
Contemporaneously, the Issuer will acquire the related Lease Receivables from
the Seller pursuant to the Assignment and Servicing Agreement. The rights and
benefits of the Seller under the Assignment and Servicing Agreement will be
assigned to the Issuer as collateral for the Notes by the Seller pursuant to the
Assignment and Servicing Agreement. The Issuer will pledge its right, title and
interests in and to such Lease Receivables to the Trustee on behalf of
Noteholders pursuant to the Indenture. Certain of the rights and benefits of the
Issuer under the Assignment and Servicing Agreement will be assigned to the
Trustee on behalf of Noteholders as collateral for the Notes by the Issuer
pursuant to the Indenture.
Purchase Obligation. The Originator will be obligated to purchase
from the Issuer its interest in any Lease transferred to the Issuer or pledged
to the Trustee on behalf of the Noteholders, in which any representation or
warranty of the Originator under the Transaction Documents has been breached,
which breach has not been cured following discovery of such breach (each a
"Warranty Lease"). In addition, the Originator may from time to time reacquire
certain Leases or substitute other Substitute Leases for such Leases subject to
specified conditions set forth in the related Transaction Documents.
The Trustee will have possession of the Leases and the documents in
the files relating thereto not retained by the Servicer for its servicing
purposes, and the Servicer will retain copies of any other documents which
relate to the Lease Receivables, any related evidence of insurance and payment,
delinquency and related reports maintained by the Servicer in the ordinary
course of business with respect to each Lease Receivable. Prior to transfer of
the Lease Receivables to the Issuer, the Servicer will cause its electronic
ledger to be marked to show that such Lease Receivables have been transferred to
the Seller and then to the Issuer, and the Originator and the Seller will file
UCC financing statements reflecting the sale and assignment of the Lease
Receivables in certain jurisdictions, as required by the Assignment and
Servicing Agreement. See "Certain Legal Aspects of the Lease Receivables" in the
Prospectus.
Substitutions. Pursuant to the Transaction Documents, in addition to
Warranty Leases, the Originator will have the option to substitute Eligible
Leases (as defined herein) for Defaulted Leases, Leases which have undergone
modifications or adjustments to the terms of such leases, and Leases that have
prepaid, up to a maximum of [ %] of the aggregate present value of all the
remaining payments scheduled to be made with respect to such lease
(the"Discounted Lease Balance") of the Leases contributed to the pool, provided
the following conditions are met:
(i) At the time of substitution, the substituted Eligible Leases
have in the aggregate Discounted Lease Balances of not less than the Discounted
Lease Balance of the Leases being replaced;
(ii) Substitutions by the Originator shall be approximately the same
Weighted Average Life of the remaining originally scheduled Lease payments in
the pool and shall not extend the final maturity of the pool beyond the original
maturity of the initial Leases in the pool.
Each Substitute Lease shall be a Lease, satisfying certain
representations and warranties set forth in the Assignment and Servicing
Agreement and the Indenture, (a "Substitute Lease") as of the related Substitute
Lease Cut-Off Date. In addition, the following conditions must be satisfied:
(i) as of the related Substitute Lease Cut-Off Date, the Substitute
Leases then being transferred have in the aggregate Discounted Lease Balances
that are not less than the aggregate of the Discounted Lease Balances of the
Leases being replaced; and
S-18
<PAGE>
(ii) no substitution shall be permitted if, after giving effect to
such substitution, (x) the sum of the lease payments on all Leases due in any
Remittance Period (as defined herein) thereafter would be less than (y) the sum
of the lease payments which would otherwise be due in such Remittance Period. A
"Remittance Period" is the period from which payments made on each payment date
relate to the collections received starting from the opening of business on the
[second] day of the immediately preceding calendar month to the close of
business on the [first day] of the calendar month in which such payment date
occurs
"Eligible Leases" are leases which have been originated in the
ordinary course of the Originator's business and comply with the Originator's
credit and collection policies.
The Servicer. The Servicer will service the Lease Receivables
comprising an Asset Pool pursuant to the Assignment and Servicing Agreement. The
Servicer may delegate its servicing responsibilities to one or more
sub-Servicers, but will not be relieved of its liabilities with respect thereto.
The Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Transaction Documents An uncured breach of such a
representation or warranty that in any respect materially and adversely affects
the interests of the Noteholders will constitute a Default by the Servicer (a
Servicer Default") under the related Transaction Documents.
Remittance and Other Servicing Procedures. [Information will be
provided in accordance with the structuring of the transaction.]
Servicing Compensation and Payment of Expenses. For its servicing of
the Leases, the Servicer will receive servicing compensation including a monthly
fee for each Remittance Period (payable on the next succeeding Payment Date) and
Servicing Charges.
The servicing compensation will compensate the Servicer for
customary equipment lease servicing activities to be performed by the Servicer
for the Issuer, additional administrative services performed by the Servicer on
behalf of the Issuer, and expenses paid by the Servicer on behalf of the Issuer.
Reports to Noteholders. On or prior to each Payment Date, the
Servicer or the Trustee, as applicable, will forward or cause to be forwarded to
each holder of record of such class of Notes a statement or statements with
respect to the Asset Pool setting forth the information specifically described
in the Transaction Document which generally will include the following
information:
(i) the amount of the distribution with respect to each class of
Notes;
(ii) the amount of such distribution allocable to principal;
(iii) the amount of such distribution allocable to interest;
(iv) the Asset Pool balance, if applicable, as of the close of
business on the last day of the related Remittance Period;
(v) the aggregate outstanding principal balance and the Pool Factor
(as defined herein) for each Class of Notes after giving effect to all
payments reported under (ii) above on such Payment Date;
(vi) the amount paid to the Servicer, if any, with respect to the
related Remittance Period; and
(vii) the amount of the aggregate purchase amounts for Lease
Receivables that have been reacquired, if any, for such Remittance Period.
Each amount set forth pursuant to clauses (i), (ii), (iii) and (v)
with respect to the Notes will be expressed as a dollar amount per $1,000 of the
initial principal balance of the Notes, as applicable.
Within the prescribed period of time for tax reporting purposes
after the end of each calendar year, the Issuer, or the Servicer on behalf of
the Issuer, will provide to the Noteholders a statement containing the amounts
described in (ii) and (iii) above 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.
S-19
<PAGE>
The "note factor" is the seven digit decimal number that the
Servicer will compute or cause to be computed for each Remittance Period and
will make available on the related Calculation Date representing the ratio of
(x) the note principal balance which will be outstanding on the next Payment
Date (after taking into account all distributions to be made on such Payment
Date) to (y) the Initial Note Principal Balance.
The "Pool Factor" is the seven digit decimal number that the
Servicer will compute or cause to be computed for each Remittance Period and
will make available on the related Calculation Date representing the ratio of
(x) the aggregate Discounted Lease Balance as of the end of the immediately
preceding Remittance Period to (y) the aggregate Discounted Lease Balance as of
the Cut-Off Date.
In addition, by January 31 of each calendar year following any year
during which the Notes are outstanding, commencing January 31, [ ], the Trustee
will furnish to each Noteholder of record at any time during such preceding
calendar year, information as to the aggregate of amounts reported pursuant to
items (a) and (b) above for such calendar year to enable Noteholders to prepare
their federal income tax returns.]
Servicer Events of Default. [information will be provided upon the
structuring of the transaction]
[Rights Upon Servicer Default]. [information will be provided upon
the structuring of the transaction]
[Security Interest]. [The security will be described when the
structuring of the transaction is available].
Representations and Warranties of the Originator and the Seller.
[The representation and warranties will be described when the structuring of the
transaction is available.]
Indemnification. [The indemnification provisions will be described
when the structuring of the transaction is available.]
Indenture
Accounts. The Servicer will maintain an account (the "Collection
Account") in the name of the Trustee to which all lease payments received under
each Lease (including any residual proceeds and late charges), any recoveries
for Defaulted Leases if not substituted for, proceeds of losses from casualties
and Leases that termination early, and payments by the Seller in connection with
repurchases by the Seller of Leases as a result of breaches of representations
and warranties by the Seller (such breach a "Warranty Event") to the extent the
Originator has not substituted Substitute Leases will be directed within at
least two (2) Business Days of receipt by the Servicer, but excluding any
amounts exempt from deposit into the Collection Account ("Excluded Amounts").
Excluded Amounts include (i) collections attributable to any taxes,
fees or other charges imposed by any governmental authority; (ii) collections
representing reimbursements of insurance premiums or payments for services that
were not financed by the Seller; (iii) other non-contract or rental charges
reimbursable to the Servicer in accordance with the Servicer's customary
policies and procedures; and (iv) collections with respect to repurchased
Leases.
Available Funds. Available Funds ("Available Funds") for
distribution on any Payment Date shall include the following funds received on
or prior to the related Calculation Date, net of any Excluded Amounts: [to be
modified as appropriate based on transaction structure]
(i) lease payments (including residual proceeds and late charges);
(ii) advances from the Servicer;
(iii) recoveries on Defaulted Leases to the extent the Servicer has
not substituted an Eligible Lease for such Defaulted Lease;
(iv) proceeds from losses from casualties or Leases that terminate
early;
(v) proceeds from purchases by the Seller due to a Warranty Event;
and
S-20
<PAGE>
(vi) proceeds from investment of funds in the Collection Account.
Interest. [Information on the interest payable to Noteholders will
be provided in accordance with the structuring of the transaction.]
Principal. [Information on the principal payable to Noteholders will
be provided in accordance with the structuring of the transaction.]
Withholding. The Trustee is required to comply with all applicable
federal income tax withholding requirements respecting payments to Noteholders
of interest with respect to the Notes. The consent of Noteholders is not
required for such withholding. In the event the Noteholder is other than DTC,
then in the event that the Trustee does withhold or causes to be withheld any
amount from interest payments or advances thereof to any Noteholders pursuant to
federal income tax withholding requirements, the Trustee shall indicate the
amount withheld annually to such Noteholders.
Optional Redemption. The Servicer will have the option, subject to
certain conditions, to redeem all, but not less than all, of the Notes as of any
Payment Date on which the aggregate Discounted Lease Balance as of the related
Calculation Date is less than or equal to 10 % of the aggregate Discounted Lease
Balance as of the Cut-off Date.
Events of Default. [information will be provided upon the
structuring of the transaction]
Early Retirement of the Notes. [information will be provided upon
the structuring of the transaction]
Material Federal Income Tax Consequences
General
The following paragraphs together with the description of federal
income tax consequences detailed in the Prospectus under the heading "Material
Federal Income Tax Consequences" set forth the material federal income tax
consequences to the original purchasers of the Notes of the purchase, ownership
and disposition of the Notes. Tax Counsel's opinion does not purport to deal
with all federal income tax considerations applicable to all categories of
investors. Certain holders, including insurance companies, tax exempt
organizations, financial institutions or broker deals, taxpayers subject to the
alternative minimum tax, and holders that will hold the Notes as other than
capital assets, may be subject to special rules that are not discussed below or
in the Prospectus. In particular, this decision applies only to institutional
investors that purchase Notes directly from the Issuer and hold the Notes as
capital assets.
The discussion that follows, and the opinion set forth below of
Dewey Ballantine LLP, special tax counsel ("Tax Counsel") to Lehman Brothers
(the "Underwriter") are based upon provisions of the Internal Revenue Code of
1956, as amended (the "Code") and treasury regulations promulgated thereunder as
in effect on the date hereof and on existing judicial and administrative
interpretations thereof. These authorities are subject to change and to
differing interpretations, which could apply retroactively. The opinion of Tax
Counsel is not binding on the courts or the Internal Revenue Service (the
"IRS"). Potential investors should consult their own tax advisors in determining
the federal, state, local and any other tax consequences to them of the
purchase, ownership and disposition of the Notes.
The following discussion addresses lease-backed Notes such as the
Notes that are intended to be treated for federal income tax purposes as
indebtedness secured by the underlying Lease Receivables. Tax counsel has
prepared the following discussion and is of the opinion that such discussion is
correct in all material respects.
[Additional disclosure will be provided based on the structuring of the
transaction.]
ERISA Considerations
Section 406 of ERISA and Section 4975 of the Code prohibit a
pension, profit sharing, or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the plan.
ERISA also imposes
S-21
<PAGE>
certain duties on persons who are fiduciaries of plans subject to ERISA and
prohibits certain transactions between a plan and parties in interest with
respect to such plans. Under ERISA, any person who exercises any authority or
control respecting the management or disposition of the assets of a plan is
considered to be a fiduciary of such plan (subject to certain exceptions not
here relevant). A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for such persons.
Employee plans that are government plans (as defined in Section 3(32) of ERISA)
and certain church plans (as defined in Section 3(53) of ERISA), are not subject
to ERISA; however, such plans may be subject to comparable federal, state or
local law restrictions.
Certain transactions involving the Issuer might be deemed to
constitute prohibited transactions under ERISA and the Code if assets of the
Issuer were deemed to be "plan assets" of an employee benefit plan subject to
ERISA or the Code, or an individual retirement account (an "IRA"), or any entity
whose underlying assets are deemed to be assets of an employee benefit plan or
an IRA by reason of such employee benefit plan's or such IRA's investment in
such entity (each a "Benefit Plan"). Under a regulation issued by the United
States Department of Labor (the "Plan Assets Regulation"), the assets of the
Issuer would be treated as plan assets of a Benefit Plan for the purposes of
ERISA and the Code only if the Benefit Plan acquired an "equity interest" in the
Issuer and none of the exceptions contained in the Plan Assets Regulation were
applicable. An equity interest is defined under the Plan Assets Regulation as an
interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. The Notes
should be treated as indebtedness without substantial equity features for
purposes of the Plan Assets Regulation. This determination is based in part upon
the traditional debt features of the Notes, including the reasonable expectation
of purchasers of Notes that the Notes will be repaid when due, as well as the
absence of conversion rights, warrants and other typical equity features. The
debt treatment of the Notes for ERISA purposes could change if the Issuer
incurred losses. However, without regard to whether the Notes are treated as an
equity interest for such purposes, the acquisition or holding of Notes by or on
behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Issuer or any of its Affiliates is or becomes a party in
interest or disqualified person with respect to such Benefit Plan. In such case,
certain exemptions from the prohibited transaction rules could be applicable
depending on the type and circumstances of the plan fiduciary making the
decision to acquire a Note. Included among these exemptions are: Prohibited
Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance
company pooled separate accounts; PTCE 91-38, regarding investments by banks,
collective investment funds; PTCE 95-60, regarding investments by insurance
company general accounts; PTCE 96-23, regarding transactions by in-house asset
managers; and PTCE 84-14, regarding transactions by "qualified professional
assets managers." Each investor using the assets of a Benefit Plan which
acquires the Notes, or to whom the Notes are transferred, will be deemed to have
represented that the acquisition and continued holding of the Notes will be
covered by a Department of Labor class exemption.
Due to the complexity of the applicable rules and the penalties that
may be imposed upon persons included in non-exempt prohibited transactions, any
Benefit Plan fiduciary considering the purchase of a Note with plan assets
should consult with its counsel with respect to the potential applicability of
ERISA and the Code to such investment. Moreover, each Benefit Plan fiduciary
should determine whether, under the general fiduciary standards of investment
prudence and diversification, an investment in the Notes is appropriate for the
Benefit Plan, taking into account the overall investment policy of the Benefit
Plan and the composition of the Benefit Plan's investment portfolio.
Ratings
It is a condition to the issuance of the Notes that the Class [A]
Notes be rated [ ] by _______ and [ ] by _________. The ratings are not a
recommendation to purchase, hold or sell the Notes, inasmuch as such ratings do
not comment as to market price or suitability for a particular investor. Each
rating may be subject to revision or withdrawal at any time by the assigning
Rating Agency. There is not assurance that any such rating will continue for any
period of time or that it will not be lowered or withdrawn entirely by the
Rating Agency if, in its judgment, circumstances so warrant. A revision or
withdrawal of such rating may have an adverse effect on the market price of the
Notes. The rating of the Notes addresses the likelihood of the timely payment of
interest and the ultimate payment of principal on the Notes pursuant to their
terms. The rating does not address the rate of prepayments that may be
experienced on the Leases and, therefore, does not address the effect of the
rate of prepayments on the return of principal to the Noteholders.
S-22
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Plan Of Distribution
Subject to the terms and conditions set forth in an underwriting
agreement (the "Underwriting Agreement") for the sale of the Notes dated [ ],
the Issuer has agreed to sell and the Underwriter has agreed to purchase, the
Notes. The Issuer is affiliated with IOS Capital.
In the Underwriting Agreement, the Underwriter has agreed, subject
to the terms and conditions therein, to purchase all the Notes offered hereby if
any of such Notes are purchased.
The Underwriter has advised the Issuer that it proposes to offer the
Notes purchased by the Underwriter for sale from time to time in one or more
negotiated transactions or otherwise, at market prices prevailing at the time of
sale, at prices related to such market prices or at negotiated prices. The
Underwriter may effect such transactions by selling such Notes to or through a
dealer, and such dealer may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriters or purchasers of the
Notes for whom they may act as agent. Any dealers that participate with the
Underwriter in the distribution of the Notes purchased by the Underwriter may be
deemed to be underwriters, and any discounts or commissions received by them or
the Underwriter, and any profit on the resale of Notes by them or the
Underwriter may be deemed to be underwriting discounts or commissions under the
Securities Act of 1933, as amended (the "Securities Act"). Noteholders should
consult with their legal advisors in this regard prior to any such reoffer or
sale.
In connection with this offering, the underwriters may over-allot or
effect transactions which stabilize or maintain the market prices of the offered
Notes at levels above those which might otherwise prevail in the open market.
Such stabilizing, if commenced, may be discontinued at any time.
No dealer, salesman or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus and the related Prospectus Supplement and, if given or made,
such information or representations must not be relied upon. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create an implication that there has been no change in the affairs
of the Seller or the Issuer or any affiliate thereof or the Leases since the
date hereof. This Prospectus does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so to
anyone to whom it is unlawful to make such offer or solicitation.
The Transaction Documents and the Underwriting Agreement provide
that the Servicer and Issuer will indemnify the Underwriters against certain
civil liabilities, including liabilities under the Securities Act, or contribute
to payments the Underwriter may be required to make in respect thereof.
For further information regarding any offer or sale of the Notes
pursuant to this Prospectus Supplement and the Prospectus, see "Plan of
Distribution" in the Prospectus.
Legal Opinions
Certain legal matters relating to the Notes will be passed upon for
the Issuer by Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania
and for the Underwriter by Dewey Ballantine LLP, New York, New York.
S-23
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Index Of Principal Defined Terms
Page Page
---- ----
Asset Pool.......................S-8 Leases...........................S-8
Assignment and Servicing Noteholders......................S-8
Agreement......................S-8 Notes............................S-8
Available Funds.................S-20 Originator.......................S-8
Business Day....................S-16 Payment Date....................S-15
Benefit Plan....................S-22 Plan Assets Regulation..........S-22
Closing Date....................S-18 Pool Factor.....................S-20
Collection Account..............S-20 PTCE............................S-22
Conditional Prepayment Rate.....S-17 Remittance Period...............S-19
CPR.............................S-17 Restricting Events..............S-16
Cut-Off Date.....................S-9 Securities Act..................S-23
Defaulted Leases.................S-8 Seller...........................S-8
Discounted Lease Balance........S-18 Servicer.........................S-8
Eligible Leases.................S-19 Servicer Default................S-19
Equipment........................S-8 Substitute Lease................S-18
Excluded Amounts................S-20 Tax Counsel.....................S-21
IKON............................S-14 Transaction Document............S-17
Indenture........................S-8 Trustee..........................S-8
Initial Note Principal Balance..S-15 Underwriters....................S-23
IOS Capital......................S-8 Underwriting Agreement..........S-23
IRA.............................S-22 Warranty Lease..................S-18
Issuer...........................S-8 Weighted Average Life...........S-17
Lease Receivables................S-8
S-24
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===================================== =======================================
$825,000,000
IKON Receivables LLC
----------------------------
P R O S P E C T U S
----------------------------
Lehman Brothers
Dated March __, 1999
Until 90 days after the date of
this prospectus, all dealers that
effect transactions in the Notes,
whether or not participating in
this offering, may be required to
deliver a prospectus. This is in
addition to the dealers' obligation
to deliver a prospectus when acting
as underwriters and with respect to
their unsold allotments or
subscriptions.
===================================== =======================================
