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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 30, 1999
IKON Receivables, LLC
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(Exact name of registrant as specified in its charter)
Delaware 333-71073 23-2990188
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(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
Attention: President 31208
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1738 Bass Road (Zip Code)
P.O. Box 9115
Macon, Georgia
(Address of Principal Executive Offices)
Registrant's telephone number, including area code
(912) 471-2300
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No change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
------------------------------------
Description of the Notes and the Leases
IKON Receivables, LLC (the "Registrant" or the "Issuer") has
registered $1,825,000,000 in principal amount of Lease-Backed Notes for issuance
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Act"), by a Registration Statement on Form S-3 (File
No. 333-71073) (as amended, the "Registration Statement").
Pursuant to the Registration Statement, the Registrant issued
$699,595,000 in aggregate principal amount of its Lease-Backed Notes (the
"Notes"), on October 7, 1999 (the "Closing Date").
This Current Report on Form 8-K is being filed to satisfy an
undertaking to file copies of certain agreements executed in connection with the
issuance of the Notes, forms of which were filed as Exhibits to the Registration
Statement.
The Notes were issued pursuant to an Indenture attached hereto as
Exhibit 4.1, dated as of October 1, 1999, among the Issuer, IOS Capital, Inc. as
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Servicer, and Harris Trust and Savings Bank, as Trustee.
The primary assets of the Issuer are a pool of equipment leases (the
"Leases"), a security interest in the underlying equipment and other property
relating to the Leases, which were transferred to the Issuer on the Closing Date
pursuant to the Assignment and Servicing Agreement attached hereto as Exhibit
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10.1. As of the Closing Date, the Leases had the characteristics described in
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the Prospectus dated May 7, 1999, the Preliminary Prospectus Supplement dated
September 24, 1999 previously filed with the Commission pursuant to Rule
424(b)(3) of the Act and the Prospectus Supplement dated September 30, 1999
previously filed with the Commission pursuant to Rule 424(b)(2) of the Act.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated September 30, 1999, among the
Issuer, IKON Receivables-1, LLC, IOS Capital, Inc., and Lehman Brothers as
Representative of the Underwriters.
4.1 Indenture, dated as of October 1, 1999 among the Issuer, Harris
Trust Savings Bank, as Trustee, and IOS Capital Inc., as Servicer.
4.2 Certificate Guaranty Insurance Policy, dated October 7, 1999,
issued and delivered by Ambac Assurance Corporation.
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5.1 Opinion of Dewey Ballantine LLP regarding legality of the
registered securities, dated October 7, 1999.
8.1 Opinion of Dewey Ballantine LLP regarding tax matters, dated
October 7, 1999.
10.1 Assignment and Servicing Agreement, dated as of October 1, 1999,
among the Issuer, IKON Receivables-1, LLC, and IOS Capital, Inc., as Originator
and Servicer.
10.2 Indemnification Agreement, dated October 7, 1999, among Lehman
Brothers, Chase Securities Inc., Deutsche Bank Securities Inc., PNC Capital
Markets, Inc., as Underwriters (the "Underwriters"), and Ambac Assurance
Corporation, as Insurer.
10.3 Insurance and Indemnity Agreement, dated October 7, 1999, among
IOS Capital, Inc., as Originator and Servicer, the Issuer, IKON Receivables-1,
LLC, and Ambac Assurance Corporation, as Insurer.
10.4 ISDA Master Agreement and Rate Swap Transaction, between Lehman
Brothers Financial Products, Inc. and the Issuer, and Rate Swap Transaction
between Lehman Brothers Special Financing Inc. and IOS Capital Inc., each dated
as of October 7, 1999.
23.1 Consent of KPMG LLP regarding financial statements of Ambac
Assurance Corporation, and their report.*
* Previously filed on Form 8-K filed with the Securities and Exchange
Commission on October 1, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
IKON Receivables, LLC
By: IKON Receivables Funding, Inc.,
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its Manager
By: /s/ Tom Sheehan
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Name: Tom Sheehan
Title: Treasurer
Dated: October 21, 1999
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EXHIBIT INDEX
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Exhibit No. Description
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1.1 Underwriting Agreement, dated September 30, 1999, among the
Issuer, IKON Receivables-1, LLC, IOS Capital, Inc., and Lehman
Brothers as Representative of the Underwriters.
4.1 Indenture, dated as of October 1, 1999 among the Issuer, Harris
Trust Savings Bank, as Trustee, and IOS Capital Inc., as Servicer.
4.2 Certificate Guaranty Insurance Policy, dated October 7, 1999,
issued and delivered by Ambac Assurance Corporation.
5.1 Opinion of Dewey Ballantine LLP regarding legality of the
registered securities, dated October 7, 1999.
8.1 Opinion of Dewey Ballantine LLP regarding tax matters, dated
October 7, 1999.
10.1 Assignment and Servicing Agreement, dated as of October 1, 1999,
among the Issuer, IKON Receivables-1, LLC, and IOS Capital, Inc.,
as Originator and Servicer.
10.2 Indemnification Agreement, dated October 7, 1999, among Lehman
Brothers, Chase Securities Inc., Deutsche Bank Securities Inc.,
PNC Capital Markets, Inc., as Underwriters (the "Underwriters"),
and Ambac Assurance Corporation, as Insurer.
10.3 Insurance and Indemnity Agreement, dated October 7, 1999, among
IOS Capital, Inc., as Originator and Servicer, the Issuer IKON
Receivables-1, LLC, and Ambac Assurance Corporation, as Insurer.
10.4 ISDA Master Agreement and Rate Swap Transaction, between Lehman
Brothers Financial Products, Inc. and the Issuer, and Rate Swap
Transaction between Lehman Brothers Special Financing Inc. and IOS
Capital Inc., each dated as of October 7, 1999.
23.1 Consent of KPMG LLP regarding financial statements of Ambac
Assurance Corporation, and their report.*
* Previously filed on Form 8-K filed with the Securities and
Exchange Commission on October 1, 1999.
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Exhibit 1.1
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IKON RECEIVABLES LLC
$235,326,000 - 6.14125% Class A-1 Lease-Backed Notes, Series 1999-2
$ 51,100,000 - 6.31% Class A-2 Lease-Backed Notes, Series 1999-2
$100,000,000 - 6.59% Class A-3a Lease-Backed Notes, Series 1999-2
$240,891,000 - Class A-3b Lease-Backed Notes, Series 1999-2
$ 72,278,000 - 6.88% Class A-4 Lease-Backed Notes, Series 1999-2
UNDERWRITING AGREEMENT
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September 30, 1999
LEHMAN BROTHERS INC.,
as Representative for the Underwriters
3 World Financial Center
200 Vesey Street
New York, New York 10285
Ladies and Gentlemen:
IKON Receivables LLC, a limited liability company organized and
existing under the laws of Delaware (the "Issuer"), IKON Receivables-1 LLC, a
limited liability company organized and existing under the laws of Delaware (the
"Seller"), and IOS Capital, Inc., a corporation organized and existing under the
laws of Delaware ("IOS Capital"), hereby agree with you as follows:
Section 1. Issuance and Sale of Notes. The Issuer has authorized the
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issuance of $235,326,000 of 6.14125% Class A-1 Lease-Backed Notes, Series 1999-2
(the "Class A-1 Notes"); $51,100,000 of 6.31% Class A-2 Lease-Backed Notes,
Series 1999-2 (the "Class A-2 Notes"); $100,000,000 of 6.59% Class A-3a Lease-
Backed Notes, Series 1999-2 (the "Class A-3a Notes"); $240,891,000 of Class A-3b
Lease-Backed Notes Series 1992-2 (the "Class A-3b Notes") and $72,278,000 of
6.88% Class A-4 Lease-Backed Notes, Series 1999-2 (the "Class A-4 Notes";
together with the Class A-1 Notes, Class A-2 Notes, and Class A-3 Notes and
Class A-3b Notes, the "Notes"). The Notes will be issued pursuant to an
Indenture, dated as of September 1, 1999 (the "Indenture"), among the Issuer,
IOS Capital, as Servicer, and Harris Trust and Savings Bank (the "Trustee"). The
Notes are more fully described in the Final Prospectus (as defined below), a
copy of which the Issuer is furnishing to you. The Notes will evidence secured
debt obligations of the Issuer. The assets of the Issuer will include a pool of
primarily office equipment lease contracts, including certain payments due
thereunder (the "Leases"), and the Issuer's interest in the underlying equipment
(the "Equipment"). The Notes will be entitled to the benefits of a financial
guaranty insurance policy issued
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by Ambac Assurance Corporation ("Ambac") in accordance with the terms of an
Insurance and Indemnity Agreement among Ambac, the Issuer, the Seller, IOS
Capital and the Trustee (the "Insurance Agreement"). Capitalized terms used and
not defined herein shall have the meanings specified in the Indenture.
The Notes will be sold by the Issuer to the Underwriters in the
amounts set forth on Schedule A hereto.
The terms which follow, when used in this Underwriting Agreement (this
"Agreement"), shall have the meanings indicated:
"Base Prospectus" means the prospectus included in the
Registration Statement.
"Effective Date" means each date that the Registration Statement
and any post-effective amendment or amendments thereto became or become
effective under the Securities Act.
"Execution Time" means the date and time that this Agreement is
executed and delivered by the parties hereto.
"Final Prospectus" means the Base Prospectus together with any
prospectus supplement delivered to purchasers of the Notes at or before the
time of confirmation of their purchases.
"Preliminary Prospectus" means any preliminary prospectus
supplement specifically relating to the Notes, together with the Base
Prospectus.
"Registration Statement" means the registration statement on Form
S-3 (File No. 333-71073) in respect of the Notes filed with the Securities
and Exchange Commission, including amendments, incorporated documents,
exhibits and financial statements, in the form in which it has or shall
become effective and, in the event that any post-effective amendment
thereto becomes effective prior to the Issuance Date, shall also mean such
registration statement as so amended.
"Rule 424" refers to such rule under the Securities Act.
"Underwriters" means Lehman Brothers Inc., Chase Securities, Inc.
Deutsche Bank Alex Brown and PNC Capital Markets, Inc.
"Underwriting Information" has the meaning given to such term in
Section 8(b) hereof.
Section 2. Purchase and Sale of Notes.
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(a) Subject to the terms and conditions and in reliance upon the
covenants, representations and warranties set forth herein, the Underwriters
agree to purchase from the Issuer the Notes pursuant to the terms of this
Agreement on the
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Issuance Date at the purchase price or prices (the "Purchase Price") set forth
on Schedule A attached hereto.
(b) The obligations of each of the Underwriters hereunder to purchase
the respective Notes shall be several and not joint. Each Underwriter's
obligation shall be to purchase the aggregate principal amount of Notes as is
indicated with respect to each Underwriter on Schedule A attached hereto. The
rights of the parties in the event of the failure on the part of the
Underwriters to purchase any Notes as contemplated herein shall be as set forth
in Section 13 hereof.
(c) It is understood that the Underwriters propose to offer the Notes
for sale to the public in the manner set forth in the Final Prospectus.
Section 3. Delivery and Payment.
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Delivery of and payment for the Notes to be purchased by the
Underwriters shall be made at the offices of Dewey Ballantine LLP, 1301 Avenue
of the Americas, New York, New York, at 10:00 A.M., New York time, on October 7,
1999 (the "Issuance Date"). The Notes shall be delivered against payment by the
Underwriters of the Purchase Price therefor, to or upon the order of the Issuer
by one or more wire transfers in immediately available funds. Following the
Effective Date, at the request of the Underwriters, delivery of one or more
global notes (the "Global Notes") representing the Notes shall be made to the
respective accounts of the Underwriters. The Global Notes to be so delivered
shall be registered in the name of Cede & Co., as nominee for The Depository
Trust Company ("DTC"). The interests of beneficial owners of the Notes will be
represented by book entries on the records of DTC and participating members
thereof. Definitive Notes representing the Notes will be available under the
circumstances described in the Indenture.
Section 4. Representations and Warranties.
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(a) The Issuer hereby represents and warrants to, and agrees with,
the Underwriters as follows:
(i) The Issuer meets the requirements for use of Form S-3
under the Securities Act of 1933, as amended (the "Securities Act"), and
has filed with the Securities and Exchange Commission (the "Commission")
the Registration Statement, including the Base Prospectus and form of
Prospectus Supplement, on such Form S-3 for the registration under the
Securities Act of the Notes. Such Registration Statement has been declared
effective. The Issuer may have filed one or more amendments thereto, each
of which has previously been furnished to you. The Issuer will file with
the Commission either, (A) prior to the effectiveness of such Registration
Statement, a further amendment thereto (including the form of Final
Prospectus) or, (B) after effectiveness of such Registration Statement, a
Final Prospectus in accordance with Rule 424(b). In the case of clause (B),
the Issuer will include in such Registration Statement, as amended at the
Effective Date, all information required by the Securities Act and
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the rules thereunder to be included with respect to the Notes and the
offering thereof. As filed, such amendment and form of Final Prospectus, or
such Final Prospectus, shall include all information required by the
Securities Act and, except to the extent you shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus
which has previously been furnished to you) as the Issuer has advised you,
prior to the Execution Time, will be included or made therein.
(ii) On the Effective Date, the Registration Statement did or will
comply in all material respects with the applicable requirements of the
Securities Act and the rules thereunder; on the Effective Date and when the
Final Prospectus is first filed (if required) in accordance with Rule
424(b) and on the Issuance Date, the Final Prospectus will comply in all
material respects with the applicable requirements of the Securities Act
and the rules thereunder; on the Effective Date, the Registration Statement
did not or will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading; and the Final Prospectus, as of its
date and on the Issuance Date, did not or will not include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, provided, however, that the
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Issuer makes no representation or warranty as to the Underwriting
Information.
(iii) This Agreement has been duly authorized, executed and delivered
by the Issuer and constitutes a legal, valid and binding agreement of the
Issuer enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors rights
generally and to general principles of equity, and except that the
provisions hereof relating to indemnification of the Underwriters may be
subject to limitations of public policy.
(iv) Each of the Indenture and the Assignment and Servicing
Agreement dated as of October 1, 1999 by and among the Originator, the
Seller and the Issuer (the "Assignment and Servicing Agreement") has been
duly authorized by the Issuer and, when executed and delivered, will
constitute the legal, valid and binding obligation of the Issuer,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors rights
generally and to general principles of equity, and each of the Indenture
and the Assignment and Servicing Agreement conforms to the description
thereof contained in the Final Prospectus.
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(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, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors rights generally and to general
principles of equity, and entitled to the benefits of the Indenture.
(vi) The performance of this Agreement, the Indenture and the
Assignment and Servicing Agreement by the Issuer will not (A) conflict with
or result in a breach of, and will not constitute a default under any of
the provisions of, its certificate of formation or any law, governmental
rule or regulation, or any judgment, decree or order binding on the Issuer
or its properties, or any of the provisions of any indenture, mortgage,
deed of trust, contract or other agreement or instrument to which the
Issuer is a party or by which it is bound, or (B) result in the creation or
imposition of any Adverse Claim and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Notes
or the consummation by the Issuer of the transactions contemplated by this
Agreement, except such consents, approvals, authorizations, registrations
or qualifications as have been already obtained and such as may be required
under the Securities Act and under state securities or Blue Sky laws in
connection with the purchase and distribution of the Notes by the
Underwriters. As used herein, "Adverse Claim" means a lien, pledge,
security interest or other charge or encumbrance.
(vii) The Issuer is not, and will not, as of the Issuance Date, be an
"investment company" under the Investment Company Act of 1940, as amended
(the "1940 Act").
(viii) The Indenture, when executed and delivered, will have been duly
qualified under the Trust Indenture Act of 1939.
(ix) There is no pending or threatened action, suit or proceeding
against or affecting the Issuer in any court or tribunal or before any
arbitrator of any kind or before or by any governmental authority (i)
asserting the invalidity of this Agreement, the Assignment and Servicing
Agreement, the Indenture or the Notes, (ii) seeking to prevent the issuance
of the Notes or the consummation of any of the transactions contemplated by
this Agreement, the Assignment and Servicing Agreement or the Indenture or
(iii) seeking any determination or ruling that might materially and
adversely affect (A) its performance of its obligations under this
Agreement, the Assignment and Servicing Agreement or the Indenture (as
applicable) or (B) the validity or enforceability of this Agreement, the
Assignment and Servicing Agreement, the Indenture or the Notes.
(b) IOS Capital hereby represents and warrants to and agrees with the
Underwriters as follows:
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(i) This Agreement has been duly authorized, executed and delivered
by IOS Capital and constitutes a legal, valid and binding agreement of IOS
Capital enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principals of equity, and except that the
provisions hereof relating to indemnification of the Underwriters may be
subject to limitations of public policy.
(ii) Each of the Indenture and the Assignment and Servicing
Agreement have been duly authorized, and when executed and delivered, will
constitute the legal, valid and binding obligation of IOS Capital,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors rights
generally and to general principles of equity, and each of the Indenture
and the Assignment and Servicing Agreement conforms in all material
respects to the description thereof contained in the Final Prospectus.
(iii) The performance of this Agreement by IOS Capital, and the
consummation by IOS Capital of the transactions herein contemplated, will
not (A) conflict with or result in a breach of, and will not constitute a
default under any of the provisions of its certificate of incorporation or
by-laws or any law, governmental rule or regulation, or any judgment,
decree or order binding on IOS Capital or its properties, or any of the
provisions of any indenture, mortgage, deed of trust, contract or other
agreement or instrument to which IOS Capital is a party or by which it is
bound, which conflict, breach or default would be material to the issue and
sale of the Notes or would have a material adverse effect on the
operations, management, prospects or financial condition of IOS Capital or
on the shareholders equity of IOS Capital, or (B) result in the creation or
imposition of any Adverse Claim and no consent, approval, authorization,
order, registration or qualification of or with any court or governmental
agency or body is required for the consummation by IOS Capital of the
transactions contemplated by this Agreement, except such consents,
approvals, authorizations, registrations or qualifications as have been
already obtained and such as may be required under the Securities Act and
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Notes by the Underwriters.
(iv) IOS Capital represents and warrants it has delivered to the
Underwriters complete and correct copies of its balance sheet and
statements of income and retained earnings reported by IOS Capital, Inc.
and IKON Office Solutions, Inc. (the "IKON Entities") for the fiscal year
ended September 30, 1998. Except as set forth in or contemplated in the
Registration Statement and the Final Prospectus, there has been no material
adverse change in the condition (financial or otherwise) of the IKON
Entities since September 30, 1998.
(v) Any taxes, fees and other governmental charges arising from the
execution and delivery of this Agreement, the Assignment and Servicing
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Agreement and the Indenture and in connection with the execution, delivery
and issuance of the Notes and with the transfer of the Leases and the
Equipment, have been paid or will be paid by the Issuer prior to the
Issuance Date.
(vi) Ernst & Young LLP is an independent public accountant with
respect to the IKON Entities and the Issuer within the meaning of the
Securities Act and the rules and regulations promulgated thereunder.
(vii) There is no pending or threatened action, suit or proceeding
against or affecting IOS Capital in any court or tribunal or before any
arbitrator of any kind or before or by any governmental authority (i)
asserting the invalidity of this Agreement, the Assignment and Servicing
Agreement, the Indenture or the Notes, (ii) seeking to prevent the issuance
of the Notes or the consummation of any of the transactions contemplated by
this Agreement, the Assignment and Servicing Agreement or the Indenture or
(iii) seeking any determination or ruling that might materially and
adversely affect (A) its performance of its obligations under this
Agreement, the Assignment and Servicing Agreement or the Indenture (as
applicable) or (B) the validity or enforceability of this Agreement, the
Assignment and Servicing Agreement, the Indenture or the Notes.
In addition, IOS Capital hereby makes and repeats the representations
and warranties set forth in Section 2 of the Assignment and Servicing Agreement.
Such representations and warranties are incorporated by reference in this
Section 4(b), and the Underwriters may rely thereon as if such representations
and warranties were fully set forth herein.
(c) The Seller hereby represents and warrants to and agrees with the
Underwriters as follows:
(i) This Agreement has been duly authorized, executed and delivered
by the Issuer and constitutes a legal, valid and binding agreement of the
Seller enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors rights
generally and to general principles of equity, and except that the
provisions hereof relating to indemnification of the Underwriters may be
subject to limitations of public policy.
(ii) The Assignment and Servicing Agreement has been duly authorized
by the Seller and, when executed and delivered, will constitute the legal,
valid and binding obligation of the Seller, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors rights generally and to general
principles of equity.
(iii) The performance of this Agreement and the Assignment and
Servicing Agreement by the Seller will not (A) conflict with or result in a
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breach of, and will not constitute a default under any of the provisions
of, its certificate of formation or any law, governmental rule or
regulation, or any judgment, decree or order binding on the Seller or its
properties, or any of the provisions of any indenture, mortgage, deed of
trust, contract or other agreement or instrument to which the Seller is a
party or by which it is bound, or (B) result in the creation or imposition
of any adverse claim and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Notes or the
consummation by the Seller of the transactions contemplated by this
Agreement, except such consents, approvals, authorizations, registrations
or qualifications as may be required under the Securities Act and under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Notes by the Underwriters.
(iv) There is no pending or threatened action, suit or proceeding
against or affecting the Seller in any court or tribunal or before any
arbitrator of any kind or before or by any governmental authority (i)
asserting the invalidity of this Agreement, the Assignment and Servicing
Agreement, the Indenture or the Notes, (ii) seeking to prevent the issuance
of the Notes or the consummation of any of the transactions contemplated by
this Agreement, the Assignment and Servicing Agreement or the Indenture or
(iii) seeking any determination or ruling that might materially and
adversely affect (A) its performance of its obligations under this
Agreement or the Assignment and Servicing Agreement or (B) the validity or
enforceability of this Agreement, the Assignment and Servicing Agreement,
the Indenture or the Notes.
In addition, the Seller hereby makes and repeats the representations
and warranties set forth in Section 3 of the Assignment and Servicing Agreement.
Such representations and warranties are incorporated by reference in this
Section 4(c), and the Underwriters may rely thereon as if such representations
and warranties were fully set forth herein.
(d) The Underwriters severally and not jointly hereby make and repeat
each of the representations set forth in the third paragraph under
"Underwriting" in the Prospectus Supplement (dealing with offers and sales of
Notes to persons in the United Kingdom). Such representations are incorporated
by reference in this Section 4(d), and the Issuer, the Seller and IOS Capital
may rely thereon as if such representations were fully set forth herein.
Section 5. Covenants of the Issuer and IOS Capital. The Issuer
---------------------------------------
hereby covenants and agrees with you, and IOS Capital hereby covenants and
agrees with you to cause the Issuer:
(a) to use its best efforts to cause the Registration Statement, and
any amendment thereto, if not effective as of the date hereof, to become
effective; if the Registration Statement has become or becomes effective, or
filing of the Final Prospectus is otherwise required under Rule 424(b), to file
the Final Prospectus, properly completed,
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pursuant to Rule 424(b) within the time period prescribed and to provide
evidence satisfactory to the Underwriters of such timely filing; to promptly
advise the Underwriters (i) when the Registration Statement shall have become
effective, (ii) when any amendment thereof shall have become effective, (iii) of
any request by the Commission for any amendment or supplement of the
Registration Statement, the Final Prospectus, or for any additional information,
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threatening of
any proceeding for that purpose, and (v) of the receipt by the Issuer of any
notification with respect to the suspension of the qualification of the Notes
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; to not file any amendment of the Registration Statement or
supplement to the Final Prospectus to which the Underwriters reasonably object;
and to use best efforts to prevent the issuance of any such stop order and, if
issued, to obtain as soon as possible the withdrawal thereof;
(b) if, at any time when a Final Prospectus relating to the Notes is
required to be delivered under the Securities Act, any event occurs as a result
of which the Final Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading or, if it shall be necessary to supplement such Final
Prospectus to comply with the Securities Act or the rules thereunder, to
promptly prepare and file with the Commission, subject to paragraph (a) of this
Section 5, a supplement which will correct such statement or omission or an
amendment which will effect such compliance;
(c) as soon as practicable, to make generally available to the
holders of Notes (the "Noteholders") and to the Underwriters an earnings
statement or statements of the Issuer which will satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 under the Securities Act;
(d) to furnish to the Underwriters and counsel for the Underwriters,
without charge, a signed copy of the Registration Statement (including exhibits
thereto) and, so long as delivery of a prospectus by any of the Underwriters or
any dealer may be required by the Securities Act, to furnish as many copies of
each Final Prospectus and Preliminary Prospectus relating to the Notes and any
supplement thereto as the Underwriters may reasonably request;
(e) to take all reasonable actions requested by the Underwriters to
arrange for the qualification of the Notes for sale under the laws of such
jurisdictions within the United States and as the Underwriters may designate and
as necessary to qualify the Notes for book-entry registration under the rules of
DTC and to maintain such qualifications in effect so long as required for the
completion of the distribution of the Notes; provided, in connection therewith
--------
that neither the Issuer nor IOS Capital shall be required to qualify to do
business as a foreign corporation in any jurisdiction where it is not so
qualified or to take any action that would subject it to service of process in
any jurisdiction where it is not so subject, other than in suits arising out of
the offering of the
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Notes or the transactions contemplated by the Notes, the Indenture or the
Assignment and Servicing Agreement;
(f) for so long as the Notes are outstanding, to deliver to the
Underwriters by first-class mail and as soon as practicable a copy of all
reports and notices delivered to the Rating Agencies, Trustee, Ambac or the
Noteholders under the Indenture;
(g) for so long as the Notes are outstanding, to furnish to the
Underwriters as soon as practicable after filing any other information
concerning the Issuer or IOS Capital filed with any government or regulatory
authority which is otherwise publicly available; and
(h) to the extent, if any, that any rating provided with respect to
the Notes set forth in Section 6(g) hereof is conditional upon the furnishing of
documents reasonably available to the Issuer, the Seller or IOS Capital, to
furnish such documents within any required time period.
Section 6. Conditions of Underwriters' Obligation. The obligations of
--------------------------------------
the Underwriters to purchase and pay for the Notes on the Issuance Date shall be
subject to the accuracy in all material respects of the respective
representations and warranties of the Issuer, the Seller and IOS Capital herein,
in the Assignment and Servicing Agreement and in the Indenture, to the
performance by the Issuer, the Seller and IOS Capital in all material respects
of their respective obligations hereunder, under the Assignment and Servicing
Agreement and under the Indenture and to the following additional conditions:
(a) The Issuer, the Seller and IOS Capital shall each have delivered
a certificate (an "Officer's Certificate"), dated the Issuance Date, signed by
its Vice President and its Chief Financial Officer, to the effect that:
(i) the representations and warranties made by the Issuer, the
Seller or IOS Capital (as the case may be) in this Agreement, the Indenture
and the Assignment and Servicing Agreement are true and correct in all
material respects at and as of the date of such Officer's Certificate as if
made on and as of such date (except to the extent they expressly relate to
an earlier date);
(ii) the Issuer, the Seller or IOS Capital (as the case may be)
has complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied under this Agreement, the Indenture
and the Assignment and Servicing Agreement at or prior to the date of such
Officer's Certificate;
(iii) nothing has come to such officer's attention that would lead
him to believe that the Final Prospectus contains any untrue statement of a
material fact or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; and
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(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 a favorable opinion from Don Liu, Esq.
(subject to customary and usual qualifications), dated the Issuance Date and
reasonably satisfactory in form and substance to the Underwriters and their
counsel with respect to or to the effect that: (i) the existence and good
standing of IOS Capital, (ii) that the Issuer, the Seller and IOS Capital, as
applicable, have the corporate authority to perform this Agreement, the
Assignment and Servicing Agreement, the Indenture and the Insurance Agreement
(collectively, the "Transaction Documents") and the transactions contemplated
herein and therein; (iii) the due authorization, execution, delivery and
enforceability of this Agreement and the other Transaction Documents, as
applicable, by the Issuer, the Seller and IOS Capital; (iv) each of this
Agreement and the other Transaction Documents are the legal, valid and binding
obligation of the Issuer, the Seller and IOS Capital, as applicable, enforceable
against each of them in accordance with its terms (subject to customary
exceptions relating to bankruptcy and laws affecting creditors' rights); (v) the
Notes have been duly authorized, executed and delivered by the Issuer and
constitute the legal, valid and binding obligations of the Issuer enforceable in
accordance with their terms (subject to customary exceptions as to bankruptcy
and laws affecting creditors' rights) and are entitled to the benefits of the
Indenture; (vi) the issuance and sale of the Notes by the Issuer, the
performance of this Agreement by the Issuer, the Seller and IOS Capital and
compliance by the Issuer, the Seller and IOS Capital with the terms of the
Transaction Documents, as applicable, and the consummation of the transactions
contemplated herein and therein will not conflict with the organizational
documents of the Issuer, the Seller or IOS Capital, or to the best of such
counsel's knowledge, any other contract to which the Issuer, the Seller or IOS
Capital is a party or by which any of them is bound; (vii) to the best of such
counsel's knowledge, there is no legal or governmental proceeding threatened or
pending against the Issuer, the Seller or IOS Capital which would have a
material adverse effect on the issuance of the Notes, the performance by the
Issuer, the Seller or IOS Capital of this Agreement or compliance by the Issuer,
the Seller or IOS Capital with the terms of the Transaction Documents to which
they are parties, respectively; and (viii) on the Issuance Date the Registration
Statement is effective, and, that to the best of such counsel's knowledge no
stop order suspending the effectiveness of the Registration Statement has been
issued or is threatened, and that although such counsel is not passing on the
factual accuracy, completeness or fairness of the statements contained in the
sections entitled "The Issuer", "The Servicer and the Originator" and "The Asset
Pool" in the Prospectus Supplement and "The Issuer", "The Asset Pools",
"Management's Discussion and Analysis of Financial Condition", "Directors and
Executive Officers of the Manager of the Issuer", "The Leases" and "The
Originator's Leasing Business" in the Base Prospectus nothing came to such
counsel's attention that leads such counsel to believe that any of such sections
(as of the Effective Date or the date of the Final Prospectus) contained an
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untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made not misleading (in each case other
than the financial and statistical information and notes and schedules thereto,
as to which such counsel need express no opinion). In rendering such opinion,
counsel may rely, to the extent deemed proper and as stated therein, as to
matters of fact on certificates of responsible officers of the Issuer, the
Seller or IOS Capital and public officials and as to matters of state law of
jurisdictions other than the jurisdictions in which such counsel is admitted to
practice, on opinions of local counsel satisfactory to the Underwriters.
(c) You shall have received a favorable opinion from Parker, Hudson,
Rainer & Dobbs, counsel to the Issuer, the Seller and IOS Capital (subject to
customary and usual qualifications), dated the Issuance Date and reasonably
satisfactory in form and substance to the Underwriters and their counsel with
respect to or to the effect, in each case to the extent governed by the laws of
the State of Georgia, that: (A) in the event a court disregarded the intent of
the parties and characterized the transfer by IOS Capital to the Seller of the
Leases and the related Equipment owned by IOS Capital located in the State of
Georgia pursuant to the Assignment and Servicing Agreement as a pledge of
collateral rather than an absolute assignment by way of capital contribution,
the Assignment and Servicing Agreement creates a valid security interest in
favor of the Seller therein, which security interest is a perfected first
priority security interest, (B) in the event a court disregarded the intent of
the parties and characterized the transfer by the Seller to the Issuer of the
Leases pursuant to the Assignment and Servicing Agreement as a pledge rather
than an absolute assignment by way of capital contribution, the Assignment and
Servicing Agreement creates a valid security interest in favor of the Issuer
therein, which security interest is a perfected first priority security
interest, (C) the Assignment and Servicing Agreement creates a valid security
interest in the Seller's right, title and interest in and to the Equipment,
which security interest is a perfected first priority security interest, and (D)
the Indenture creates a valid security interest in favor of the Trustee in the
Issuer's right, title and interest in and to the Leases and the related
Equipment, which security interest is a perfected first priority security
interest (such counsel being permitted to assume for purposes of such opinions
that no prior financing statements covering the Leases or Equipment are in
effect based on a review of UCC searches as of a recent date and that financing
statements (i) naming the Seller as secured party and IOS Capital as debtor and
the Leases and any related Equipment as the collateral, (ii) the Issuer as
secured party and the Seller as debtor and the Leases and all right, title and
interest of the Seller in the related Equipment as the collateral, and (iii)
naming the Trustee as secured party and the Issuer as debtor and the Leases and
all right, title and interest of the Issuer in and to the Equipment as the
collateral have been filed in the filing offices within the State of Georgia
identified in such opinion).
(d) You shall have received a favorable opinion from Richards, Layton
& Finger, special counsel to the Issuer, the Seller and IKON Receivables Funding
Inc. (the "Manager") (subject to customary and usual qualifications) with
respect to or to the effect that: (i) the due formation, existence and good
standing of the Issuer, the Seller and the Manager, (ii) the legal, valid and
binding effect and enforceability of the limited liability company agreement of
the Seller and the Issuer, (iii) a Delaware court applying
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Delaware law would conclude that the consent of the Manager and of IOS Capital,
as sole member of the Seller, would be required to file a voluntary bankruptcy
petition on behalf of the Seller and the provisions requiring such consent would
be enforceable, (iv) a Delaware court applying Delaware law would conclude that
the consent of the Manager and of the Seller, as sole member of the Issuer,
would be required to file a voluntary bankruptcy petition on behalf of the
Issuer and the provisions requiring such consent would be enforceable, (v) an
insolvency or bankruptcy event affecting the sole member of the Seller or the
Issuer would not result in the dissolution of such entity, (vi) a bankruptcy
court would hold that Delaware law, and not federal law, governs the
determination of what persons or entities have authority to file a voluntary
bankruptcy petition on behalf of the Issuer or the Seller, as applicable, (vii)
creditors of IOS Capital or the Seller may only claim against the respective
ownership interests in the Seller (in the case of IOS Capital ) and the Issuer
(in the case of the Seller) and have no direct claim to the assets of the Seller
or the Issuer, as applicable, and (viii) that the Seller and the Issuer are
separate legal entities under Delaware law.
(e) The Underwriters shall have received from Dewey Ballantine LLP,
counsel for the Underwriters, such opinion or opinions, dated the Issuance Date,
with respect to the validity of the Notes, the Registration Statement, the Final
Prospectus, true sale, nonconsolidation, enforceability of the Transaction
Documents and the Notes, certain securities law issues, perfection, federal
taxes, and other related matters as the Underwriters may require.
(f) At the Execution Time and at the Issuance Date, Ernst & Young LLP
shall have furnished to the Underwriters a letter or letters, dated the date of
this Agreement and the Issuance Date, respectively, in form and substance
satisfactory to the Underwriters.
(g) The Class A-1 Notes shall have been rated at least "A-1+" and "P-
1", that the Class A-2, A-3a, A-3b and A-4 notes be rated at least "AAA" and
"Aaa" by Standard & Poor's Ratings Group ("S&P") and Moody's Investors Service,
Inc. ("Moody's"), respectively, which ratings shall not have been reduced or
withdrawn as evidenced by the Officer's Certificate referred to in Section 6(b).
(h) Counsel to the Trustee shall have delivered a favorable opinion
(subject to customary and usual exceptions), dated the Issuance Date, as the
case may be, and satisfactory in form and substance to the Underwriters and
counsel for the Underwriters and to the Issuer, the Seller and IOS Capital and
their counsel with respect to, or to the effect that: (i) the due incorporation
and valid existence of the Trustee, (ii) the due authorization, execution and
delivery by the Trustee of the Indenture, (iii) the Indenture is the legal,
valid and binding obligation of the Trustee, enforceable against the Trustee in
accordance with its terms (subject to the customary and usual exceptions), (iv)
the execution, delivery and performance of the Indenture will not conflict with
the Trustee's organizational documents and (v) the Notes have been duly
authenticated by the Trustee.
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(i) All proceedings in connection with the transactions contemplated
by this Agreement and all documents incident hereto shall be reasonably
satisfactory in form and substance to you, and you and your counsel shall have
received such other information, certificates and documents as you or they may
reasonably request.
Section 7. Reimbursement of Expenses. In the event that (x) no closing
-------------------------
of the sale of the Notes occurs by the Issuance Date through no fault of the
Issuer or IOS Capital or because any of the conditions set forth in Sections
6(d), 6(e), 6(g), 6(h) and 6(i) have not been met, or (y) the Underwriters
terminate the engagement pursuant to Section 10 or because any conditions
precedent in Section 6 (other than Section 6(a), 6(b), 6(c) and 6(f)) have not
been fulfilled, then the liability of the Issuer and IOS Capital to the
Underwriters shall be limited to the reimbursement of the Underwriters' expenses
incurred through the date of termination for its reasonable out-of-pocket and
incidental expenses. In addition, whether or not the Notes are issued or sold:
(a) The Issuer or IOS Capital shall pay the reasonable fees and
expenses associated with the transactions contemplated hereby not paid by the
Underwriters in accordance with the provisions of Section 7(b), including,
without limitation, the following fees and expenses:
(i) Rating Agency fees payable with respect to their ratings of
the Notes;
(ii) fees charged by the firm of independent public accountants
referred to in Section 6(f);
(iii) filing fees in connection with the transactions
contemplated hereby including, but not limited to, the Commission;
(iv) fees and expenses of Dewey Ballantine LLP;
(v) Trustee's fees and fees of counsel to the Trustee;
(vi) Ambac's fee and fees of counsel to Ambac;
(vii) the costs and expenses of printing the Registration
Statement, the Final Prospectus and each Preliminary Prospectus;
(viii) the costs of printing or reproducing this Agreement, the
Blue Sky Survey and any other documents in connection with the offer,
sale and delivery of the Notes;
(ix) all expenses in connection with the qualification of the
Notes under state securities laws as provided in section 5(e), including
the fees and disbursements of counsel in connection with the Blue Sky
Survey;
(x) the cost of preparing the Notes;
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(xi) the cost or expenses of any transfer agent or registrar;
and
(xii) all other costs and expenses incident to the performance of
their obligations hereunder which are not otherwise specifically provided
for in this Section 7; provided, however, that the Issuer and IOS Capital
-------- -------
do not hereby waive any right to reimbursement from the Underwriters in the
event of any of the Underwriters' failure to perform in accordance with
this Agreement.
(b) It is understood and agreed that, except as provided in Sections 8
and 9, the Underwriter will pay securities transfer taxes on resale of any of
the Notes by them, and any advertising expenses connected with any offers they
may make.
Section 8. Indemnification and Contribution.
--------------------------------
(a) The Issuer and IOS Capital, jointly and severally, will indemnify
and hold harmless each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls any Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Securities and Exchange Act of 1934 as amended (the "Exchange Act") (each an
"Indemnified Party") from and against any and all losses, claims, damages or
liabilities, joint or several, to which such Underwriter or any such controlling
persons may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the Final
Prospectus or any amendment or supplement thereto, or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances in
which they were made not misleading, and will promptly reimburse each such
Indemnified Party for any legal or other expenses reasonably incurred by each
such Indemnified Party in connection with investigating, preparing to defend or
defending, or appearing as a third-party witness in connection with, any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Issuer and IOS Capital shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement or the Final
Prospectus, or any such amendment or supplement, in reliance upon and in
conformity with the Underwriting Information. The foregoing indemnity agreement
is in addition to any liability which each of the Issuer and IOS Capital may
otherwise have to you or any person who controls you.
(b) Each Underwriter agrees severally, and not jointly, to indemnify
and hold harmless the Issuer and IOS Capital against any losses, claims, damages
or liabilities to which the Issuer or IOS Capital may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
an untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Final Prospectus, or any amendment or
supplement thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
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the statements therein in light of the circumstances under which they were made
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Registration Statement or the Final Prospectus or any such amendment
or supplement, in reliance upon and in conformity with written information
furnished to the Issuer or IOS Capital by or on behalf of such Underwriter
expressly for use therein and will reimburse the Issuer or IOS Capital for any
legal or other expenses reasonably incurred by the Issuer or IOS Capital in
connection with the investigating, preparing to defend or defending, or
appearing as a third- party witness in connection with, any such loss, claim,
damage, liability or action. The Issuer and IOS Capital acknowledge that the
statements set forth in the second, third, fifth and sixth paragraphs under the
heading "Underwriting" in the Prospectus Supplement constitute the only
information furnished in writing by or on behalf of the Underwriters for
inclusion in the Registration Statement and the Final Prospectus (the
"Underwriting Information"), and each of you with respect to yourself confirm
that such statements are correct.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the claim or commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
------------------
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 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
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a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party; and except that, if clause (i)
or (iii) is applicable, such liability shall be only in respect of the counsel
referred to in such clause (i) or (iii). Notwithstanding the immediately
preceding sentence and the first sentence of this paragraph, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.
(d) Each Underwriter agrees severally and not jointly to deliver to
the Issuer or IOS Capital no later than the date on which the Final Prospectus
is required to be filed pursuant to Rule 424 with a copy of its Derived
Information (defined below) for filing with the Commission.
(e) Each Underwriter agrees severally and not jointly, assuming all
Company Provided Information (defined below) is accurate and complete in all
material respects, to indemnify and hold harmless the Issuer and IOS Capital
against any and all losses, claims, damages or liabilities, joint or several, to
which they may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement of a material fact contained in the
Derived Information provided by you, or arise out of or are based upon, when
read in conjunction with the Final Prospectus, the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and agrees to reimburse each such indemnified party
for any legal or other expenses reasonably incurred by him, her or it in
connection with investigating or defending or preparing to defend any such loss,
claim, damage, liability or action as such expenses are incurred. Your
obligations under this Section 8(e) shall be in addition to any liability which
you may otherwise have.
(f) Each of the Issuer and IOS Capital agrees to indemnify and hold
harmless the Underwriters, the directors, officers, employees and agents of each
Underwriter and each person who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several, to which they
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement of a material fact contained in the
Company-Provided Information provided by the Issuer, the Seller or IOS Capital,
or arise out of or are based upon, when read in conjunction with the Final
Prospectus, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
agrees to reimburse each such indemnified party for any legal or other expenses
reasonably
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incurred by him, her or it in connection with investigating or defending or
preparing to defend any such loss, claim, damage, liability or action as such
expenses are incurred. Your obligation under this Section 8(f) shall be in
addition to any liability which you may otherwise have.
(g) The procedures set forth in Section 8(c) shall be equally
applicable to Sections 8(e) and 8(f).
(h) For purposes of this Section 8, the term "Derived Information"
means such portion, if any, of the information delivered to the Issuer or IOS
Capital by the Underwriters pursuant to Section 8(d) for filing with the
Commission as:
(i) is not contained in the Final Prospectus without taking
into account information incorporated therein by reference;
(ii) does not constitute Company-Provided Information; and
(iii) is of the type of information defined as Collateral Term
Sheets, Structural Term Sheets or Computational Materials (as such terms
are interpreted in the No-Action Letters).
"Company-Provided Information" means any computer tape furnished to
the Underwriters by the Issuer, the Seller or IOS Capital concerning the Leases
or any other information furnished by the Issuer, the Seller or IOS Capital to
the Underwriters that is relied on or is reasonably anticipated by the parties
hereto to be relied on by the Underwriters in the course of the Underwriters'
preparation of its Derived Information or the Underwriting Information.
The terms "Collateral Term Sheet" and "Structural Term Sheet" shall
have the respective meanings assigned to them in the February 13, 1995 letter
(the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the SEC staff's response thereto, were
publicly available February 17, 1995). The term "Collateral Term Sheet" as used
herein includes any subsequent Collateral Term Sheet that reflects a substantive
change in the information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "Kidder letter" and
together with the PSA Letter, the "No-Action Letters") of Brown & Wood on behalf
of Kidder, Peabody & Co., Inc. (which letter, and the SEC staff's response
thereto, were publicly available May 20, 1994).
(i) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) in such proportion as is equitable and as shall reflect the
relative benefits received by the Issuer, the Seller and IOS Capital on the one
hand and the Underwriters on the other from the offering of the Notes. If,
however, the allocation
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provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Issuer, the Seller or IOS Capital on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Issuer, the Seller or IOS
Capital on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion that the total net proceeds from the offering (before
deducting expenses) received by the Issuer, the Seller and IOS Capital bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus
Supplement. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuer or IOS Capital on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Issuer, IOS
Capital and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (i) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (i). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this subsection (i) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating, preparing to defend or defending, or appearing as a third-party
witness in connection with, any such action or claim. Notwithstanding the
provisions of this subsection (i), none of the Underwriters shall be required to
contribute any amount in excess of the total underwriting discount and
commissions as set forth on the cover page of the Prospectus Supplement paid to
the respective Underwriter. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(j) The obligations of the Issuer and IOS Capital under this Section 8
shall be in addition to any liability which the Issuer or IOS Capital may
otherwise have and shall extend, upon the same terms and conditions, to each
director, officer, employee and agent of each Underwriter and each person, if
any, who controls any of the Underwriters within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Issuer, the Seller and IOS
Capital and to each person, if any, who controls the Issuer or IOS Capital
within the meaning of the Securities Act.
(k) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or
19
<PAGE>
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such action,
suit or proceeding.
Section 9. Survival. The respective representations, warranties and
--------
agreements of the Issuer, the Seller, IOS Capital and the Underwriters set forth
in or made pursuant to this Agreement will remain in full force and effect,
notwithstanding any investigation heretofore or hereafter made by or on behalf
of the Issuer, the Seller, IOS Capital or the Underwriters, and such
representations, warranties and agreements made by the Issuer, the Seller and
IOS Capital shall survive the delivery and payment for the Notes. The provisions
of Sections 7 and 8 shall survive the termination or cancellation of this
Agreement.
Section 10. Termination.
-----------
(a) This Agreement may be terminated by you in your absolute
discretion at any time upon the giving of notice at any time prior to the
Issuance Date: (i) if there has been, since September 30, 1998, any material
adverse change in the condition, financial or otherwise, of IOS Capital, the
Seller or the Issuer, or in the earnings, business affairs or business prospects
of IOS Capital, the Seller or the Issuer, whether or not arising in the ordinary
course of business, or (ii) if there has occurred any outbreak or escalation of
hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in your reasonable judgment,
impracticable to market the Notes or enforce contracts for the sale of the
Notes, or (iii) if trading generally on either the American Stock Exchange or
the New York Stock Exchange has been suspended, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required, by either of said exchanges or by order of the Commission or any other
governmental authority, or (iv) if a banking moratorium has been declared by
either federal or New York authorities. In the event of any such termination, no
party will have any liability to any other party hereto, except as otherwise
provided in Section 7 or 8 hereof.
(b) This Agreement may not be terminated by the Issuer, the Seller or
IOS Capital, without the written consent of the Underwriters, except in
accordance with law.
(c) Notwithstanding anything herein to the contrary, in the event the
Issuer, the Seller or IOS Capital does not perform any obligation under this
Agreement or any representation and warranty hereunder is incomplete or
inaccurate in any material respect, this Agreement and all of the Underwriters'
obligations hereunder may be immediately cancelled by the Underwriters by notice
thereof to the Issuer or IOS Capital. Any such cancellation shall be without
liability of any party to any other party except that the provisions of Sections
7 and 8 hereof shall survive any such cancellation.
Section 11. Notice. All communications provided for or permitted
------
hereunder shall be in writing and shall be deemed to have been duly given if
personally
20
<PAGE>
delivered to or mailed by certified or registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to you, addressed to you, at the addresses first stated in this Agreement, or to
such other address as you may designate in writing to the Issuer, the Seller and
IOS Capital; if to IOS Capital, addressed to IOS Capital at 1738 Bass Road, P.O.
Box 9115, Macon, Georgia, 31210; if to the Issuer, addressed to IKON
Receivables, LLC at 1738 Bass Road P.O. Box 9115, Macon, Georgia 31210; and if
to the Seller, addressed to IKON Receivables -1 LLC at 1738 Bass Road, P.O. Box
9115, Macon, Georgia 31210, or such other address as IOS Capital, the Issuer or
the Seller may have designated in writing to you.
Section 12. Successors. This Agreement will inure to the benefit of
----------
and be binding upon the Issuer, the Seller and IOS Capital and their respective
successors and assigns and the Underwriters and their respective successors and
assigns.
Section 13. Default by Any of the Underwriters. Subject to Section 6
----------------------------------
hereof, if any of the Underwriters shall fail on the Issuance Date to purchase
the Notes, which it is obligated to purchase hereunder (the "Defaulted Notes"),
the remaining Underwriter(s) (the "Non- Defaulting Underwriter(s)") shall have
the right, but not the obligation, within one (1) Business Day thereafter, to
make arrangements to purchase all, but not less than all, of the Defaulted Notes
upon the terms herein set forth; if, however, the Non-Defaulting Underwriter(s)
shall not have completed such arrangements within such one (1) Business Day
period, then this Agreement shall terminate without liability on the part of the
Non-Defaulting Underwriter(s).
No action taken pursuant to this Section 13 shall relieve the
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, any of the Non-Defaulting Underwriters or the
Company shall have the right to postpone the Issuance Date for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement, the Final Prospectus or in any other documents or arrangements.
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 14. Governing Law.
-------------
(a) THIS AGREEMENT IS TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE ISSUER, THE SELLER AND IOS CAPITAL HEREBY SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND
21
<PAGE>
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS
SET FORTH IN SECTION 11 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U. S. MAILS,
POSTAGE PREPAID. THE ISSUER, THE SELLER AND IOS CAPITAL HEREBY WAIVE ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
----- --- ----------
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE ISSUER, THE SELLER OR IOS CAPITAL TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT EITHER'S RIGHT TO BRING
ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE ISSUER, THE SELLER AND IOS CAPITAL HEREBY WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION
WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN
A BENCH TRIAL WITHOUT A JURY.
Section 15. 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 16. 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, the Seller or IOS Capital, whereupon
this Agreement shall become a binding agreement between the Underwriters, on the
one hand, and the Issuer, the Seller and IOS Capital on the other.
22
<PAGE>
Very truly yours,
IOS CAPITAL, INC.
By: /s/ J.F. Quinn
--------------------------
Name: J.F. Quinn
Title: Treasurer
IKON RECEIVABLES, LLC
By: IKON Receivables Funding, Inc., its Manager
By: /s/ Thomas P. Sheehan
--------------------------
Name: Thomas P. Sheehan
Title: Treasurer
IKON RECEIVABLES-1 LLC
By: IKON Receivables Funding, Inc., its Manager
By: /s/ Thomas P. Sheehan
--------------------------
Name: Thomas P. Sheehan
Title: Treasurer
The foregoing Agreement is
hereby accepted and entered
into as of the date hereof.
LEHMAN BROTHERS INC.,
as Representative of the Underwriters
By: /s/ Kurt A. Locher
--------------------------
Name: Kurt A. Locher
Title: Managing Director
[Signature Page to the Underwriting Agreement]
<PAGE>
SCHEDULE A
The Notes will be purchased by Lehman Brothers Inc., Chase Securities, Inc.,
Deutsche Bank.Alex Brown and PNC Capital Markets, Inc. as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Lehman Brothers Chase Deutsche Bank. PNC Capital
Inc. Securities Inc. Alex Brown Markets Inc. Underwriting
Principal Amount Principal Amount Principal Amount Principal Amount Discount
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A-1
Notes $ 70,597,800 $ 70,597,800 $ 47,065,200 $ 47,065,200 .175%
- ----------------------------------------------------------------------------------------------------------
Class A-2
Notes $ 15,330,000 $ 15,330,000 $ 10,220,000 $ 10,220,000 .200%
- ----------------------------------------------------------------------------------------------------------
Class A-3a
Notes $ 30,000,000 $ 30,000,000 $ 20,000,000 $ 20,000,000 .375%
- ----------------------------------------------------------------------------------------------------------
Class A-3b
Notes $ 72,267,000 $ 72,267,000 $ 48,178,200 $ 48,178,200 .375%
- ----------------------------------------------------------------------------------------------------------
Class A-4
Notes $ 21,683,000 $ 21,683,000 $ 14,445,600 $ 14,455,600 .425%
- ----------------------------------------------------------------------------------------------------------
Totals $ 209,878,500 $ 209,878,500 $ 139,919,000 $ 139,919,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 4.1
-----------
Execution Copy
================================================================================
IKON RECEIVABLES, LLC.
Issuer
HARRIS TRUST AND SAVINGS BANK,
Trustee
and
IOS CAPITAL, INC.,
Servicer
----------------------
INDENTURE
Dated as of October 1, 1999
----------------------
$699,595,000 in aggregate principal amount
of Lease-Backed Notes, consisting of:
$235,326,000 of 6.14125% Class A-1 Lease-Backed Notes
$ 51,100,000 of 6.31% Class A-2 Lease-Backed Notes
$100,000,000 of 6.59% Class A-3a Lease-Backed Notes
$240,891,000 of Class A-3b Lease-Backed Notes
$ 72,278,000 of 6.88% Class A-4 Lease-Backed Notes
================================================================================
<PAGE>
IKON RECEIVABLES LLC
Reconciliation and Tie between the Indenture
dated as of October 1, 1999 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
(S) 310 (a)(1)........................ (S) 8.07
(a)(2)........................ 8.07
(a)(3)........................ Not Applicable
(a)(4)........................ Not Applicable
(b)........................... 8.07; 8.08; 7.07; 1.05; 1.06
(c)........................... Not Applicable
311 (a)........................... 8.13
(b)........................... 8.13
312 (a)........................... 2.11
(b)........................... 12.02
(c)........................... 12.02
313 (a)........................... 8.14
(b)(1)........................ Not Applicable
(b)(2)........................ 8.14
(c)........................... 8.14; 1.06
(d)........................... 8.14
314 (a)........................... 9.12; 9.09; 1.06
(b)........................... Not Applicable
(c)(1)........................ 12.04
(c)(2)........................ 12.04
(c)(3)........................ 12.01
(d)........................... 12.01
(e)........................... 12.05
(f)........................... Not Applicable
315 (a)........................... 8.01(a)
(b)........................... 8.02; 1.06
(c)........................... 8.01(b)
(d)........................... 8.01(c)
(e)........................... 7.13
316 (a) (last sentence)........... 2.12
(a)(1)(A)..................... 7.12
(a)(1)(b)..................... 7.11
(a)(2)........................ Not Applicable
317 (a)(1)........................ 7.03(c)
(a)(2)........................ 7.04
(b)........................... 9.03(c)
318 (a)........................... 12.01, 12.02
(c)........................... 12.01
ii
NY--346860.7
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..............3
SECTION 1.01. General Definitions.........................................3
SECTION 1.02. Compliance Certificates and Opinions.......................20
SECTION 1.03. Form of Documents Delivered to Trustee and
Insurer....................................................20
SECTION 1.04. Acts of Noteholders, etc...................................22
SECTION 1.05. Notices, etc., to Trustee, Servicer, Issuer,
Insurer and Rating Agencies................................22
SECTION 1.06. Notice to Noteholders; Waiver..............................23
SECTION 1.07. Effect of Headings and Table of Contents...................24
SECTION 1.08. Successors and Assigns.....................................24
SECTION 1.09. Benefits of Indenture......................................24
SECTION 1.10. Recording of Indenture.....................................24
SECTION 1.11. GOVERNING LAW..............................................25
SECTION 1.12. Legal Holidays.............................................25
SECTION 1.13. Execution in Counterparts..................................25
SECTION 1.14. Inspection.................................................25
SECTION 1.15. Survival of Representations and Warranties.................26
ARTICLE II THE NOTES..........................................................26
SECTION 2.01. General Provisions; Optional Redemption by Issuer..........26
SECTION 2.02. Execution, Authentication, Delivery, and Dating............28
SECTION 2.03. Transfer and Exchange......................................28
SECTION 2.04. Mutilated, Destroyed, Lost and Stolen Notes................29
SECTION 2.05. Book-Entry Registration....................................30
SECTION 2.06. Notice to Clearing Agency Noteholders......................31
SECTION 2.07. Definitive Notes...........................................31
SECTION 2.08. Payment of Interest and Principal; Rights Preserved........32
SECTION 2.09. Persons Deemed Owners......................................32
SECTION 2.10. Cancellation...............................................32
SECTION 2.11. Noteholder Lists...........................................32
SECTION 2.12. Treasury Notes.............................................33
SECTION 2.13. CUSIP Numbers..............................................33
ARTICLE III ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION AND
APPLICATION OF MONEYS; REPORTS...............................................33
SECTION 3.01. Transaction Accounts; Investments by Trustee...............33
SECTION 3.02. Collection of Moneys.......................................36
SECTION 3.03. Collection Account; Payments...............................36
SECTION 3.04. The Reserve Account........................................38
SECTION 3.05. Reports by Trustee; Notices of Certain Payments............39
i
<PAGE>
SECTION 3.06. Trustee May Rely on Certain Information from Servicer......40
SECTION 3.07. Optional Deposits by the Insurer; Notice of Waivers........40
SECTION 3.08. The Security Deposit Account...............................40
ARTICLE IV THE POLICY.........................................................41
SECTION 4.01. Claims Under Policy........................................41
SECTION 4.02. Preference Claims..........................................42
SECTION 4.03. Surrender of Policy........................................43
ARTICLE V RELEASE OF LEASES AND INTERESTS IN EQUIPMENT........................43
SECTION 5.01. Release of Equipment.......................................43
SECTION 5.02. Release of Leases Upon Final Lease Payment.................43
SECTION 5.03. Execution of Documents.....................................43
SECTION 5.04. Further Release of Collateral..............................44
ARTICLE VI SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER....................44
SECTION 6.01. Servicer Events of Default.................................44
SECTION 6.02. Substitute Servicer........................................44
ARTICLE VII EVENTS OF DEFAULT; REMEDIES.......................................45
SECTION 7.01. Events of Default..........................................45
SECTION 7.02. Acceleration of Maturity; Rescission and Annulment.........46
SECTION 7.03. Remedies...................................................47
SECTION 7.04. Trustee Shall File Proofs of Claim.........................48
SECTION 7.05. Trustee May Enforce Claims Without Possession
of Notes...................................................49
SECTION 7.06. Application of Money Collected.............................49
SECTION 7.07. Limitation on Suits........................................50
SECTION 7.08. Unconditional Right of Noteholders to Receive Principal
and Interest...............................................51
SECTION 7.09. Restoration of Rights and Remedies.........................51
SECTION 7.10. Rights and Remedies Cumulative.............................51
SECTION 7.11. Delay or Omission Not Waiver...............................52
SECTION 7.12. Control by Noteholders.....................................52
SECTION 7.13. Undertaking for Costs......................................52
SECTION 7.14. Waiver of Stay or Extension Laws...........................53
SECTION 7.15. Sale of Asset Pool.........................................53
ARTICLE VIII THE TRUSTEE......................................................54
SECTION 8.01. Certain Duties and Responsibilities........................54
SECTION 8.02. Notice of Defaults or Events of Default....................55
SECTION 8.03. Certain Rights of Trustee..................................56
SECTION 8.04. May Hold Notes.............................................57
SECTION 8.05. Money Held in Trust........................................57
SECTION 8.06. Compensation, Reimbursement, etc...........................57
SECTION 8.07. Corporate Trustee Required; Eligibility....................58
SECTION 8.08. Resignation and Removal; Appointment of Successor..........58
ii
<PAGE>
SECTION 8.09. Acceptance of Appointment by Successor.....................59
SECTION 8.10. Merger, Conversion, Consolidation or
Succession to Business.....................................60
SECTION 8.11. Co-Trustees and Separate Trustees..........................60
SECTION 8.12. Acceptance by Trustee......................................61
SECTION 8.13. Preferential Collection of Claims Against the Issuer.......62
SECTION 8.14. Reports by Trustee to Noteholders..........................62
SECTION 8.15. No Proceedings.............................................62
SECTION 8.16. Appointment and Powers.....................................62
SECTION 8.17. Performance of Duties......................................63
SECTION 8.18. Control by the Insurer.....................................63
ARTICLE IX COVENANTS..........................................................63
SECTION 9.01. Payment of Principal and Interest..........................63
SECTION 9.02. Maintenance of Office or Agency; Chief Executive
Office.....................................................63
SECTION 9.03. Money for Payments to Noteholders to be Held in Trust......64
SECTION 9.04. Corporate Existence; Merger; Consolidation, etc............65
SECTION 9.05. Protection of Asset Pool; Further Assurances...............65
SECTION 9.06. [Reserved].................................................66
SECTION 9.07. Performance of Obligations; Assignment and Servicing
Agreement..................................................66
SECTION 9.08. Negative Covenants.........................................66
SECTION 9.09. Information as to Issuer...................................67
SECTION 9.10. Taxes......................................................67
SECTION 9.11. Indemnification............................................68
SECTION 9.12. Commission Reports; Reports to Trustee; Reports to
Noteholders................................................68
ARTICLE X SUPPLEMENTAL INDENTURES.............................................69
SECTION 10.01. Supplemental Indentures Without Consent of
Noteholders................................................69
SECTION 10.02. Supplemental Indentures with Consent of Noteholders........70
SECTION 10.03. Execution of Supplemental Indentures.......................71
SECTION 10.04. Effect of Supplemental Indentures..........................71
SECTION 10.05. Reference in Notes to Supplemental Indentures..............71
SECTION 10.06. Compliance with Trust Indenture Act........................71
ARTICLE XI SATISFACTION AND DISCHARGE.........................................71
SECTION 11.01. Satisfaction and Discharge of Indenture....................71
SECTION 11.02. Application of Trust Money.................................72
ARTICLE XII MISCELLANEOUS.....................................................73
SECTION 12.01. Trust Indenture Act Controls...............................73
SECTION 12.02. Communication by Noteholders with Other Noteholders........73
SECTION 12.03. Location of Leases.........................................73
iii
<PAGE>
SECTION 12.04. Officers' Certificate and Opinion of Counsel
as to Conditions Precedent.................................73
SECTION 12.05. Statements Required in Certificate or Opinion..............73
SECTION 12.06. Nonpetition................................................74
SCHEDULES
SCHEDULE 1 Leases
EXHIBITS
EXHIBIT A Forms of Notes and Trustee's Certificate of
Authentication
iv
<PAGE>
INDENTURE
This INDENTURE dated as of October 1, 1999, is among IKON RECEIVABLES,
LLC, a Delaware limited liability company (herein called the "Issuer"), HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation, as trustee (herein
called the "Trustee"), and IOS CAPITAL, INC., as servicer (herein called the
"Servicer").
RECITALS
The Issuer has duly authorized the issuance of $699,595,000 in
aggregate principal amount of its Lease-Backed Notes, consisting of $235,326,000
aggregate principal amount of 6.14125% Class A-1 Lease-Backed Notes (the "Class
A-1 Notes"), $51,100,000 aggregate principal amount of 6.31% Class A-2 Lease-
Backed Notes (the "Class A-2 Notes"), $100,000,000 aggregate principal amount of
6.59% Class A-3a Lease-Backed Notes (the "Class A-3a Notes"), $240,891,000
aggregate principal amount of Class A-3b Lease-Backed Notes (the "Class A-3b
Notes") and $72,278,000 aggregate principal amount of 6.88% 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-3a Notes, Class A-3b, the "Notes"), and to provide
therefor the Issuer has duly authorized the execution and delivery of this
Indenture. The Notes shall be entitled to payments of interest and principal as
set forth herein.
Ambac Assurance Corporation, a Wisconsin stock insurance company (the
"Insurer"), has issued and delivered a financial guaranty insurance policy,
dated the Issuance Date (with endorsements, the "Policy"), pursuant to which the
Insurer guarantees Insured Payments, as defined in the Policy. The Insurer has
also issued and delivered the Swap Insurance Policy (as defined herein).
As an inducement to the Insurer to issue and deliver the Policy and
the Swap Insurance Policy, the Issuer and the Insurer have executed and
delivered the Insurance and Indemnity Agreement, dated as of October 7, 1999 (as
amended from time to time, the "Insurance Agreement") among IOS Capital, Inc.,
IKON Receivables-1, LLC, the Issuer and the Insurer.
As an additional inducement to the Insurer to issue the Policy and the
Swap Insurance Policy, and as security for the performance by the Issuer of the
Insurer Secured Obligations (as defined below) and as security for the
performance by the Issuer of the Trustee Secured Obligations, the Issuer has
agreed to assign the Asset Pool (as defined below) to the Trustee for the
benefit of the Issuer Secured Parties, as their respective interests may appear.
<PAGE>
All things necessary to make the Notes, when executed by the Issuer
and authenticated and delivered hereunder, the valid obligations of the Issuer,
and to make this Indenture a valid agreement of the Issuer, in accordance with
its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the holders thereof, it is mutually covenanted and agreed, for the benefit of
all Noteholders, as follows:
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee on the Issuance Date, for the
benefit and security of the Issuer Secured Parties, all of the Issuer's right,
title and interest in and to (a) the Leases and all Lease Payments, Casualty
Payments, Retainable Deposits, Lease Purchase Amounts, Termination Payments,
Servicer Advances and other amounts now due or becoming due with respect thereto
since the Cut-Off Date (other than any prepayments of rent required pursuant to
the terms of any Lease at or before the commencement of the Lease and any
payments due before the Cut-Off Date) and all Additional Leases and Substitute
Leases and all Lease Payments, Casualty Payments, Retainable Deposits, Lease
Purchase Amounts, Termination Payments, Servicer Advances and other amounts due
or becoming due with respect thereto since the effective date of their
respective addition or substitution (other than any prepayments of rent required
by the terms of any Lease at or before the commencement of the Lease and any
payments due before the effective date of such addition or substitution), (b)
all rights to payment or performance under any Lease Guaranty, (c) all rights
and interests of the Issuer in any collateral with respect to any Lease,
including any security deposit (whether or not they shall have become Retainable
Deposits) and any security interest in any Equipment securing the obligations of
the related Lessees under the Leases, (d) all interests of the Issuer in the
Equipment (which, however, excludes any ownership interests therein) at any time
subject to any Lease, including the security interest granted by the Seller to
the Issuer pursuant to the Assignment and Servicing Agreement in the Equipment,
(e) all rights, remedies, claims, powers and privileges of the Issuer under or
with respect to the Swap and the Swap Documents, (f) all moneys from time to
time on deposit in any of the Transaction Accounts, including all investments
and income from the investment of such moneys, (g) all rights of the Issuer
under the Assignment and Servicing Agreement, and (h) all proceeds of any of the
foregoing, whether in cash or other property (collectively, the "Asset Pool").
Such Grant is made in trust to the Trustee, for the benefit of the
Issuer Secured Parties.
The Grant of the Asset Pool effected by this Indenture shall include
all rights, powers, and options (but none of the obligations) of the Issuer with
respect thereto, including, without limitation, the immediate and continuing
right to claim for, collect, receive, and give receipts for Lease Payments in
respect of the Leases and all other moneys constituting part of the Asset Pool,
to give and receive notices and other
2
<PAGE>
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 under the Leases or with respect to any part of the Asset Pool.
In addition, the Insurer shall cause the Policy to be issued to the
Trustee for the benefit of the Noteholders and shall cause the Swap Insurance
Policy to be issued.
The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof, and agrees to perform the duties herein
required to the best of its ability and to the end that the interests of the
Noteholders and the Insurer may be adequately and effectively protected as
hereinafter provided.
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01. General Definitions.
-------------------
Except as otherwise specified or as the context may otherwise require,
the following terms have the meanings set forth below for all purposes of this
Indenture, and the definitions of such terms are applicable to the singular as
well as to the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms.
Acceleration Event: if: (i) a Servicer Event of Default has occurred
------------------
(regardless of whether the rights and obligations of the Servicer have been
terminated pursuant to Section 6.01); (ii) with respect to any Payment Date, the
Overcollateralization Balance is less than or equal to the
Overcollateralization Floor; (iii) for any three consecutive Due Periods, the
average of the Annualized Default Rates for those Due Periods is greater than
6.25%,; or (iv) for any three consecutive Due Periods, the average of the
Delinquency Rates for those Due Periods is greater than 8.0%.
Act: with respect to any Noteholder, as defined in Section 1.04.
---
Additional Lease: as defined in Section 14 of the Assignment and
----------------
Servicing Agreement.
Additional Principal: with respect to each Payment Date equals the
--------------------
excess, if any, of (i)(A) the Outstanding Principal Amount of the Notes plus the
Overcollateralization Balance as of the immediately preceding Payment Date after
giving effect to payments on such Payment Date minus (B) the Discounted Present
Value of the Performing Leases as of the related Determination Date, over (ii)
the Class A Principal Payment to be paid on such Payment Date.
Affiliate: with respect to any specified Person, any other Person
---------
which directly or indirectly controls, or is controlled by, or is under common
control with, such specified Person. The term "control" means the possession,
directly or indirectly, of the
3
<PAGE>
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
Annualized Default Rate: for any Due Period, the sum as of the related
-----------------------
Determination Date of the Discounted Present Value of the Leases that became
Non-Performing Leases during such Due Period minus the sum of the recoveries on
Non-Performing Leases received during such Due Period, divided by the Discounted
Present Value of the Leases on the Determination Date immediately preceding that
Determination Date, multiplied by twelve
Assignment and Servicing Agreement: the Assignment and Servicing
----------------------------------
Agreement dated as of October 1, 1999 among the Issuer, the Seller and IOS
Capital, as the same may be amended or modified from time to time in accordance
with the provisions hereof and thereof.
Authorized Officer: with respect to any matter, any officer of or
------------------
other Person representing the Issuer, IOS Capital or the Servicer, as the case
may be, who is authorized to act for the Issuer, IOS Capital or the Servicer, as
the case may be.
Available Funds: with respect to any Payment Date, the following
---------------
amounts on deposit in the Collection Account on the related Determination Date:
(a) Lease Payments due during the immediately preceding or any prior Due Period,
(b) recoveries from Non-Performing Leases (including amounts received from the
Seller pursuant to Section 5.05 of the Assignment and Servicing Agreement) to
the extent IOS Capital has not substituted Substitute Leases for such Non-
Performing Leases; (c) late charges received on delinquent Lease Payments not
advanced by the Servicer; (d) proceeds from purchases by IOS Capital of Leases
as a result of breaches of representations and warranties to the extent IOS
Capital has not substituted Substitute Leases for such Leases; (e) proceeds from
the investment of funds in the Collection Account, the Reserve Account and the
Security Deposit Account; (f) Casualty Payments; (g) Retainable Deposits; (h)
Servicer Advances, if any, in respect of the related Due Period; (i) any amounts
paid by the Counterparty to the Issuer pursuant to the Swap Documents; (j)
Termination Payments to the extent the Issuer does not reinvest such Termination
Payments in Additional Leases; (k) proceeds received for redemption of the Notes
pursuant to Section 2.01(b); (l) payments received from the Insurer pursuant to
Section 3.07; and (m) to the extent there occurs an Available Funds Shortfall,
funds, if any, on deposit in the Reserve Account after making any distribution
in respect of such Payment Date from the Reserve Account to the Collection
Account on account of investment earnings pursuant to the first sentence of
Section 3.04(b).
Available Funds Shortfall: as defined in Section 3.04(b).
-------------------------
Available Reserve Amount: with respect to any Payment Date, the
------------------------
amount on deposit in the Reserve Account after making any distribution in
respect of such Payment Date from the Reserve Account to the Collection Account
on account of investment earnings pursuant to the first sentence of Section
3.04(b).
Benefit Plan: as defined in Section 2.03(a).
------------
4
<PAGE>
Book-Entry Class A-1 Notes: the Class A-1 Notes, evidenced by one or
--------------------------
more global notes registered in the name of DTC or its nominee, the ownership
and transfers of which shall be made through book entries by DTC as described in
Section 2.05.
Book-Entry Class A-2 Notes: the Class A-2 Notes, evidenced by one or
--------------------------
more global notes registered in the name of DTC or its nominee, the ownership
and transfers of which shall be made through book entries by DTC as described in
Section 2.05.
Book-Entry Class A-3a Notes: the Class A-3a Notes, evidenced by one
---------------------------
or more global notes registered in the name of DTC or its nominee, the ownership
and transfers of which shall be made through book entries by DTC as described in
Section 2.05.
Book-Entry Class A-3b Notes: the Class A-3b Notes, evidenced by one
---------------------------
or more global notes registered in the name of DTC or its nominee, the ownership
and transfers of which shall be made through book entries by DTC as described in
Section 2.05.
Book-Entry Class A-4 Notes: the Class A-4 Notes, evidenced by one or
--------------------------
more global notes registered in the name of DTC or its nominee, the ownership
and transfers of which shall be made through book entries by DTC as described in
Section 2.05.
Book-Entry Note: any Book-Entry Class A-1 Note, Book-Entry Class A-2
---------------
Note, Book-Entry Class A-3a, Book-Entry Class A-3b Note or Book-Entry Class A-4
Note.
Business Day: any day that is not a Saturday, Sunday or other day on
------------
which commercial banking institutions in the cities in which the Corporate Trust
Office and the principal offices of the Insurer and the Servicer are located are
authorized or obligated by law or executive order to remain closed.
Casualty Payment: any payment pursuant to a Lease on account of the
----------------
loss, theft, condemnation, governmental taking, destruction, or damage beyond
repair of any item of Equipment subject thereto which results, in accordance
with the terms of the Lease, in a reduction in the number or amount of any
future Lease Payments due thereunder or in the termination of the Lessee's
obligation to make future Lease Payments thereunder.
Cede & Co.: the initial registered holder of the Class A Notes,
----------
acting as nominee of The Depository Trust Company.
Cedel: CEDEL S.A.
-----
Class A Notes: as defined in the Recitals hereto.
-------------
Class A Percentage: 85.65812%.
------------------
5
<PAGE>
Class A Principal Payment: (a) while the Class A-1 Notes are
-------------------------
outstanding, (i) on all Payment Dates prior to the Payment Date in October 2002,
the lesser of (1) the amount necessary to reduce the Outstanding Principal
Amount on the Class A-1 Notes to zero and (2) the difference between (A) the
Discounted Present Value of the Performing Leases as of the Determination Date
for the preceding Payment Date and (B) the Discounted Present Value of the
Performing Leases as of the related Determination Date, and (ii) on and after
the Payment Date in October 2000, the entire Outstanding Principal Amount of the
Class A-1 Notes, and (b) after the Class A-1 Notes have been paid in full, the
amount necessary to reduce the aggregate Outstanding Principal Amount on the
Class A Notes to the Class A Target Investor Principal Amount.
Class A Target Investor Principal Amount: with respect to each
----------------------------------------
Payment Date, an amount equal to the product of (a) the Class A Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
Class A-1 Initial Principal Amount: $235,326,000.
----------------------------------
Class A-1 Note Interest Rate: the rate at which interest accrues on
----------------------------
the Class A-1 Notes, which rate shall be equal to 6.14125% per annum.
Class A-1 Note Owner: with respect to a Book-Entry Class A-1 Note,
--------------------
the Person who is the beneficial owner of such Book-Entry Class A-1 Note, as
reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly or as an indirect participant, in accordance with the
rules of DTC).
Class A-1 Noteholder: Cede & Co. or a holder of a Definitive Class
--------------------
A-1 Note.
Class A-1 Notes: as defined in the Recitals hereto.
---------------
Class A-2 Initial Principal Amount: $51,100,000.
----------------------------------
Class A-2 Note Interest Rate: the rate at which interest accrues on
----------------------------
the Class A-2 Notes, which rate shall be equal to 6.31% per annum.
Class A-2 Note Owner: with respect to a Book-Entry Class A-2 Note,
--------------------
the Person who is the beneficial owner of such Book-Entry Class A-2 Note, as
reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly or as an indirect participant, in accordance with the
rules of DTC).
Class A-2 Noteholder: Cede & Co. or a holder of a Definitive Class
--------------------
A-2 Note.
Class A-2 Notes: as defined in the Recitals hereto.
---------------
Class A-3a Initial Principal Amount: $100,000,000.
-----------------------------------
Class A-3b Initial Principal Amount: $240,891,000.
-----------------------------------
6
<PAGE>
Class A-3a Note Interest Rate: the rate at which interest accrues on
-----------------------------
the Class A-3a Notes, which rate shall be equal to 6.59% per annum.
Class A-3b Note Interest Rate: the rate at which interest accrues on
-----------------------------
the Class A-3b Notes, which rate shall be equal to LIBOR plus .36%.
Class A-3a Note Owner: with respect to a Book-Entry Class A-3a Note,
---------------------
the Person who is the beneficial owner of such Book-Entry Class A-3a Note, as
reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly or as an indirect participant, in accordance with the
rules of DTC).
Class A-3b Note Owner: with respect to a Book-Entry Class A-3b Note,
---------------------
the Person who is the beneficial owner of such Book-Entry Class A-3b Note, as
reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly or as an indirect participant, in accordance with the
rules of DTC).
Class A-3a Noteholder: Cede & Co. or a holder of a Definitive Class
---------------------
A-3a Note.
Class A-3b Noteholder: Cede & Co. or a holder of a Definitive Class
---------------------
A-3b Note.
Class A-3a Notes: as defined in the Recitals hereto.
----------------
Class A-3b Notes: as defined in the Recitals hereto.
----------------
Class A-4 Initial Principal Amount: $72,278,000.
----------------------------------
Class A-4 Note Interest Rate: the rate at which interest accrues on
----------------------------
the Class A-4 Notes, which rate shall be equal to 6.88% per annum.
Class A-4 Note Owner: with respect to a Book-Entry Class A-4 Note,
--------------------
the Person who is the beneficial owner of such Book-Entry Class A-4 Note, as
reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly or as an indirect participant, in accordance with the
rules of DTC).
Class A-4 Noteholder: Cede & Co. or a holder of a Definitive Class A-
--------------------
4 Note.
Class A-4 Notes: as defined in the Recitals hereto.
---------------
Clearing Agency: an organization registered as a "clearing agency"
---------------
pursuant to Section 17A of the Exchange Act, or any successor provision thereof.
The initial Clearing Agency shall be DTC.
Clearing Agency Participant: a broker, dealer, bank, other financial
---------------------------
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
7
<PAGE>
Code: as defined in Section 2.03(a).
----
Collection Account: the account or accounts by that name established
------------------
and maintained by the Trustee pursuant to Section 3.01(a).
Commission: the Securities and Exchange Commission.
----------
Corporate Trust Office: the principal corporate trust office of the
----------------------
Trustee located at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Indenture Trust Administration, or at such other address as the
Trustee may designate from time to time by notice to the Noteholders, the
Insurer, the Issuer and the Servicer.
Counterparty: Lehman Brothers Financial Products Inc., a Delaware
------------
corporation, or its permitted successors or assigns under the Swap Documents.
Cumulative Loss Amount: with respect to each Payment Date, an amount
----------------------
equal to the excess, if any, of (a) the total of (i) the Outstanding Principal
Amount of the Notes as of the immediately preceding Payment Date after giving
effect to all principal payments made on that day, plus (ii) the
Overcollateralization Balance as of the immediately preceding Payment Date,
minus (iii) the lesser of (A) the Discounted Present Value of the Performing
Leases as of the Determination Date relating to the immediately preceding
Payment Date minus the Discounted Present Value of the Performing Leases as of
the related Determination Date and (B) Available Funds remaining after the
payment of the Insurer Premium, amounts owing the Servicer, Interest Payments
and Reimbursement Amounts on such Payment Date, over (b) the Discounted Present
Value of the Performing Leases as of the related Determination Date.
Cut-Off Date: the opening of business on September 1, 1999.
------------
Default: any occurrence that is, or with notice or the lapse of time
-------
or both would become, an Event of Default.
Deficiency Amount: (a) for any Payment Date, any shortfall in the sum
-----------------
of Available Funds (excluding amounts in the Reserve Account) plus amounts on
deposit in the Reserve Account to pay the related Interest Payments due on such
Payment Date, (b) on the Payment Date in October, 2000, any shortfall in the sum
of Available Funds (excluding amounts in the Reserve Account) plus amounts on
deposit in the Reserve Account to pay the Outstanding Principal Amount of Class
A-1 Notes, (c) on the Payment Date in May, 2001, any shortfall in the sum of
Available Funds (excluding amounts in the Reserve Account) plus amounts on
deposit in the Reserve Account to pay the Outstanding Principal Amount of the
Class A-2 Notes, (d) on the Payment Date in August, 2003, any shortfall in the
sum of Available Funds (excluding amounts in the Reserve Account) plus amounts
on deposit in the Reserve Account to pay, on a prorata basis, the Outstanding
Principal Amount of the Class A-3a Notes and the Class A-3b Notes and (e) on the
Payment Date in November, 2005, any shortfall in the sum of Available Funds
(excluding amounts in the Reserve Account) plus amounts on deposit in the
Reserve Account to pay the Outstanding Principal Amount of the Class A-4 Notes
(in each case after taking into account all payments to be made on such Payment
Date,
8
<PAGE>
including payments resulting from the application of funds in accordance
with Section 3.07).
Definitive Note: a definitive, fully registered Note issued pursuant
---------------
to Section 2.07.
Delinquency Rate: for any Due Period, the sum as of the related
----------------
Determination Date of the Discounted Present Value of the Leases that are 61 or
more days delinquent, as of such Determination Date, divided by the Discounted
Present Value of the Leases on that Determination Date.
Delinquent Lease: as of any Determination Date, any Lease (other than
----------------
a Lease which became a Non-Performing Lease prior to such Determination Date)
with respect to which the Lessee has not paid all Lease Payments then due.
Depository Agreement: the letter of representations, between the
--------------------
Issuer and the Depository Trust Company, as Clearing Agency.
Determination Date: with respect to any Payment Date, the fifth
------------------
Business Day immediately preceding such Payment Date.
Discount Rate: with respect to any Determination Date, 7.792%.
-------------
Discounted Present Value: with respect to any Lease as of any date,
------------------------
an amount equal to the net present value of all remaining scheduled Lease
Payments, determined by discounting each such Lease Payment on a monthly basis
(assuming a calendar year consisting of twelve 30-day months), at a rate equal
to the Discount Rate, to the last day of the Due Period prior to the relevant
calculation date. In determining the Discounted Present Value of any Lease on
any date, it will be assumed that Lease Payments are due on the last day of the
calendar month immediately preceding the relevant calculation date and the
future remaining Lease Payments will be calculated after giving effect to any
payments received prior to the date of calculation to the extent such payments
relate to Lease Payments due and payable by the Lessee with respect to the
related Due Period and any prior Due Period.
Discounted Present Value of the Delinquent Leases: with respect to any
-------------------------------------------------
Payment Date or Determination Date, the Discounted Present Value of the Leases
that are Delinquent Leases and as to which a Lease Payment, or any portion
thereof, was 61 or more days overdue as of the last day of the Due Period
immediately preceding such Payment Date or Determination Date.
Discounted Present Value of the Performing Leases: the Discounted
-------------------------------------------------
Present Value of the Leases, reduced by the discounted present value of all
future remaining scheduled Lease Payments on the Non-Performing Leases,
discounted at the Discount Rate and otherwise determined in accordance with the
definition of "Discounted Present Value".
DTC: the Depository Trust Company.
---
9
<PAGE>
Due Period: with respect to any Payment Date and the Determination
----------
Date with respect thereto, the period beginning on the first day and ending on
the last day of the calendar month prior to the month in which such Payment Date
and such Determination Date occur.
Eligible Account: either (a) an account maintained with a depository
----------------
institution or trust company acceptable to each of the Rating Agencies and (so
long as no Insurer Default has occurred and is continuing) the Insurer or (b) a
trust account or similar account acceptable to each of the Rating Agencies
maintained with a federal or state chartered depository institution, which may
be an account maintained with the Trustee.
Eligible Investments: any one or more of the following obligations or
--------------------
securities:
(a) direct non-callable obligations of, and non-callable obligations
fully guaranteed by, the United States of America, or any agency or
instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America;
(b) demand and time deposits in, certificates of deposits of, and
bankers' acceptances issued by, any depository institution or company
(including the Trustee acting in its commercial capacity) incorporated
under the laws of the United States of America or any state thereof, having
a combined capital and surplus of at least $100,000,000, and subject to
supervision and examination by federal and/or state banking authorities, so
long as at the time of such investment or contractual commitment providing
for such investment the commercial paper or other short-term debt
obligations of such depository institution or company (or, in the case of a
depository institution that is the principal subsidiary of a holding
company, the commercial paper or other short-term debt obligations of such
holding company) have the highest short-term credit ratings available from
Moody's and S&P;
(c) purchase obligations with respect to and collateralized by (i) any
security described in clause (a) above or (ii) any other security issued or
guaranteed by an agency or instrumentality of the United States of America,
in each case entered into with a depository institution or company (acting
as principal) of the type described in clause (b) above; provided that the
--------
Trustee has taken delivery of such security;
(d) commercial paper (including both non-interest bearing discount
obligations and interest-bearing obligations) payable on demand or on a
specified date not more than 270 days after the date of issuance thereof
having the highest short-term credit ratings from Moody's and S&P at the
time of such investment;
(e) money market funds that redeem their shares on demand, invest only
in other Eligible Investments, and are rated Aaa by Moody's and AAAm or
10
<PAGE>
AAAm-G by S&P (including funds for which the Trustee or any of its
affiliates is investment manager or advisor);
(f) demand notes payable on demand issued by an institution rated A2
by Moody's and A-1+ by S&P at the time of such investment;
(g) funding agreements or guaranteed investment contracts provided by
issuers rated Aaa or P-1 by Moody's and A-1+ by S&P which provide, by their
terms, for receipt by the Trustee on or prior to the next Payment Date of a
predetermined fixed dollar amount which cannot vary or change; and
(h) such other investments as may be approved by the Rating Agencies
and, so long as no Insurer Default has occurred and is continuing, the
Insurer.
Equipment: each item of personal property, together with any
---------
replacement parts, additions, and repairs thereto, any replacements thereof, and
any accessories incorporated therein and/or affixed thereto, subject to a Lease
or, following expiration or termination of the Lease to which the same was
previously subject, remaining subject to the security interest granted by the
Seller to the Issuer pursuant to Section 1.02(b) of the Assignment and Servicing
Agreement.
ERISA: the Employee Retirement Income Security Act of 1974, as
-----
amended.
Euroclear: the Euroclear System.
---------
Event of Default: as defined in Section 7.01.
----------------
Exchange Act: the Securities Exchange Act of 1934, as amended.
------------
Excess Copy Charge: with respect to any Lease, means the amount owing
------------------
by such Lessee under such Lease reflecting usage of the related Equipment in
excess of a specified copy amount per month.
Financing Statement: as defined in Section 14 of the Assignment and
-------------------
Servicing Agreement.
Governmental Authority: Any court or federal or state regulatory body,
----------------------
administrative agency or other tribunal or other governmental instrumentality.
Grant: grant, bargain, sell, convey, assign, transfer, mortgage,
-----
pledge, create and grant a security interest in and right of set-off against,
deposit, set over and confirm.
Holder: a holder of a Note.
------
Indemnified Party: as defined in Section 9.11.
-----------------
11
<PAGE>
Indenture: this instrument as originally executed and as from time to
---------
time supplemented or amended pursuant to the applicable provisions hereof.
Initial Payment Date: November 15, 1999.
--------------------
Insurance Agreement: as defined in the Recitals hereto.
-------------------
Insured Payments: as defined in the Policy and any payments made by
----------------
the Insurer under the Swap Insurance Policy.
Insurer: as defined in the Recitals hereto.
-------
Insurer Default: the failure by the Insurer to make a payment
---------------
required under the Policy in accordance with the terms thereof.
Insurer Premium: any monthly premium fees due and payable to the
---------------
Insurer pursuant to the Insurance Agreement.
Insurer Secured Obligations: all amounts and obligations which may at
---------------------------
any time be owed to or on behalf of the Insurer (or any agents, accountants or
attorneys for the Insurer) under this Indenture, the Insurance Agreement or any
other Transaction Document.
Interest Accrual Period: means, with respect to the Class A-3b Notes,
-----------------------
the period beginning on, and including, October 7, 1999 and ending on, but
excluding, the first Payment Date and each subsequent period beginning on, and
including, the last day of the Preceding Interest Accrual Period and ending on,
but excluding, the next following Interest Accrual Period.
Interest Payments: as defined in Section 2.01(c).
-----------------
IOS Capital: IOS Capital, Inc., a Delaware corporation.
-----------
Issuance Date: October 7, 1999.
-------------
Issuer: the Person named as the "Issuer" in the first paragraph of
------
this instrument.
Issuer Order or Issuer Request: a written order or request delivered
------------------------------
to the Trustee and signed in the name of the Issuer by an Authorized Officer.
Issuer Secured Parties: each of the Trustee, in respect of the
----------------------
Trustee Secured Obligations, and the Insurer, in respect of the Insurer Secured
Obligations.
Late Payment Rate: as defined in the Policy.
-----------------
Lease: collectively, (i) each lease agreement, conditional sale
-----
contract and other agreement creating a contractual obligations to which the
Originator is a party, to the extent that such lease agreement, conditional sale
contract or other agreement is described in Exhibit A to the Assignment and
Servicing Agreement (as such Exhibit A
12
<PAGE>
may be amended from time to time in accordance with the Assignment and Servicing
Agreement), including, without limitations, each Additional Lease and Substitute
Lease; (ii) each schedule or supplement to each such lease agreement,
conditional sale contract or other agreement (and each master lease agreement
insofar as it relates to any such schedule or supplement); and (iii) any and all
amendments or modifications from time to time to each such lease agreement,
conditional sale contract or other agreement, or to any schedule or supplement,
in accordance with the Assignment and Servicing Agreement.
Lease Delinquency Payment: any payment made with respect to a Lease
-------------------------
in an amount equal to all or part of any specific Lease Payment due with respect
to such Lease (a) by the Servicer pursuant to Section 5.01 of the Assignment and
Servicing Agreement, (b) by a transfer from the Reserve Account pursuant to
Section 3.04, or (c) by the Issuer in its sole discretion.
Lease Guaranty: with respect to any Lease, any guaranty of payment or
--------------
performance of the whole or any part of the liabilities or obligations of the
Lessee under such Lease.
Lease Payment: the equipment financing portion of each fixed
-------------
periodic rental payment payable by a Lessee under a Lease. Casualty Payments,
Retainable Deposits, Termination Payments, prepayments of rent required pursuant
to the terms of a Lease, payments becoming due before the Cut-Off Date and
supplemental or additional payments required by the terms of a Lease with
respect to taxes, insurance, maintenance (including, without limitation, any
Maintenance Charges), security deposits or other specific charges (including,
without limitation, any Excess Copy Charges) shall not be Lease Payments
hereunder and, in calculating the Discounted Present Value of the Leases and the
Discounted Present Value of the Performing Leases, the amount thereof shall not
be included.
Lease Purchase Amount: at any date of determination with respect to
---------------------
any Lease, means the sum of (i) the Discounted Present Value of the Lease as of
the beginning of the Due Period relating to such date of determination (plus any
amounts previously due and unpaid) and (ii) the product of (x) the amount
described in the foregoing clause (i) and (y) one-twelfth of the Discount Rate.
Lessee: with respect to any Lease, the lessee thereunder.
------
LIBOR: the London interbank offered rate for one-month Eurodollar
-----
deposits appearing on the Telerate Screen Page 3750.
LIBOR Business Day: any day other than (i) a Saturday or a Sunday or
------------------
(ii) a day on which banking institutions in the State of New York or in the city
of London, England are required or authorized by law to be closed.
Lien: as defined in Section 14 of the Assignment and Servicing
----
Agreement.
13
<PAGE>
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.
-------
Non-Performing Lease: as of any Determination Date, any Lease with
--------------------
respect to which at any time following the Cut-Off Date or related Transfer
Date, as the case may be, either (a) a Lease Payment, or any portion thereof,
was 121 or more days overdue as of the last day of the Due Period with respect
to such Determination Date, unless on or before such Determination Date such
Lease Payment (or portion thereof) has been paid or (b) the Servicer has
accelerated the remaining payments or (c) the Servicer has determined such Lease
to be uncollectible in accordance with the Servicer's customary practices prior
to the last day of the Due Period with respect to such Determination Date.
Noteholder: at any time, any Person in whose name a Note is
----------
registered in the Note Register.
Note Interest Rate: the Class A-1 Note Interest Rate, the Class A-2
------------------
Note Interest Rate, the Class A-3a Note Interest Rate, the Class A-3b Note
Interest Rate or the Class A-4 Note Interest Rate, as the case may be.
Note Owner: the beneficial owner of a Note issued hereunder.
----------
Note Register: as defined in Section 2.03(a).
-------------
Note Registrar: as defined in Section 2.03(a)
--------------
Notes: any notes authorized by, and authenticated and delivered
-----
under, this Indenture.
Notice of Claim: as defined in the Policy.
---------------
Officers' Certificate: with respect to the Issuer, the Seller or the
---------------------
Servicer, a certificate signed by the Chairman, the President or a Vice
President of the Issuer, the Seller or the Servicer, as the case may be, and by
another Vice President, the Treasurer, and Assistant Treasurer, the Secretary,
or an Assistant Secretary of the Issuer, the Seller or the Servicer, as the case
may be, who is not the same Person as the other officer signing such
certificate.
Opinion of Counsel: a written opinion, which shall be satisfactory in
------------------
form and substance to the Trustee and the Insurer, of counsel who may, except as
otherwise expressly provided in this Indenture, be inside or outside counsel for
the Issuer and who shall be satisfactory to the Trustee and the Insurer.
14
<PAGE>
Other Lease Payments: all payments on or in respect of Leases which
--------------------
are not Lease Payments, Lease Delinquency Payments, Casualty Payments,
Retainable Deposits or Termination Payments, including Maintenance Charges and
Excess Copy Charges.
Outstanding: with respect to the Notes, as of any date of
-----------
determination, all Notes theretofore authenticated and delivered under this
Indenture except:
(a) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes or portions thereof for whose payment money in the necessary
amount has been theretofore irrevocably deposited with the Trustee in trust
for the holders of such Notes; and
(c) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by a
Person in whose hands the Note is a valid obligation;
provided, however, that Notes which have been paid with proceeds of the Policy
- -------- -------
shall continue to remain Outstanding for purposes of this Indenture until the
Insurer has been paid as subrogee hereunder or reimbursed as to such payment
pursuant to the Insurance Agreement as evidenced by a written notice from the
Insurer delivered to the Trustee, and the Insurer shall be deemed to be the
Holder thereof to the extent of any payments thereon made by the Insurer and,
provided further, that in determining whether the holders of the requisite
- -------- -------
percentage of the Outstanding Principal Amount of the Notes have given any
request, demand, authorization, direction, notice, consent, or waiver hereunder,
Notes owned by the Issuer or any Affiliate of the Issuer shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, or waiver, only Notes that a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Notes so owned by the Issuer or any Affiliate of the Issuer that
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Issuer, any other
obligor upon the Notes, IOS Capital, the Seller or any Affiliate of any of the
foregoing Persons.
Outstanding Class A Principal Amount: The aggregate principal amount
------------------------------------
of the Class A Notes Outstanding at any time.
Outstanding Class A-1 Principal Amount: the aggregate principal
--------------------------------------
amount of the Class A-1 Notes Outstanding at any time.
Outstanding Class A-2 Principal Amount: the aggregate principal
--------------------------------------
amount of the Class A-2 Notes Outstanding at any time.
Outstanding Class A-3a Principal Amount: the aggregate principal
---------------------------------------
amount of the Class A-3a Notes Outstanding at any time.
15
<PAGE>
Outstanding Class A-3b Principal Amount: the aggregate principal
---------------------------------------
amount of the Class A-3b 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 Principal Amount: the aggregate unpaid principal amount
----------------------------
of the Notes Outstanding at any time.
Overcollateralization Balance: with respect to each Payment Date is
-----------------------------
an amount equal to the excess, if any, of (a) the Discounted Present Value of
Performing Leases as of the related Determination Date over (b) the Outstanding
Principal Amount of the Notes as of such Payment Date after giving effect to all
principal payments made on that day.
Overcollateralization Floor: with respect to any Payment Date, (a)
---------------------------
2.5% of the Discounted Present Value of the Leases as of the Cut-Off Date, plus
(b) the Cumulative Loss Amount with respect to such Payment Date, minus (c) the
amount on deposit in the Reserve Account (after giving effect to withdrawals to
be made on account of such Payment Date).
Paying Agent: each agent of the Issuer appointed for the purpose of
------------
making payments on the Notes, including the Trustee.
Payment Date: the 15th day of each month (or the next Business Day
------------
thereafter if such day is not a Business Day), commencing on the Initial Payment
Date, and ending on the latest Stated Maturity.
Person: any individual, corporation, partnership, joint venture,
------
association, limited liability company, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
Policy: the financial guaranty insurance policy No. AB0306BE with
------
respect to the Notes, dated October 7, 1999, including any endorsements thereto,
issued by the Insurer to the Trustee for the benefit of the Noteholders.
Preference Amounts: as defined in the Policy.
------------------
Principal Payments: as defined in Section 2.01(b).
------------------
Preference Claim: as defined in Section 4.02(b).
----------------
Rating Agency: each of S&P and Moody's.
-------------
Record Date: with respect to any Payment Date, the last day of the
-----------
calendar month immediately preceding such Payment Date. The Record Date will be
the Issuance Date with respect to the first Payment Date.
16
<PAGE>
Reference Bank Rate: will be determined on the basis of the rates at
-------------------
which deposits in U.S. Dollars are offered by the reference banks (which shall
be three major banks that are engaged in transactions in the London interbank
market, selected by the Trustee) as of 11:00 A.M., London time, on the day that
is two LIBOR Business Days prior to the immediately preceding Payment Date to
prime banks in the London interbank market for a period of one month in amounts
approximately equal to the principal amount of the Class A-3b Notes then
outstanding. The Trustee will request the principal London office of each of
the reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the arithmetic mean of the quotations.
If on such date fewer than two quotations are provided as requested, the rate
will be the arithmetic mean of the rates quoted by one or more major banks in
New York City, selected by the Trustee, as of 11:00 A.M., New York City time, on
such date for loans in U.S. Dollars to leading European banks for a period of
one month in amounts approximately equal to the principal amount of the Class A-
3b Notes then outstanding. If no such quotations can be obtained, the rate will
be LIBOR for the prior Payment Date.
Reimbursement Amount: shall mean, as of any date, the sum of (x) (i)
--------------------
all Insured Payments paid by the Insurer, but for which the Insurer has not been
reimbursed prior to such date pursuant to Section 3.03(b) or 7.06 hereof, plus
----
(ii) interest accrued thereon, calculated at the Late Payment Rate from the date
the Trustee received the related Insured Payments, or the date such Insured
Payments were made, in the case of Insured Payments consisting of Preference
Amounts not made to the Trustee or in the case of Insured Payments made under
the Swap Insurance Policy, and (y) without duplication (i) any amounts then due
and owing to the Insurer under the Insurance Agreement plus (ii) interest on
----
such amounts at the Late Payment Rate from the date such amounts were due.
Required Deposit Date: as defined in Section 3.03(a).
---------------------
Required Payments: as defined in Section 3.04(b).
-----------------
Required Reserve Amount: as of any time, the lesser of (a) 1.00% of
-----------------------
the initial Discounted Present Value of the Leases as of the Cut-Off Date and
(b) the then Outstanding Principal Amount of the Notes.
Reserve Account: the account by that name established and maintained
---------------
by the Trustee pursuant to Section 3.01.
Responsible Officer: with respect to the Trustee, any officer
-------------------
assigned to the Corporate Trust Office of the Trustee, including any managing
director, vice president, assistant vice president, assistant treasurer,
assistant secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Indenture, and also,
with respect to a particular matter, any other officer, to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
17
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Retainable Deposits: any security or other similar deposit which the
-------------------
Servicer has determined in accordance with its customary servicing practices is
not refundable to the related Lessee.
S&P: Standard & Poor's Rating Services, a division of The McGraw-Hill
---
Companies Inc. and any successor thereto.
Securities Act: the Securities Act of 1933, as amended.
--------------
Security Deposit Account: the account by that name established and
------------------------
maintained by the Trustee pursuant to Section 3.01.
Seller: IKON Receivables-1, LLC, a Delaware limited liability
------
company.
Servicer: IOS Capital and any successor Servicer appointed pursuant
--------
to the terms hereof and of the Assignment and Servicing Agreement and, to the
extent that it at any time is performing the functions of the Servicer, the
Trustee, subject to the terms of Section 5.01 hereof.
Servicer Advance: as defined in Section 5.01 of the Assignment and
----------------
Servicing Agreement.
Servicer Event of Default: as defined in Section 10.01 of the
-------------------------
Assignment and Servicing Agreement.
Servicer Order: a written order or request delivered to the Trustee
--------------
and signed in the name of the Servicer by an Authorized Officer.
Servicing Fee: the Servicing Fee payable pursuant to the Assignment
-------------
and Servicing Agreement.
Servicing Report: as defined in Section 6.01(b) of the Assignment and
----------------
Servicing Agreement.
Stated Maturity: The stated maturity date with respect to the Class A-
---------------
1 Notes is the Payment Date in October 2000 (the "Class A-1 Stated Maturity
Date"), the stated maturity date with respect to the Class A-2 Notes is the
Payment Date in May 2001 (the "Class A-2 Stated Maturity Date"), the stated
maturity date with respect to the Class A-3a Notes is the Payment Date in August
2003 (the "Class A-3a Stated Maturity Date"), the stated maturity date with
respect to the Class A-3b Notes is the Payment Date in August 2003 (the "Class
A-3b Stated Maturity Date")and the stated maturity date with respect to the
Class A-4 Notes is the Payment Date in November 2005 (the "Class A-4 Stated
Maturity Date" and, together with the Class A-1 Stated Maturity Date, the Class
A-2 Stated Maturity Date, the Class A-3a Stated Maturity Date, the Class A-3b
Stated Maturity Date, the "Stated Maturity Dates").
Substitute Lease: as defined in Section 11.01(a) of the Assignment
----------------
and Servicing Agreement.
18
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Swap: that certain interest rate swap transaction governed by the
----
Swap Documents.
Swap Documents: The ISDA Master Agreement dated as of October 7, 1999
--------------
between the Issuer and the Swap Counterparty, including the schedule thereto and
confirmations thereunder, as the same may be amended from time to time as
permitted therein and herein, in each case to the extent relating to the Swap.
Swap Insurance Policy: the financial guaranty insurance policy No.
---------------------
SF0276BE dated October 7, 1999 with respect to the Issuer's obligations under
the Swap Documents, including any endorsements thereto, issued by the Insurer to
the Counterparty.
Telerate Screen Page 3750: means the display designated as page 3750
-------------------------
on the Telerate Service (or such other page as may replace page 3750 on that
service for the purpose of displaying London interbank offered rates of major
banks).
Termination Payment: a payment payable by a Lessee under a Lease upon
-------------------
the early termination of such Lease (but not on account of a casualty or a Lease
default) which may be agreed upon by the Servicer, acting in the name of the
Issuer, and the Lessee in accordance with the provisions of Section 5.02 of the
Assignment and Servicing Agreement.
Transaction Accounts: the Collection Account, the Reserve Account and
--------------------
the Security Deposit Account.
Transaction Documents: this Indenture, the Assignment and Servicing
---------------------
Agreement and the Insurance Agreement.
Transaction Payment Amount: for each Required Deposit Date, the
--------------------------
amount of all Lease Payments, Lease Delinquency Payments, Lease Purchase
Amounts, recoveries relating to Non-Performing Leases, Casualty Payments,
Retainable Deposits, Termination Payments and other payments on or in respect of
a Lease received by the Servicer required to be deposited in the Collection
Account pursuant to Section 3.03(a) and required to be reported by the Servicer
for such Required Deposit Date in accordance with Section 6.01(c) of the
Assignment and Servicing Agreement.
Transfer Date: With respect to any Substitute Lease or Additional
-------------
Lease, the date of transfer thereof to the Issuer pursuant to the Assignment and
Servicing Agreement.
Trustee: the Person named as the "Trustee" in the first paragraph of
-------
this instrument until a successor Person shall have become the Trustee pursuant
to the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean such successor Person; provided, that the provisions of Section 8.07 and
--------
Section 8.10, as applicable to any Person at any time serving as Trustee
hereunder, shall survive the termination of such Person's status as Trustee
hereunder and the succession of any other Person to such status.
19
<PAGE>
Trustee Secured Obligations: all amounts and obligations which the
---------------------------
Issuer or the Servicer, as the case may be, may at any time owe to or on behalf
of itself or of the Trustee for the benefit of the Noteholders under this
Indenture or the Notes.
Trust Indenture Act: the Trust Indenture Act of 1939 as in effect on
-------------------
the date on which this Indenture is qualified under the Trust Indenture Act,
except as provided in Section 10.06 or 12.01 hereof.
Underwriting Agreement: the Underwriting Agreement, among the Issuer,
----------------------
IOS Capital and the several underwriters named therein relating to the issuance
of the Notes.
Uniform Commercial Code: with respect to a particular jurisdiction,
-----------------------
the Uniform Commercial Code, as in effect from time to time in such
jurisdiction, or any successor statute thereto.
Warranty Lease: a Lease subject to purchase by IOS Capital as a
--------------
result of a breach of a representation or warranty in accordance with the
provisions of Section 5.04 of the Assignment and Servicing Agreement.
SECTION 1.02. Compliance Certificates and Opinions.
------------------------------------
Upon any written application or request (or oral application with
prompt written or telecopied confirmation) by the Issuer to the Trustee to take
any action under any provision of this Indenture, other than any request that
(a) the Trustee authenticate the Notes specified in such request, (b) the
Trustee invest moneys in any of the Transaction Accounts pursuant to the written
directions specified in such request, or (c) the Trustee pay moneys due and
payable to the Issuer hereunder to the Issuer's assignee specified in such
request, the Trustee shall require the Issuer to furnish to the Trustee and, so
long as no Insurer Default has occurred and is continuing, the Insurer, an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and that the request otherwise is in accordance with the terms of the Indenture,
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such requested action as to which other evidence of satisfaction of the
conditions precedent thereto is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
SECTION 1.03. Form of Documents Delivered to Trustee and Insurer.
--------------------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
20
<PAGE>
Any certificate or opinion of an officer of the Issuer delivered to
the Trustee or the Insurer may be based, insofar as it relates to legal matters,
upon a certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous. Any such Officer's
Certificate or opinion and any Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or representations
by, an officer or officers of the Issuer as to such factual matters unless such
officer or counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any Opinion of Counsel may be based on the written opinion of
other counsel, in which event such Opinion of Counsel shall be accompanied by a
copy of such other counsel's opinion and shall include a statement to the effect
that such counsel believes that such counsel and the Trustee and the Insurer may
reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee or the Insurer, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's or the Insurer's right to rely upon the truth
and accuracy of any statement or opinion contained in any such document as
provided in Section 8.01(a)(ii).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default or Servicer Event
of Default is a condition precedent to the taking of any action by the Trustee
or the Insurer at the request or direction of the Issuer, then, notwithstanding
that the satisfaction of such condition is a condition precedent to the Issuer's
right to make such request or direction, the Trustee and the Insurer shall be
protected in acting in accordance with such request or direction if it does not
have knowledge of the occurrence and continuation of such Default or Event of
Default or Servicer Event of Default. For all purposes of this Indenture,
neither the Trustee nor the Insurer shall be deemed to have knowledge of any
Insurer Default, Servicer Event of Default, Default or Event of Default nor
shall the Trustee or the Insurer have any duty to monitor or investigate to
determine whether such default has occurred (other than an Event of Default of
the kind described in Section 7.01(a) or 7.01(b)) unless, in the case of the
Trustee, a Responsible Officer of the Trustee shall have actual knowledge
thereof or shall have been notified in writing thereof by the Issuer, the
Servicer, the Insurer or any Noteholder.
21
<PAGE>
SECTION 1.04. Acts of Noteholders, etc.
------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to the
Issuer and/or the Insurer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 8.01)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section 1.04.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the holder of any Note shall bind every future holder of
the same Note and the holder of every Note issued upon the registration of
transfer thereof or in exchange therefore or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Issuer in
reliance thereon, whether or not notation of such action is made upon such Note.
(d) By accepting the Notes issued pursuant to this Indenture, each
Noteholder irrevocably appoints the Trustee hereunder as the special
attorney-in-fact for such Noteholder vested with full power on behalf of such
Noteholder to effect and enforce the rights of such Noteholder and the revisions
pursuant hereto for the benefit of such Noteholder; provided that nothing
--------
contained in this Section 1.04(d) shall be deemed to confer upon the Trustee any
duty or power to vote on behalf of the Noteholders with respect to any matter on
which the Noteholders have a right to vote pursuant to the terms of this
Indenture.
SECTION 1.05. Notices, etc., to Trustee, Servicer, Issuer, Insurer and
--------------------------------------------------------
Rating Agencies.
- ---------------
Any request, demand, authorization, direction, notice, consent,
waiver, Act of Noteholders, or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with, the Trustee,
the Issuer, the Insurer or the Servicer shall be sufficient for every purpose
hereunder (unless otherwise herein
22
<PAGE>
expressly provided) if in writing and mailed, first-class postage prepaid or
certified mail return receipt requested, or sent by private courier or confirmed
telecopy. Unless otherwise specifically provided herein, no such request,
demand, authorization, direction, notice, consent, waiver, Act of Noteholders or
other document shall be effective until received and any provision hereof
requiring the making, giving, furnishing, or filing of the same on any date
shall be interpreted as requiring the same to be sent or delivered in such
fashion that it will be received on such date. Any such request, demand,
authorization, direction, notice, consent, waiver, Act of Noteholders, or other
document shall be sent or delivered to the following addresses:
(a) if to the Trustee, at the Corporate Trust Office (Number for
telecopy (312) 461-3525), or at any other address previously furnished in
writing to the Issuer, the Insurer and the Servicer by the Trustee; or
(b) if to the Issuer, at IKON Receivables, LLC, 1738 Bass Road, P.O.
Box 9115, Macon, Georgia 31208, Attention: Robert McLain (Number for telecopy:
(912) 471-2375), with a copy to, General Counsel, IKON Office Solutions, Inc.,
70 Valley Stream Parkway, Malvern, PA 19355, or at any other address previously
furnished in writing to the Trustee, the Insurer and the Servicer by the Issuer;
or
(c) if to the Servicer, at IOS Capital, Inc., 1738 Bass Road, P.O. Box
9115, Macon, Georgia, 31208, Attention: Harry G. Kozee, Vice President -
Finance, with a copy to the General Counsel, (Number for telecopy: (912) 471-
2375), with a copy to, General Counsel, IKON Office Solutions, Inc., 70 Valley
Stream Parkway, Malvern, PA 19355, or at any other address previously furnished
in writing to the Trustee, the Insurer and the Servicer; or
(d) if to the Rating Agencies: to Standard and Poor's, 55 Water
Street, New York, New York 10041, Attention: Structured Finance Ratings, and to
Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: ABS Monitoring Department; or
(e) if to the Insurer: to Ambac Assurance Corporation, One State
Street Plaza, New York, New York 10004, Attention: Structured Asset Backed
Securities Department Head (Number for telecopy: (212) 208-3547).
SECTION 1.06. Notice to Noteholders; Waiver.
-----------------------------
(a) Where this Indenture provides for notice to Noteholders of any
event, or the mailing of any report to Noteholders, such notice or report shall
be sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid or certified mail return receipt
requested, or sent by private courier or confirmed telecopy to each Noteholder
affected by such event or to whom such report is required to be mailed, at its
address as it appears in the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice or
the mailing of such report. In any case where a notice or report to Noteholders
is mailed, neither the failure to mail such notice or report, nor any defect in
any notice or report so mailed, to any particular Noteholder shall affect the
sufficiency of such notice
23
<PAGE>
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. Benefits of Indenture.
----------------------
The Insurer and its successors and assigns shall be a third-party
beneficiary to the provisions of this Indenture, and shall be entitled to rely
upon and directly to enforce the provisions of this Indenture so long as no
Insurer Default has occurred and is continuing. Nothing in this Indenture or in
the Notes, express or implied, shall give to any other Person, other than the
parties hereto and their successors hereunder and the Noteholders, and any other
party secured hereunder, and any other Person with an ownership interest in any
part of the Asset Pool, any benefit or any legal or equitable right, remedy or
claim under this Indenture. The Insurer may disclaim any of its rights and
powers under this Indenture, but not its duties and obligations under the Policy
or the Swap Insurance Policy, upon delivery of a written notice to the Trustee.
SECTION 1.10. Recording of Indenture.
-----------------------
If this Indenture is subject to recording in any appropriate public
recording offices, such recording is to be effected by the Issuer and at its
expense accompanied by an Opinion of Counsel (which may be counsel to the
Trustee or any other counsel reasonably acceptable to the Trustee and the
Insurer) to the effect that such recording is necessary either for the
protection of the Noteholders or any other Person secured hereunder or for the
enforcement of any right or remedy granted to the Trustee under this Indenture.
24
<PAGE>
SECTION 1.11. GOVERNING LAW.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THIS INDENTURE IS SUBJECT
TO THE TRUST INDENTURE ACT OF 1939, AS AMENDED, AND SHALL BE GOVERNED THEREBY
AND CONSTRUED IN ACCORDANCE THEREWITH.
SECTION 1.12. Legal Holidays.
--------------
In any case where any Payment Date or the Stated Maturity or any other
date on which principal of or interest on any Note is proposed to be paid shall
not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Notes) such payment need not be made on such date, but may
be made on the next succeeding Business Day with the same force and effect as if
made on such Payment Date, Stated Maturity, or other date on which principal of
or interest on any Note is proposed to be paid; provided that no interest shall
--------
accrue for the period from and after such Payment Date, Stated Maturity, or any
other date on which principal of or interest on any Note is proposed to be paid,
as the case may be, until such next succeeding Business Day.
SECTION 1.13. Execution in Counterparts.
-------------------------
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 1.14. Inspection.
----------
The Issuer agrees that, on reasonable prior notice, it will permit the
representatives of the Trustee or the Insurer or any Noteholder holding Notes,
or a beneficial interest therein, evidencing at least 25% of the Outstanding
Principal Amount of the Notes, during the Issuer's normal business hours, to
examine all of the books of account, records, reports and other papers of the
Issuer, to make copies thereof and extracts therefrom, to cause such books to be
audited by independent accountants selected by the Issuer and reasonably
acceptable to the Trustee and the Insurer or such Noteholder, as the case may
be, and to discuss the Issuer's affairs, finances and accounts with its
officers, employees and independent accountants (and by this provision the
Issuer hereby authorizes its accountants to discuss with such representatives
such affairs, finances and accounts), all at such reasonable times and as often
as may be reasonably requested for the purpose of reviewing or evaluating the
financial condition or affairs of the Issuer or the performance of and
compliance with the covenants and undertakings of the Issuer in this Indenture,
the Assignment and Servicing Agreement or any of the other documents referred to
herein or therein. Any expense incident to the exercise by the Trustee or the
Insurer at any time or any Noteholder during the continuance of any Default or
Event of Default, of any right under this Section 1.14 shall be borne by the
Issuer.
25
<PAGE>
SECTION 1.15. Survival of Representations and Warranties.
------------------------------------------
The representations, warranties and certifications of the Issuer made
in this Indenture or in any certificate or other writing delivered by the Issuer
pursuant hereto shall survive the authentication and delivery of the Notes
hereunder.
ARTICLE II
THE NOTES
SECTION 2.01. General Provisions; Optional Redemption by Issuer.
-------------------------------------------------
(a) The Notes shall consist of $235,326,000 principal amount of Class
A-1 Notes, $51,100,000 principal amount of Class A-2 Notes, $100,000,000
principal amount of Class A-3a Notes, $240,891,000 principal amount of Class A-
3b Notes, $72,278,000 principal amount of Class A-4 Notes and the forms thereof
and of the Trustee's certificate of authentication shall be in substantially the
forms set forth in Exhibit A hereto, with such appropriate insertions,
omissions, substitutions, and other variations as are required or permitted by
this Indenture.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $699,595,000 of Notes, except for
Notes authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Section 2.03, 2.04, or
10.05. The Notes shall be issuable only in registered form and only in minimum
denominations of at least $1,000; provided that the foregoing shall not restrict
--------
or prevent the transfer in accordance with Section 2.03 of any Note having a
remaining Outstanding Principal Amount of other than an integral multiple of
$1,000, or the issuance of a single Note of each Class, with a denomination less
than $1,000.
(b) For each Payment Date, payments of principal (the "Principal
Payments") on the Notes will be made in accordance with Sections 3.03(b), or
7.06, as applicable. Except as otherwise provided in Section 7.02, no part of
the principal of any Note shall be paid prior to the Payment Date on which such
principal is due in accordance with the preceding provisions of this Section
2.01(b), except that the Issuer may redeem the Notes in their entirety
(including any unpaid interest due), without premium, as of any Payment Date on
which the Discounted Present Value of the Performing Leases is less than or
equal to ten percent (10%) of the aggregate Discounted Present Value of the
Leases as of the Cut-Off Date (after giving effect to all Principal Payments on
such Payment Date). The Issuer will give written notice of any such redemption
to the Trustee and the Trustee shall give written notice to the Noteholders at
least 30 days before the Payment Date fixed for such prepayment by certified
mail return receipt requested, hand delivery or overnight courier. Notice of
such prepayment having been so given, the remaining unpaid principal as of the
Payment Date fixed for prepayment together with all interest accrued and unpaid
to such Payment Date, shall become due and payable on such Payment Date.
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(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-3a
Notes, Class A-3b Notes and Class A-4 Notes will be the interest that has
accrued on the respective Notes since the last Payment Date or, in the case of
the first Payment Date, since the Issuance Date, at the Class A-1 Note Interest
Rate, Class A-2 Note Interest Rate, Class A-3a Note Interest Rate, Class A-3b
Note Interest Rate and Class A-4 Note Interest Rate, respectively, applied to
the then Outstanding Principal Amounts of the Class A-1 Notes, Class A-2 Notes,
Class A-3a Notes, Class A-3b Notes and Class A-4 Notes, respectively, on the
preceding Payment Date. With respect to the Class A-1 Notes and the Class A-3b
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 7.06, as applicable.
(d) All payments made with respect to any Note shall be made in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts and shall be applied first
to the interest then due and payable on such Notes, then to the principal
thereof, and finally to premium, if any.
(e) All Class A-1 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-1 Notes shall be made pro rata
among all Outstanding Class A-1 Notes, without preference or priority of any
kind.
(f) All Class A-2 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-2 Notes shall be made pro rata
among all Outstanding Class A-2 Notes, without preference or priority of any
kind.
(g) All Class A-3a Notes and all Class A-3b 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-
3a Notes and Class A-3b Notes shall be made pro rata among all Outstanding Class
A-3a Notes and Class A-3b 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.
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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 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 Issuer 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 Issuer Request.
SECTION 2.03. Transfer and Exchange.
---------------------
(a) The Trustee is hereby appointed "Note Registrar" for the purpose
of registering Notes and transfers of Notes as herein provided. The Note
Registrar shall cause to be kept at the Corporate Trust Office a register (the
"Note Register") in which, subject to such reasonable regulations as the Trustee
may prescribe, the Issuer shall provide for the registration of Notes and of
transfers of Notes.
The Trustee shall not register the transfer of any Note (other than
the transfer of a Note to the nominee of the Clearing Agency) unless the
transferee has executed and delivered to the Trustee a certification to the
effect that either (i) the transferee is not (A) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA or (b) a plan (as defined in Section 4975(e)(1) of the Internal Revenue
Code of 1986, as amended (the "Code")) that is subject to Section 4975 of the
Code (each of the foregoing, a "Benefit Plan"), and is not acting on behalf of
or investing the assets of a benefit Plan, or (ii) the transferee's acquisition
and continued holding of the Note will be covered by a U.S. Department of Labor
Prohibited Transaction Class Exemption. Each transferee of a Book-Entry Note
shall be deemed to make one of the foregoing representations.
(b) Subject to Section 2.03(a), upon surrender for registration of
transfer of any Note at the office designated pursuant to Section 9.02 for such
purpose, the Issuer shall execute and the Trustee upon request shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
aggregate original principal amount. The Trustee shall make a notation on any
such new Note of the amount of principal, if any, that has been paid on such
Note.
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(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.
(e) No service charge shall be made for any registration of transfer
or exchange of Notes, but the Issuer or the Trustee may require payment by the
transferor of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Notes, other than exchanges pursuant to Section 10.05 not involving any
transfer.
SECTION 2.04. Mutilated, Destroyed, Lost and Stolen Notes.
-------------------------------------------
(a) If any mutilated Note is surrendered to the Trustee, the Issuer
shall execute and the Trustee shall authenticate and deliver in exchange
therefore a replacement Note of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
(b) If (i) there shall be delivered to the Issuer and the Trustee
evidence to their satisfaction of the destruction, loss or theft of any Note and
(ii) there is delivered to the Issuer, the Trustee and (unless an Insurer
Default has occurred and is continuing) the Insurer such security or indemnity
as may be required by them to save each of them and any agent of either of them
harmless, then, in the absence of actual notice to the Issuer or the Trustee
that such Note has been acquired by a bona fide purchaser, the Issuer shall
execute and upon its written request the Trustee shall authenticate and deliver,
in lieu of any such destroyed, lost or stolen Note, a replacement Note of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
(c) In case the final installment of principal on any such mutilated,
destroyed, lost or stolen Note has become or will at the next Payment Date
become due and payable, the Issuer in its discretion may, instead of issuing a
replacement Note, pay such Note.
(d) Upon the issuance of any replacement Note under this Section, the
Issuer or the Trustee may require the payment by the Noteholder of a sum
sufficient to cover any tax or other governmental charge that may be imposed as
a result of the issuance of such replacement Note.
(e) Every replacement Note issued pursuant to this Section 2.04 in
lieu of any destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the destroyed,
lost or stolen Note shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Notes duly issued hereunder.
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(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.
-----------------------
Each of the Class A-1 Notes, Class A-2 Notes, Class A-3a Notes, Class
A-3b Notes and Class A-4 Notes, upon original issuance, shall be issued in the
form attached as Exhibit A and delivered to The Depository Trust Company, the
initial Clearing Agency, by, or on behalf of, the Issuer. Each of the Class A-1
Notes, Class A-2 Notes, Class A-3a Notes, Class A-3b Notes and Class A-4 Notes
shall initially be registered on the Note Register in the name of Cede & Co.,
the nominee of The Depository Trust Company, as the initial Clearing Agency, and
no Class A-1 Note Owner, Class A-2 Note Owner, Class A-3a Note Owner, Class A-3b
Note Owner or Class A-4 Note Owner will receive a definitive note representing
such Note Owner's interest, except as provided in Section 2.07. Unless and
until Definitive Class A-1 Notes, Definitive Class A-2 Notes, Definitive Class
A-3a Notes, Definitive Class A-3b Notes and/or Definitive Class A-4 Notes
("Definitive Notes") have been issued to the applicable Note Owners pursuant to
Section 2.07:
(a) the provisions of this Section 2.05 shall be in full force and
effect with respect to the Class A-1 Notes, Class A-2 Notes, Class A-3a Notes,
Class A-3b Notes or the Class A-4 Notes, as the case may be;
(b) the Issuer, the Servicer and the Trustee, and their officers,
directors, employees and agents, may deal with the Clearing Agency and the
Clearing Agency Participants for all purposes with respect to the Class A-1
Notes, Class A-2 Notes, Class A-3a Notes, Class A-3b Notes or Class A-4 Notes,
as the case may be (including the making of distributions on the Class A-1
Notes, Class A-2 Notes, Class A-3a Notes, Class A-3b Notes and Class A-4 Notes,
as the case may be), as the authorized representatives of the respective Note
Owners;
(c) to the extent that the provisions of this Section 2.05 conflict
with any other provisions of this Indenture, the provisions of this Section 2.05
shall control; and
(d) the rights of the respective Note Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and shall be
limited to those established by law and agreements between such respective Note
Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant
to the Depository Agreement, unless and until Definitive Notes, are issued
pursuant to Section 2.07, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the related Class A-1 Notes, Class A-
2 Notes, Class A-3a Notes, Class A-3b Notes and Class A-4 Notes, as the case may
be, to such Clearing Agency Participants.
For purposes of any provision of this Indenture requiring or
permitting actions with the consent of, or at the direction of, holders of Class
A-1 Notes, Class A-2
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Notes, Class A-3a Notes, Class A-3b Notes or Class A-4 Notes, as the case may
be, evidencing a specified percentage of the Outstanding Principal Amount of the
Class A-1 Notes, Class A-2 Notes, Class A-3a Notes, Class A-3b Notes or the
Class A-4 Notes, respectively, such direction or consent may be given by Note
Owners (acting through the Clearing Agency and the Clearing Agency Participants)
owning Class A-1 Notes, Class A-2 Notes, Class A-3a Notes, Class A-3b Notes or
Class A-4 Notes evidencing the requisite percentage of the Outstanding Principal
Amount of such Notes, respectively.
SECTION 2.06. Notice to Clearing Agency Noteholders.
-------------------------------------
Whenever notice or other communication to the Class A-1 Noteholders,
Class A-2 Noteholders, Class A-3a Noteholders, Class A-3b Noteholders or Class
A-4 Noteholders is required under this Agreement, unless and until Definitive
Notes shall have been issued to the related Note Owners pursuant to Section
2.07, the Trustee shall give all such notices and communications specified
herein to be given to such Noteholders to the applicable Clearing Agency which
shall give such notices and communications to the related Class A-1 Note Owners,
Class A-2 Note Owners, Class A-3a Note Owners, Class A-3b Note Owners or Class
A-4 Note Owners in accordance with its applicable rules, regulations and
procedures.
SECTION 2.07. Definitive Notes.
----------------
(a) If (a) (i) the Servicer advises the Issuer in writing that DTC is
no longer willing or able to properly discharge its responsibilities under the
Depository Agreement with respect to the Notes and (ii) the Issuer is unable to
locate a qualified successor, (b) the Servicer, at its option, advises the
Issuer in writing that it elects to terminate the book-entry system with respect
to the Notes or (c) after the occurrence of an "Event of Default" under this
Indenture or a default by the Servicer under the Assignment and Servicing
Agreement, Noteholders evidencing not less than a majority of the aggregate
unpaid Outstanding Principal Amount of the Notes advise the Issuer in writing
that the continuation of a book-entry system with respect to the Notes is no
longer in the best interests of the Note Owners, then the Issuer shall notify
the Trustee and all Note Owners through the Clearing Agency, of the occurrence
of any such event and of the availability of Definitive Notes. Upon surrender by
DTC of the Notes, accompanied by registration and transfer instructions from DTC
for registration, the Issuer shall reissue such Notes as Definitive Notes to the
Noteholders. The Issuer shall not be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Notes, as the case may be,
all references herein to obligations imposed upon or to be performed by DTC
shall be deemed to be imposed upon and performed by the Issuer, to the extent
applicable with respect to such Definitive Notes, and the Issuer shall recognize
the holders of the relevant Definitive Notes as Noteholders hereunder.
(b) Definitive Notes will not be eligible for clearing or settlement
through DTC, Euroclear or Cedel.
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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, the Insurer, and any agent of the Issuer, the Trustee or
the Insurer may treat the registered Noteholder as the owner of such Note for
the purpose of receiving payment of principal of and interest on such Note and
for all other purposes whatsoever, whether or not such Note be overdue, and
neither the Issuer, the Trustee, the Insurer nor any agent of the Issuer, the
Trustee or the Insurer shall be affected by notice to the contrary.
SECTION 2.10. Cancellation.
------------
All Notes surrendered for registration of transfer or exchange or
following final payment shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
cancelled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section, except as
expressly permitted by this Indenture. Subject to the next sentence, all
cancelled Notes held by the Trustee may be disposed of in the normal course of
its business or as directed by an Issuer Order. Promptly following the date on
which all principal of and interest on the Notes has been paid in full and the
Notes have been surrendered to the Trustee, the Trustee shall, if the Insurer
has paid any amount in respect of the Notes under the Policy or otherwise which
has not been reimbursed to it, deliver such surrendered Notes to the Insurer.
SECTION 2.11. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders and shall
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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 Notes.
--------------
In determining whether the Noteholders of the required Outstanding
Principal Amount of the Notes have concurred in any direction, waiver or
consent, Notes owned by the Issuer, any other obligor upon the Notes or an
Affiliate of the Issuer shall be considered as though not Outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes which a Responsible
Officer actually knows are so owned shall be so disregarded.
SECTION 2.13. CUSIP Numbers.
-------------
The Issuer in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall indicate the "CUSIP" numbers of
the Notes in notices of redemption and related materials as a convenience to
Noteholders; provided that any such notice may state that no representation is
--------
made as to the correctness of such numbers either as printed on the Notes or as
contained in any notice of redemption and related materials.
ARTICLE III
ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION
AND APPLICATION OF MONEYS; REPORTS
SECTION 3.01. Transaction Accounts; Investments by Trustee.
--------------------------------------------
(a) On or before the Issuance Date, the Trustee shall establish in the
name of the Trustee for the benefit of the Noteholders and the Insurer to the
extent of their interests therein as provided in this Indenture the following
accounts, which accounts shall be Eligible Accounts maintained at the Corporate
Trust Office:
(i) Collection Account;
(ii) Reserve Account; and
(iii) Security Deposit Account.
Subject to the further provisions of this Section 3.01(a), the Trustee shall,
upon receipt or upon transfer from another account, as the case may be, deposit
into such accounts all amounts received by it which are required to be deposited
therein in accordance with the provisions of this Indenture. All such amounts
and all investments made with such
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amounts, including all income and other gain from such investments, shall be
held by the Trustee in such accounts as part of the Asset Pool as herein
provided, subject to withdrawal by the Trustee in accordance with, and for the
purposes specified in the provisions of, this Indenture.
(b) The Trustee shall hold in trust but shall not be required to deposit
in any account specified in Section 3.01(a) any payment received by it until
such time as the Trustee shall have identified to its reasonable satisfaction
the nature of such payment and, on the basis thereof, the proper account or
accounts into which such payment is to be deposited. In determining into which
of the accounts, if any, referred to above any amount received by the Trustee is
to be deposited, the Trustee may conclusively rely (in the absence of bad faith
on the part of the Trustee) on the advice of the Servicer. Unless the Trustee is
advised differently in writing by the Lessee making the payment or by the
Servicer in writing (with the Servicer's instruction controlling), the Trustee
shall assume that any amount remitted to it by such Lessee is to be deposited
into the Collection Account pursuant to Section 3.03. The Trustee may establish
from time to time such deadline or deadlines as it shall determine are
reasonable or necessary in the administration of the Asset Pool after which all
amounts received or collected by the Trustee on any day shall not be deemed to
have been received or collected until the next succeeding Business Day.
(c) Neither the Servicer nor the Trustee shall have any right of set-off
with respect to the Collection Account, the Reserve Account or the Security
Deposit Account or any investment therein.
(d) So long as no Event of Default has occurred and is continuing, all or
a portion of the amounts in the Transaction Accounts, shall be invested and
reinvested by the Trustee pursuant to a Servicer Order in one or more Eligible
Investments. Subject to the restrictions on the maturity of investments set
forth in Section 3.01(f), each such Servicer Order may authorize the Trustee to
make the specific Eligible Investments set forth therein, to make Eligible
Investments from time to time consistent with the general instructions set forth
therein, or to make specific Eligible Investments pursuant to instructions
received in writing or by telegraph or facsimile transmission from the employees
or agents of the Servicer, identified therein, in each case in such amounts as
such Servicer Order shall specify. The Issuer agrees to report as income for
financial reporting and tax purposes (to the extent reportable) all investment
earnings on amounts in the Collection Account, the Reserve Account or the
Security Deposit Account. The Servicer agrees to give appropriate and timely
investment directions to the Trustee so that there will not be more than two
Business Days in any one calendar year at the end of which funds in the
Transaction Accounts are not invested, directly or indirectly, pursuant to a
Servicer Order in Eligible Investments that mature on or after the opening of
business on the next Business Day.
(e) In the event that either (i) the Servicer, shall have failed to give
investment directions to the Trustee by 9:30 A.M., New York City time on any
Business Day on which there may be uninvested cash or (ii) an Event of Default
shall be continuing, the Trustee shall promptly invest and reinvest the funds
then in the Collection Account, the Reserve Account or the Security Deposit
Account, as the case may be, to
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the fullest extent practicable in Eligible investments specified in clause (e)
of the definition thereof. All investments made by the Trustee shall mature no
later than the maturity date therefore permitted by Section 3.01(f) unless the
Trustee shall have received written confirmation from each Rating Agency, that
the liquidation of such Eligible Investments prior to their respective maturity
dates, will not result in the reduction or withdrawal of such Rating Agency's
then-current rating of the Notes.
(f) Unless payable on demand, no investment of any amount held in the
Transaction Accounts shall mature later than the Business Day immediately
preceding the Payment Date which is scheduled to occur immediately following the
date of investment. All income or other gains (net of losses) from the
investment of moneys deposited in the Transaction Accounts shall be deposited by
the Trustee in such account immediately upon receipt.
(g) Any investment of any funds in the Transaction Accounts and any sale
of any investment held in such accounts, shall be made under the following terms
and conditions:
(i) each such investment shall be made in the name of the Trustee or in
the name of a nominee of the Trustee, in each case in such manner as shall be
necessary to maintain the identity of such investments as assets of the Asset
Pool;
(ii) any certificate or other instrument evidencing such investment shall
be delivered directly to the Trustee or its agent and the Trustee shall have
sole possession of such instrument, and all income on such investment; and
(iii) the proceeds of any sale of an investment shall be remitted by the
purchaser thereof directly to the Trustee for deposit in the account in which
such investment was held.
(h) If any amounts are needed for disbursement from the Transaction
Accounts and sufficient uninvested funds are not collected and available therein
to make such disbursement, in the absence of a Servicer Order for the
liquidation of investments held therein in an amount sufficient to provide the
required funds, the Trustee shall select and cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such accounts.
(i) The Trustee shall not in any way be held liable by reason of any
insufficiency in the Transaction Accounts resulting from losses on investments
made in accordance with the provisions of this Section 3.01 (but the institution
serving as Trustee shall at all times remain liable for its own debt
obligations, if any, constituting part of such investments) or losses incurred
in respect of the liquidation of any Eligible Investment prior to its stated
maturity. The Trustee shall not be liable for the selection of any Eligible
Investment or any investment made by it in accordance with this Section 3.01 on
the grounds that it could have made a more favorable investment or a more
favorable selection for sale of an investment.
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SECTION 3.02. Collection of Moneys.
--------------------
(a) On or before the Issuance Date, the Servicer shall designate a
lockbox for the receipt directly from Lessees of all payments under the Leases
and for the receipt from IOS Capital or the Lessees of security deposits in
respect of any of the Leases. Amounts so received shall be deposited in the
Collection Account in accordance with the provisions of Section 3.03(a) or, in
the case of security deposits, the Security Deposit Account in accordance with
Section 3.08(a).
(b) The Trustee shall from time to time, in accordance with instructions
of the Servicer, withdraw from the Collection Account and pay to the Servicer
for appropriate application by the Servicer any amounts in the Collection
Account which the Servicer advises the Trustee in writing are Other Lease
Payments. Prior to such payment, the Trustee shall have rights to and an
interest in such amounts to the extent (but only to the extent) it is determined
that such amounts actually constitute Transaction Payment Amounts.
(c) If at any time the Issuer shall receive any amount referred to in
Section 3.03(a), it shall hold such payment in trust for the benefit of the
Trustee, the holders of the Notes and the Insurer, shall segregate such payment
from the other property of the Issuer, and shall, promptly (but in no event
later than the next following Business Day) upon receipt, deliver such payment
in the form received to the Trustee.
SECTION 3.03. Collection Account; Payments.
----------------------------
(a) The Servicer shall within two Business Days of receipt (a "Required
Deposit Date") deposit the following funds, as received, into the Collection
Account:
(i) Lease Payments;
(ii) recoveries from Non-Performing Leases to the extent IOS Capital has
not substituted Substitute Leases for such Non-Performing Leases;
(iii) late charges received on delinquent Lease Payments not advanced by
the Servicer;
(iv) proceeds from purchases by IOS Capital of Leases as a result of
breaches of representations and warranties of IOS Capital pursuant to Section
5.04 of the Assignment and Servicing Agreement to the extent IOS Capital has not
substituted Substitute Leases for such Leases;
(v) Casualty Payments;
(vi) Servicer Advances, if any;
(vii) any amounts paid by the Counterparty to the Issuer pursuant to the
Swap Documents;
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(viii) Retainable Deposits;
(ix) Termination Payments to the extent the Issuer does not reinvest
such Termination Payments in Additional Leases; and
(x) proceeds for redemption of the Notes in the event the Issuer
exercises its right to redeem the Notes in accordance with Section 2.01(b).
(b) Unless the Notes have been declared due and payable pursuant to
Section 7.02 and moneys collected by the Trustee are being applied in accordance
with Section 7.06, Available Funds on deposit in the Collection Account
(including the amounts, if any, deposited into the Collection Account from the
Reserve Account and the Security Deposit Account in accordance with the
provisions of Sections 3.04 and 3.08) shall be withdrawn by the Trustee as
directed by the Servicer in the related Servicing Report on or before each
Payment Date from the Collection Account, in the amounts required, for
application in the following order of priority, to make the following Required
Payments (all in accordance with the applicable Servicing Report):
(i) to pay the Insurer the amounts then due and owing in respect of the
Insurer Premium;
(ii) to pay the Counterparty any amount due pursuant to the Swap
Documents;
(iii) to pay the Servicing Fee;
(iv) to reimburse unreimbursed Servicer Advances in respect of a prior
Payment Date;
(v) 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-3a Notes; (d) to make Interest Payments on
the Class A-3b Notes; and (e) to make Interest Payments on the Class A-4 Notes;
(vi) to pay the Insurer any Reimbursement Amounts due under the terms of
the Insurance Agreement;
(vii) 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) pro rata, to the Class A-3a Noteholders and the Class A-3b Noteholders
only, until the Outstanding Principal Amount on the Class A-3a Notes and the
Outstanding Principal Amount on the Class A-3b Notes has been 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;
(viii) if an Acceleration Event has occurred, to pay the Additional
Principal, if any, as an additional reduction of principal, to the Class A
Noteholders then receiving the Class A Principal Payment, in the order
established in clause (vii) above,
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until the Outstanding Principal Amount on all of the Class A Notes has been
reduced to zero;
(ix) 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
(x) to pay the Issuer, the balance, if any.
(c) Notwithstanding the foregoing, on any Payment Date the Servicer
shall instruct the Trustee to retain, and the Trustee shall retain, in the
Collection Account an amount equal to all Lease Payments received that were due
after the prior Due Period, and all Casualty Payments, and Termination Payments
received or realized after the Determination Date for such Payment Date and
shall not distribute any such amounts on such Payment Date. If at any time any
amount or portion thereof previously distributed pursuant to this Section
3.03(c) shall have been recovered, or shall be subject to recovery, in any
proceeding with respect to the Issuer or otherwise, then for purposes of
determining future distributions pursuant to this Section 3.03(c) such amount or
portion thereof shall be deemed to have not been previously so distributed.
(d) The Servicer shall submit with the Servicing Report a certificate
(i) setting forth any amounts to be withdrawn (on an item-by-item basis) from
the Collection Account other than as provided in Section 3.03(b), (ii) stating
that none of such amounts are all or part of any amounts required to be retained
in the Collection Account pursuant to this Section 3.03 and (iii) identifying
the Lease or Leases to which such amounts relate.
SECTION 3.04. The Reserve Account.
-------------------
(a) On the Issuance Date, the Issuer has made an initial deposit of
$7,773,283.16 into the Reserve Account. On each Payment Date, the Trustee shall
transfer to the Collection Account from the Reserve Account such amounts as
shall be required by Section 3.04(b).
(b) Prior to each Payment Date the Trustee shall transfer from the
Reserve Account to the Collection Account the amount specified by the Servicer
in the related Servicing Report representing investment earnings on amounts held
in the Reserve Account as of the related Determination Date. If by 12:00 noon,
New York City time, on the Business Day preceding any Payment Date, Available
Funds are insufficient to permit on such Payment Date all distributions required
by Section 3.03(b)(i) through 3.03(b)(vii) (such payments, the "Required
Payments" and such shortfall, an "Available Funds Shortfall"), then, to the
extent of the Available Reserve Amount, the Trustee shall transfer, not later
than the end of such Business Day, from the Reserve Account to the Collection
Account such amount to the extent available as shall be necessary to make on
such Payment Date all Required Payments.
(c) In the event that after giving effect to all the disbursements
required to be made on any Payment Date, the Available Reserve Amount exceeds
the Required Reserve Amount, the Trustee shall transfer, not later than the end
of business on such Payment Date, an amount equal to such excess to the Issuer.
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(d) Upon the satisfaction and discharge of this Indenture, any balance
remaining in the Reserve Account, after all obligations to the Noteholders
hereunder have been fully satisfied, shall be paid to reimburse the Trustee for
any amounts owing to it arising from the performance of its obligations under
this Indenture and, then, to the Issuer.
SECTION 3.05. Reports by Trustee; Notices of Certain Payments.
-----------------------------------------------
(a) The Trustee shall within two Business Days after the request of the
Issuer, the Servicer, the Insurer or any Noteholder, deliver to the requesting
Person a written report setting forth the amounts on deposit in the Collection
Account, the Reserve Account and the Security Deposit Account and identifying
the investments included therein.
(b) On or prior to each Payment Date, the Servicer shall provide to the
Trustee and the Trustee shall forward to the Insurer, each Rating Agency and
each Noteholder of record a statement setting forth at least the following
information as to the Notes to the extent applicable:
(i) the amount of Interest Payments and payments in reduction of
principal paid on such Payment Date with respect to all Class A-1 Notes,
Class A-2 Notes, Class A-3a Notes, Class A-3b and Class A-4 Notes, respectively;
(ii) the aggregate Outstanding Principal Amount of all Outstanding Class
A-1 Notes, Class A-2 Notes, Class A-3a Notes, Class A-3b Notes and Class A-4
Notes, respectively and the Pool Factor for each such Class after giving effect
to all payments reported under (i) above;
(iii) the amount of the Servicing Fee and unreimbursed Servicer Advances
paid on such Payment Date pursuant to Section 3.03(b)(ii) and Section
3.03(b)(iii);
(iv) the amount on deposit in the Collection Account, the Reserve
Account and the Security Deposit Account, in each case after giving effect to
all of the withdrawals and applications or transfers required on or before such
Payment Date pursuant to Sections 3.02, 3.03, 3.04 and 3.08;
(v) the Discounted Present Value of Performing Leases and the
Discounted Present Value of Non-Performing Leases as of the last day of the
related Due Period; and
(vi) the aggregate Lease Purchase Amounts for Leases purchased by the
Originator pursuant to Section 5.04 of the Assignment and Servicing Agreement
during the related Due Period.
(c) With each report of the Trustee furnished pursuant to this Section
3.05 following any Payment Date, the Trustee shall enclose a copy of the
relevant Servicing Report.
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(d) Upon request of a Noteholder, the Trustee will provide information
as to the Outstanding Principal Amount of each Class of Notes to such
Noteholder.
SECTION 3.06. Trustee May Rely on Certain Information from Servicer.
-----------------------------------------------------
Pursuant to Sections 5.01, 6.01 and 6.02 of the Assignment and
Servicing Agreement and Sections 3.02 through 3.05 hereof, the Servicer is
required to furnish to the Trustee and/or the Insurer from time to time certain
information and make various calculations which are relevant to the performance
of the Trustee's duties in this Article III and in Article IV of this Indenture.
The Trustee and the Insurer shall be entitled to rely in good faith on such
information or calculations unless and until the Insurer or a Responsible
Officer of the Trustee, as the case may be, has actual knowledge, or is advised
by any Noteholder or the Insurer (either in writing or orally with prompt
written or telecopied confirmation), that such information or calculations is or
are incorrect.
SECTION 3.07. Optional Deposits by the Insurer; Notice of Waivers
---------------------------------------------------
(a) The Insurer shall at any time, and from time to time, with respect
to a Payment Date, have the option (but shall not be required, except as
provided in Article IV) to deliver amounts to the Trustee for deposit into the
Collection Account for any of the following purposes: (i) to provide funds in
respect of the payment of fees or expenses of any provider of services to the
Issuer with respect to such Payment Date, or (ii) to include such amount as part
of the Available Funds for such Payment Date to the extent that without such
amount a draw would be required to be made on the Policy. Any amounts so
delivered by the Insurer shall be included in Reimbursement Amounts.
(b) If the Insurer waives any event that might trigger an event of
default under the Insurance Agreement and so notifies the Trustee in writing,
the Trustee shall notify the Rating Agencies of such waiver.
SECTION 3.08. The Security Deposit Account
----------------------------
(a) On the Issuance Date, the Issuer has made an initial deposit into the
Security Deposit Account of $262,961.57 representing security deposits in
respect of the Leases as of the Issuance Date. The Servicer on behalf of the
Issuer shall within two Business Days of receipt thereof deposit into the
Security Deposit Account all additional security deposits received in respect of
the Leases from time to time in the Asset Pool.
(b) Prior to each Payment Date, the Trustee shall transfer from the
Security Deposit Account to the Collection Account the amounts specified by the
Servicer in the related Servicing Report representing (a) investment earnings on
amounts held in the Security Deposit Account as of the related Determination
Date and (b) Retainable Deposits.
(c) The Servicer shall be responsible for the payment of all amounts held
from time to time in the Security Deposit Account not required to be transferred
to the Collection Account in accordance with Section 3.08(b) to the Lessees or
other Persons entitled thereto in accordance with the related Lease
documentation. From time
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to time, upon written request of the Servicer, the Trustee shall release from
the Security Deposit Account and from the Lien of this Indenture such amounts as
the Servicer shall determine to be necessary for application as provided in the
immediately preceding sentence.
ARTICLE IV
THE POLICY
SECTION 4.01. Claims Under Policy.
-------------------
(a) On each Determination Date, the Trustee shall determine from the
related Servicer Report with respect to the immediately following Payment Date
the Deficiency Amount, if any. If the Trustee determines that a Deficiency
Amount would exist, the Trustee shall complete a Notice in the form of Exhibit A
to the Policy and submit such Notice to the Insurer no later than 12:00 noon New
York City time on the third Business Day preceding such Payment Date as a claim
for payment in an amount equal to the Deficiency Amount. Amounts paid by the
Insurer pursuant to a claim submitted under this Section 4.01, shall be
deposited by the Trustee into the Collection Account for payment to Noteholders
on the related Payment Date pursuant to Section 3.03(b).
(b) Any notice delivered by the Trustee to the Insurer pursuant to
Section 4.01(a) shall specify the Deficiency Amount claimed under the Policy and
shall constitute a "Notice" (as defined in the Policy) under the Policy. In
accordance with the provisions of the Policy, the Insurer is required to pay to
the Trustee the Deficiency Amount properly claimed thereunder by 12:00 noon, New
York City time, on the later of (i) the third Business Day (as defined in the
Policy) following receipt on a Business Day of the Notice of Claim, and (ii) the
applicable Payment Date. Any payment made under the Policy by the Insurer shall
be applied solely to the payment of the Notes as set forth in the Policy, and
for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each Noteholder
any Deficiency Amount from the Insurer and (ii) deposit the same in the
Collection Account for payment to Noteholders as provided in Section 3.03(b).
For the purposes of clause (d) below, any Deficiency Amount disbursed by the
Trustee from claims made under the Policy shall not be considered payment by the
Issuer with respect to such Notes, and shall not discharge the obligations of
the Issuer with respect thereto. The Insurer shall be entitled to receive the
related Reimbursement Amount pursuant to Section 3.03(b) with respect to each
Insured Payment made by the Insurer.
(d) The Insurer shall, to the extent it makes any payment with respect to
the Notes, become subrogated to the rights of the recipients of such payments to
the extent of such payments. Subject to and conditioned upon any payment with
respect to the Notes by or on behalf of the Insurer, the Trustee and the
Noteholders shall assign to the Insurer all rights to the payment of interest or
principal with respect to the Notes which are then due for payment to the extent
of all payments made by the Insurer, and the Insurer may exercise any option,
vote, right, power or the like with respect to the Notes to
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the extent that it has made payment pursuant to the Policy. To evidence such
subrogation, the Note Registrar (as defined in this Indenture) shall note the
Insurer's rights as subrogee upon the register of Noteholders upon receipt from
the Insurer of proof of payment by the Insurer of any Insured Payment (as
defined in the Policy). The foregoing subrogation shall in all cases be subject
to the rights of the Noteholders to receive all Insured Payments (as defined in
the Policy) in respect of the Notes.
(e) The Trustee shall keep a complete and accurate record of all Policy
proceeds deposited into the Collection Account and the allocation of such funds
to payment of interest on and principal paid in respect of any Note. The Insurer
shall have the right to inspect such records at reasonable times upon one
Business Day's prior notice to the Trustee.
(f) The Trustee shall be entitled to enforce on behalf of the Noteholders
the obligations of the Insurer under the Policy. Notwithstanding any other
provision of this Indenture or any Transaction Documents, the Noteholders are
not entitled to make any claims under the Policy or institute proceedings
directly against the Insurer.
SECTION 4.02. Preference Claims.
-----------------
(a) In the event that the Trustee has received a certified copy of an
order of the appropriate court that any amount previously distributed to a
Noteholder in respect of any Note has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Trustee shall so notify
the Insurer, shall comply with the provisions of the Policy to obtain payment by
the Insurer of such avoided payment, and shall, at the time it provides notice
to the Insurer, notify Holders of the Notes by mail that, in the event that any
Noteholder's payment is so recoverable, such Noteholder will be entitled to
payment pursuant to the terms of the Policy. The Trustee shall furnish to the
Insurer its records evidencing the payments of principal of and interest on the
Notes, if any, which have been made by the Trustee and subsequently recovered
from Noteholders, and the dates on which such payments were made. Pursuant to
the terms of the Policy, the Insurer will make such payment on behalf of the
Noteholder to the receiver or trustee in bankruptcy named in the final order of
the court exercising jurisdiction on behalf of the Noteholder and not to any
Noteholder directly (unless a Noteholder has returned principal or interest on
the Notes to such receiver or trustee in bankruptcy, in which case the Insurer
will make such payment to the Trustee for payment to such Noteholder upon proof
of such payment reasonably satisfactory to the Insurer).
(b) The Trustee shall promptly notify the Insurer of any proceeding or
the institution of any action (of which the Trustee has actual knowledge)
seeking the avoidance as a preferential transfer under applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (a "Preference Claim")
of any payment made with respect to the Notes. Each Holder, by its purchase of
Notes, and the Trustee hereby agrees that so long as an Insurer Default shall
not have occurred and be continuing, the Insurer may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim, including, without limitation, (i) the
direction of any appeal of any order relating to any Preference Claim
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and (ii) the posting of any surety, supersedeas or performance bond pending any
such appeal. In addition, and without limitation of the foregoing, as set forth
in Section 4.01(d), the Insurer shall be subrogated to, and each Noteholder and
the Trustee hereby delegate and assign, to the fullest extent permitted by law,
the rights of the Trustee and each Noteholder in the conduct of any proceeding
with respect to a Preference Claim, including, without limitation, all rights of
any party to an adversary proceeding action with respect to any court order
issued in connection with any such Preference Claim.
SECTION 4.03. Surrender of Policy.
-------------------
The Trustee shall surrender the Policy to the Insurer for cancellation
upon the expiration of the Policy in accordance with the terms thereof.
ARTICLE V
RELEASE OF LEASES AND INTERESTS IN EQUIPMENT
SECTION 5.01. Release of Equipment.
--------------------
Subject to the satisfaction of the provisions of Section 5.02, the
Trustee shall release the Trustee's security interest in the Issuer's interest
in the Equipment from the Lien of the Indenture upon receipt from the Servicer
of written certification of the occurrence of: (a) the sale of such Equipment
pursuant to Section 4.03(b) of the Assignment and Servicing Agreement, or (b)
the release of the related Lease from the Lien of this Indenture.
SECTION 5.02. Release of Leases Upon Final Lease Payment.
------------------------------------------
In the event that the Trustee shall have received notice (either in
writing or orally with prompt written or telecopied confirmation) from the
Servicer that the Trustee has received with respect to any Lease (i) the final
Lease Payment due and payable under such Lease, (ii) a Termination Payment in
respect of such Lease, (iii) a Lease Purchase Amount in respect of such Lease,
(iv) a Casualty Payment under such Lease (and, following such final Lease
Payment, Casualty Payment, Lease Purchase Amount or Termination Payment, no
further payments (other than Other Lease Payments) on or in respect of such
Lease are or will be due and payable), or (iv) the full amount of any recoveries
with respect to any such Lease that is a Non-Performing Lease, such Lease shall
be released from the lien of this Indenture and returned to the Issuer.
SECTION 5.03. Execution of Documents.
----------------------
The Trustee shall promptly execute and deliver such documents,
including without limitation partial releases and termination statements (which
shall be furnished to the Trustee by the Issuer), and take such other actions as
the Issuer, by Issuer Request, may reasonably request (including the return of
any Lease which has been released) to fully effectuate the release from this
Indenture of any Lease and interests in the related Equipment required to be so
released pursuant to Sections 5.01 or 5.02.
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SECTION 5.04. Further Release of Collateral.
-----------------------------
Notwithstanding any provision of this Indenture to the contrary, any
amounts properly retained by the Servicer pursuant to Section 4.03, 4.04 and
4.05 of the Assignment and Servicing Agreement are, without further action by
the Trustee released from the Lien of this Indenture.
ARTICLE VI
SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER
SECTION 6.01. Servicer Events of Default.
--------------------------
If a Servicer Event of Default has occurred and is continuing, the
Trustee shall, upon the written request of the Insurer (so long as no Insurer
Default has occurred and is continuing ) or the holders of 66-2/3% of the then
Outstanding Principal Amount of the Notes (if an Insurer Default has occurred
and is continuing), give notice in writing to the Servicer of the termination of
all of the rights and obligations of the Servicer under the Assignment and
Servicing Agreement (but none of IOS Capital's obligations pursuant to Section 5
of the Assignment and Servicing Agreement, which shall survive such
termination). On and after the giving of such written notice, all rights and
obligations of the Servicer under the Assignment and Servicing Agreement,
including, without limitation, the Servicer's right thereunder to receive the
Servicing Fee, but none of the Servicer obligations pursuant to Section 4
thereof, shall pass to, be vested in, and be assumed by the Trustee, and the
Trustee shall be authorized to, and shall, execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such termination and of such passing,
vesting, and assumption; provided that in performing the duties of the Servicer
--------
under the Assignment and Servicing Agreement the Trustee shall at all times be
deemed to be acting as the Trustee hereunder and shall be entitled to the full
benefit of all the protections, benefits, immunities and indemnities provided in
this Indenture for or with respect to the Trustee, including without limitation
those set forth in Article VIII hereof.
SECTION 6.02. Substitute Servicer.
-------------------
Notwithstanding the provisions of Section 6.01, the Trustee may, if it
shall be unwilling to continue to act as the successor to the Servicer in
accordance with Section 6.01, or shall, if it is unable to continue to so act or
is so instructed in writing by the Insurer (if no Insurer Default has occurred
and is continuing) or the holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes (if an Insurer Default has occurred and is continuing),
appoint a successor to the Servicer in accordance with the provisions of Section
10.03 of the Assignment and Servicing Agreement.
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ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
SECTION 7.01. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any Interest Payment on any Note when
the same becomes due and payable; or
(b) default in the payment of the principal of the Notes at Stated
Maturity; or
(c) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere in
this Section specifically dealt with), or any representation or warranty of the
Issuer made in this Indenture proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such default
shall continue or not be cured, or the circumstance or condition in respect of
which such misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days (or for such longer
period, not in excess of 90 days, as may be reasonably necessary to remedy such
default if the Servicer delivers an Officer's Certificate to the Trustee to the
effect that the Issuer has commenced, or will promptly commence and diligently
pursue, all reasonable efforts to remedy such default and such default can be
remedied in 90 days or less) after there shall have been given, by registered or
certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by
the Holders of at least 25% of the Outstanding Principal Amount of the Notes, a
written notice specifying such default or incorrect representation or warranty
and requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(d) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Issuer in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (ii) a decree or order adjudging the
Issuer a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment, or composition of or in respect
of the Issuer under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
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(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; or
(f) the occurrence and continuance of a Servicer Event of Default.
The Issuer shall deliver to the Trustee and the Insurer and the Rating
Agencies, within three days after obtaining knowledge of the occurrence thereof,
written notice in the form of an Officer's Certificate of any event which with
the giving of notice and the lapse of time would become an Event of Default
under (c), (d), (e) or (f) above, its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 7.02. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
(a) If an Event of Default occurs and is continuing, then, subject to
the provisions of Section 7.02(c) below, and in every such case, the Trustee
may, and (if so directed by holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes) shall, declare the unpaid principal amount of the Notes to
be immediately due and payable at par together with all accrued and unpaid
interest thereon, without presentment, demand, protest or notice of any kind,
all of which are hereby waived by the Issuer.
(b) Subject to Section 7.02(c) below, the holders of 66-2/3% of the
then Outstanding Principal Amount of the Notes may direct the time, method and
place of conducting any proceedings for any remedy available to the Trustee or
of exercising any trust or power conferred on it.
(c) Subject only to provisions hereof expressly stated to be
applicable notwithstanding this Section 7.02 and notwithstanding any other
contrary provision of this Indenture, so long as the Policy remains in effect
and no Insurer Default has occurred and is continuing, and irrespective of any
contrary instruction from the holders of any Notes but subject to any further
conditions or requirements of this Indenture, the Trustee (i) shall not declare
the Notes to be immediately due and payable or waive any Event of Default or
exercise any remedies upon the occurrence of an Event of Default, except at the
written direction of the Insurer, (ii) shall upon the occurrence of an Event of
Default declare the Notes to be immediately due and payable or waive any such
Event of Default upon the written direction of the Insurer, and (iii) shall upon
the occurrence and
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continuance of an Event of Default, exercise or refrain from exercising
available remedies in accordance with the written direction and control of the
Insurer.
(d) At any time after such an Event of Default has occurred and before
a judgment or decree for payment of the money due has been obtained by the
Trustee as hereinafter in this Article provided, the Insurer (if no Insurer
Default has occurred and is continuing) or the holders of Notes evidencing 66-
2/3% of the then Outstanding Principal Amount of the Notes (if an Insurer
Default has occurred and is continuing) by written notice to the Issuer and the
Trustee, may rescind and annul such declaration and its consequences if the
Issuer has paid or deposited with the Trustee a sum sufficient to pay:
(i) all Principal Payments on any Class A Notes which have
become due otherwise than by such declaration of acceleration and
interest thereon from the date when the same first became due until
the date of payment or deposit at the appropriate Note Interest Rate,
(ii) all Interest Payments due with respect to any Class A
Notes and, to the extent that payment of such interest is lawful,
interest upon overdue interest from the date when the same first
became due until the date of payment or deposit at a rate per annum
equal to the appropriate Note Interest Rates, and
(iii) all sums paid or advanced by the Trustee hereunder and
all sums due to the Insurer and the reasonable compensation, expenses,
disbursements, and advances of the Trustee and the Insurer and their
respective agents and counsel;
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 7.03. Remedies.
--------
(a) If an Event of Default occurs and is continuing of which a
Responsible Officer has actual knowledge, the Trustee shall immediately give
notice to each Noteholder and the Rating Agencies as set forth in Section 8.02.
(b) Following any acceleration of the Notes, the Trustee shall have
all of the rights, powers and remedies with respect to the Asset Pool as are
available to secured parties under the Uniform Commercial Code or other
applicable law. Such rights, powers and remedies may be exercised by the Trustee
in its own name as trustee of an express trust.
(c) If an Event of Default specified in Section 7.01(a) or 7.01(b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Issuer for the whole
amount of principal and interest remaining unpaid.
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(d) In exercising its rights and obligations under this Section 7.03,
the Trustee may sell the assets in the Asset Pool; provided that, if the Event
--------
of Default involves other than non-payment of principal or interest on the
Notes, then such sale must be for an amount greater than or equal to amounts due
under clauses first through fourth in Section 7.06 unless directed otherwise by
----- ------
the Insurer (if no Insurer Default has occurred and is continuing) or the
holders of 66-2/3% of the then Outstanding Principal Amount of the Notes (if an
Insurer Default has occurred and is continuing). None of the Trustee, the
Insurer nor any Noteholder shall have any rights against the Issuer other than
to enforce the Lien of this Indenture and to sell the assets in the Asset Pool.
SECTION 7.04. Trustee Shall File Proofs of Claim.
----------------------------------
(a) In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition,
or other judicial proceeding relative to the Issuer, the Seller, IOS Capital,
the Servicer or any other obligor upon the Notes or the other obligations
secured hereby or relating to the property of the Issuer, the Seller, IOS
Capital, the Servicer or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Issuer, the Seller, IOS
Capital or the Servicer for the payment of overdue principal or interest or any
such other obligation) shall by intervention in such proceeding or otherwise,
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and any other obligation
secured hereby and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee, the Insurer (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee and the Insurer and their respective agents and counsel) and the
Noteholders allowed in such judicial proceeding, provided, however, that the
-------- -------
Trustee shall file such proof of claim on behalf of the Insurer only upon the
Insurer's written direction and on behalf of the Noteholders only at the written
direction of the holders of not less than 66-2/3% of the then Outstanding
Principal Amount of the Notes; and
(ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator, or
other similar official in any such judicial proceeding is hereby authorized by
each Noteholder and the Insurer to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Noteholders to pay to the Trustee and the Insurer any amount due them for
the reasonable compensation, expenses, disbursements and advances of the Trustee
and the Insurer and their respective agents and counsel, and any other amounts
due the Trustee under Section 7.06.
(b) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Noteholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights
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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 7.05. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the holders
of the Notes and the Insurer.
SECTION 7.06. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article following
an Event of Default, and any moneys that may then be held or thereafter received
by the Trustee shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of the entire amount due
on account of principal or interest, upon presentation of the Notes and
surrender thereof:
first to the payment of all costs and expenses of collection
-----
incurred by the Trustee, the Insurer and the Noteholders (including the
reasonable fees and expenses of any counsel to the Trustee, the Insurer and
the Noteholders) and all fees and expenses (including legal fees and
expenses) owed to the Trustee under this Indenture and the Assignment and
Servicing Agreement;
second to pay the Counterparty any amount due pursuant to the
------
Swap Documents;
third if the person then acting as Servicer under the
-----
Assignment and Servicing Agreement is not IOS Capital or an Affiliate of
IOS Capital, to the payment of all Servicing Fees and unreimbursed Servicer
Advances then due to such Person;
fourth 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-3a Principal Amount, Outstanding
Class A-3b 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-3a Note Interest Rate, Class
A-3b Note Interest Rate and Class A-4 Note Interest Rate, respectively,
second, to the payment of the Outstanding Class A-1 Principal Amount,
third, to the payment of the Outstanding Class A-2 Principal Amount,
fourth, to the pro rata payment of the Outstanding Class A-3a Principal
Amount and the Outstanding Class A-3b Principal Amount and fifth, to
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the payment of the Outstanding Class A-4 Principal Amount; provided, that
--------
the Noteholders may allocate such payments for interest, principal and
premium at their own discretion, except that no such allocation shall
affect the allocation of such amounts or future payments received by any
other Noteholder;
fifth to the payment of amounts then due the Insurer under this
-----
Indenture, including the Insurer Premium (other than amounts referred to in
clause sixth below);
-----
sixth to the payment to the Insurer of any Reimbursement
-----
Amounts;
seventh if the Person then acting as Servicer is IOS
-------
Capital or an Affiliate of IOS Capital, to the payment of all Servicing
Fees and unreimbursed Servicer Advances then due to such Person; and
eighth to the payment of the remainder, if any, to the Issuer or
------
any other Person legally entitled thereto.
SECTION 7.07. Limitation on Suits.
-------------------
None of the Noteholders nor the Insurer shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i) such Noteholder or the Insurer, as the case may be, has
previously given written notice to the Trustee of a continuing Event of Default;
(ii) the holders of not less than 66-2/3% of the then Outstanding
Principal Amount of the Notes or the Insurer, as the case may be, shall have
made written request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(iii) such Noteholder or Noteholders or the Insurer, as the
case may be, have offered to the Trustee indemnity satisfactory to it against
the costs, expenses and liabilities to be incurred in compliance with such
request;
(iv) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
(v) so long as any of the Notes remain Outstanding, no direction
inconsistent with such written request has been given to the Trustee during such
30-day period by the holders of 66-2/3% of the then Outstanding Principal Amount
of the Notes or the Insurer, as the case may be; and
(vi) in the case of any proceeding instituted by any Noteholder
without the written consent of the Insurer, an Insurer Default has occurred and
is continuing;
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it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb, or prejudice the rights of any other
Noteholders, or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Noteholders. It is further understood and intended that so long as any portion
of the Notes remains Outstanding, IOS Capital shall not have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture
(other than for the enforcement of Sections 3.03(b), 3.04(b), 3.05, 3.06, 4.01
and 4.02 hereof) or for the appointment of a receiver or trustee (including,
without limitation, a proceeding under the Bankruptcy Code), or for any other
remedy hereunder. Nothing in this Section 7.07 shall be construed as limiting
the rights of otherwise qualified Noteholders to petition a court for the
removal of a Trustee pursuant to Section 8.08(h) hereof.
SECTION 7.08. Unconditional Right of Noteholders to Receive Principal
-------------------------------------------------------
and Interest.
- ------------
Notwithstanding any other provision in this Indenture, other than the
provisions hereof limiting the right to recover amounts due on the Notes to
recoveries from the property of the Asset Pool, the holder of any Note shall
have the absolute and unconditional right to receive payment of the principal of
and interest on such Note on the Maturities for such payments, including the
Stated Maturity, and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Noteholder.
SECTION 7.09. Restoration of Rights and Remedies.
----------------------------------
If the Trustee, the Insurer or any Noteholder has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee, the Insurer or to such Noteholder, then and
in every such case, subject to any determination in such proceeding, the Issuer,
the Trustee, the Insurer and the Noteholders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee, the Insurer and the Noteholders continue as though no
such proceeding had been instituted.
SECTION 7.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost, or stolen Notes in Section 2.04 (f), no
right or remedy herein conferred upon or reserved to the Insurer or to the
Noteholders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
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SECTION 7.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee, the Insurer or of any holder of
any Note to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee, the Insurer or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee, the Insurer or by the Noteholders, as the case may be.
SECTION 7.12. Control by Noteholders.
----------------------
Except as may otherwise be provided in this Indenture regarding
control by the Insurer, until such time as the conditions specified in Section
11.01(a)(i) have been satisfied in full, the holders of 66-2/3% of the then
Outstanding Principal Amount of the Notes shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee.
Notwithstanding the foregoing,
(i) no such direction shall be in conflict with any rule of law or
with this Indenture;
(ii) the Trustee shall not be required to follow any such direction
which the Trustee reasonably believes might result in any personal liability on
the part of the Trustee for which the Trustee is not indemnified to its
satisfaction; and
(iii) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with any such direction; provided that the
--------
Trustee shall give notice of any such action to each Noteholder.
SECTION 7.13. Undertaking for Costs.
---------------------
All parties to this Indenture agree (and each holder of any Note by
its acceptance thereof shall be deemed to have agreed) that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the Trustee
or the Insurer, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate more than 10% of the then Outstanding
Principal Amount of the Notes, or to any suit instituted by any Noteholder for
the enforcement of the payment of the principal of or interest on any Note on or
after the Maturities for such payments, including the Stated Maturity as
applicable.
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SECTION 7.14. Waiver of Stay or Extension Laws.
--------------------------------
The Issuer covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 7.15. Sale of Asset Pool.
------------------
(a) The power to effect any sale of any portion of the Asset Pool
described pursuant to Section 7.03 shall not be exhausted by any one or more
sales as to any portion of the Asset Pool remaining unsold, but shall continue
unimpaired until the entire Asset Pool shall have been sold or all amounts
referred to in clauses first through fifth in Section 7.06 shall have been paid.
----- -----
The Trustee may from time to time, upon directions in accordance with Section
7.12, postpone any public sale by public announcement made at the time and place
of such sale. For any public sale of the Asset Pool, the Trustee shall have
provided each Noteholder with notice of such sale at least two weeks in advance
of such sale which notice shall specify the date, time and location of such
sale.
(b) To the extent permitted by applicable law, the Trustee shall not
in any private sale sell to a third party the Asset Pool, or any portion thereof
unless,
(i) until such time as the conditions specified in Section 11.01 have
been satisfied in full, the Insurer (if no Insurer Default has occurred and is
continuing) or the holders of not less than 66-2/3% of the then Outstanding
Principal Amount of the Notes (if an Insurer Default has occurred and is
continuing) consent to or direct the Trustee in writing to make such sale; or
(ii) the proceeds of such sale would be not less than the sum of all
amounts due to the Trustee hereunder and all amounts referred to in clause first
-----
through third of Section 7.06 on the Payment Date next succeeding the date of
-----
such sale.
The foregoing provisions shall not preclude or limit the ability of the Trustee
to purchase all or any portion of the Asset Pool at a private sale.
(c) In connection with a sale of all or any portion of the Asset
Pool:
(i) any one or more Noteholders or the Insurer may bid for and
purchase the property offered for sale, and upon compliance with the terms of
sale may hold, retain, and possess and dispose of such property, without further
accountability, and any Noteholder or the Insurer, as the case may be, may, in
paying the purchase money therefore, deliver in lieu of cash any Outstanding
Notes or claims for interest thereon (or, in the case of the Insurer, surrender
the Insurer's subrogation rights with respect to such Outstanding Notes or
claims for interest thereon) for credit in the amount that shall, upon
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distribution of the net proceeds of such sale, be payable thereon, and the
Notes, in case the amounts so payable thereon shall be less than the amount due
thereon, shall be returned to the Noteholders after being appropriately stamped
to show such partial payment;
(ii) the Trustee shall execute and deliver an appropriate instrument
of conveyance transferring its interest, without representation, warranty or
recourse, in any portion of the Asset Pool in connection with a sale thereof;
(iii) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its interest in any
portion of the Asset Pool in connection with a sale thereof, and to take all
action necessary to effect such sale; and
(iv) no purchaser or transferee at such a sale shall be bound to
ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(d) The method, manner, time, place and terms of any sale of all or
any portion of the Asset Pool shall be commercially reasonable.
(e) The provisions of this Section 7.15 shall not be construed to
restrict the ability of the Trustee to exercise any rights and powers against
the Issuer or the Asset Pool that are vested in the Trustee by this Indenture,
including, without limitation, the power of the Trustee to proceed against the
collateral subject to the lien of this Indenture and to institute judicial
proceedings for the collection of any deficiency remaining thereafter.
(f) The purchase price received by the Trustee in respect of any
sale made in accordance with this Section 7.15 shall be deemed conclusive and
binding on the parties hereto, the Insurer and the Noteholders.
ARTICLE VIII
THE TRUSTEE
SECTION 8.01. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default known to
the Trustee:
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and the other Transaction
Documents to which it is a party, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which
54
<PAGE>
by any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing to
the actual knowledge of a Responsible Officer of the Trustee, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own grossly negligent action, its own grossly
negligent failure to act, or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was grossly negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
the Noteholders in accordance with Section 7.12 relating to the time, method,
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or indemnity satisfactory to it, against such risk or
liability is not assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 8.02. Notice of Defaults or Events of Default.
---------------------------------------
Within two Business Days after a Responsible Officer obtaining
knowledge of the occurrence of any Default or Event of Default hereunder, the
Trustee shall transmit, by certified mail return receipt requested, hand
delivery or overnight courier, to (a) all Noteholders, as their names and
addresses appear in the Note Register, (b) the Insurer and (c) the Rating
Agencies, notice of such Default or Event of Default hereunder known to the
Trustee, unless such Default or Event of Default shall have been cured or
waived.
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SECTION 8.03. Certain Rights of Trustee.
-------------------------
(a) Subject to the provisions of Section 8.01:
(i) the Trustee may conclusively rely and shall be fully protected
in acting refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, note,
debenture, other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties (and the Trustee need not investigate any fact or matter stated in the
document);
(ii) any request or direction or action of the Issuer mentioned
herein shall be sufficiently evidenced by an Issuer Order;
(iii) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate;
(iv) the Trustee may consult with counsel as to legal matters and the
advice of any such counsel selected by the Trustee shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(v) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Noteholders or the Insurer pursuant to this Indenture, unless such
Noteholders or the Insurer shall have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
(vi) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, note,
debenture, other evidence of indebtedness, or other paper or document, unless
requested in writing to do so by the Insurer (so long as no Insurer Default has
occurred and is continuing) and having been indemnified to its satisfaction by
the Insurer against the costs, expenses and liabilities that it may incur in
making such investigation, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Issuer, personally or by agent or attorney;
(vii) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys,
custodians or nominees and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent, attorney, custodian or
nominee appointed with due care by it hereunder;
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(viii) the Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers;
(ix) the Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder;
(x) the Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on the part
of the Issuer;
(xi) the permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its gross negligence or willful default; and
(xii) in the event that the Trustee is also acting as paying agent or
transfer agent and registrar hereunder, the rights and protections afforded to
the Trustee pursuant to this Article VIII shall also be afforded to such paying
agent or transfer agent or registrar.
(b) The recitals contained herein and in the Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Issuer, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes, except to the extent provided by the Trustee's
certificate of authentication on the Notes. The Trustee shall not be accountable
for the use or application by the Issuer of the proceeds of the Notes.
SECTION 8.04. May Hold Notes.
--------------
The Trustee, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Issuer with the same
rights it would have if it were not Trustee.
SECTION 8.05. Money Held in Trust.
-------------------
Money and investments held by the Trustee shall be held in trust in
one or more trust accounts hereunder, but need not be segregated from other
funds except to the extent required by law.
SECTION 8.06. Compensation, Reimbursement, etc.
--------------------------------
The Servicer agrees:
(a) to pay to the Trustee from time to time such compensation for
all services rendered by it hereunder as the Issuer and the Trustee may agree in
writing (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust); and
57
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(b) to reimburse the Trustee upon its request, for all reasonable
expenses, disbursements, and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement, or advance as may be attributable to its
negligence or bad faith.
SECTION 8.07. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall (a) be a
corporation organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers; (b) have a combined capital and surplus
of at least $50,000,000; (c) be subject to supervision or examination by federal
or state authority; and (d) at the time of appointment, shall have long-term
debt obligations (or, if the Trustee does not have outstanding long-term debt
obligations and is a subsidiary of a holding company, which holding company
shall have long-term obligations) having a credit rating of at least "A-" from
S&P and "Baa3" from Moody's.
If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
This Indenture shall always have a Trustee who satisfies the
requirements of Section 310(a)(1) of the Trust Indenture Act. The Trustee is
subject to the provisions of Section 310(b) of the Trust Indenture Act regarding
disqualification of a trustee upon acquiring any conflicting interest.
SECTION 8.08. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 8.09.
(b) The Trustee may resign at any time by giving written notice
thereof to the Issuer, the Insurer (if no Insurer Default has occurred and is
continuing) and, if an Insurer Default has occurred and is continuing, the
Noteholders, by mailing notice of resignation by first-class mail, postage
prepaid, to the Issuer or the Insurer at their respective addresses set forth in
the Assignment and Servicing Agreement and to Noteholders at their addresses
appearing on the Note Register.
(c) The Trustee may be removed at any time by written notice of the
Insurer (if no Insurer Default has occurred and is continuing) or the holders of
not less than 66-2/3% of the then Outstanding Principal Amount of the Notes (if
an Insurer Default has occurred and is continuing) delivered to the Trustee and
the Issuer.
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(d) If the Trustee shall resign, be removed, or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Issuer, with the consent of the Insurer (if no Insurer Default has occurred and
is continuing) or the holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes (if an Insurer Default has occurred and is continuing), by
an act of the Issuer, shall promptly appoint a successor Trustee.
(e) If no successor Trustee shall have been so appointed as
hereinbefore provided and accepted appointment in the manner hereinafter
provided within 30 days after any such resignation or removal, existence of
incapability, or occurrence of such vacancy, the Trustee, the Insurer (if no
Insurer Default has occurred and is continuing) or any Noteholder (if an Insurer
Default has occurred and is continuing) may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Issuer shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Insurer at its address set forth in the Assignment and Servicing Agreement and
to all Noteholders as their names and addresses appear in the Note Register and
to each Rating Agency. Each notice shall include the name of the successor
Trustee and the address of its Corporate Trust Office.
(g) The Issuer may remove the Trustee if the Trustee fails to comply
with Section 8.07 of this Indenture.
(h) If the Trustee after written request by any Noteholder who has
been a Noteholder for at least six months fails to comply with Section 310(b) of
the Trust Indenture Act, such Noteholder may petition any court of competent
jurisdiction, for the removal of the Trustee and the appointment of a successor
Trustee acceptable to the Insurer.
(i) The Issuer (with the consent of the Insurer, if no Insurer
Default has occurred and is continuing) may and shall at the direction of the
Insurer (if no Insurer Default has occurred and is continuing) or the
Noteholders evidencing more than 25% of the aggregate Outstanding Principal
Amount of the Notes (if an Insurer Default has occurred and is continuing),
remove the Trustee if the Trustee ceases to be eligible to continue as such
under this Indenture and fails to resign after written request therefor.
SECTION 8.09. Acceptance of Appointment by Successor.
--------------------------------------
(a) Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the Issuer
or the successor Trustee, such retiring Trustee shall, upon payment of its
charges and expenses, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the
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retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Issuer shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
(b) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 8.10. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
- --------
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such Person
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. In case any Notes shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion,
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Notes so authenticated with the same effect as if such successor
Trustee had itself authenticated such Notes. The Trustee shall provide prompt
written notice to each Rating Agency of any event referenced in this Section
8.10.
SECTION 8.11. Co-Trustees and Separate Trustees.
---------------------------------
(a) At any time or times, if the Issuer, the Trustee or any Noteholder
determines that it is necessary for the purpose of meeting the legal
requirements of any jurisdiction in which any of the Asset Pool may at the time
be located, the Issuer and the Trustee (with the written consent of the Insurer,
if no Insurer Default has occurred and is continuing) shall have power to
appoint, and, upon the written request of the Trustee or the Insurer (if no
Insurer Default has occurred and is continuing) or the holders of a majority of
the then Outstanding Principal Amount of the Notes (if an Insurer Default has
occurred and is continuing), the Issuer shall for such purpose join with the
Trustee in the execution, delivery, and performance of all instruments and
agreements necessary or proper to appoint, one or more Persons either to act as
co-trustee, jointly with the Trustee, of all or any part of such Asset Pool, or
to act as separate trustee of any such property, in either case with such powers
as may be provided in the instrument of appointment, and to vest in such Person
or Persons in the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section. If the
Issuer does not join in such appointment within 15 days after the receipt by it
of a request so to do, or in case an Event of Default has occurred and is
continuing, the Trustee (if no Insurer Default has occurred and is continuing),
or the holders of a majority of the then Outstanding Principal Amount of the
Notes (if an Insurer Default has occurred and is continuing), alone shall have
power to make such appointment.
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(b) Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Issuer.
(i) Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms:
(ii) The Notes shall be authenticated and delivered and all rights,
powers, duties, and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder, shall be exercised, solely by
the Trustee.
(iii) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such appointment
shall be conferred or imposed upon and exercised or performed by the Trustee or
by the Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate trustee,
except to the extent that, under any law of any jurisdiction in which any
particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-trustee or separate
trustee.
(iv) The Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Issuer evidenced by an Issuer Order and the
written concurrence of the Insurer (if no Insurer Default has occurred and is
continuing), may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, in case an Event of Default has
occurred and is continuing, the Trustee shall have power to accept the
resignation of, or remove, any such co-trustee or separate trustee without the
concurrence of the Issuer (if no Insurer Default has occurred and is
continuing). Upon the written request of the Trustee, the Issuer shall join with
the Trustee in the execution, delivery and performance of all instruments and
agreements necessary or proper to effectuate such resignation or removal. A
successor to any co-trustee or separate trustee so resigned or removed may be
appointed in the manner provided in this Section.
(v) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee or any other such trustee
hereunder and the Trustee shall not be personally liable by reason of any act or
omission of any co-trustee or other such separate trustee hereunder selected by
the Trustee with due care or appointed in accordance with directions to the
Trustee pursuant to this Section 8.11.
(vi) Any Act of Noteholders delivered to the Trustee shall be deemed
to have been delivered to each such co-trustee and separate trustee.
SECTION 8.12. Acceptance by Trustee.
---------------------
The Trustee hereby acknowledges the conveyance of the Asset Pool and
the receipt of the Leases and the other assets in the Asset Pool granted by the
Issuer
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hereunder and declares that the Trustee, through a custodian, will hold such
Leases and other Asset Pool conveyed by the Issuer in trust, for the use and
benefit of all Noteholders and the Insurer subject to the terms and provisions
hereof.
SECTION 8.13. Preferential Collection of Claims Against the Issuer.
----------------------------------------------------
The Trustee is subject to Trust Indenture Act Section 311(a),
excluding any creditor relationship listed in Trust Indenture Act Section
311(b). A Person who has resigned or been removed as Trustee shall be subject
to Trust Indenture Act Section 311(a) to the extent indicated therein.
SECTION 8.14. Reports by Trustee to Noteholders.
---------------------------------
To the extent required by the Trust Indenture Act, within 60 days
after each October 15, following the date of this Indenture, the Trustee shall
mail to the Insurer and to Noteholders a brief report dated as of such reporting
date that complies with Trust Indenture Act Section 313(a), if such a report is
required pursuant to Trust Indenture Act Section 313(a). The Trustee also shall
comply with Trust Indenture Act Section 313(b). The Trustee shall also transmit
by mail all reports as required by Trust Indenture Act Section 313(c).
A copy of each such report required under Trust Indenture Act Section
313 shall, at the time of such transmission to Noteholders be filed with the
Commission and with each stock exchange or other market system on which the
Notes are listed. The Issuer or any other obligor upon the Notes shall notify
the Trustee in writing if the Notes become listed on any stock exchange or
market trading system.
SECTION 8.15. No Proceedings.
--------------
The Trustee hereby agrees that it will not, with respect to its fees
and expenses, directly or indirectly institute, or cause to be instituted,
against the Issuer any proceeding of the type referred to in Section 7.01(d) or
(e) so long as there shall not have elapsed one year plus one day since the
latest maturing Notes have been paid in full in cash, provided, however that
nothing herein shall prohibit the Trustee from filing proofs of claim or
otherwise participating in any such proceeding.
SECTION 8.16. Appointment and Powers.
----------------------
Subject to the terms and conditions hereof, each of the Issuer Secured
Parties hereby appoints Harris Trust and Savings Bank as the Trustee with
respect to the Asset Pool and as initial Paying Agent, and Harris Trust and
Savings Bank hereby accepts such appointment and agrees to act as Trustee with
respect to the Asset Pool for the Issuer Secured Parties, to maintain custody
and possession of the assets in the Asset Pool (except as otherwise provided
herein and in the Assignment and Servicing Agreement) and to perform the other
duties of the Trustee in accordance with the provisions of this Indenture and
the Assignment and Servicing Agreement. Each Issuer Secured Party hereby
authorizes the Trustee to take such action on its behalf, and to exercise such
rights, remedies, powers and privileges hereunder, as the Insurer (if no Insurer
Default has occurred and is continuing) or the holders of not less than 66 2/3%
of
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the then Outstanding Principal Amount of the Notes (if an Insurer Default has
occurred and is continuing) may direct and as are specifically authorized to be
exercised by the Trustee by the terms hereof, together with such actions,
rights, remedies, powers and privileges as are reasonably incidental thereto.
The Trustee shall act upon and in compliance with the written instructions of
the Insurer or the Noteholders given in accordance with the provisions of this
Indenture promptly following receipt of such written instructions; provided that
the Trustee shall not act in accordance with any instructions (i) which are not
authorized by, or in violation of the provisions of, this Indenture, (ii) which
are in violation of any applicable law, rule or regulation or (iii) for which
the Trustee has not received indemnity satisfactory to it. Receipt of such
instructions shall not be a condition to the exercise by the Trustee of its
express duties hereunder, except where this Indenture provides that the Trustee
is permitted to act only following and in accordance with such instructions.
SECTION 8.17. Performance of Duties.
----------------------
The Trustee shall have no duties or responsibilities except those
expressly set forth in this Indenture and the other Transaction Documents to
which the Trustee is a party or as directed in writing by the Insurer or the
Noteholders in accordance with this Indenture. The Trustee shall not be
required to take any discretionary action hereunder except at the written
direction and with the indemnification of the Controlling Party and as provided
in Section 7.12. The Trustee shall, and hereby agrees that it will, perform all
of the duties and obligations required of it under this Indenture and the other
Transaction Documents to which it is a party.
SECTION 8.18. Control by the Insurer.
-----------------------
The Trustee shall comply with notices and instructions given by the
Issuer only if accompanied by the written consent of the Insurer, except that if
any Event of Default has occurred and is continuing, the Trustee shall act upon
and comply with notices and instructions given by the Insurer alone in the place
and stead of the Issuer.
ARTICLE IX
COVENANTS
SECTION 9.01. Payment of Principal and Interest.
---------------------------------
The Issuer will duly and punctually pay the principal of and interest
on the Notes in accordance with the terms of the Notes and this Indenture.
SECTION 9.02. Maintenance of Office or Agency; Chief Executive
------------------------------------------------
Office.
------
(a) The Issuer will maintain at the Corporate Trust Office an office
or agency where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Issuer in respect of the
Notes and this Indenture may be served. The Issuer hereby appoints the Trustee
as its agent to receive all such presentations, surrenders, notices and demands.
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(b) The chief executive office of each of the Issuer, the Seller and
the Servicer, and the office at which each of the Issuer, the Seller and the
Servicer maintains its records with respect to the Leases, its interests in the
Equipment, and the transactions contemplated hereby, is currently located in
Macon, Georgia. None of the Issuer, the Seller or the Servicer will change the
location of such offices without giving the Trustee and the Insurer at least 30
days prior written notice thereof.
SECTION 9.03. Money for Payments to Noteholders to be Held in Trust.
-----------------------------------------------------
(a) All payments of amounts due and payable with respect to any
Notes that are to be made from amounts withdrawn from the Collection Account
pursuant to Section 3.03(b) or Section 7.06 shall be made on behalf of the
Issuer by the Trustee, and no amounts so withdrawn from the Collection Account
for payments of Notes shall be paid over to the Issuer under any circumstances
except as provided in this Section 9.03 or in Section 3.03(b), Section 3.04(b)
or Section 7.06.
(b) In making payments hereunder, the Trustee will:
(i) allocate all sums received for payment to the Noteholders on
each Payment Date among such Noteholders pursuant to Section 3.03(b) or Section
7.06, as applicable, in accordance with the information known to the Trustee;
(ii) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided; and
(iii) comply with all requirements of the Code (or any successor
statutes), and all regulations thereunder, with respect to the withholding from
any payments made by it on any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in connection
therewith.
Whenever the Issuer shall have one or more Paying Agents, it will,
prior to each due date of the principal of or interest on any Notes, deposit
with a Paying Agent a sum sufficient to pay the principal or interest so
becoming due, such sum to be held in trust for the benefit of the Noteholders
entitled to such principal or interest, and (unless such Paying Agent is the
Trustee) the Issuer will promptly notify the Trustee of its action or failure so
to act.
The Issuer will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of or
interest on Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as
herein provided, and
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(2) give the Trustee notice of any default by the Issuer (or any other
obligor upon the Notes) in the making of any payment of principal or
interest.
(c) Except as required by applicable law, any money held by the
Trustee in trust for the payment of any amount due with respect to any Note and
remaining unclaimed for three years after such amount has become due and payable
to the Noteholder shall be discharged from such trust and, subject to applicable
escheat laws, paid to the Issuer upon request; and such Noteholder shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Trustee with respect to such trust money shall
thereupon cease.
SECTION 9.04. Corporate Existence; Merger; Consolidation, etc.
-----------------------------------------------
(a) The Issuer will keep in full effect its existence and rights as
a limited liability company under the laws of the State of Delaware.
(b) The Issuer shall at all times observe and comply in all material
respects with (i) all laws applicable to it, (ii) all requisite and appropriate
organizational and other formalities in the management of its business and
affairs and the conduct of the transactions contemplated hereby and by the
Underwriting Agreement and the Assignment and Servicing Agreement.
(c) The Issuer shall not (i) consolidate or merge with or into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any other Person or (ii) commingle its assets with those of any
other Person.
SECTION 9.05. Protection of Asset Pool; Further Assurances.
--------------------------------------------
The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such Financing Statements,
continuation statements, instruments of further assurance, and other
instruments, and will take such other action as may be necessary or advisable
to:
(i) Grant more effectively all or any portion of the Asset Pool;
(ii) maintain or preserve the Lien of this Indenture or carry out
more effectively the purposes hereof;
(iii) publish notice of, or protect the validity of, any Grant made
or to be made by this Indenture and perfect the security interest contemplated
hereby in favor of the Trustee in each of the Leases, and all other property
included in the Asset Pool;
(iv) enforce or cause the Servicer to enforce any of the Leases; or
(v) preserve and defend title to the Leases (including the right to
receive all payments due or to become due thereunder), the interests in the
Equipment, or other property included in the Asset Pool and preserve and defend
the rights of the Trustee and the Noteholders in such Leases (including the
right to receive all payments due or to
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become due thereunder), interests in the Equipment and other property against
the claims of all Persons and parties.
The Issuer, upon the Issuer's failure to do so, hereby designates the Trustee
its agent and attorney-in-fact to execute any Financing Statement or
continuation statement required pursuant to this Section 9.05; provided,
--------
however, that such designation shall not be deemed to create a duty in the
- -------
Trustee to monitor the compliance of the Issuer with the foregoing covenants;
and provided, further, that the duty of the Trustee to execute any instrument
-------- -------
required pursuant to this Section 9.05 shall arise only if a Responsible Officer
of the Trustee has actual knowledge of any failure of the Issuer to comply with
the provisions of this Section 9.05.
SECTION 9.06. [Reserved].
----------
SECTION 9.07. Performance of Obligations; Assignment and Servicing
----------------------------------------------------
Agreement.
- ---------
(a) The Issuer will punctually perform and observe all of its
obligations and agreements contained in the Notes and the Transaction Documents.
(b) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any Lease or any other instrument included in the
Asset Pool, or which would result in the amendment, hypothecation,
subordination, termination, or discharge of, or impair the validity or
effectiveness of, any Lease or such other instrument, except as expressly
provided in this Indenture or the Assignment and Servicing Agreement.
(c) If any Authorized Officer shall have knowledge of the occurrence
of a default under the Assignment and Servicing Agreement, the Issuer shall
promptly notify the Trustee and the Noteholders thereof, and shall specify in
such notice the action, if any, the Issuer is taking in respect of such default.
Unless consented to by the Insurer (if no Insurer Default has occurred and is
continuing) or the holders of 66 2/3% of the then Outstanding Principal Amount
of the Notes (if an Insurer Default has occurred and is continuing), the Issuer
may not waive any default under or amend the Assignment and Servicing Agreement.
SECTION 9.08. Negative Covenants.
------------------
The Issuer will not:
(a) sell, transfer, exchange or otherwise dispose of any portion of
the Asset Pool except as expressly permitted by this Indenture;
(b) claim any credit on, or make any deduction from, the principal
of, or interest on, any of the Notes by reason of the payment of any taxes
levied or assessed upon any portion of the Asset Pool;
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(c) engage in any business or activity other than in connection
with, or relating to the ownership of, the Leases and the interests in the
Equipment, the issuance of the Notes, and the specific transactions contemplated
by the Transaction Documents;
(d) become liable for, issue, incur, assume, or allow to remain
outstanding any indebtedness, or guaranty any indebtedness of any Person, other
than the Notes, except as contemplated by this Indenture, the registration
statement filed with respect to the Notes and the Assignment and Servicing
Agreement;
(e) seek dissolution or liquidation in whole or in part or
reorganization of its business or affairs;
(f) (i) permit the validity or effectiveness of this Indenture or
any Grant hereby to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations under this Indenture,
except as may be expressly permitted hereby, (ii) permit any Lien to be created
on or to extend to or otherwise arise upon or burden the Asset Pool or any part
thereof or any interest therein or the proceeds thereof other than the lien of
this Indenture, or (iii) subject to Section 4.01(c) of the Assignment and
Servicing Agreement, permit the lien of this Indenture not to constitute a valid
first priority security interest in the Asset Pool; or
(g) make any loan or advance to any Affiliate of the Issuer or to
any other Person.
SECTION 9.09. Information as to Issuer.
------------------------
The Issuer shall deliver to the Trustee and the Insurer and, the
Trustee shall deliver to each Rating Agency and to each holder of Outstanding
Notes (and, upon the request of any Noteholder, to any prospective transferee of
any Notes):
(a) Notice of Event of Default - immediately upon becoming aware of
the existence of any condition or event which constitutes a Default or an Event
of Default, a written notice describing its nature and period of existence and
what action the Issuer is taking or proposes to take with respect thereto; and
(b) Report on Proceedings - promptly upon the Issuer's becoming
aware of (i) any proposed or pending investigation of it by any Governmental
Authority or agency, or (ii) any pending or proposed court or administrative
proceeding which involves or may involve the possibility of materially and
adversely affecting the properties, business, prospects, profits or condition
(financial or otherwise) of the Issuer, a written notice specifying the nature
of such investigation or proceeding and what action the Issuer is taking or
proposes to take with respect thereto and evaluating its merits.
SECTION 9.10. Taxes.
-----
(a) The Issuer shall pay all taxes when due and payable or levied
against its assets, properties or income, including any property that is part of
the Asset Pool.
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(b) The parties hereto agree that it is their mutual intent that,
for all applicable tax purposes, the Notes will constitute indebtedness.
Further, each party hereto and each Noteholder (by accepting and holding a Note)
hereby covenants to every other party hereto and to every other Noteholder to
treat the Notes as indebtedness for all applicable tax purposes in all tax
filings, reports and returns and otherwise, and further covenants that neither
it nor any of its Affiliates will take, or participate in the taking of or
permit to be taken, any action that is inconsistent with the treatment of the
Notes as indebtedness for tax purposes. All successors and assignees of the
parties hereto shall be bound by the provisions hereof.
SECTION 9.11. Indemnification.
---------------
The Issuer agrees to indemnify and hold harmless the Trustee (and its
officers, directors employees and agents), the Insurer and each Noteholder
(each an "Indemnified Party") against any and all liabilities, losses, damages,
penalties, costs and expenses (including costs of defense and legal fees and
expenses) which may be incurred or suffered by such Indemnified Party without
gross negligence or willful misconduct on the part of the Indemnified Party as a
result of claims, actions, suits or judgments asserted or imposed against it and
arising out of the transactions contemplated hereby or by the Assignment and
Servicing Agreement, including without limitation, any claims resulting from any
use, operation, maintenance, repair, storage or transportation of any item of
Equipment, whether or not in the Issuer's possession or under its control, and
any tort claims and any fines or penalties arising from any violation of the
laws or regulations of any Governmental Authority; provided that, all amounts
--------
payable pursuant to this Section 9.11 shall be fully subordinated to amounts
payable under the Notes, shall be without recourse to the Issuer except to the
extent that all amounts otherwise due and payable under the terms of this
Indenture have been fully paid and shall not, to the extent that such amounts
are unpaid, constitute a claim against the Issuer except to the extent that all
amounts otherwise due and payable under the terms of this Indenture have been
fully paid. This section shall survive the termination of this Indenture and
the earlier removal or resignation of the Trustee.
SECTION 9.12. Commission Reports; Reports to Trustee; Reports to
--------------------------------------------------
Noteholders.
- -----------
To the extent it has not satisfied the following requirements by
reporting under Section 9.09 hereof, the Issuer shall:
(a) file with the Trustee and the Insurer, within 15 days after the
Issuer is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports which the Issuer may
be required to file with the Commission pursuant to Section 13 or Section 15(d)
of the Exchange Act (or copies of such portions thereof as may be prescribed by
rules and regulations of the Commission); or, if the Issuer is not required to
file with the Commission information, documents or reports pursuant to either
Section 13 or Section 15(d) of the Exchange Act, then the Issuer will file with
the Trustee and with the Commission, in accordance with rules and regulations
prescribed by the Commission, such of the supplementary and periodic
information, documents and reports required pursuant to Section 13 of the
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Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed in such rules and regulations;
(b) file with the Trustee, the Insurer and with the Commission, in
accordance with the rules and regulations prescribed by the Commission, such
additional information, documents and reports with respect to compliance by the
Issuer with the conditions and covenants provided for in this Indenture as may
be required by such rules and regulations; and
(c) furnish to the Insurer and to the Trustee for distribution to
the Noteholders, as the names and addresses of such Noteholders appear in the
Note Register, in the manner and to the extent provided in Section 8.14 hereof,
such summaries of any information, documents and reports required to be filed
with the Trustee pursuant to the provisions of Subsections (a) and (b) of this
Section 9.12 as may be required to be provided to such Noteholders by the rules
and regulations of the Commission under the provisions of the Trust Indenture
Act.
ARTICLE X
SUPPLEMENTAL INDENTURES
SECTION 10.01. Supplemental Indentures Without Consent of
------------------------------------------
Noteholders.
- -----------
(a) Without the consent of any Noteholders, the Issuer, by an
Issuer Order, and the Trustee, at any time and from time to time, may, with the
consent of the Insurer (if no Insurer Default has occurred and is continuing)
enter into one or more indentures supplemental hereto, for any of the following
purposes:
(i) to add to the covenants of the Issuer for the benefit of the
Noteholders, or to surrender any right or power herein conferred upon the
Issuer;
(ii) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein; or
(iii) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or to better assure, convey and
confirm unto the Trustee any property subject or required to be subjected to the
lien of this Indenture; provided such action pursuant to this Section 10.01(a)
--------
shall not adversely affect the interests of the Noteholders in any respect or in
the reduction or withdrawal of the then current ratings of the Outstanding
Notes.
(b) The Trustee shall promptly deliver to each Noteholder and each
Rating Agency a copy of any supplemental indenture entered into pursuant to
Section 10.01(a).
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SECTION 10.02. Supplemental Indentures with Consent of Noteholders.
---------------------------------------------------
(a) With the consent of the Insurer (if no Insurer Default has
occurred and is continuing) or the holders of not less than 66-2/3% of the then
Outstanding Principal Amount of the Notes and by Act of said Noteholders
delivered to the Issuer and the Trustee (if an Insurer Default has occurred and
is continuing), the Issuer, by an Issuer Order, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Noteholders under
this Indenture; provided, that, subject to the express rights of the Insurer
--------
under the Transaction Documents, no supplemental indenture shall be entered into
if it would result in the reduction or withdrawal of the then current ratings of
the Outstanding Notes and no supplemental indenture shall, without the consent
of the holder of each Outstanding Note affected thereby:
(i) change the Stated Maturity of any Note or the Principal Payments
or Interest Payments due or to become due on any Payment Date with respect to
any Note, or change the priority of payment thereof as set forth herein, or
reduce the principal amount thereof or the Note Interest Rate thereon, or change
the place of payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Maturity thereof;
(ii) reduce the percentage of the Outstanding Principal Amount of the
Notes the consent of whose Noteholders is required for any such supplemental
indenture, for any waiver of compliance with provisions of this Indenture or
Events of Default and their consequences, or for any Act of Noteholders;
(iii) modify any of the provisions of this Section except to increase
any percentage or fraction set forth therein or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the holder of each Outstanding Note affected thereby;
(iv) modify or alter the provisions of the proviso to the definition
of the term "Outstanding"; or
(v) permit the creation of any Lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Asset Pool or,
except as provided in Sections 5.01 or 5.02, terminate the lien of this
Indenture on any property at any time subject hereto or deprive any Noteholder
of the security afforded by the lien of this Indenture.
(b) The Trustee shall promptly deliver to the Insurer and each
Noteholder and each Rating Agency a copy of any supplemental indenture entered
into pursuant to this Section 10.02.
70
<PAGE>
SECTION 10.03. Execution of Supplemental Indentures.
------------------------------------
In executing any supplemental indenture or any amendment, modification
or supplement to any other Transaction Document the Trustee and the Insurer
shall be entitled to receive, and (subject to Section 8.01) shall be, fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such instrument is authorized or permitted by this Indenture or such applicable
Transaction Document. The Trustee may, but shall not be obligated to, enter
into any supplemental indenture which affects the Trustee's own rights, duties,
obligations, immunities or indemnities under this Indenture or otherwise.
SECTION 10.04. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes, and every
Noteholder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 10.05. Reference in Notes to Supplemental Indentures.
---------------------------------------------
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Notes so modified as to conform, in the opinion of the Issuer, to any such
supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
SECTION 10.06. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment, supplement or waiver to this Indenture or the Notes
shall comply with the Trust Indenture Act as then in effect.
ARTICLE XI
SATISFACTION AND DISCHARGE
SECTION 11.01. Satisfaction and Discharge of Indenture.
---------------------------------------
(a) This Indenture shall cease to be of further effect (except as to
any surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Issuer, shall execute proper instruments provided to it acknowledging
satisfaction and discharge of this Indenture, when
(i) 100 days shall have elapsed since either
(A) all Notes theretofore authenticated and delivered (other
than (1) Notes which have been destroyed, lost or stolen and which have
71
<PAGE>
been replaced or paid as provided in Section 2.04 and (2) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to
the Issuer or discharged from such trust, as provided in Section
9.03(c)) have been delivered to the Trustee for cancellation; or
(B) the final installments of principal on all such Notes not
theretofore delivered to the Trustee for cancellation
(1) have become due and payable, or
(2) will become due and payable at their Stated Maturity,
as applicable, within one year,
and the Issuer has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on such Notes
not theretofore delivered to the Trustee for cancellation, for
principal and interest to the date of such deposit (in the case of
Notes which have become due and payable) or to the Stated Maturity
thereof;
(ii) the Issuer has paid or caused to be paid all Insurer Secured
Obligations and all Trustee Secured Obligations; and
(iii) the Issuer has delivered to the Trustee and the Insurer an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
At such time, the Trustee shall deliver to the Issuer or, upon an Issuer Order,
its assignee, all cash, securities and other property held by it as part of the
Asset Pool other than funds deposited with the Trustee pursuant to Section
11.01(a)(i)(B), for the payment and discharge of the Notes.
(b) Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Issuer to the Trustee under Sections 8.06 and
9.11, and, if money shall have been deposited with the Trustee pursuant to
Section 11.01(a)(i)(B), the obligations of the Trustee under Section 11.02 and
Section 9.03(c), shall survive.
(c) The Trustee shall provide prompt written notice to each Rating
Agency of any satisfaction and discharge of this Indenture pursuant to this
Article 11.
SECTION 11.02. Application of Trust Money.
--------------------------
Subject to the provisions of Section 9.03(c), all money deposited with
the Trustee pursuant to Sections 11.01 and 9.03 shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment to the Persons entitled thereto, of the principal and
interest for whose payment such money has been deposited with the Trustee.
72
<PAGE>
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by operation of Trust Indenture Act Section 318(a), the
duties imposed by Section 318(c) shall control.
SECTION 12.02. Communication by Noteholders with Other Noteholders.
---------------------------------------------------
Noteholders may communicate, pursuant to Trust Indenture Act Section
312(b), with other Noteholders with respect to their rights under this Indenture
or the Notes. The Issuer, the Trustee, the Note Registrar and all other parties
shall have the protection of Trust Indenture Act Section 312(c).
SECTION 12.03. Location of Leases.
------------------
Subject to the provisions of Section 1.04(e) of the Assignment and
Servicing Agreement, the Servicer shall maintain the Leases at its office in
Macon, Georgia or at such other offices of the Servicer as shall from time to
time be identified by prior written notice to the Trustee and the Insurer.
Subject to the foregoing, the Servicer may temporarily move individual Leases or
any portion thereof without notice as necessary to conduct collection and other
servicing activities.
SECTION 12.04. Officers' Certificate and Opinion of Counsel as to
--------------------------------------------------
Conditions Precedent.
- --------------------
Upon any request or application by the Issuer (or any other obligor
upon the Notes) to the Trustee to take any action under this Indenture or the
other Transaction Documents, the Issuer (or such other Obligor) shall furnish to
the Trustee and the Insurer:
(a) an Officers' Certificate (which shall include the statements set
forth in Section 12.05) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements set
forth in Section 12.05) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
73
<PAGE>
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 12.06. Nonpetition.
-----------
The Trustee shall not petition or otherwise invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its respective property, or ordering the winding up or liquidation of the
affairs of the Issuer, provided, however, that nothing herein shall prohibit the
Trustee from filing proofs of claim or otherwise participating in any such
proceedings instituted by any other Person.
74
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
IKON RECEIVABLES, LLC,
as Issuer
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By: /s/ Thomas P. Sheehan
---------------------------------
Name: Thomas P. Sheehan
Title: Treasurer
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /s/ Robert D. Foltz
---------------------------------
Name: Robert D. Foltz
Title: Vice President
IOS CAPITAL, INC., as Servicer
By: /s/ J.F. Quinn
---------------------------------
Name: J.F. Quinn
Title: Treasurer
75
<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
6.1425% CLASS A-1 LEASE-BACKED NOTE, SERIES 1999-2
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 November 15, 1999,
in accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of 6.1425% 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
November 15, 1999, Payment Date, since October 7, 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 November 15, 1999, either by check to the
registered address of the Holder of this Class A-1 Note as of the relevant
Record Date or by wire transfer to an account at a bank in the United States as
the Holder shall specify, as provided more fully in the Indenture; provided,
--------
that the final payment of principal and interest in respect of the Notes shall
be payable to the Holder of this Note only upon presentation and surrender of
<PAGE>
this Note at the Corporate Trust Office of the Trustee or at the principal
office of any Paying Agent appointed pursuant to the Indenture.
This Class A-1 Note is one of a duly authorized issue of Class A Notes
of the Issuer designated as its 6.1425% Class A-1 Lease-Backed Notes, Series
1999-2" (herein called the "Class A-1 Notes") limited in aggregate principal
amount to $235,326,000, issued under the Indenture, dated as of October 1, 1999
(herein called the "Indenture"), among the Issuer, IOS Capital Inc. as Servicer,
and Harris Trust and Savings Bank, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders and of the terms upon
which the Class A-1 Notes are authenticated and delivered. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings set
forth in the Indenture.
The Class A-1 Notes are entitled to the benefits of a financial
guarantee insurance policy issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments with respect to the Class A-1 Notes on each
Payment Date, all as more fully set forth in the Indenture.
The Stated Maturity of the Class A-1 Notes is the Payment Date in
October 2000 on which date the Outstanding Principal Amount of the Class A-1
Notes shall be due and payable.
The Class A-1 Notes are subject to redemption, without premium, at the
option of the Issuer as of any Payment Date on which the Discounted Present
Value of the Performing Leases is less than or equal to ten percent (10%) of the
aggregate Discounted Present Value of the Leases as of the Cut-Off Date after
giving effect to all principal Payment on such Payment Date.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class
A-1 Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A-1 Note will be secured by the pledge to the Trustee of
the Asset Pool.
If an Event of Default under the Indenture occurs, the Trustee shall,
at the direction of the Insurer (if no Insurer Default has occurred and is
continuing) or of Holders of not less than 66 2/3% of the aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing), and, if an Insurer Default has occurred and is continuing,
may, declare due and payable in the manner and with the effect provided in the
Indenture, the principal of all the Class A-1 Notes (but not less than all the
Class A-1 Notes). Notice of such declaration will be given by mail to
A-1-2
<PAGE>
Holders, as their names and addresses appear in the Note Register, as provided
in the Indenture. Upon payment of such principal amount together with all
accrued interest, the obligations of the Issuer with respect to the payment of
principal and interest on this Class A-1 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Insurer (with or without the
consent of any Holder of the Notes if no Insurer Default has occurred and is
continuing) or the Holders of not less than 66 2/3% in aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing). The Indenture also contains provisions permitting the
Insurer (with or without the consent of any Holder of the Notes if no Insurer
Default has occurred and is continuing) or the Holders of not less than 66 2/3%
in aggregate principal amount of the Notes at the time Outstanding (if an
Insurer Default has occurred and is continuing), on behalf of all the Holders,
to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Insurer (with or without the consent of any Holder of
the Notes if no Insurer Default has occurred and is continuing) or the Holder of
this Class A-1 Note (if an Insurer Default has occurred and is continuing) shall
be conclusive and binding upon such Holder and upon all future Holders of this
Class A-1 Note and of any Class A-1 Note issued upon the registration of
transfer hereof or in exchange here for or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Class A-1 Note or any Class
A-1 Note.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-1 Note is registrable in the
Note Register, upon surrender of this Class A-1 Note for registration of
transfer at the office or agency of the Trustee in the City of Chicago, Illinois
and at any other office or agency maintained by the Issuer for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Class A-1
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class A-1 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000,000. As provided in the Indenture
and subject to certain limitations therein set forth, Class A-1 Notes are
exchangeable for a like aggregate principal amount of Class A-1 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Insurer and any agent of the Issuer, the
Trustee or the Insurer may treat the Person in whose name this Class A-1 Note is
registered as the
A-1-3
<PAGE>
owner hereof for all purposes, whether or not this Class A-1 Note may be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
Each Noteholder, by acceptance of this Note, covenants and agrees to
treat the Notes as indebtedness for purposes of federal income, state and local
income and franchise and any other income taxes.
The Indenture and this Class A-1 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-1-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: , 1999
-----
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING,
INC., its Manager
By:
-----------------------------------
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class A-1 Notes referred to in the within mentioned
Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
-----------------------------------
Authorized Officer
A-1-5
<PAGE>
ASSIGNMENT FORM
---------------
If you the holder want to assign this Class A-1 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-1 Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________, agent to transfer this Class A-1 Note on
the books of the Issuer. The agent may substitute another to act for him.
Dated: Signed:
------------------ ------------------------
------------------------
(sign exactly as the
name appears on the
other side of this
Class A-1 Note)
Signature Guarantee
-------------------------------------------------------------
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A-1 Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A-1 Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class
A-1 Note.
A-1-6
<PAGE>
CLASS A-2 NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
IKON RECEIVABLES, LLC
6.31% CLASS A-2 LEASE-BACKED NOTE, SERIES 1999-2
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 November 15,
1999, in accordance with the Indenture. Interest will accrue on the unpaid
principal hereof from the date of issuance, at the rate of 6.31% 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 comprised
of twelve thirty day months.
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 November 15, 1999, either by check to the
registered address of the Holder of this Class A-2 Note as of the relevant
Record Date or by wire transfer to an account at a bank in the United States as
the Holder shall specify, as provided more fully in the Indenture; provided,
--------
that the final payment of principal and interest in respect of the Notes shall
be payable to the Holder of this Note only upon presentation and surrender of
this Note at the Corporate Trust Office of the Trustee or at the principal
office of any Paying Agent appointed pursuant to the Indenture.
<PAGE>
This Class A-2 Note is one of a duly authorized issue of Class A Notes
of the Issuer designated as its "6.31% Class A-2 Lease-Backed Notes, Series
1999-2" (herein called the "Class A-2 Notes") limited in aggregate principal
amount to $51,100,000 issued under the Indenture, dated as of October 1, 1999
(herein called the "Indenture"), among the Issuer, IOS Capital Inc. as Servicer,
and Harris Trust and Savings Bank, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders and of the terms upon
which the Class A-2 Notes are authenticated and delivered. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings set
forth in the Indenture.
The Class A-2 Notes are entitled to the benefits of a financial
guarantee insurance policy issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments with respect to the Class A-2 Notes on each
Payment Date, all as more fully set forth in the Indenture.
The Stated Maturity of the Class A-2 Notes is the Payment Date in May
2001 on which date the Outstanding Principal Amount of the Class A-2 Notes shall
be due and payable.
The Class A-2 Notes are subject to redemption, without premium, at the
option of the Issuer as of any Payment Date on which the Discounted Present
Value of the Performing Leases is less than or equal to ten percent (10%) of the
aggregate Discounted Present Value of the Leases as of the Cut-Off Date after
giving effect to all principal Payment on such Payment Date.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class A-
2 Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A-2 Note will be secured by the pledge to the Trustee of
the Asset Pool.
If an Event of Default under the Indenture occurs, the Trustee shall,
at the direction of the Insurer (if no Insurer Default has occurred and is
continuing) or of Holders of not less than 66 2/3% of the aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing), and, if an Insurer Default has occurred and is continuing,
may, declare due and payable in the manner and with the effect provided in the
Indenture, the principal of all the Class A-2 Notes (but not less than all the
Class A-2 Notes). Notice of such declaration will be given by mail to Holders,
as their names and addresses appear in the Note Register, as provided in the
Indenture. Upon payment of such principal amount together with all accrued
interest, the
A-2-2
<PAGE>
obligations of the Issuer with respect to the payment of principal and interest
on this Class A-2 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Insurer (with or without the
consent of any Holder of the Notes if no Insurer Default has occurred and is
continuing) or the Holders of not less than 66-2/3% in aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing). The Indenture also contains provisions permitting the
Insurer (with or without the consent of any Holder of the Notes if no Insurer
Default has occurred and is continuing) or the Holders of not less than 66 2/3%
in aggregate principal amount of the Notes at the time Outstanding (if an
Insurer Default has occurred and is continuing), on behalf of all the Holders,
to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Insurer (with or without the consent of any Holder of
the Notes if no Insurer Default has occurred and is continuing) or the Holder of
this Class A-2 Note (if an Insurer Default has occurred and is continuing) shall
be conclusive and binding upon such Holder and upon all future Holders of this
Class A-2 Note and of any Class A-2 Note issued upon the registration of
transfer hereof or in exchange here for or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Class A-2 Note or any Class
A-2 Note.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-2 Note is registrable in the
Note Register, upon surrender of this Class A-2 Note for registration of
transfer at the office or agency of the Trustee in the City of Chicago, Illinois
and at any other office or agency maintained by the Issuer for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Class A-2
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class A-2 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000,000. As provided in the Indenture
and subject to certain limitations therein set forth, Class A-2 Notes are
exchangeable for a like aggregate principal amount of Class A-2 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Insurer and any agent of the Issuer, the
Trustee or the Insurer may treat the Person in whose name this Class A-2 Note is
registered as the owner hereof for all purposes, whether or not this Class A-2
Note may be overdue, and
A-2-3
<PAGE>
neither the Issuer, the Trustee nor any such agent shall be affected by notice
to the contrary.
Each Noteholder, by acceptance of this Note, covenants and agrees to
treat the Notes as indebtedness for purposes of federal income, state and local
income and franchise and any other income taxes.
The Indenture and this Class A-2 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-2-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: , 1999
-----
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING,
INC., its Manager
By:
--------------------------------
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class A-2 Notes referred to in the within mentioned
Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
--------------------------------
Authorized Officer
A-2-5
<PAGE>
ASSIGNMENT FORM
---------------
If you the holder want to assign this Class A-2 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-2 Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________, agent to transfer this Class A-2 Note on
the books of the Issuer. The agent may substitute another to act for him.
Dated: Signed:
------------------ -------------------------
-------------------------
(sign exactly as the name
appears on the other side
of this Class A-2 Note)
Signature Guarantee
-------------------------------------------------------------
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A-2 Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A-2 Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class A-
2 Note.
A-2-6
<PAGE>
Class A-3a Note
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
IKON RECEIVABLES, LLC
6.59% CLASS A-3a LEASE-BACKED NOTE, SERIES 1999-2
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 November 15,
1999, in accordance with the Indenture. Interest will accrue on the unpaid
principal hereof from the date of issuance, at the rate of 6.59% 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 comprised
of twelve thirty day months.
Principal and interest on this Class A-3a 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 November 15, 1999, either by check to the
registered address of the Holder of this Class A-3a Note as of the relevant
Record Date or by wire transfer to an account at a bank in the United States as
the Holder shall specify, as provided more fully in the Indenture; provided,
--------
that the final payment of principal and interest in respect of the Notes shall
be payable to the Holder of this Note only upon presentation and surrender of
this Note at the Corporate Trust Office of the Trustee or at the principal
office of any Paying Agent appointed pursuant to the Indenture.
<PAGE>
This Class A-3a Note is one of a duly authorized issue of Class A
Notes of the Issuer designated as its "6.59% Class A-3a Lease-Backed Notes,
Series 1999-2" (herein called the "Class A-3a Notes") limited in aggregate
principal amount to $100,000,000, issued under the Indenture, dated as of
October 1, 1999 (herein called the "Indenture"), among the Issuer, IOS Capital
Inc. as Servicer, and Harris Trust and Savings Bank, as Trustee (herein called
the "Trustee", which term includes any successor trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Issuer, the Trustee and the Holders and of the
terms upon which the Class A-3a Notes are authenticated and delivered. Unless
otherwise defined herein, all capitalized terms used herein shall have the
meanings set forth in the Indenture.
The Class A-3a Notes are entitled to the benefits of a financial
guarantee insurance policy issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments with respect to the Class A-3a Notes on each
Payment Date, all as more fully set forth in the Indenture.
The Stated Maturity of the Class A-3a Notes is the Payment Date in
August 2003, on which date the Outstanding Principal Amount of the Class A-3a
Notes shall be due and payable.
The Class A-3a Notes are subject to redemption, without premium, at
the option of the Issuer as of any Payment Date on which the Discounted Present
Value of the Performing Leases is less than or equal to ten percent (10%) of the
aggregate Discounted Present Value of the Leases as of the Cut-Off Date after
giving effect to all principal Payment on such Payment Date.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class A-
3a Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A-3a Note will be secured by the pledge to the Trustee of
the Asset Pool.
If an Event of Default under the Indenture occurs, the Trustee shall,
at the direction of the Insurer (if no Insurer Default has occurred and is
continuing) or of Holders of not less than 66-2/3% of the aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing), and, if an Insurer Default has occurred and is continuing,
may, declare due and payable in the manner and with the effect provided in the
Indenture, the principal of all the Class A-3a Notes (but not less than all the
Class A-3a Notes). Notice of such declaration will be given by mail to Holders,
as their names and addresses appear in the Note Register, as provided in the
Indenture. Upon payment of such principal amount together with all accrued
interest, the
A-3a-2
<PAGE>
obligations of the Issuer with respect to the payment of principal and interest
on this Class A-3a Note shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Insurer (with or without the
consent of any Holder of the Notes if no Insurer Default has occurred and is
continuing) or the Holders of not less than 66-2/3% in aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing). The Indenture also contains provisions permitting the
Insurer (with or without the consent of any Holder of the Notes if no Insurer
Default has occurred and is continuing) or the Holders of not less than 66-2/3
in aggregate principal amount of the Notes at the time Outstanding (if an
Insurer Default has occurred and is continuing), on behalf of all the Holders,
to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Insurer (with or without the consent of any Holder of
the Notes if no Insurer Default has occurred and is continuing) or the Holder of
this Class A-3a Note (if an Insurer Default has occurred and is continuing)
shall be conclusive and binding upon such Holder and upon all future Holders of
this Class A-3a Note and of any Class A-3a 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-3a Note or any
Class A-3a Note.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-3a Note is registrable in the
Note Register, upon surrender of this Class A-3a Note for registration of
transfer at the office or agency of the Trustee in the City of Chicago, Illinois
and at any other office or agency maintained by the Issuer for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Class A-3a
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class A-3a 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-3a Notes are
exchangeable for a like aggregate principal amount of Class A-3a Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Insurer and any agent of the Issuer, the
Trustee or the Insurer may treat the Person in whose name this Class A-3a Note
is registered as the owner hereof for all purposes, whether or not this Class
A-3a Note may be overdue,
A-3a-3
<PAGE>
and neither the Issuer, the Trustee nor any such agent shall be affected by
notice to the contrary.
Each Noteholder, by acceptance of this Note, covenants and agrees to
treat the Notes as indebtedness for purposes of federal income, state and local
income and franchise and any other income taxes.
The Indenture and this Class A-3a 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-3a-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING,
INC., its Manager
By:
--------------------------
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class A-3a Notes referred to in the within
mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
--------------------------
Authorized Officer
A-3a-5
<PAGE>
ASSIGNMENT FORM
---------------
If you the holder want to assign this Class A-3a Note, fill in the
form below and have your signature guaranteed:
I or we assign and transfer this Class A-3a 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-3a 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-3a 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-3a 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-3a Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class
A-3a Note.
A-3a-6
<PAGE>
Class A-3b 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-3b LEASE-BACKED NOTE, SERIES 1999-2
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 on each Payment Date, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, for each Interest Accrual Period at the rate
per annum equal to the sum of .36% and LIBOR for that Interest Accrual Period,
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 that Interest Accrual Period. Interest accruing as
provided above for each Interest Accrual Period will be payable on the Payment
Date corresponding to that Interest Accrual Period.
Principal and interest on this Class A-3b 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 November 15, 1999, either by check to the
registered address of the Holder of this Class A-3b 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.
This Class A-3b Note is one of a duly authorized issue of Class A
Notes of the Issuer designated as its "Class A-3b Lease-Backed Notes, Series
1999-2" (herein called the "Class A-3b Notes") limited in aggregate principal
amount to $240,891,000, issued under the Indenture, dated as of October 1, 1999
(herein called the "Indenture"), among the Issuer, IOS Capital Inc. as Servicer,
and Harris Trust and Savings Bank, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders and of the terms upon
which the Class A-3b Notes are authenticated and delivered. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings set
forth in the Indenture.
The Class A-3b Notes are entitled to the benefits of a financial
guarantee insurance policy issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments with respect to the Class A-3b Notes on each
Payment Date, all as more fully set forth in the Indenture.
The Stated Maturity of the Class A-3b Notes is the Payment Date in
August 2003, on which date the Outstanding Principal Amount of the Class A-3b
Notes shall be due and payable.
The Class A-3b Notes are subject to redemption, without premium, at
the option of the Issuer as of any Payment Date on which the Discounted Present
Value of the Performing Leases is less than or equal to ten percent (10%) of the
aggregate Discounted Present Value of the Leases as of the Cut-Off Date after
giving effect to all principal Payment on such Payment Date.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class A-
3b Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A-3b Note will be secured by the pledge to the Trustee of
the Asset Pool.
If an Event of Default under the Indenture occurs, the Trustee shall,
at the direction of the Insurer (if no Insurer Default has occurred and is
continuing) or of Holders of not less than 66-2/3% of the aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing), and, if an Insurer Default has occurred and is continuing,
may, declare due and payable in the manner and with the effect provided in the
Indenture, the principal of all the Class A-3b Notes (but not less than all the
Class A-3b Notes). Notice of such declaration will be given by mail
A-3b-2
<PAGE>
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-3b Note shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Insurer (with or without the
consent of any Holder of the Notes if no Insurer Default has occurred and is
continuing) or the Holders of not less than 66-2/3% in aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing). The Indenture also contains provisions permitting the
Insurer (with or without the consent of any Holder of the Notes if no Insurer
Default has occurred and is continuing) or the Holders of not less than 66-2/3
in aggregate principal amount of the Notes at the time Outstanding (if an
Insurer Default has occurred and is continuing), on behalf of all the Holders,
to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Insurer (with or without the consent of any Holder of
the Notes if no Insurer Default has occurred and is continuing) or the Holder of
this Class A-3b Note (if an Insurer Default has occurred and is continuing)
shall be conclusive and binding upon such Holder and upon all future Holders of
this Class A-3b Note and of any Class A-3b 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-3b Note or any
Class A-3b Note.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-3b Note is registrable in the
Note Register, upon surrender of this Class A-3b Note for registration of
transfer at the office or agency of the Trustee in the City of Chicago, Illinois
and at any other office or agency maintained by the Issuer for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Class A-3b
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class A-3b 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-3b Notes are
exchangeable for a like aggregate principal amount of Class A-3b Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Insurer and any agent of the Issuer, the
Trustee or the Insurer may treat the Person in whose name this Class A-3b Note
is registered as
A-3b-3
<PAGE>
the owner hereof for all purposes, whether or not this Class A-3b Note may be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
Each Noteholder, by acceptance of this Note, covenants and agrees to
treat the Notes as indebtedness for purposes of federal income, state and local
income and franchise and any other income taxes.
The Indenture and this Class A-3b 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-3b-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING,
INC., its Manager
By:
---------------------------
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class A-3b Notes referred to in the within
mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
---------------------------
Authorized Officer
A-3b-5
<PAGE>
ASSIGNMENT FORM
---------------
If you the holder want to assign this Class A-3b Note, fill in the
form below and have your signature guaranteed:
I or we assign and transfer this Class A-3b 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-3b 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-3b 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-3b 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-3b Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class
A-3b Note.
A-3b-6
<PAGE>
CLASS A-4 NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
IKON RECEIVABLES, LLC
6.88% CLASS A-4 LEASE-BACKED NOTE, SERIES 1999-2
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 November 15,
1999, in accordance with the Indenture. Interest will accrue on the unpaid
principal hereof from the date of issuance, at the rate of 6.88% 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 comprised
of twelve thirty day months.
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 November 15, 1999, either by check to the
registered address of the Holder of this Class A-4 Note as of the relevant
Record Date or by wire transfer to an account at a bank in the United States as
the Holder shall specify, as provided more fully in the Indenture; provided,
--------
that the final payment of principal and interest in respect of the Notes shall
be payable to the Holder of this Note only upon presentation and surrender of
this Note at the Corporate Trust Office of the Trustee or at the principal
office of any Paying Agent appointed pursuant to the Indenture.
<PAGE>
This Class A-4 Note is one of a duly authorized issue of Class A Notes
of the Issuer designated as its "6.88% Class A-4 Lease-Backed Notes, Series
1999-2" (herein called the "Class A-4 Notes") limited in aggregate principal
amount to $72,278,000, issued under the Indenture, dated as of October 1, 1999
(herein called the "Indenture"), among the Issuer, IOS Capital Inc. as Servicer,
and Harris Trust and Savings Bank, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Trustee and the Holders and of the terms upon
which the Class A-4 Notes are authenticated and delivered. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings set
forth in the Indenture.
The Class A-4 Notes are entitled to the benefits of a financial
guarantee insurance policy issued by Ambac Assurance Corporation (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Insured Payments with respect to the Class A-4 Notes on each
Payment Date, all as more fully set forth in the Indenture.
The Stated Maturity of the Class A-4 Notes is the Payment Date in
November 2005, on which date the Outstanding Principal Amount of the Class A-4
Notes shall be due and payable.
The Class A-4 Notes are subject to redemption, without premium, at the
option of the Issuer as of any Payment Date on which the Discounted Present
Value of the Performing Leases is less than or equal to ten percent (10%) of the
aggregate Discounted Present Value of the Leases as of the Cut-Off Date after
giving effect to all principal Payment on such Payment Date.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Class
A-4 Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A-4 Note will be secured by the pledge to the Trustee of
the Asset Pool.
If an Event of Default under the Indenture occurs, the Trustee shall,
at the direction of the Insurer (if no Insurer Default has occurred and is
continuing) or of Holders of not less than 66-2/3% of the aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing), and, if an Insurer Default has occurred and is continuing,
may, declare due and payable in the manner and with the effect provided in the
Indenture, the principal of all the Class A-4 Notes (but not less than all the
Class A-4 Notes). Notice of such declaration will be given by mail to Holders,
as their names and addresses appear in the Note Register, as provided in the
Indenture. Upon payment of such principal amount together with all accrued
interest, the
A-4-2
<PAGE>
obligations of the Issuer with respect to the payment of principal and interest
on this Class A-4 Note shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders under the Indenture at any time by the
Issuer and the Trustee with the consent of the Insurer (with or without the
consent of any Holder of the Notes if no Insurer Default has occurred and is
continuing) or the Holders of not less than 66-2/3% in aggregate principal
amount of the Notes at the time Outstanding (if an Insurer Default has occurred
and is continuing). The Indenture also contains provisions permitting the
Insurer (with or without the consent of any Holder of the Notes if no Insurer
Default has occurred and is continuing) or the Holders of not less than 66-2/3%
in aggregate principal amount of the Notes at the time Outstanding (if an
Insurer Default has occurred and is continuing), on behalf of all the Holders,
to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Insurer (with or without the consent of any Holder of
the Notes if no Insurer Default has occurred and is continuing) or the Holder of
this Class A-4 Note (if an Insurer Default has occurred and is continuing) shall
be conclusive and binding upon such Holder and upon all future Holders of this
Class A-4 Note and of any Class A-4 Note issued upon the registration of
transfer hereof or in exchange here for or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Class A-4 Note or any Class
A-4 Note.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Class A-4 Note is registrable in the
Note Register, upon surrender of this Class A-4 Note for registration of
transfer at the office or agency of the Trustee in the City of Chicago, Illinois
and at any other office or agency maintained by the Issuer for that purpose,
duly endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Class A-4
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Class A-4 Notes are issuable only in registered form without
coupons in minimum denominations of $1,000,000. As provided in the Indenture
and subject to certain limitations therein set forth, Class A-4 Notes are
exchangeable for a like aggregate principal amount of Class A-4 Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Issuer, the Trustee, the Insurer and any agent of the Issuer, the
Trustee or the Insurer may treat the Person in whose name this Class A-4 Note is
registered as the owner hereof for all purposes, whether or not this Class A-4
Note may be overdue, and
A-4-3
<PAGE>
neither the Issuer, the Trustee nor any such agent shall be affected by notice
to the contrary.
Each Noteholder, by acceptance of this Note, covenants and agrees to
treat the Notes as indebtedness for purposes of federal income, state and local
income and franchise and any other income taxes.
The Indenture and this Class A-4 Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
A-4-4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated: _____, 1999
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING, INC., its Manager
By:
-----------------------------------------------
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class A-4 Notes referred to in the within mentioned
Indenture.
HARRIS TRUST AND SAVINGS BANK, as Trustee
By:
-----------------------------------------------
Authorized Officer
A-4-5
<PAGE>
ASSIGNMENT FORM
---------------
If you the holder want to assign this Class A-4 Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class A-4 Note to:
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
(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.
<TABLE>
<CAPTION>
<S> <C>
Dated: ________________ Signed:____________________________________
____________________________________
(sign exactly as the name
appears on the other side of
this Class A-4 Note)
</TABLE>
Signature Guarantee_____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A-4 Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A-4 Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class
A-4 Note.
A-4-6
<PAGE>
[LETTERHEAD OF AMBAC APPEARS HERE]
Exhibit 4.2
Insured Obligations: $699,595,000 Policy Number: AB0306BE
IKON Receivables, LLC Lease-
Backed Notes, Series 1999-2,
Class A-1, Class A-2, Class A-3a,
Class A-3b and Class A-4
Premium: Calculated as set forth in
the Certificate Guaranty Insurance
Policy Endorsement attached hereto
Ambac Assurance Corporation (Ambac) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees unconditionally and irrevocably to pay to the Trustee for
the benefit of the Holders of the Insured Obligations, that portion of the
Insured Amounts which shall become Due for Payment but shall be unpaid by reason
of Nonpayment.
Ambac will make such payments to the Trustee from its own funds on the later of
(a) one (1) Business Day following notification to Ambac of Nonpayment or (b)
the Business Day on which the Insured Amounts are Due for Payment. Such payments
of principal or interest shall be made only upon presentation of an instrument
of assignment in form and substance satisfactory to Ambac, transferring to Ambac
all rights under such Insured Obligations to receive the principal of and
interest on the Insured Obligation. Ambac shall be subrogated to all the
Holders' rights to payment on the Insured Obligations to the extent of the
insurance disbursements so made. Once payments of the Insured Amounts have been
made to the Trustee, Ambac shall have no further obligation hereunder in respect
of such Insured Amounts.
In the event the Trustee for the Insured Obligations has notice that any payment
of principal or interest on an Insured Obligation which has become Due for
Payment and which is made to a Holder by or on behalf of the Trustee has been
deemed a preferential transfer and theretofore recovered from its Holder
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction, such Holder will be
entitled to payment from Ambac to the extent of such recovery if sufficient
funds are not otherwise available.
This Policy is noncancelable by Ambac for any reason, including failure to
receive payment of any premium due hereunder. The premium on this Policy is not
refundable for any reason. This Policy does not insure against loss of any
prepayment or other acceleration payment which at any time may become due in
respect of any Insured Obligation, other than at the sole option of Ambac, nor
against any risk other than Nonpayment, including failure of the Trustee to make
any payment due Holders of Insured Amounts.
To the fullest extent permitted by applicable law, Ambac hereby waives and
agrees not to assert any and all rights and defenses, to the extent such rights
and defenses may be available to Ambac, to avoid payment of its obligations
under this Policy in accordance with the express provisions hereof.
Any capitalized terms not defined herein shall have the meaning given such terms
in the endorsement attached hereto or in the Agreement.
In witness whereof, Ambac has caused this Policy to be affixed with its
corporate seal and to be signed by its duly authorized officers in facsimile to
become effective as their original signatures and binding upon Ambac by virtue
of the countersignature of its duly authorized representative.
P. Lassiter (SEAL) Stephen D. Cooke
/s/ Philip Lassiter /s/ Stephen D. Cooke
President Secretary
Barry Schofield
/s/ Barry Schofield
Authorized Representative
Effective Date: October 7, 1999
<PAGE>
Execution Copy
CERTIFICATE GUARANTY INSURANCE ENDORSEMENT
Attached to and forming Effective Date of Endorsement:
part of Policy #AB0306BE October 7, 1999
issued to:
Harris Trust and Savings Bank,
as Indenture Trustee for the Holders of
IKON Receivables, LLC Lease-Backed Notes
For purposes of this Policy, the following terms shall have the following
meanings:
"Certificate Insurance Policy" or "Policy" shall mean this Certificate
Guaranty Insurance Policy together with each and every endorsement hereto.
"Due for Payment" shall mean, with respect to any Insured Amount, such
amount is due and payable pursuant to the terms of the Indenture.
"First Payment Date" shall mean November 15, 1999.
"Holder" shall mean any person who is the registered owner or beneficial
owner of any Note.
"Indenture" shall mean the Indenture dated as of October 1, 1999 among IKON
Receivables, LLC, as Issuer, IOS Capital, Inc., as Servicer and Harris Trust and
Savings Bank, as Indenture Trustee, as such Indenture may be amended, modified
or supplemented from time to time as set forth in the Indenture.
"Indenture Trustee" shall mean Harris Trust and Savings Bank or its
successor-in-interest, in its capacity as trustee under the Indenture, or if any
successor trustee or any co-trustee shall be appointed as provided therein, the
"Indenture Trustee" shall also mean such successor trustee or such co-trustee,
as the case may be, subject to the provisions thereof.
"Insolvency Proceeding" means the commencement, after the date hereof, of
any bankruptcy, insolvency, readjustment or debt, reorganization, marshaling of
assets and liabilities or similar proceedings by or against the Indenture
Trustee as debtor, or the commencement, after the date hereof, of any
proceedings by or against the Indenture Trustee as debtor for the winding up or
the liquidation of its affairs, or the consent after the date hereof to the
appointment of a trustee, conservator, receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, reorganization, marshaling of assets and
liabilities or similar proceedings relating to the Indenture Trustee as debtor.
<PAGE>
"Insurance Agreement" shall mean the Insurance and Indemnity Agreement,
dated as of October 7, 1999, among IKON Receivables, LLC, as Issuer, IKON
Receivables-I, LLC, as Seller, IOS Capital, Inc., as Originator and Servicer,
Harris Trust and Savings Bank, as Indenture Trustee and Ambac Assurance
Corporation, as Insurer, as such agreement may be amended, modified or
supplemented from time to time.
"Insured Amounts" shall mean, with respect to any Payment Date, the
Deficiency Amount for such Payment Date.
"Insured Payments" shall mean, (i) with respect to any Payment Date, the
aggregate amount actually paid by the Insurer to the Indenture Trustee in
respect of Insured Amounts for such Payment Date and (ii) Preference Amounts for
any given Business Day.
"Insurer" shall mean Ambac Assurance Corporation, a Wisconsin domiciled
stock insurance corporation, or any successor thereto, as issuer of the
Certificate Insurance Policy.
"Late Payment Rate" shall mean for any Payment Date, the greater of (i) the
rate of interest, as it is publicly announced by Citibank, N.A. at its principal
office in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 2% and (ii) the then applicable highest rate of interest on the Notes. The
- ----
Late Payment Rate shall be computed on the basis of a year of 360 days and the
actual number of days elapsed. In no event shall the Late Payment Rate exceed
the maximum rate permissible under any applicable law limiting interest rates.
"Nonpayment" shall mean, with respect to any Payment Date, an Insured
Amount is Due for Payment but has not been paid pursuant to the Indenture.
"Notice" shall mean the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A or B, as
applicable, to the Policy, the original of which is subsequently delivered by
registered or certified mail, from the Indenture Trustee specifying the amount
of any Insured Payment which shall be due and owing.
"Payment Date" shall mean the 15th day of each month (or if such day is not
a Business Day, the first Business Day immediately following) beginning with the
First Payment Date and ending on November 15, 2005.
"Preference Amount" means any payment of principal or interest on a Note
which has become Due for Payment and which was made to a Holder by or on behalf
of the Indenture Trustee which has been deemed a preferential transfer and
recoverable, or
<PAGE>
theretofore recovered, from its Holder pursuant to the United States Bankruptcy
Code in accordance with a final, nonappealable order of a court of competent
jurisdiction.
"Premium Percentage" shall have the meaning set forth in the Insurance
Agreement.
"Reimbursement Amount" shall mean, as of any date, the sum of (x) (i) all
Insured Payments paid by the Insurer, but for which the Insurer has not been
reimbursed prior to such date pursuant to Section 3.03(b) or 7.06 of the
Indenture, plus (ii) interest accrued thereon, calculated at the Late Payment
----
Rate from the date the Indenture Trustee received the related Insured Payments,
or the date such Insured Payments were made, in the case of Insured Payments
consisting of Preference Amounts not made to the Indenture Trustee and (y)
without duplication (i) any amounts then due and owing to the Insurer under the
Insurance Agreement plus (ii) interest on such amounts at the Late Payment Rate
----
from the date such amounts were due.
Capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them in the Indenture.
Notwithstanding any other provision of this Policy, the Insurer will pay
any Insured Amount payable hereunder no later than 12:00 noon, New York City
time, on the later of the Payment Date on which the related Insured Amount is
due or the third Business Day following receipt in New York, New York on a
Business Day by the Insurer of a Notice; provided that, if such Notice is
received after 12:00 noon, New York City time, on such Business Day, it will be
deemed to be received on the following Business Day. If any such Notice is not
in proper form or is otherwise insufficient for the purpose of making a claim
under the Policy, it shall be deemed not to have been received for purposes of
this paragraph, and the Insurer shall promptly so advise the Indenture Trustee
in writing and the Indenture Trustee may submit an amended Notice.
The Insurer shall pay any Preference Amount when due to be paid pursuant to
the Order referred to below, but in any event no earlier than the third Business
Day following receipt by the Insurer of (i) a certified copy of a final, non-
appealable order of a court or other body exercising jurisdiction in such
Insolvency Proceeding to the effect that the Holder is required to return such
Preference Amount paid during the term of this Policy because the payments of
such amounts were avoided as a preferential transfer or otherwise rescinded or
required to be restored by the Holder (the "Order"), (ii) a certificate by or on
behalf of the Holder that the Order has been entered and is not subject to any
stay, (iii) an assignment, in form and substance satisfactory to the Insurer,
duly executed and delivered by the Holder, irrevocably assigning to the Insurer
all rights and claims of the Holder relating to or arising under the Indenture
against the estate of the Indenture Trustee or otherwise with respect to such
Preference Amount and (iv) a Notice appropriately completed and executed by the
Indenture Trustee. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
and not to the Indenture Trustee or the Holder directly, unless the Indenture
Trustee or the Holder has made a payment of the Preference Amount to the court
or such receiver,
<PAGE>
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
in which case the Insurer will pay the Indenture Trustee, subject to the
delivery of (a) the items referred to in clauses (i), (ii), (iii) and (iv) above
to the Insurer and (b) evidence satisfactory to the Insurer that payment has
been made to such court or receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Order.
The Insurer hereby agrees that if it shall be subrogated to the rights of
Holders by virtue of any previous payment under this Policy, no recovery of such
payment will occur unless the full amount of the Holders' allocable
distributions with respect to such payment can be made. In so doing, the
Insurer does not waive its rights to seek full payment of all Reimbursement
Amounts owed to it under the Indenture.
The terms and provisions of the Indenture constitute the instrument of
assignment referred to in the second paragraph of the face of this Policy.
A premium will be payable on this Policy on each Payment Date as provided
in Section 3.03 of the Indenture, beginning with the First Payment Date, in an
amount equal to the Premium.
THE INSURANCE PROVIDED BY THE POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
The Policy to which this Endorsement is attached and of which it forms a
part is hereby amended to provide that there shall be no acceleration payment
due under the Policy unless such acceleration is at the sole option of the
Insurer.
Nothing herein contained shall be held to vary, alter, waive or extend any
of the terms, conditions, provisions, agreements or limitations of the above
mentioned Policy other than as above stated.
This Policy is issued under the pursuant to, and shall be construed under,
the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Ambac Assurance Corporation has caused this
Endorsement to the Policy to be signed by its duly authorized officers.
Attest:
/s/ Nora Dahlman /s/ Barry Schofield
- ---------------------------- ---------------------------
Assistant Secretary Vice President
<PAGE>
A-1
EXHIBIT A
TO THE CERTIFICATE GUARANTY INSURANCE POLICY
Policy No. AB0306BE
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF INSURED AMOUNTS
Date: [ ]
AMBAC ASSURANCE CORPORATION
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to Certificate Guaranty Insurance Policy No. AB0306BE
(the "Policy") issued by Ambac Assurance Corporation ("Ambac"). Terms
capitalized herein and not otherwise defined shall have the meanings specified
in the Policy and the Indenture, as the case may be, unless the context
otherwise requires.
The Indenture Trustee hereby certifies as follows:
1. The Indenture Trustee is the Indenture Trustee under the Indenture for
the Holders.
2. The relevant Payment Date is [date].
3. Payment on the Notes in respect of the Payment Date is due to be
received on _________ under the Indenture, in an amount equal to
$________.
4. There is a Deficiency Amount of $_______ in respect of the Notes,
which amount is an Insured Amount which is Due for Payment pursuant to
the terms of the Indenture.
5. The Indenture Trustee has not heretofore made a demand for the Insured
Amount in respect of the Payment Date.
6. The Indenture Trustee hereby requests the payment of the Insured
Amount that is Due for Payment be made by Ambac under the Policy and
directs that payment under the Policy be made to the following account
by bank wire transfer of federal
<PAGE>
A-2
or other immediately available funds in accordance with the terms of
the Policy to:_____________ Indenture Trustee's account number.
7. The Indenture Trustee hereby agrees that, following receipt of the
Insured Payment from Ambac, it shall (a) hold such amounts in trust
and apply the same directly to the distribution of payment on the
Notes when due; (b) not apply such funds for any other purpose; (c)
deposit such funds to the Collection Account; and (d) maintain an
accurate record of such payments with respect to each Note and the
corresponding claim on the Policy and proceeds thereof.
By:
------------------------------
Indenture Trustee
Title:
---------------------------
(Officer)
<PAGE>
B-1
EXHIBIT B
TO THE CERTIFICATE GUARANTY INSURANCE POLICY
Policy No. AB0306BE
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF PREFERENCE AMOUNT
Date: [ ]
AMBAC ASSURANCE CORPORATION
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to Certificate Guaranty Insurance Policy No. AB0306BE
(the "Policy") issued by Ambac Assurance Corporation ("Ambac"). Terms
capitalized herein and not otherwise defined shall have the meanings specified
in the Policy and the Indenture, as the case may be, unless the context
otherwise requires.
The Indenture Trustee hereby certifies as follows:
1. The Indenture Trustee is the Indenture Trustee under the Indenture for
the Holders.
2. A payment previously made on the Notes has become a Preference Amount,
as indicated by the attached Order.
3. The Holder of the applicable Notes has certified that the Order has
been entered and is not subject to stay.
4. The amount of the Preference Amount is $______, and consists of
interest on the Notes in the amount of $______ paid on _______,
_______, [and principal paid on the Notes in the amount of $______
paid on ______, _______.]
5. Neither the Indenture Trustee nor the Holder has heretofore made a
demand for such Preference Amount.
6. The Indenture Trustee hereby requests the payment of the Insured
Payment be made by Ambac under the Policy and directs that payment
under the Policy be
<PAGE>
B-2
made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the
Policy to:_______./1/
7. The Indenture Trustee hereby agrees that if such Insured Payment is
made to it, following receipt of such Insured Payment from Ambac, it
shall (a) hold such amounts in trust and apply the same directly to
the Holder for payment of the Preference Amount; (b) not apply such
funds for any other purpose; and (c) maintain an accurate record of
such payments with respect to each Note and the corresponding claim on
the Policy and proceeds thereof.
By:
------------------------------
Indenture Trustee
Title:
---------------------------
(Officer)
- -----------------
/1/ The account of the relevant receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Order, unless the Holder or Indenture
Trustee has already paid such Preference Amount to such party, in which
case, the account of the Indenture Trustee.
<PAGE>
Exhibit 5.1
-----------
October 7, 1999
To the Persons Named on Annex A
Re: IKON Receivables, LLC Lease Backed Notes, Series 1999-2
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for the underwriters in connection with the
issuance of $699,595,000 aggregate principal amount of 6.14125% Class A-1 Lease-
Backed Notes, Series 1999-2, $51,100,000 aggregate principal amount of 6.31%
Class A-2 Lease-Backed Notes, Series 1999-2, $100,000,000 aggregate principal
amount of 6.59% Class A-3a Lease-Backed Notes, Series 1999-2, $240,891,000
aggregate principal amount of Variable Rate Class A-3b Lease-Backed Notes Series
1999-2 and $72,278,000 aggregate principal amount of 6.88% Class A-4 Lease-
Backed Notes, Series 1999-2 (collectively, the "Notes") by IKON Receivables, LLC
(the "Issuer") pursuant to an Indenture, dated as of October 1, 1999 (the
"Indenture") among the Issuer, IOS Capital, Inc. (the "Originator"), as
servicer, and Harris Trust and Savings Bank, as indenture trustee (the
"Indenture Trustee"). Capitalized terms used herein without definitions shall
have the respective meaning assigned thereto in the Indenture.
In connection with this opinion we have examined (i) the Indenture;
(ii) the Assignment and Servicing Agreement, dated as of October 1, 1999 (the
"Assignment and Servicing Agreement") among the Originator, IKON Receivables-1,
LLC (the "Seller") and the Issuer; (iii) the Underwriting Agreement, dated
September 30, 1999 among the Originator, the Seller, the Issuer, and Lehman
Brothers, Inc. ("Lehman Brothers"), as the representative of the underwriters;
(iv) the Registration Statement on Form S-3 (No. 333-71073) with respect to the
Notes, filed with the Securities and Exchange Commission on January 22, 1999,
together with all amendments thereto (the "Registration Statement"), the
Prospectus dated May 7, 1999 included in the Registration Statement and the
Prospectus Supplement dated September 30, 1999 relating to the Notes (such
Prospectus and Prospectus Supplement, together, the "Prospectus"); (v) the
Insurance and Indemnity Agreement, dated as of October 7, 1999 (the "Insurance
and Indemnity Agreement"), among Ambac Assurance Corporation, the Issuer, the
Seller, the Originator and the Indenture Trustee; and (vi) originals or copies,
certified or otherwise identified to our satisfaction, of all such other records
of the Originator, the Seller, the Issuer, and such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinions set forth herein.
<PAGE>
In our examination, we have assumed the genuineness of all documents
submitted to us as originals, the conformity of all documents submitted to us as
certified or photostatic copies of the original documents and the authenticity
of such documents. We have assumed for purposes of our opinions hereinafter set
forth that each of the Underwriting Agreement, the Assignment and Servicing
Agreement, the Notes, the Insurance and Indemnity Agreement and the Indenture
(the "Agreements") has been duly authorized, executed and delivered by all
parties thereto, and that each signatory has full power, authority and legal
right to execute and deliver the Agreements and to perform its obligations
thereunder. We understand that, insofar as such matters relate to the Seller,
the Originator and the Issuer, you have received the opinion of Don Liu, Esq.,
counsel to the Originator.
We express no opinion as to the effect of the laws of any jurisdiction
other than the laws of the State of New York, the laws of the State of Georgia
(as to UCC matters) and the Federal laws of the United States of America. As
you are aware we are not admitted to practice in the State of Georgia.
Accordingly, as to matters of Georgia law, we have relied on the CCH Secured
Transactions Guide as to the relevant laws of such state.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. Each of the Assignment and Servicing Agreement, the Indenture, the
Insurance and Indemnity Agreement and the Underwriting Agreement constitutes the
legal, valid and binding obligation of the Originator, enforceable against the
Originator in accordance with its terms, except in each case as may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws of general applicability affecting the enforcement of
creditors' rights and (ii) the application of general principles of equity
(including the availability of equitable remedies), including, without
limitation, concepts of materiality, reasonableness, public policy, good faith
and fair dealing (regardless of whether considered in a proceeding in equity or
at law) and (iii) with respect to rights of indemnity thereunder, limitations of
public policy under applicable securities laws.
2. Each of the Assignment and Servicing Agreement, the Underwriting
Agreement, the Insurance and Indemnity Agreement, the Notes and the Indenture
constitutes the legal, valid and binding obligations of the Issuer, enforceable
against the Issuer in accordance with their terms, except in each case as may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability affecting the
enforcement of creditors' rights and (ii) the application of general principles
of equity (including the availability of equitable remedies), including, without
limitation, concepts of materiality, reasonableness, public policy, good faith
and fair dealing (regardless of whether considered in a proceeding in equity or
at law) and subject to the qualification that, if certain provisions contained
in the Indenture are held to be unenforceable, such unenforceability will not
(subject to the limitations on enforceability set forth above) render the
Indenture invalid as a whole or substantially interfere with the realization of
the principal benefits and/or security
2
<PAGE>
provided thereby and (iii) with respect to rights of indemnity thereunder,
limitations of public policy under applicable securities laws.
3. Each of the Assignment and Servicing Agreement and the Insurance
and Indemnity Agreement constitutes the legal, valid and binding obligations of
the Seller, enforceable against the Seller in accordance with their terms,
except in each case as may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws of general
applicability affecting the enforcement of creditors' rights and (ii) the
application of general principles of equity (including the availability of
equitable remedies), including, without limitation, concepts of materiality,
reasonableness, public policy, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law) and (iii) with respect
to rights of indemnity thereunder, limitations of public policy under applicable
securities laws.
4. Each Note, assuming the due execution by the Issuer and due
authentication by the Indenture Trustee and payment therefor, is validly issued
and outstanding and is entitled to the benefits of the Indenture.
5. The Issuer is not, and will not as a result of the offer and sale
of the Notes become, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
6. The statements in the Prospectus under the heading "ERISA
Considerations" to the extent that they constitute matters of New York law or
federal law, or legal conclusions with respect thereto, have been reviewed by us
and constitute a fair and accurate summary with respect to those consequences or
aspects that are discussed.
7. The Indenture, when executed and delivered, will have been duly
qualified under the Trust Indenture Act of 1939, as amended.
8. The statements made in the Prospectus under the headings
"Description of the Notes" and "Description of the Transaction Documents,"
insofar as such statements purport to summarize certain provisions of the Notes,
the Indenture and the Assignment and Servicing Agreement, provide a fair and
accurate summary of such provisions.
9. The Registration Statement is effective under the Act and, to the
best of our knowledge and information, no stop order suspending the
effectiveness of the Registration Statement has been issued under the 1933 Act
or proceedings therefor initiated or threatened by the Commission.
10. The Registration Statement and the Prospectus (other than the
financial statements and other financial and statistical information included
therein, as to which no opinion is rendered), as of their respective dates,
complied as to form in all material respects with the requirements of the Act
and the rules and regulations thereunder.
3
<PAGE>
12. Subject to the assumptions and qualifications set forth below, it
is our opinion that, to the extent governed by the laws of the State of New York
or the State of Georgia, the Indenture operates to grant a valid security
interest in the Issuer's interest in the Swap and the Swap Documents to the
Trustee, which pledge would be a valid perfected first priority security
interest with respect to the Issuer's right, title and interest in and to all
rights, remedies, claims, powers and privileges of the Issuer under, or with
respect to, the Swap and the Swap Documents.
For purposes of the foregoing opinion we have assumed:
1. The UCC-1 financing statements (the "Financing Statements") with
respect to the Swap and the Swap Documents naming the Issuer a debtor and the
Trustee as secured party to be filed in the office of the clerk of the Superior
Court in Bibb Court of the State of Georgia, will be properly filed in the
appropriate filing offices in the State of Georgia.
2. The search results from the State of Georgia dated September 30,
1999 with respect to the Issuer (the "Search Results") are accurate and
complete, that no financing statements relating to the Swap or the Swap
Documents have been filed since the date of the Search Results and that the
representations and warranties of the Issuer contained in the Indenture and in
certain certificates delivered in connection herewith are accurate.
The foregoing opinion is also subject to the following qualifications:
1. We express no opinion as to the priority of any security interest
over (a) any lien, claim or other interest that arises by operation of law
(including judgment liens or liens arising under the Employee Retirement Income
Security Act of 1974, as amended) or does not require any filing in order to
take priority over any security interest which is perfected by filing, and (b)
any claim or lien in favor of any government or any agency or instrumentality
thereof (including federal tax liens).
2. In the case of proceeds, the rights and continuation of security
interests and of the perfection thereof are limited to the extent set forth in
Section 9-306 of the UCC.
3. We call your attention to the fact that (i) Article 9 of the UCC
requires the filing of continuation statements within the period of six months
prior to the expiration of five years from the date of the original filings in
order to maintain the effectiveness of the filings referred to in this opinion,
(ii) the effectiveness of any such filing will be terminated with respect to the
Issuer, (a) more than four months after the Issuer changes its name, identity or
corporate structure so as to make the Financing Statements seriously misleading,
unless new appropriate financing statements indicating the new name, identity or
corporate structure of the Issuer, are properly filed before the expiration of
such four months and (b) four months after the Issuer changes its chief
executive office to a new jurisdiction. We note, however, that the Indenture
requires the Issuer to record and file such financing statements and
continuation statements with
4
<PAGE>
respect thereto as are necessary to perfect and maintain perfection of the
Trustee's security interest in the Asset Pool and to notify the Trustee in the
event it changes its name, identity or corporate structure or relocates its
chief executive office to a new jurisdiction.
Our opinion contained herein is rendered only as of the date hereof,
and we undertake no obligation to update this letter or the opinions contained
herein after the date hereof.
This letter is furnished by us in connection with the issuance of the
Notes occurring on the date hereof and is solely for the benefit of the
addressees hereto, and is not to be used, circulated, quoted or otherwise
referred to for any other purpose without our express written permission.
Very truly yours,
/s/ Dewey Ballantine LLP
5
<PAGE>
ANNEX A
IKON Receivables, LLC
1738 Bass Road
Macon, Georgia 31208
Lehman Brothers, Inc.,
as Representative of the Underwriters
Three World Financial Center
200 Vesey Street
New York, New York 10285
Harris Trust and Savings Bank, as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
6
<PAGE>
Exhibit 8.1
-----------
October 7, 1999
To the Parties Listed on Schedule I:
Re: IKON Receivables, LLC Lease Backed Notes, Series 1999-2
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel in connection with the issuance
of $235,326,000 aggregate principal amount of 6.14125% Class A-1 Lease-Backed
Notes, Series 1999-2, $51,100,000 aggregate principal amount of 6.31% Class A-2
Lease-Backed Notes, Series 1999-2, $100,000,000 aggregate principal amount of
6.59% Class A-3a Lease-Backed Notes, Series 1999-2, $240,891,000 aggregate
principal amount of Variable Rate Class A-3b Lease-Backed Notes, Series 1999-2,
and $72,278,000 aggregate principal amount of 6.88% Class A-4 Lease-Backed
Notes, Series 1999-2 (collectively, the "Notes") by IKON Receivables, LLC (the
"Issuer") pursuant to an Indenture, dated as of October 1, 1999 (the
"Indenture") among the Issuer, IOS Capital, Inc., as servicer, and Harris Trust
and Savings Bank, as indenture trustee (the "Indenture Trustee"). Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Indenture.
We have examined the question of whether the Notes will be treated as
indebtedness for federal income tax purposes. Our analysis is based on the
provisions of the Internal Revenue Code of 1986, as amended, and the 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 special tax counsel is not binding on the courts
or the Internal Revenue Service (the "IRS").
In general, whether a transaction constitutes the issuance of
indebtedness for federal income tax purposes is a question of fact, the
resolution of which is based primarily upon the economic substance of the
instruments and the transaction pursuant to which they are issued rather than
the form of the transaction or the manner in which the instruments are labeled.
No transaction closely comparable to the transactions contemplated by the
Indenture has been the subject of any Treasury regulation, revenue ruling, or
judicial decision. The IRS and the courts have set forth various factors to be
taken into account in determining whether or not a transaction constitutes the
issuance of
<PAGE>
indebtedness for federal income tax purposes, which we have reviewed
as they apply to this transaction.
Based on the foregoing, and such legal and factual investigations as we have
deemed appropriate, including certain representations and presentations of
factual data provided to us by the underwriter, we are of the opinion that for
federal income tax purposes:
1. The Notes will be treated as indebtedness for federal income tax
purposes because (i) the characteristics of the transaction strongly indicate
that in economic substance, the transaction is the issuance of indebtedness;
(ii) the form of the transaction is an issuance of indebtedness; and (iii) the
parties have stated unambiguously their intention to treat the transaction as an
issuance of indebtedness for all applicable tax purposes.
2. Assuming compliance with the terms of the Transaction Documents,
the Issuer will not be treated as an association (or a publicly traded
partnership) taxable as a corporation for federal income tax purposes.
3. The statements in the Prospectus under the heading "Material
Federal Income Tax Considerations" accurately describe the material federal
income tax consequences to the holders of the Notes.
Our opinion contained herein is rendered only as of the date hereof,
and we undertake no obligation to update this letter or the opinions contained
herein after the date hereof.
This opinion is furnished by us as special tax counsel in connection
with the issuance of the Notes occurring on the date hereof and is solely for
the benefit of the addressees hereto, and is not to be used, circulated, quoted
or otherwise referred to for any other purpose without our express written
permission.
Very truly yours,
/s/ Dewey Ballantine LLP
2
<PAGE>
SCHEDULE I
IKON Receivables, LLC
1738 Bass Road
Macon, Georgia 31208
Lehman Brothers, Inc.,
as Representative of the Underwriters
Three World Financial Center
200 Vesey StreetNew York, New York 10285
Harris Trust and Savings Bank, as Trustee
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
3
<PAGE>
Exhibit 10.1
------------
================================================================================
IOS CAPITAL, INC.,
ORIGINATOR AND SERVICER
IKON RECEIVABLES-1, LLC
SELLER
AND
IKON RECEIVABLES, LLC,
ISSUER
_________________________
ASSIGNMENT AND SERVICING AGREEMENT
Dated as of October 1, 1999
_________________________
================================================================================
ALL RIGHT, TITLE AND INTEREST OF IKON RECEIVABLES, LLC IN AND TO THIS AGREEMENT
HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF HARRIS
TRUST AND SAVINGS BANK, AS TRUSTEE, UNDER THE INDENTURE DATED AS OF OCTOBER 1,
1999, FOR THE BENEFIT OF THE PERSONS REFERRED TO THEREIN.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
R E C I T A L S...................................................................................................1
SECTION 1. CAPITAL CONTRIBUTION...................................................................................2
1.01 Capital Contribution of Leases, Etc....................................................................2
1.02 Capital Contribution and Pledge of Equipment...........................................................2
1.03 Contribution of Leases; Grant of Security Interest.....................................................2
1.04 Servicer to Act as Custodian...........................................................................4
1.05 No Recourse to IKON or Affiliates......................................................................5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR.......................................................5
2.01 Corporate Organization and Authority...................................................................5
2.02 Business and Property..................................................................................6
2.03 Financial Statements...................................................................................6
2.04 Equipment and Leases...................................................................................6
2.05 Payments..............................................................................................10
2.06 Full Disclosure.......................................................................................10
2.07 Pending Litigation....................................................................................10
2.08 Title to Leases and Equipment.........................................................................11
2.09 Transactions Legal and Authorized.....................................................................11
2.10 Governmental Consent..................................................................................11
2.11 Taxes.................................................................................................11
2.12 Compliance with Law...................................................................................12
2.13 ERISA.................................................................................................12
2.14 Ability to Perform....................................................................................13
2.15 Ordinary Course; No Insolvency........................................................................13
2.16 Assets and Liabilities................................................................................13
2.17 Fair Consideration....................................................................................13
2.18 Ability to Pay Debts..................................................................................13
2.19 Bulk Transfer Provisions..............................................................................14
2.20 Transfer Taxes........................................................................................14
2.21 Principal Executive Office............................................................................14
2.22 Servicing Provisions Customary........................................................................14
2.23 Nonconsolidation......................................................................................14
2.24 Capital Contribution Treatment........................................................................15
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER..........................................................15
3.01 Corporate Organization and Authority..................................................................15
3.02 Business and Property.................................................................................16
3.03 Ownership and Security Interest.......................................................................16
3.04 Title to Leases and Equipment.........................................................................16
3.05 Transactions Legal and Authorized.....................................................................16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.06 Governmental Consent..................................................................................17
3.07 Compliance with Law...................................................................................17
3.08 Assets and Liabilities................................................................................17
3.09 Fair Consideration....................................................................................18
3.10 Ability to Pay Debts..................................................................................18
3.11 Bulk Transfer Provisions..............................................................................18
3.12 Transfer Taxes........................................................................................18
3.13 Principal Executive Office............................................................................18
3.14 Nonconsolidation......................................................................................18
3.15 Capital Contribution Treatment........................................................................19
SECTION 4. ADMINISTRATION OF LEASES..............................................................................19
4.01 Servicer to Act.......................................................................................19
4.02 Lease Amendments and Modifications....................................................................21
4.03 Non-Performing Leases.................................................................................22
4.04 Costs of Servicing; Servicing Fee; Administrative Expenses............................................23
4.05 Other Transactions....................................................................................24
SECTION 5. SERVICER ADVANCES AND ORIGINATOR'S AND SELLER'S SUPPORT...............................................24
5.01 Late Lease Payments...................................................................................24
5.02 Early Termination Leases..............................................................................24
5.03 Indemnification.......................................................................................25
5.04 Purchases; Other Payments.............................................................................25
5.05 Payment Advices.......................................................................................27
SECTION 6. INFORMATION TO BE PROVIDED............................................................................27
6.01 Monthly Status Reports; Servicing Reports.............................................................27
6.02 Annual Independent Public Accountant's Report.........................................................29
SECTION 7. THE SERVICER..........................................................................................30
7.01 Merger or Consolidation of the Servicer...............................................................30
7.02 Limitation on Liability of the Servicer and Others....................................................30
7.03 Servicer Not to Resign or Be Removed..................................................................30
7.04 Financial and Business Information....................................................................31
7.05 Officers' Certificates................................................................................32
7.06 Inspection............................................................................................32
7.07 Servicer Records......................................................................................33
SECTION 8. THE ORIGINATOR........................................................................................33
8.01 Merger or Consolidation of the Originator.............................................................33
8.02 Control of Seller.....................................................................................33
8.03 Financial and Business Information....................................................................33
8.04 Officers' Certificates................................................................................35
8.05 Books and Records.....................................................................................35
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
8.06 Communications........................................................................................35
SECTION 9. THE SELLER............................................................................................35
9.01 Merger or Consolidation of the Seller.................................................................35
9.02 Control of Issuer.....................................................................................35
9.03 Information...........................................................................................36
9.04 Inspection............................................................................................36
9.05 Books and Records.....................................................................................36
9.06 Communications........................................................................................36
SECTION 10. DEFAULT..............................................................................................37
10.01 Servicer Events of Default...........................................................................37
10.02 Termination..........................................................................................39
10.03 Trustee to Act; Appointment of Successor.............................................................39
10.04 Servicer to Cooperate................................................................................40
10.05 Notification to Noteholders..........................................................................40
10.06 Remedies Not Exclusive...............................................................................41
SECTION 11. SUBSTITUTION AND ADDITION OF LEASES..................................................................41
11.01 Substitution and Addition............................................................................41
11.02 Procedure............................................................................................42
11.03 Objection and Purchase...............................................................................43
11.04 Originator's, Seller's and Servicer's Subsequent Obligations.........................................44
SECTION 12. ASSIGNMENT...........................................................................................44
12.01 Assignment to Trustee................................................................................44
12.02 Assignment by Originator, Seller or Servicer.........................................................44
SECTION 13. NATURE OF OBLIGATIONS AND SECURITY THEREFOR..........................................................44
13.01 Obligations Absolute.................................................................................44
13.02 Security for Obligations.............................................................................45
13.03 Further Assurances; Financing Statements.............................................................45
SECTION 14. DEFINITIONS..........................................................................................46
SECTION 15. MISCELLANEOUS........................................................................................52
15.01 Continuing Obligations...............................................................................52
15.02 GOVERNING LAW........................................................................................52
15.03 Successors and Assigns...............................................................................52
15.04 Modification.........................................................................................52
15.05 No Proceedings.......................................................................................53
15.06 Notices..............................................................................................53
15.07 Counterparts.........................................................................................53
15.08 Nonpetition Covenant.................................................................................53
</TABLE>
iii
<PAGE>
Schedule 1 - Portfolio Detail
Exhibit A - Schedule of Leases and Equipment
Exhibit B - Form of Receivables Servicing Report
iv
<PAGE>
ASSIGNMENT AND SERVICING AGREEMENT
This ASSIGNMENT AND SERVICING AGREEMENT (this "Agreement" or this
"Assignment and Servicing Agreement") is made and dated as of October 1, 1999,
among IKON RECEIVABLES, LLC, a Delaware limited liability company, as acquiror
hereunder (the "Issuer"), IOS CAPITAL, INC., a Delaware corporation, as
originator of the Leases (in such capacity, the "Originator"), contributor of
the Leases to IKON Receivables-1, LLC and servicer hereunder (in such capacity,
the "Servicer"), and IKON RECEIVABLES-1 LLC, as contributor of the Leases to the
Issuer (the "Seller").
R E C I T A L S
A. The Originator wishes to contribute, transfer, assign, set over
and convey to the Seller, and the Seller wishes to acquire from the Originator,
all right, title and interest of the Originator in, to and under the Leases and
the Equipment subject to the Leases (such terms and all other capitalized terms
used herein having the meanings ascribed thereto in Section 14 hereof unless
otherwise indicated).
B. The Seller wishes to contribute, transfer, assign, set over and
convey to the Issuer, and the Issuer wishes to acquire from the Seller, (i) all
right, title and interest of the Seller in, to and under the Leases, and (ii)
all right, title and interest of the Seller in, to and under the covenants,
representations, warranties and other obligations of the Originator (including
the Originator's Purchase Obligation) under this Assignment and Servicing
Agreement.
C. The Seller wishes to grant a security interest to the Issuer, and
the Issuer wishes to accept the Seller's grant of a security interest to the
Issuer of, all right, title and interest of the Seller in and to the Equipment
subject to the Leases as security for the performance by the Seller of certain
of its obligations hereunder.
D. Pursuant to the Indenture, the Issuer is issuing one class of
6.14125% Class A-1 Lease-Backed Notes, Series 1999-2 in the aggregate principal
amount of $235,326,000 (the "Class A-1 Notes"), one class of 6.31% Class A-2
Lease-Backed Notes, Series 1999-2 in the aggregate principal amount of
$51,100,000 (the "Class A-2 Notes"), one class of 6.59% Class A-3a Lease-Backed
Notes, Series 1999-2 in the aggregate principal amount of $100,000,000 (the
"Class A-3a Notes"), one class of Class A-3b Lease-Backed Notes (the "Class A-3b
Notes") in the aggregate principal amount of $240,891,000, and one class of
6.88% Class A-4 Lease-Backed Notes, Series 1999-2 in the aggregate principal
amount of $72,278,000 (the "Class A-4 Notes" and, together with the Class A-1
Notes, the Class A-2 Notes, the Class A-3a Notes and the Class A-3b Notes, the
"Notes"), the net proceeds of which are being used to fund the Reserve Account
established pursuant to the Indenture and to make distributions by the Issuer to
the Seller and by the Seller to the Originator.
E. Pursuant to the Indenture, the Issuer is granting, inter alia, to
----- ----
the Trustee, for the benefit of the holders from time to time of the Notes, a
security interest in all right, title and interest of the Issuer in, to and
under the Leases, the Equipment and this Assignment and Servicing Agreement.
<PAGE>
SECTION 1. CAPITAL CONTRIBUTION
1.01 Capital Contribution of Leases, Etc.
-----------------------------------
(a) By their execution and delivery of this Assignment and
Servicing Agreement, the Originator, in consideration for the membership
interests in the Seller, hereby contributes, transfers, assigns, sets over and
conveys to the Seller, and the Seller hereby acquires from the Originator,
without recourse (except to the extent of the Originator's Purchase Obligations
as set forth herein), all of the Originator's right, title and interest in and
to each of the Leases (including all Related Interests).
(b) By their execution and delivery of this Assignment and
Servicing Agreement, the Seller, in consideration for the membership interests
in the Issuer, hereby contributes, transfers, assigns, sets over and conveys to
the Issuer, and the Issuer hereby acquires from the Seller without recourse
(except to the extent of the Seller's Purchase Obligations as set forth herein),
all of the Seller's right, title and interest in and to each of (i) the Leases
(including all Related Interests), and (ii) the covenants, representations,
warranties and other obligations of the Originator (including the Originator's
Purchase Obligation) under this Assignment and Servicing Agreement.
1.02 Capital Contribution of and Grant of Security Interest in
---------------------------------------------------------
Equipment.
---------
(a) The Originator and the Seller each acknowledge and confirm that
the Originator, as additional consideration for the beneficial interests in the
Seller, is also contributing and transferring to the Seller, and in connection
with each transfer and assignment of Additional Leases and Substitute Leases,
the Originator will contribute and transfer to the Seller, without recourse, all
right, title and interest of the Originator in and to each item of Equipment
subject to each Lease, Additional Lease and Substitute Lease. After such
contribution and transfer by the Originator to the Seller, all right, title and
interest of the Originator in and to each item of Equipment subject to each
Lease shall be vested in the Seller.
(b) The Seller and the Issuer each acknowledge and confirm that the
Seller is granting a security interest to the Issuer, and in connection with
each transfer and assignment of Additional Leases and Substitute Leases the
Seller will grant a security interest to the Issuer, in all right, title and
interest of the Seller in and to each item of Equipment subject to each Lease,
Additional Lease and Substitute Lease, as security for the performance by the
Seller of its obligations under Section 5.05. After such grant by the Seller to
the Issuer, the Issuer shall have a security interest in all right, title and
interest of the Seller in and to each item of Equipment subject to each Lease,
Additional Lease and Substitute Lease.
1.03 Contribution of Leases; Grant of Security Interest.
--------------------------------------------------
It is the intention of the parties hereto that each transfer of
Leases, Additional Leases, Substitute Leases and Equipment by the Originator to
the Seller pursuant to Sections 1.01(a) and 1.02(a), and each transfer of
Leases, Additional Leases and Substitute Leases by the Seller to the Issuer
pursuant to Section 1.01(b), shall constitute an absolute assignment thereof by
way of capital contribution and not a loan. Neither the Originator nor the
Seller shall take any action inconsistent with the treatment of such transfers
as absolute assignments by way of capital
2
<PAGE>
contributions or with the Issuer's ownership of the Leases (including all
Related Interests). Each of the Originator, the Seller and the Issuer shall
indicate in its records that, and shall respond to any inquiries from third
parties by indicating that, (i) ownership of the Leases, Additional Leases,
Substitute Leases, including all Related Interests, is held by the Issuer and
pledged to the Trustee, pursuant to the Indenture, and (ii) ownership of each
item of Equipment subject to each Lease is held by the Seller (subject to the
security interest therein granted by the Seller to the Issuer hereunder and by
the Issuer to the Trustee pursuant to the Indenture). In the event, however,
that contrary to the expressed intentions of the parties, the transactions
evidenced by Sections 1.01(a), 1.01(b) and 1.02(a) do not constitute an absolute
transfer and assignment of assets pursuant to the provisions of such Sections,
then it is the intention of the parties hereto that this Assignment and
Servicing Agreement shall constitute a security agreement under applicable law
and that, effective as of the date hereof, the Originator shall be deemed to
have granted to the Seller, and the Seller shall be deemed to have granted to
the Issuer, first priority security interests, as follows:
(a) Originator hereby grants to Seller a security interest in all
of the Originator's right, title and interest in, to and under the
following described property, whether such property (or Originator's right,
title or interest therein) is now existing or is hereafter created,
acquired or arising, and wherever located, as security for the payment and
performance of all liabilities, indebtedness and obligations now or at any
time or times hereafter owing by Originator to Seller, whether absolute or
conditional, due or to become due, liquidated or unliquidated and arising
under the terms of this Assignment and Servicing Agreement: (i) all Leases,
including, without limitation, all Additional Leases and Substitute Leases;
(ii) all amounts due or to become due at any time or times under or with
respect to any of the Leases since the Cut-Off Date (other than any pre-
payments of rent required pursuant to the terms of any Lease at or before
the commencement of the Lease), including, without limitation, all Lease
Payments, Casualty Payments, Retainable Deposits and Termination Payments;
(iii) all rights to payment or performance under any Lease Guaranty; (iv)
all rights and interests in any collateral with respect to any Lease,
including any security deposit and any security interest in the Equipment
securing the Lessee's obligations under any Lease; (v) all of the
Originator's right, title and interest in and to any Equipment; (vi) all
rights and benefits of Originator under this Assignment and Servicing
Agreement; and (vii) all proceeds of any of the foregoing (collectively,
the "Originator Collateral").
(b) Seller hereby grants to Issuer a security interest in all of
Seller's right, title and interest in, to and under the following described
property, whether such property (or Seller's right, title or interest
therein) is now existing or is hereafter created, acquired or arising, and
wherever located, as security for the payment and performance of all
liabilities, indebtedness and obligations now or at any time or times
hereafter owing by Seller to Issuer, whether absolute or conditional, due
or to become due, liquidated or unliquidated and arising under the terms of
this Assignment and Servicing Agreement: (i) all Leases, including, without
limitation, all Additional Leases and Substitute Leases; (ii) all amounts
due or to become due at any time or times under or with respect to any
Leases since the Cut-Off Date (other than any pre-payments of rent required
pursuant to the terms of any Lease at or before the commencement of the
Lease), including, without limitation, all Lease Payments, Casualty
Payments, Retainable Deposits and Termination
3
<PAGE>
Payments; (iii) all rights to payment or performance under any Lease
Guaranty; (iv) all rights and interests in any collateral with respect to
any Lease, including any security deposit and any security interest in the
Equipment securing the Lessee's obligations under any Lease; (v) all of the
Seller's right, title and interest in and to any Equipment; (vi) all rights
and benefits of Seller under this Assignment and Security Agreement; (vii)
all interest of the Seller in any of the Originator Collateral, including,
without limitation, the security interest granted by Originator to Seller
in the Originator Collateral; and (viii) all proceeds of any of the
foregoing (collectively, the "Seller Collateral").
1.04 Servicer to Act as Custodian.
----------------------------
(a) The Servicer shall hold and acknowledges that it is holding
the Leases and all other assets in the Asset Pool that it may from time to
time receive hereunder as custodian for the Trustee, excluding any amounts
distributed to the Servicer by the Trustee in accordance with Section
3.03(b) of the Indenture.
(b) The Servicer shall perform its duties under this Section 1.04
in accordance with the standard set forth in Section 4.01 as such standard
applies to servicers acting as custodial agents. The Servicer shall
promptly report to the Trustee any failure by it to hold the Leases as
herein provided and shall promptly take appropriate action to remedy any
such failure but only to the extent (i) any such failure is caused by the
acts or omissions of the Servicer and (ii) such remedial action is
otherwise within its capabilities or control. As custodian, the Servicer
shall have the following powers and perform the following duties:
(A) hold the Leases on behalf of the Trustee for the benefit of
the Noteholders and the Insurer, maintain accurate records pertaining
to each Lease to enable it to comply with the terms and conditions of
this Assignment and Servicing Agreement, and maintain a current
inventory thereof;
(B) implement policies and procedures in accordance with the
Servicer's normal business practices with respect to the handling and
custody of the Leases so that the integrity and physical possession of
the Leases will be maintained; and
(C) attend to all details in connection with maintaining custody
of the Leases on behalf of the Issuer and for the Trustee on behalf of
the Noteholders and the Insurer.
(c) In acting as custodian of the Leases, the Servicer agrees
further that it does not and will not have or assert any beneficial
ownership interest in such Leases. The Servicer shall mark conspicuously
its master data processing records evidencing each Lease with a legend,
acceptable to the Trustee and the Insurer, evidencing that (i) all right,
title and interest in the Leases has been contributed and transferred to
the Issuer and pledged by the Issuer to the Trustee as provided in the
Indenture, and (ii) a security interest in all right, title and interest of
the Seller in and to the related Equipment has been granted by the Seller
to the Issuer hereunder and pledged by the Issuer to the Trustee as
provided in the Indenture.
(d) Subject to the provisions of this Assignment and Servicing
Agreement, the Servicer agrees to maintain the Leases at its office at 1738
Bass Road, Macon, Georgia or at such other offices of the Servicer as shall
from time to time be identified by prior written notice to the
4
<PAGE>
Trustee and the Insurer. The Servicer shall keep the originals of the
Leases and related Lease files segregated from other leases, records and
files of the Servicer in a place where it is indicated that they are being
held for the Trustee; provided, however, that the originals of the Leases
-------- -------
and related Lease files in respect of obligors in the State of Florida need
not be so segregated provided that such Leases (and Lease files) are also
retained in imaged form and the Servicer is in compliance with the
requirements of Section 1.04(c). Notwithstanding the foregoing, the
Servicer may temporarily move individual Leases or any portion thereof and
related Lease files without notice as necessary to conduct collection and
other servicing activities.
(e) Notwithstanding anything to the contrary contained herein, in
the event that the long-term debt rating assigned to the Servicer is
downgraded below BBB- by S&P or Baa3 by Moody's, the Servicer shall deliver
the originals of all of the Leases (and related Lease files), including the
originals of any Leases (and related Lease files) in imaged form, to the
Trustee within three (3) Business Days of receipt of written demand by the
Insurer.
1.05 No Recourse to IKON Office Solutions, Inc. or Affiliates.
--------------------------------------------------------
Notwithstanding anything to the contrary contained here, the
contributions and transfers of the Leases and Equipment pursuant to
Sections 1.01(a), 1.01(b) and 1.02(a) are without representation or
warranty by, or recourse to or against, IKON Office Solutions, Inc. or any
subsidiary or Affiliate of IKON Office Solutions, Inc. other than the
Originator and the Seller, including any right to require IKON Office
Solutions, Inc. or any such subsidiary or Affiliate other than the
Originator or the Seller to purchase or acquire any Lease or item of
Equipment for any reason or to compensate the Originator, the Seller, the
Issuer or any other Person for or in respect of any Lease or item of
Equipment (whether on account of the non-payment of any lease or rental
payment or for any other reason).
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
The Originator, as Originator and Servicer, hereby represents and
warrants as follows:
2.01 Corporate Organization and Authority.
------------------------------------
The Originator:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation,
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and
to carry on its business as now conducted (except where the
failure to have such licenses and permits would not have a
material adverse effect on the Asset Pool or the business or
condition (financial or otherwise) of the Originator or
impair the enforceability of any Lease) and to enter into
and perform its obligations under this Assignment and
Servicing Agreement, and the transactions
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contemplated hereby, including performance of the duties of
the Servicer and the Originator's support obligations
hereunder, and
(c) has duly qualified and is authorized to do business and is
in good standing as a foreign corporation in each
jurisdiction where the character of its properties or the
nature of its activities makes such qualification necessary
(except where the failure to be so qualified or in good
standing would not have a material adverse effect on the
Asset Pool or the business or condition (financial or
otherwise) of the Originator or impair the enforceability of
any Lease).
2.02 Business and Property.
---------------------
The Prospectus accurately describes in all material respects the
general nature of the business of the Originator.
2.03 Financial Statements.
--------------------
(a) The consolidated balance sheet of the Originator and its
consolidated subsidiaries for the fiscal years ended September 30, 1998 and
September 30, 1997 and the related consolidated statements of income,
retained earnings and cash flow for the respective fiscal years ended on
such dates, all accompanied by reports thereon containing opinions without
qualification, except as therein noted, by Ernst & Young, independent
certified public accountants, and the unaudited interim consolidated
balance sheets of the Originator and its consolidated subsidiaries as of
December 31, 1998 and as of June 30, 1999 and the related consolidated
statements of income, retained earnings and cash flow for the three months
ended December 31, 1998 and June 30, 1999, respectively, have been prepared
in accordance with generally accepted accounting principles consistently
applied, and present fairly the financial position of the Originator and
its subsidiaries as of such dates and the results of their operations for
such periods.
(b) Except as disclosed in the Prospectus and the financial
statements referred to in the preceding Section 2.03(a), since September
30, 1998 there has been no change in the business, condition or prospects
(financial or otherwise) of the Originator except changes in the ordinary
course of business, none of which individually or in the aggregate has been
materially adverse. Neither the Originator nor any of its subsidiaries has
any material liabilities or obligations not incurred in the ordinary course
of business other than those disclosed in the financial statements referred
to in Section 2.03(a) or for which adequate reserves are reflected in such
financial statements.
2.04 Equipment and Leases.
--------------------
(a) Prior to the date of each contribution and transfer of any
Leases and each contribution and transfer or grant of a security interest
in the related Equipment in accordance with Sections 1.01 and 1.02, the
Originator purchased each item of Equipment from the manufacturer or other
supplier. The Originator has paid in full, to the manufacturer or supplier,
as the case may be, the purchase price and any related charges in
connection with the acquisition of the Equipment. The contribution to the
Seller and the concurrent contribution to the Issuer of
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the Leases, the contribution of all of the Originator's right, title and
interest in each item of Equipment to the Seller and the grant of a
security interest in the Seller's interests in each item of Equipment to
the Issuer, do not violate the terms or provisions of any Lease or any
other agreement to which the Originator is a party or by which it is bound.
(b) Immediately prior to the completion of each contribution and
transfer described in Sections 1.01(a), 1.01(b) and 1.02(a), the Originator
will (i) be the legal owner of the Leases (including all Related Interests)
and (ii) have good title to each item of Equipment. Upon completion of each
contribution and transfer described in Sections 1.01(a), 1.01(b) and
1.02(a) and the grant of the security interest described in Section
1.02(b), (i) the Issuer will be the legal owner of the related Leases
(including all Related Interests), (ii) the Seller will have good title to
each item of related Equipment, and (iii) the Issuer will have a valid
security interest in all of the Seller's right, title and interest in and
to each item of related Equipment.
(c) At the time of each transfer of a Lease hereunder, (A) each
such Lease (i) will be a triple-net lease (i.e., pursuant to which the
- -
Lessee is unconditionally responsible for the payment of insurance,
maintenance and taxes with respect to the Equipment subject to the Lease);
(ii) will be a legal, valid and binding full recourse obligation of the
Lessee thereunder, enforceable by the Issuer (and by the Trustee as
assignee of the Issuer) against such Lessee in accordance with the terms
thereof, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws relating to or affecting
the enforcement of creditors' rights and by general equity principles; and
(iii) provides that it is noncancellable by the Lessee; and (iv) will be in
full force and effect; (B) any and all requirements of any federal, state
or local law, including, without limitation, usury, truth-in-lending and
equal credit opportunity laws applicable to such Lease will have been
complied with; and (C) the Originator has no knowledge (after due inquiry)
of any challenge, dispute or claim by or against the Lessee under or
affecting such Lease or of the bankruptcy or insolvency of the applicable
Lessee. As of the initial Determination Date, or the effective date of the
transfer of any Additional Lease or Substitute Lease, each Lessee has paid
the first scheduled installment of rent under its respective Lease.
(d) At the time that any Lease is contributed and transferred
hereunder, the Originator will have no knowledge that any item of the
Equipment subject thereto has suffered any loss or damage which has not
been repaired.
(e) Each Lease requires the Lessee thereunder to maintain
insurance on the Equipment subject thereto in an amount sufficient to fully
insure such Equipment.
(f) In addition to the insurance maintained by the Lessees with
respect to the Equipment, the Originator (or an Affiliate of the
Originator) maintains (i) one or more casualty insurance policies which, in
the aggregate, are in an amount not less than the aggregate Outstanding
Principal Amount of the Notes, (ii) a general liability insurance policy in
the aggregate amount of $1,000,000 and (iii) an excess liability insurance
policy in umbrella form in the aggregate amount of $10,000,000. Each of
such policies is in full force and effect and covers all Equipment. All
premiums in respect of such policies have been paid. Each of the Trustee
and the Issuer are named as loss payees and additional insureds, as their
interests may appear, on
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such casualty and liability policies maintained by the Originator and will
be provided with copies of all such policies upon written request.
(g) No Lease has outstanding rent which is 61 or more days past
due as of the Cut-Off Date.
(h) Each Lease was entered into by the Originator in accordance
with the Originator's regular credit approval process described in the
Prospectus, and no selection procedures adverse to the credit quality of
the Asset Pool were employed in selecting the Leases for contribution under
this Assignment and Servicing Agreement.
(i) Each Lease provides that the obligation of the Lessee to pay
rent thereunder throughout the term thereof is and will be unconditional
without regard to any event affecting the Equipment, the obsolescence of
any Equipment, any claim of such Lessee against the Issuer, the Originator
or the Servicer or any change in circumstance of such Lessee or any other
circumstance whatsoever except to the extent that in the event of a
casualty of any item of Equipment, the Lessee, at a minimum, is obligated
to pay, in lieu of the future Lease Payments with respect to such item, the
outstanding principal or net book value of the Leases and any applicable
make whole premium.
(j) Each of the Leases provides that payments thereunder are not
subject to setoff or reduction.
(k) In the case of each Lease which consists of a master lease
and one or more exhibits or schedules thereto, the Originator has neither
assigned such master lease in its entirety, nor delivered physical
possession of such master lease, to any Person other than the Seller, the
Issuer or the Trustee (or the trustee under another indenture in a
transaction substantially similar to the transaction contemplated hereby,
which other indenture provides that the lien thereof on such master lease
extends only to such master lease insofar as it relates to lease schedules
which are not part of the Asset Pool).
(l) As of the time of each contribution and transfer of Leases
hereunder, there are no facts or circumstances which give rise, or would
give rise at any time in the future, to any right of rescission, setoff,
counterclaim or defense, including the defense of usury, to obligations of
any Lessee, including the obligation of such Lessee to pay all amounts due
with respect to any Lease to which such Lessee is a party, and neither the
operation of any of the terms of any Lease or the exercise of any right
thereunder will render such Lease unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect thereto.
(m) As of the time of each contribution and transfer of Leases
hereunder, no Lease has been amended, altered or modified in any material
respect except in writing, and copies of all such writings are attached to
the Lease.
(n) As of the time of each contribution and transfer of Leases
hereunder, no Lessee will have been released, in whole or in part, from any
of its obligations in respect of any Lease; no Lease will have been
satisfied, cancelled or subordinated, in whole, or in part, or
8
<PAGE>
rescinded, and no Equipment covered by any Lease will have been released
from such Lease, in whole or in part, nor has any instrument been executed
that would effect any such satisfaction, release, cancellation,
subordination or rescission.
(o) As of the time of each contribution and transfer of Leases
hereunder, each Lease was originated by the Originator in the ordinary
course of its business.
(p) The Leases do not violate any U.S. or state laws and no Lease
was originated in or is subject to the laws of any jurisdiction whose laws
would make any of the transfers and contributions under this Assignment and
Servicing Agreement unlawful.
(q) All parties to each Lease had authority and capacity to
execute such Lease.
(r) None of the Leases is a consumer lease.
(s) The final Lease Payment on each Lease is due and payable on
or prior to June 2005 and, as of the Cut-Off Date, the maximum remaining
term of any Lease did not exceed 68 months.
(t) Each Lease agreement is "chattel paper" within the meaning of
the Uniform Commercial Code in the states of New York and Georgia, and
there is only one original of each Lease.
(u) Each Lease provides that it is noncancellable by the Lessee
and none of the Leases contains early termination options (except for
Leases which contain early termination or prepayment clauses which require
the Lessee to pay the remainder of all remaining Lease Payments under such
Lease upon such cancellation or prepayment);
(v) None of the Leases is subject to any guaranty by the
Originator.
(w) The Leases have been transferred by the Originator to the
Seller and by the Seller to the Issuer, in each case free and clear of any
liens and are assignable without prior written consent of the Lessee.
(x) The Leases are U.S. dollar-denominated and the Lessor and
each Lessee is located in the United States.
(y) As of the Cut-Off Date, no more than two percent (2%) of the
Leases in the Asset Pool will consist of Leases with government entities as
the obligor.
(z) Each Lessee has represented to the Originator that it has
accepted the Equipment.
(aa) No Lessee is a subject of an insolvency or bankruptcy
proceeding at the time of the transfer.
(bb) No Lease is a Non-Performing Lease and each Lease is no more
than 60 days past due at the time of transfer.
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<PAGE>
(cc) Each Lease provides for periodic payments.
(dd) All the Leases were originated in the United States.
2.05 Payments.
--------
(a) The aggregate amounts of Lease Payments payable by the Lessees
under the Leases during each Due Period, together with amounts on deposit in the
Reserve Account, are sufficient to cover the Servicing Fee, the premium due in
respect of the Policy and the principal and interest on the Notes, as such
payments become due and payable.
(b) The portfolio detail set forth in Schedule 1 hereto (i)
accurately sets forth, as of the Cut-Off Date, the amount of each Lease Payment
due under each of the Leases and the month in which such Lease Payment is to be
paid in accordance with the terms of the Lease under which the same is to be
paid, (ii) accurately sets forth, as of the Cut-Off Date, the information with
respect to the other characteristics of the Leases and the Equipment described
in such portfolio detail and (iii) is otherwise true and correct in all
respects.
2.06 Full Disclosure.
---------------
The Prospectus (including, without limitation, the statistical and
descriptive information with respect to the initial Leases, Lessees and
Equipment), as of the date of the Prospectus Supplement, does not contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading; provided, however, that no representation or warranty
-------- -------
is made with respect to the information set forth in the Prospectus Supplement
under the heading "The Insurer and the Policy" (including information
incorporated by reference therein). There is no fact peculiar to the Originator
or any Affiliate of the Originator or, to the knowledge of the Originator, any
Lease, Lessee or item of Equipment, which the Originator has not or will not
disclose in the Prospectus which materially affects adversely or, so far as the
Originator can now reasonably foresee, will materially affect adversely the
ability of the Originator to perform the transactions contemplated by this
Assignment and Servicing Agreement.
2.07 Pending Litigation.
------------------
There are no proceedings or investigations pending, or to the knowledge
(after due inquiry) of the Originator threatened, against or affecting the
Originator or any subsidiary in or before any court, governmental authority or
agency or arbitration board or tribunal, including, but not limited to, any such
proceeding or investigation with respect to any environmental or other liability
resulting from the ownership or use of any of the Equipment, which, individually
or in the aggregate, would materially and adversely affect the properties,
business, profits or condition (financial or otherwise) of the Originator and
its subsidiaries, or the ability of the Originator or the Servicer to perform
its obligations under this Assignment and Servicing Agreement. The Originator is
not in default with respect to any order of any court, governmental authority or
agency or arbitration board or tribunal.
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2.08 Title to Leases and Equipment.
-----------------------------
Immediately following the transfer and contribution by the Originator
to the Seller of the Leases and the Equipment, the transfer and contribution by
the Seller to the Issuer of the Leases and the security interest granted by the
Seller to the Issuer in all of the Seller's interest in the Equipment, in each
case as contemplated in Section 1, (a) the Leases and the Equipment will be
free and clear of all Liens, except the rights of each Lessee under the related
Lease, the rights of the Seller and the Issuer hereunder and the Lien in favor
of the Trustee granted pursuant to the Indenture, and (b) there will be no
delinquent taxes or other outstanding charges affecting the Equipment which is
or may give rise to any Lien prior to, or equal or coordinate with, the Lien of
the Trustee under the Indenture.
2.09 Transactions Legal and Authorized.
---------------------------------
The contribution and transfer by the Originator to the Seller of the
Leases and the Equipment and compliance by the Originator with all of the
provisions of this Assignment and Servicing Agreement:
(a) have been duly authorized by all necessary corporate action on
the part of the Originator, and do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or obligations
of the Originator except such as have been duly obtained;
(b) are within the corporate powers of the Originator; and
(c) are legal and will not conflict with, result in any breach in
any of the provisions of, constitute a default under, or result in the creation
of any Lien upon any property of the Originator under the provisions of, any
agreement, charter instrument, by-law or other instrument to which the
Originator is a party or by which it or its property may be bound or result in
the violation of any law, regulation, rule, order or judgment applicable to the
Originator or its properties, or any order to which the Originator or its
properties is subject, of or by any government or governmental agency or
authority.
2.10 Governmental Consent.
--------------------
Except for the filing of the Required Financing Statements, no consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority is necessary or required on the part of the Originator in
connection with the execution and delivery of this Assignment and Servicing
Agreement, the contribution and transfer of the Leases and Equipment to the
Seller contemplated hereby or the performance by the Originator of its
obligations hereunder.
2.11 Taxes.
-----
(a) All tax returns required to be filed by the Originator or any
subsidiary in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon the Originator or any
subsidiary, or upon any of their respective properties, income or franchises,
shown to be due and payable on such returns have been paid. To the best of the
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<PAGE>
Originator's knowledge all such tax returns were true and correct and neither
the Originator nor any subsidiary knows of any proposed additional tax
assessment against it in any material amount nor of any basis therefor.
(b) The provisions for taxes on the books of the Originator and each
of its subsidiaries are in accordance with generally accepted accounting
principles.
2.12 Compliance with Law.
-------------------
The Originator:
(a) is not in violation of any laws, ordinances, governmental
rules or regulations to which it is subject;
(b) has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary
to the ownership of its property or to the conduct of its
business; and
(c) is not in violation in any material respect of any term
of any agreement, charter instrument, by-law or other
instrument to which it is a party or by which it may be
bound,
which violation or failure to obtain might materially adversely
affect the Asset Pool or the business or condition (financial or
otherwise) of the Originator and its subsidiaries.
2.13 ERISA.
-----
(a) The present value of all benefits vested under all "employee
pension benefit plans," as such term is defined in Section 3 of ERISA,
maintained by or contributed to by the Originator and its Related Persons (other
than multi-employer plans as such term is defined in Section 3 of ERISA), as
from time to time in effect (herein called the "Pension Plans"), does not exceed
the value of the assets of the Pension Plans allocable to such vested benefits;
(b) No Prohibited Transactions, Accumulated Funding Deficiencies, or
Reportable Events have occurred with respect to any Pension Plans that, in the
aggregate, could subject the Originator to any material tax, penalty or other
liability; and
(c) No notice of intent to terminate a Pension Plan under a distress
termination has been filed, nor has the PBGC instituted proceedings to
terminate, or appoint a trustee to administer, a Pension Plan and no event has
occurred or condition exists which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan.
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2.14 Ability to Perform.
------------------
At the date hereof, the Originator does not believe, nor does it have
any reasonable cause to believe, that it cannot (a) perform each and every
covenant contained in this Assignment and Servicing Agreement or (b) perform its
obligations hereunder as Servicer.
2.15 Ordinary Course; No Insolvency.
------------------------------
The transactions contemplated by the Notes, the Indenture and this
Assignment and Servicing Agreement are being consummated by the Originator in
furtherance of the Originator's ordinary business purposes and constitute a
practical and reasonable course of action by the Originator designed to improve
the financial position of the Originator, with no contemplation of insolvency
and with no intent to hinder, delay or defraud any of its present or future
creditors. The Originator will not, either as a result of the transaction
contemplated by this Assignment and Servicing Agreement, or immediately before
or after such transaction, be insolvent or have an unreasonably small capital
for the conduct of its business and the payment of existing and anticipated
obligations.
2.16 Assets and Liabilities.
----------------------
(a) Both immediately before and after any transfer and contribution
by the Originator to the Seller of Leases and Equipment contemplated by this
Assignment and Servicing Agreement, the present fair salable value of the
Originator's assets was or will be in excess of the amount that will be required
to pay the Originator's probable liabilities as they then exist and as they
become absolute and matured; and
(b) Both immediately before and after any transfer and contribution
by the Originator to the Seller of Leases and Equipment contemplated by this
Assignment and Servicing Agreement, the sum of the Originator's assets was or
will be greater than the sum of the Originator's debts, valuing the Originator's
assets at a fair salable value.
2.17 Fair Consideration.
------------------
The consideration received by the Originator, in exchange for the
contribution and transfer of the Leases and Equipment pursuant to this
Agreement, is fair consideration having value equivalent to or in excess of the
value of the assets being contributed by the Originator.
2.18 Ability to Pay Debts.
--------------------
The Originator does not believe that it will incur debts beyond its
ability to pay or which would be prohibited by its charter documents or by-laws
as a result of the transactions contemplated by this Assignment and Servicing
Agreement or otherwise. The Originator's assets and cash flow enable it to meet
its present obligations in the ordinary course of business as they become due.
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2.19 Bulk Transfer Provisions.
------------------------
The contribution and transfer of the Leases and Equipment by the
Originator to the Seller, the contribution and transfer of the Leases by the
Seller to the Issuer and the grant of the security interest in the Seller's
interest in the Equipment by the Seller to the Issuer, in each case as
contemplated in Section 1, are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction.
2.20 Transfer Taxes.
--------------
The contribution and transfer of the Leases and Equipment by the
Originator to the Seller, the contribution and transfer by the Seller to the
Issuer of the Leases and the grant by the Seller to the Issuer of a security
interest in the Seller's interest in the Equipment, in each case as contemplated
in Section 1, are not subject to and will not result in any tax, fee or
governmental charge payable by the Originator to any federal, state or local
government ("Transfer Taxes"). In the event that the Seller or the Issuer
receives actual notice of any Transfer Taxes arising out of any such
contribution and transfer or grant, on written demand by the Issuer, or upon the
Originator otherwise being given notice thereof, the Originator shall pay, and
otherwise indemnify and hold the Issuer, the Seller, the Trustee and the holders
of the Notes harmless, on an after-tax basis, from and against any and all such
Transfer Taxes (it being understood that the Seller, the Issuer, the holders of
the Notes and the Trustee shall have no obligation to pay such Transfer Taxes).
2.21 Principal Executive Office.
--------------------------
The principal executive office of each of the Originator and the
Servicer is located at 1738 Bass Road, Macon, Georgia 31210.
2.22 Servicing Provisions Customary.
------------------------------
The servicing arrangements hereunder, including without limitation the
terms and conditions pursuant to which the Originator will act as Servicer and
the Servicing Fee to be paid to the Originator, are consistent with the
arrangements and customary practices of the Originator when providing comparable
services to non-affiliated entities and of other servicers in the equipment
leasing industry.
2.23 Nonconsolidation.
----------------
The Originator is and at all times since its incorporation has been
operated in such a manner that it would not be substantively consolidated with
either the Seller or the Issuer and such that the separate existence of any of
the Originator, the Seller or the Issuer would not be disregarded in the event
of a bankruptcy or insolvency of the Originator or the Seller or the Issuer, and
in such regard:
(a) the Originator is not involved in the day-to-day management of
the Seller or the Issuer;
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(b) the Originator maintains separate corporate records and books of
account from the Seller and the Issuer and otherwise observes corporate
formalities and has a separate business office from the Seller and the Issuer;
(c) the financial statements and books and records of the Originator
prepared after the Issuance Date will reflect the separate existence of the
Seller and the Issuer;
(d) the Originator maintains its assets separately from the assets
of the Seller and the Issuer (including through the maintenance of a separate
bank account), the Originator's funds and assets, and records relating thereto,
have not been and are not commingled with those of the Seller and the Issuer and
the separate creditors of the Seller and the Issuer will be entitled to be
satisfied out of the Seller's and the Issuer's respective assets prior to any
value in the Seller or the Issuer becoming available to the Seller's or the
Issuer's equityholders or the Originator's creditors;
(e) all business correspondence of the Originator and other
communications are conducted in the Originator's own name and on its own
stationery; and
(f) neither the Seller nor the Issuer acts as an agent of the
Originator in any capacity and the Originator does not act as agent for the
Seller or the Issuer, but instead presents itself to the public as a corporation
separate from the Seller and the Issuer; provided that the Originator is the
--------
Servicer hereunder and under agreements similar in nature to this Agreement.
2.24 Capital Contribution Treatment.
------------------------------
The Originator will treat the contribution and transfer to the Seller of
the Leases and the Equipment as a capital contribution for financial accounting
and reporting purposes.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants as follows:
3.01 Corporate Organization and Authority.
------------------------------------
The Seller:
(a) is a limited liability company duly organized, validly
existing and in good standing under the laws of its
jurisdiction of organization,
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and
to carry on its business as now conducted and to enter into
and perform its obligations under this Assignment and
Servicing Agreement, and the transactions contemplated
hereby including its obligations under Section 5.05, and
(c) has duly qualified and is authorized to do business and is
in good standing as a foreign limited liability company in
each jurisdiction
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where the character of its properties or the nature of its
activities makes such qualification necessary.
3.02 Business and Property.
---------------------
The Prospectus accurately describes, in all material respects, the
general nature of the business of the Seller.
3.03 Ownership and Security Interest.
-------------------------------
Upon completion of each contribution and transfer described in Sections
1.01(a), 1.01(b) and 1.02(a) and the grant of the security interest described in
Section 1.02(b), (i) the Issuer will be the legal owner of the related Leases
(including all Related Interests), (ii) the Seller will have good title to each
item of related Equipment, and (iii) the Issuer will have a valid security
interest in all of the Seller's right, title and interest in and to in each item
of related Equipment.
3.04 Title to Leases and Equipment.
-----------------------------
Immediately following the transfer and contribution by the Originator to
the Seller of the Leases and the Equipment, the transfer and contribution by the
Seller to the Issuer of the Leases and the grant by the Seller to the Issuer of
the security interest in the Seller's interests in the Equipment, in each case
as contemplated in Section 1, (a) the Leases and the Equipment will be free and
clear of all Liens, except the rights of each Lessee under the related Lease,
the rights of the Seller and the Issuer hereunder and the Lien in favor of the
Trustee granted pursuant to the Indenture, and (b) there will be no delinquent
taxes or other outstanding charges affecting the Equipment which have given or
may give rise to any Liens prior to, or equal or coordinate with, the Lien of
Trustee under the Indenture.
3.05 Transactions Legal and Authorized.
---------------------------------
The contribution and transfer by the Seller of all of its right, title
and interest in and to the Leases and of the covenants, representations,
warranties and obligations of the Originator (including the Originator's
Purchase Obligation) under this Assignment and Servicing Agreement, the grant of
the security interest by the Seller to the Issuer in and to each item of
Equipment and compliance by the Seller with all of the provisions of this
Assignment and Servicing Agreement:
(a) have been duly authorized by all necessary action on the part of
the Seller, as a limited liability company, and do not require any member
approval, or approval or consent of any trustee or holders of any indebtedness
or obligations of the Seller except such as have been duly obtained;
(b) are within the powers of the Seller, as a limited liability
company; and
(c) are legal and will not conflict with, result in any breach in
any of the provisions of, constitute a default under, or result in the creation
of any Lien upon any property of the Seller under the provisions of, any
agreement, charter instrument, by-law or other
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instrument to which the Seller is a party or by which it or its property may be
bound or result in the violation of any law, regulation, rule, order or judgment
applicable to the Seller or its properties, or any order to which the Seller or
its properties is subject, of or by any government or governmental agency or
authority.
3.06 Governmental Consent.
--------------------
Except for the filing of Financing Statements in accordance with the
Filing Requirements, no consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority is necessary or
required on the part of the Seller in connection with the execution and delivery
of this Assignment and Servicing Agreement, the contribution and transfer by the
Seller to the Issuer of the Leases and the grant of the security interest by the
Seller to the Issuer in the Seller's interest in the Equipment contemplated
hereby.
3.07 Compliance with Law.
-------------------
The Seller:
(a) is not in violation of any laws, ordinances, governmental rules
or regulations to which it is subject;
(b) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of
its property or to the conduct of its business; and
(c) is not in violation in any material respect of any term of any
agreement, charter instrument, by-law or other instrument to
which it is a party or by which it may be bound,
which violation or failure to obtain might materially adversely
affect the Asset Pool or the business or condition (financial or
otherwise) of the Seller and its subsidiaries.
3.08 Assets and Liabilities.
----------------------
(a) Both immediately before and after any contribution and transfer
by the Seller to the Issuer of the Leases and the grant of the security interest
in the interests of the Seller in the Equipment contemplated by this Assignment
and Servicing Agreement, the present fair salable value of the Seller's assets
was or will be in excess of the amount that will be required to pay the Seller's
probable liabilities as they then exist and as they become absolute and matured;
and
(b) Both immediately before and after any contribution and transfer
by the Seller to the Issuer of the Leases and the grant of the security interest
in the interests of the Seller in the Equipment contemplated by this Assignment
and Servicing Agreement, the sum of the Seller's assets was or will be greater
than the sum of the Seller's debts, valuing the Seller's assets at a fair
salable value.
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3.09 Fair Consideration.
------------------
The consideration received by the Seller, in exchange for the
contribution and transfer of the Leases, the grant of the security interest in
the interests of the Seller in the Equipment and the assignment and contribution
of the covenants, representations, warranties and obligations of the Originator
(including the Originator's Purchase Obligation) under this Assignment and
Servicing Agreement, is fair consideration having value equivalent to or in
excess of the value of the assets being contributed by the Seller.
3.10 Ability to Pay Debts.
--------------------
The Seller does not believe that it will incur debts beyond its
ability to pay or which would be prohibited by its charter documents or limited
liability company agreement as a result of the transactions contemplated by this
Assignment and Servicing Agreement or otherwise. The Seller's assets and cash
flow enable it to meet its present obligations in the ordinary course of
business as they become due.
3.11 Bulk Transfer Provisions.
------------------------
The contribution and transfer by the Seller to the Issuer of the
Leases and the grant by the Seller to the Issuer of the security interest in the
interests of the Seller in the Equipment pursuant to this Assignment and
Servicing Agreement are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction.
3.12 Transfer Taxes.
--------------
The contribution and transfer by the Seller to the Issuer of the
Leases and the grant of the security interest by the Seller to the Issuer in the
Seller's interest in the Equipment pursuant to this Assignment and Servicing
Agreement are not subject to and will not result in any Transfer Taxes. In the
event that the Issuer receives actual notice of any Transfer Taxes arising out
of any such contribution and transfer or pledge, on written demand by the
Issuer, or upon the Seller otherwise being given notice thereof, the Seller
shall pay, and otherwise indemnify and hold the Issuer, the Trustee and the
holders of the Notes harmless, on an after-tax basis, from and against any and
all such Transfer Taxes (it being understood that the Issuer, the holders of the
Notes and the Trustee shall have no obligation to pay such Transfer Taxes).
3.13 Principal Executive Office.
--------------------------
The principal executive offices of the Seller are located at 1738 Bass
Road, Macon, Georgia 31210. The Seller has no place of business in any state
other than the State of Georgia.
3.14 Nonconsolidation.
----------------
The Seller is and at all times since its incorporation has been
operated in such a manner that it would not be substantively consolidated with
the Originator or the Issuer and such that the separate existence of any of the
Originator, the Seller or the Issuer would not be
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disregarded in the event of a bankruptcy or insolvency of the Seller or the
Issuer, and in such regard:
(a) the Seller is not involved in the day-to-day management of the
Originator or the Issuer;
(b) the Seller maintains separate corporate records and books of
account from the Originator and the Issuer and otherwise observes corporate
formalities and has a separate business office from the Originator and the
Issuer;
(c) the financial statements and books and records of the Seller
prepared after the Issuance Date will reflect the separate existence of the
Originator and the Issuer;
(d) the Seller maintains its assets separately from the assets of
the Originator and the Issuer (including through the maintenance of a separate
bank account), the Seller's funds and assets, and records relating thereto, have
not been and are not commingled with those of the Originator or the Issuer and
the separate creditors of the Originator and the Issuer will be entitled to be
satisfied out of the Originator's and the Issuer's respective assets prior to
any value in the Originator or the Issuer becoming available to the Originator's
or the Issuer's equity holders 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 neither the Originator nor the Issuer acts as an agent of the Seller in any
capacity and the Seller does not act as agent for the Originator or the Issuer,
but instead presents itself to the public as a corporation separate from the
Originator and the Issuer.
3.15 Capital Contribution Treatment.
------------------------------
The Seller will treat the transfer to the Issuer of the Leases and
amounts owed by Lessees under the Leases and of its interests (other than its
ownership interest) in the Equipment as a capital contribution for financial
accounting and reporting purposes.
SECTION 4. ADMINISTRATION OF LEASES
4.01 Servicer to Act.
---------------
(a) Notwithstanding the contribution and transfer by the
Originator of the Leases and the Equipment contemplated hereby, the Servicer,
for the benefit of the Issuer, will service and administer each Lease in
accordance with the terms thereof and of this Assignment and Servicing
Agreement. The Servicer shall take, or cause to be taken, all such actions as
may be necessary or advisable to service, administer and collect each Lease from
time to time, all in accordance with (i) customary and prudent servicing
procedures for leases of a similar type, (ii) all applicable laws, rules and
regulations, and (iii) without limitation as to its obligations under the
preceding clauses (i) and (ii), no less a standard of care than that which it
applies to leases it services for its own account. The Servicer shall provide
the Lessees with appropriate invoices and such other notices as may be required
to ensure that all Lease Payments, Casualty Payments
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and Termination Payments on or in respect of each Lease are remitted by the
Lessees to the address specified by the Servicer. The Servicer shall deposit
such payments to the Collection Account within two Business Days of the receipt
thereof. Any other amount received by the Servicer from time to time from the
Originator, the Issuer or any Lessee which is subject to the Lien of the
Indenture shall be held in trust by the Servicer, as agent for the Trustee and
promptly turned over to the Trustee or deposited into the Collection Account for
application in accordance with the provisions of the Indenture.
(b) The Servicer shall do, and shall have full power and authority
to do, subject only to the specific requirements and prohibitions of this
Assignment and Servicing Agreement, any and all things in connection with the
servicing and administration of the Leases and the interests in the Equipment
which are consistent with the manner in which it services leases and equipment
constituting part of its own portfolio and consistent with the customary
practices of servicers in the equipment leasing industry, but in performing its
duties hereunder, the Servicer will act on behalf and for the benefit of the
Issuer, the Trustee and the holders of the Notes and the Insurer, subject at all
times to the provisions of the Indenture, without regard to any relationship
which the Servicer or any Affiliate of the Servicer may otherwise have with a
Lessee. The Servicer shall at all times act in accordance with the provisions of
each Lease, and shall observe and comply with all requirements of law applicable
to it. Except as permitted by the terms of any Lease following a default
thereunder, the Servicer shall not take any action which would result in the
interference with the Lessee's right to quiet enjoyment of the Equipment subject
to the Lease during the term thereof. The Servicer shall exercise with respect
to each item of Equipment all rights and remedies it, the Issuer or the Trustee
shall have against any vendor of the Equipment, subject to the provisions of any
Lease, and shall promptly pay all amounts realized from such actions to the
Trustee for deposit in the Collection Account, in accordance with the terms of
the Indenture.
(c) Without limiting the generality of the foregoing, the Servicer
agrees to (i) invoice each Lessee monthly (except quarterly, semi-annually or
annually in the case of Leases which provide for quarterly, semi-annual or
annual Lease Payments, respectively) for all Lease Payments required to be paid
by such Lessee in such manner and to the same extent as the Servicer does with
respect to leases held for its own account, (ii) maintain with respect to each
Lease and each item of Equipment, and with respect to each payment by each
Lessee and compliance by each Lessee with the provisions of each Lease, complete
and accurate records in the same form and to the same extent as the Servicer
does with respect to leases and equipment held for its own account (which
records shall be at least as complete and accurate as those maintained by the
Servicer as of the date of this Assignment and Servicing Agreement), and (iii)
from time to time execute, deliver and file (or cause the same to be done), and
the Servicer is hereby authorized and empowered to execute, deliver, and file on
behalf of the Originator, the Seller, the Issuer and the Trustee, any and all
tax returns with respect to sales, use, personal property and other taxes (other
than corporate income tax returns) and any and all reports or licensing
applications required to be filed in any jurisdiction with respect to any Lease
or any item of Equipment and, except as provided in the last sentence of this
Section 4.01(c), any Financing Statements and assignments of Financing
Statements and continuation statements as may from time to time be necessary
because of Lease substitutions, equipment replacements in accordance with the
provisions of any Lease or otherwise so that the transfer of the Leases and
Equipment from the Originator to the Seller, the transfer of the Leases from the
Seller to the
20
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Issuer, the security interest granted by the Seller to the Issuer in the
Equipment and the security interest granted by the Issuer pursuant to the
Indenture in favor of the Trustee in each of the Leases and the Issuer's
interest in the Equipment, at all times will be perfected by such filings with
the appropriate Uniform Commercial Code filing offices. The Originator, the
Seller, the Issuer and the Servicer agree to file Financing Statements on Form
UCC-1 to perfect the ownership interest of the Issuer and the security interest
of the Trustee in the Leases, the ownership interest of the Seller in the
Equipment, the security interest in favor of the Issuer in the Equipment and the
security interest of the Trustee in the Issuer's interest in the Equipment. The
parties acknowledge that the Originator has not filed, and it is not
contemplated that the Originator, the Servicer, the Seller, the Issuer or any
other party will file, Financing Statements in order to perfect or to continue
in effect any security interest in any item of Equipment securing the
obligations of the Lessee under the Lease relating to such Equipment.
(d) The Servicer will maintain, or cause to be maintained, with
respect to the Leases and the Equipment casualty and liability insurance in
amounts at least as great as those described in Section 2.04(f). Each such
casualty and liability policy (i) if maintained by the Servicer, shall name the
Issuer and Trustee as loss payees or additional insureds and (ii) if maintained
by the Lessee, shall name the Servicer or the Trustee as loss payee and
additional insured; provided that the Servicer shall cause all such policies to
--------
name the Trustee and the Issuer as loss payees and additional insureds if (A)
the Originator is no longer the Servicer, (B) an Event of Default shall have
occurred and be continuing or (C) a Servicer Event of Default shall have
occurred and be continuing.
(e) On or prior to the Issuance Date, the Servicer will file the
Required Financing Statements and thereafter will file such additional Financing
Statements and continuation statements and assignments with respect to the
Leases and the Equipment as may be necessary because of equipment replacements
in accordance with the provisions of any Lease, purchases of Additional Leases
in accordance with Section 11 and Lease substitutions pursuant to Section 11
hereof or otherwise so that (i) the ownership interest and security interest
contemplated by this Agreement in favor of the Issuer, and the security interest
contemplated by the Indenture in favor of the Trustee, in the Leases will be
perfected by such filings with the appropriate Uniform Commercial Code filing
offices and (ii) the ownership interest contemplated by this Agreement in favor
of the Seller, and the security interest contemplated by this Agreement in favor
of the Issuer and by the Indenture in favor of the Trustee, in the Equipment,
will be perfected by such filings with the appropriate Uniform Commercial Code
filing offices.
(f) The Servicer shall pay Excess Copy Charges and Maintenance
Charges, if any, owing to IKON Office Solutions, Inc. in a timely fashion.
4.02 Lease Amendments and Modifications.
----------------------------------
In performing its obligations hereunder, the Servicer may, acting in
the name of the Issuer and without the necessity of obtaining the prior consent
of the Issuer, the Insurer or the Trustee, enter into and grant modifications,
waivers and amendments to the terms of any Lease except for modifications,
waivers or amendments that (a) are inconsistent with the servicing standards set
forth in Section 4.01 above, (b) would reduce the amount or extend the time for
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payment of any Lease Payment, Casualty Payment or Termination Payment to be made
under a Lease (other than to permit termination of a Lease which does not
otherwise provide for termination by requiring the payment, in lieu of all
future Lease Payments with respect to the Lease or Equipment subject thereto, an
amount which equals or exceeds the Lease Purchase Amount for such Lease as of
such date) or the Lessee's absolute and unconditional obligation to make payment
of the same, (c) would reduce or adversely affect the Lessee's obligation to
maintain, service, insure and care for the Equipment or would permit the
alteration of any item of Equipment in any way which could adversely affect its
present or future value or (d) otherwise could adversely affect the interests of
any of the Seller, the Issuer, the Trustee, the Insurer or the holders of the
Notes.
In addition, following the transfer of any Lease to the Issuer in
accordance herewith, the Servicer may make adjustments to such Lease which
modify one or more terms of such Lease, such as payment amount or payment date.
Such administrative adjustments may result in a re-booking of such Lease and the
assignment of a new Lease number, but will not be considered to be a
substitution or prepayment of such Lease. Except to the extent the Originator
substitutes a Substitute Lease therefor in accordance with Section 11 hereof,
the Servicer may permit such adjustments so long as the following conditions
precedent have been satisfied:
(i) after giving effect to such adjustment and any
additions and substitutions pursuant to Section 11, the final payment on such
Lease must be on or prior to June 2005;
(ii) after giving effect to such adjustments and any
additions and substitutions pursuant to Section 11 the aggregate amount of Lease
Payments through the term of the Leases (including the Substitute Leases and the
Additional Leases) will not be materially less than the aggregate scheduled
Lease Payments of the Leases prior to such adjustment, substitution or addition;
(iii) after giving effect to such adjustments, additions and
substitutions pursuant to Section 11, the Discounted Present Value of the
Performing Leases must not be less than the Discounted Present Value of the
Performing Leases prior to such adjustment, addition and substitution; and
(iv) after giving effect to such adjustments, additions,
and substitutions pursuant to Section 11, the weighted average remaining term of
the Performing Leases must not be greater than the weighted average remaining
term of the Performing Leases prior to such adjustment, addition, and
substitution.
4.03 Non-Performing Leases.
---------------------
(a) Upon receipt of notice from the Issuer, the Trustee or any
other Person, or if the Servicer otherwise learns that any Lease is a Non-
Performing Lease, the Servicer will take such action as is appropriate,
consistent with the Servicer's administration of leases in its own portfolio and
consistent with the customary practices of servicers in the office equipment
leasing industry, including such action as may be necessary to cause, or attempt
to cause, the Lessee thereunder to cure such non-performance (if the same may be
cured) or to terminate or attempt to
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terminate such Lease and to recover, or attempt to recover, all damages
resulting from such default.
(b) The Servicer will use its best efforts to sell or lease any
Equipment that is subject to a Non-Performing Lease in a timely manner and upon
the most favorable terms and conditions available at the time. In the event of
an Early Lease Termination, any Substitute Leases in respect thereof must have a
Discounted Present Value equal to or greater than that of the Early Termination
Lease, monthly payments at least equal to those of the Early Termination Lease
through the remaining term of such Early Termination Lease and a remaining term
less than or equal to that of the Early Termination Lease.
(c) In the event that the Servicer is required to sell or lease any
item of Equipment pursuant to the provisions of this Section 4.03 at a time when
the Servicer has other similar items of equipment available to it, the Servicer
will not favor any such other item in its remarketing efforts.
(d) All amounts realized by the Servicer in the performance of its
duties under this Section 4.03 with respect to any Lease remaining subject to
the Lien of the Indenture and related Equipment (net of the Servicer's actual
out-of-pocket expenses reasonably incurred in such realization), including
amounts received by the Servicer pursuant to the provisions of Section 5.05,
shall be held in trust by the Servicer, as agent for the Trustee and deposited
into the Collection Account for application in accordance with the provisions of
the Indenture; provided that, to the extent that (i) the Servicer has made any
--------
advances pursuant to Section 5.01 hereof with respect to any Lease which
thereafter became a Non-Performing Lease, and (ii) the Servicer has not
otherwise been fully reimbursed for such advances or payments, the Servicer
shall reimburse itself for such advances or payments from any amounts recovered
with respect to such Non-Performing Lease before depositing any such amounts
pursuant to this Section 4.03(d). Any amounts properly retained by the Servicer
pursuant to this Section are, without further action by the Trustee, released
from the Lien of the Indenture.
4.04 Costs of Servicing; Servicing Fee; Administrative Expenses.
----------------------------------------------------------
(a) All costs of servicing each Lease in the manner required by
this Section 4 shall be borne by the Servicer, but the Servicer shall be
entitled to retain, out of any amounts actually recovered by the Servicer in the
performance of its obligations under Section 4.03 hereof with respect to any
Lease or the interests in the Equipment subject thereto, the Servicer's actual
out-of-pocket expenses reasonably incurred in the course of such performance
with respect to such Lease or the interests in the Equipment. (For all purposes
of this Section 4 the Servicer's "out-of-pocket expenses" means only those
expenses incurred to third parties (e.g., reasonable fees of outside counsel in
a collection suit) and not salaries, operating costs, overtime wages and other
such "overhead" costs or expenses of the Servicer.) In addition, the Servicer
shall be entitled to receive on each Payment Date following the Issuance Date a
servicing fee with respect to the Notes (the "Servicing Fee"). Any amounts
properly retained by the Servicer pursuant to this Section are, without further
action by the Trustee, released from the Lien of the Indenture.
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(b) The amount of the Servicing Fee which the Servicer shall be
entitled to receive on each Payment Date following the original issuance of the
Notes shall be determined by multiplying one-twelfth of 0.75% by the lesser of
(i) the Discounted Present Value of the Performing Leases or (ii) the
Outstanding Principal Amount of the Notes, in each case at the Determination
Date for such Payment Date before application of payments with respect thereto.
(c) The Servicer agrees to pay, out of the Servicing Fee, all
Trustee Fees and expenses of the Trustee in connection with the Notes (including
the expenses relating to the preparation and delivery of reports to Noteholders)
and all fees of accountants in connection with the Notes.
4.05 Other Transactions.
------------------
Nothing in this Assignment and Servicing Agreement shall preclude the
Originator or the Servicer from entering into other leases or other financial
transactions with any Lessee or selling or discounting any such lease with any
Person.
SECTION 5. SERVICER ADVANCES AND ORIGINATOR'S AND SELLER'S SUPPORT
5.01 Late Lease Payments.
-------------------
On each Determination Date, the Servicer may, but will not be required
to, advance and remit to the Trustee for deposit in the Collection Account, in
such manner as will ensure that the Trustee will have immediately available
funds on account thereof by 11:00 A.M. New York City time on the second Business
Day prior to the next succeeding Payment Date, an amount (a "Servicer Advance")
equal to any Lease Payment due during the prior Due Period but unpaid prior to
such Determination Date with respect to any Lease. In consideration of each
Servicer Advance the Servicer will be entitled to retain any late payment fees
recovered from the Lessee with respect to any Lease Payment covered by a
Servicer Advance. In addition, the Servicer will be reimbursed for Servicer
Advances from Available Funds in the Collection Account in accordance with the
Indenture on the following Payment Date. Any amounts properly retained by the
Servicer pursuant to this Section are, without further action by the Trustee,
released from the Lien of the Indenture.
5.02 Early Termination Leases.
------------------------
Following the Determination Date as of which any Lease first becomes
an Early Termination Lease the Originator may, but shall have no obligation to,
either (a) substitute one or more Eligible Leases and the Equipment subject
thereto for such Lease and the Equipment subject thereto pursuant to Section 11
hereof (if the Originator is then entitled to substitute Leases and Equipment in
accordance with the provisions of Section 11.01 hereof) on or before the second
Business Day prior to the next succeeding Payment Date, (b) purchase from the
Issuer such Lease and the Issuer's interest in the related Equipment by
remitting to the Trustee an amount equal to the Lease Purchase Amount in such
manner as will ensure that the Trustee will have immediately available funds
therefor by 11:00 A.M. New York City time on the second Business Day prior to
the next succeeding Payment Date or (c) transfer to the Issuer one or more
Additional Leases in consideration of the proceeds thereof in accordance with
Section 11 hereof.
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Unless the Originator takes one of the actions set forth in the prior sentence,
the Servicer will not permit a voluntary termination of a Lease prior to its
stated maturity unless it receives a payment in connection with such termination
equal to at least the Lease Purchase Amount. Any Early Termination Lease and the
Issurer's interest in the Equipment subject thereto which is purchased, or for
which Additional Leases have been acquired or Substitute Leases transferred,
pursuant to this Section 5.02 shall nevertheless remain subject to the Lien of
the Indenture until such time as an Additional Lease or Additional Leases have
been acquired or Substitute Lease or Substitute Leases have been transferred in
accordance with the provisions of Section 11 hereof or the Lease Purchase Amount
has been paid.
5.03 Indemnification.
---------------
Subject to the provisions of Section 7.02, the Originator, in its
capacity as Servicer, agrees to indemnify and hold harmless the Issuer, the
Trustee (its officers, directors, employees and agents) and each holder of the
Notes (each an "Indemnified Party") against any and all liabilities, losses,
damages, penalties, costs and expenses (including costs of defense and legal
fees and expenses) which may be incurred or suffered by such Indemnified Party
(except to the extent arising out of the gross negligence or willful misconduct
on the part of the Indemnified Party) as a result of claims, actions, suits or
judgments asserted or imposed against it and arising out of the transactions
contemplated hereby or by the Indenture, including, without limitation, any
claims resulting from any use, operation, maintenance, repair, storage or
transportation of any item of Equipment, whether or not in the Servicer's
possession or under its control pursuant to this Assignment and Servicing
Agreement, and any tort claims and any fines or penalties arising from any
violation of the laws or regulations of the United States or any state or local
government or governmental authority; provided that the foregoing indemnity
--------
shall in no way be deemed to impose on the Originator any obligation, other than
to the extent specifically set forth in this Agreement or the Indenture, to make
any payment with respect to any Lease or Equipment or principal or interest on
the Notes, to pay or reimburse the Insurer in respect of any amount paid by the
Insurer on or in respect of the Notes or to reimburse the Issuer for any
payments on account of the Notes. This Section 5.03 shall bind any successor
Servicer hereunder. Nothing in this indemnification shall be construed as a
guaranty of any Lease or any Equipment by the Originator. The obligations of
the Servicer hereunder shall survive the satisfaction and discharge of the
Indenture or the earlier resignation or removal of the Trustee thereunder.
5.04 Purchases; Other Payments.
-------------------------
(a) In the event that (i) any of the representations or
warranties made by the Originator in Sections 2.04, 2.05(b) and 2.08 hereof with
respect to any of the Leases or the Equipment subject thereto proves at any time
to have been inaccurate in any material respect as of the Issuance Date or
related transfer date, as the case may be, or (ii) any Lease shall be terminated
in whole or in part by a Lessee, or any amounts due with respect to any Lease
shall be reduced or impaired, as a result of (x) any action or inaction by the
Originator (other than any such action or inaction of the Originator, when
acting as Servicer, in connection with the enforcement of any Lease in a manner
consistent with the provisions of this Assignment and Servicing Agreement) or
(y) any claim by any Lessee against the Originator and, in any such case, the
event or condition causing such inaccuracy, termination, reduction, impairment
or claim
25
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shall not have been cured or corrected within 30 days after the earlier of the
date on which the Originator is given notice thereof by the Issuer or the
Trustee or the date on which the Originator otherwise first has notice thereof,
the Originator will purchase such Lease and related Equipment interests by
paying to the Servicer for deposit into the Collection Account, not later than
the second Business Day after the Determination Date next following the
expiration of such 30-day period with respect to the events referenced in
Section 5.04(a)(i) and (ii), an amount equal to the Lease Purchase Amount, and
simultaneously with such purchase, the Originator shall reimburse the Servicer
for all amounts, if any, theretofore advanced by the Servicer pursuant to
Section 5.01 with respect to such Lease. Without limiting the generality of the
foregoing, it is agreed and understood that for purposes of this Section 5.04,
any inaccuracy in any representation or warranty with respect to (i) the
priority of the Lien of the Indenture with respect to any Lease or (ii) the
amount (if less than represented) of the Lease Payments, Casualty Payments or
Termination Payments under any Lease shall be deemed to be material.
(b) By the Issuance Date, the Originator and the Seller agree to
obtain and provide to the Trustee UCC searches against each of them from the
appropriate filing offices in Georgia confirming the absence of any UCC filings
(other than those in the process of being released pursuant to releases
delivered on the Issuance Date) against either of them with respect to the
Leases (including the right to receive all payments due or to become due
thereunder) and the Equipment, other than those naming the Seller or the Issuer
as the owner of the Leases or the Trustee as secured party. In the event the
Originator and Seller fail to provide any such searches required by the
preceding sentence of this Section 5.04(b) within the required time period or
any search reveals the existence of any conflicting Liens (which are not removed
within 30 days of receipt of such search), the Originator shall be required to
purchase not later than the third Business Day after the Determination Date
following the expiration of the time period during which such search was to be
obtained or such Lien released, as the case may be, any Lease as to which such
searches are not provided or with respect to which conflicting Liens with
respect thereto or any related Equipment are found to exist at the Lease
Purchase Amount for such Lease.
(c) The Originator's obligations under this Section 5.04 are the
full recourse obligations of the Originator and shall in no way be limited or
discharged by the application of any funds constituting part of the Asset Pool.
(d) In connection with any purchase of Leases and Equipment
interests pursuant to this Section 5.04, the Originator may reacquire from the
Seller the ownership interest of the Seller in such Equipment.
5.05 Seller's Obligation in Respect of Non-Performing Leases.
-------------------------------------------------------
In the event that any Lease shall become a Non-Performing Lease, and
the Originator shall not have substituted one or more Substitute Leases therefor
in accordance with the provisions of Section 11, the Seller shall pay to the
Issuer in the manner provided in the next sentence an amount equal to the lesser
of (i) the amount of all recoveries by the Seller in respect of the sale, re-
lease or other disposition of any item of Equipment subject to such Non-
Performing Lease and (ii) the Discounted Present Value of such Non-Performing
Lease (the "Recourse Amount"). The amount of any such recoveries, up to the
Recourse Amount, shall be
26
<PAGE>
deposited into the Collection Account within two Business Days of the receipt
thereof by the Seller or the Servicer. The Seller's obligations under this
Section 5.05 are secured by a security interest from the Seller to the Issuer in
all right, title and interest of the Seller in and to the Equipment subject to
the Leases (whether or not constituting Non-Performing Leases).
5.06 Payment Advices.
---------------
Each payment to the Servicer pursuant to any of the provisions of this
Assignment and Servicing Agreement shall be accompanied by written advice
containing sufficient information to identify the Lease and/or Equipment to
which such payment relates, the Section of this Assignment and Servicing
Agreement pursuant to which such payment is made, and the proper application
pursuant to the provisions of this Assignment and Servicing Agreement or the
Indenture of the amounts being paid.
SECTION 6. INFORMATION TO BE PROVIDED
6.01 Monthly Status Reports; Servicing Reports.
-----------------------------------------
(a) Within five Business Days following each Payment Date, the
Servicer will send to the Issuer, the Trustee and the Insurer a written report,
signed by one of the Servicer's financial officers, (i) identifying each Lease
with respect to which any Lease Payment was 90 or more days overdue as of the
end of the immediately preceding Due Period, the Discounted Present Value of
such Lease as of such Payment Date, the amount advanced by the Servicer with
respect to such Lease pursuant to Section 5.01 hereof since the Servicer's
previous monthly report (or, in the case of the first such report, since the
Cut-Off Date), (ii) identifying each Lease with respect to which any Lease
Payment was 60 or more days overdue as of the end of the immediately preceding
Due Period, the Discounted Present Value of such Lease as of such Payment Date,
and the amount advanced by the Servicer with respect to such Lease pursuant to
Section 5.01 hereof since the Servicer's previous monthly report (or, in the
case of the first such report, since the Issuance Date), (iii) identifying each
Lease which became a Non-Performing Lease as of the preceding Determination Date
and specifying the Discounted Present Value of such Lease as of such
Determination Date (or, in the case of the first such report, subsequent to the
Cut-Off Date) and the aggregate Discounted Present Value of all such Non-
Performing Leases, and (iv) indicating the aggregate amount recovered by the
Servicer subsequent to the preceding Payment Date (or, in the case of the first
Payment Date, subsequent to the Cut-Off Date) and on or prior to such Payment
Date with respect to Lease Delinquency Payments and Lease Payments in respect of
Non-Performing Leases previously made by the Servicer (and the specific amounts
so recovered with respect to any Non-Performing Lease) as of the related
Determination Date. Each such report shall also describe generally what action
or actions the Servicer is then taking or proposes to take to recover from the
appropriate Lessees any amounts previously paid by the Servicer to the Trustee
pursuant to Section 5.01 hereof.
(b) On the Determination Date, the Servicer shall deliver to the
Trustee, each Rating Agency and the Insurer a servicing report signed by an
Authorized Officer of the Servicer (the "Servicing Report") duly completed and
dated, in substantially the form of Exhibit B hereto.
27
<PAGE>
(c) The Servicing Report shall include, among other items, the
total amount of all Lease Payments, Casualty Payments, Retainable Deposits,
Termination Payments, Lease Purchase Amounts, recoveries related to Non-
Performing Leases and other payments received by the Servicer and deposited in
the Collection Account prior to the related Determination Date and on or
subsequent to the Determination Date preceding such Determination Date (or, in
the case of the first Determination Date, on or subsequent to the Cut-Off Date).
Such report shall indicate the amount of all Lease Payments received by the
Servicer and deposited in the Collection Account which are for any Due Period
other than the Due Period for such Determination Date and shall identify each
Lease with respect to which a Casualty Payment, Retainable Deposit, Termination
Payment or Lease Purchase Amount was made during such time period. Such report
shall also indicate (i) the aggregate amount paid by the Servicer on or
subsequent to the most recent Determination Date pursuant to Section 5.01
hereof, and (ii) the aggregate amount reimbursed to the Servicer prior to the
most recent Determination Date and on or subsequent to the Determination Date
preceding such Determination Date (or, in the case of the first Determination
Date, on or subsequent to the Cut-Off Date) for any Servicer Advances made by
the Servicer pursuant to Section 5.01 hereof. Such report shall also include the
amount of the distribution with respect to each class of Notes to be made on the
related Payment Date, the amount of such distribution allocable to principal,
the amount of such distribution allocable to interest, the Asset Pool balance as
of the close of business on the last day of the related Due Period, the
aggregate outstanding principal balance and the Pool Factor for each class of
Notes after giving effect to all distributions allocable to principal on such
Payment Date, the amounts paid to or retained by the Servicer, if any, with
respect to the related Due Period, and the amount of the aggregate Purchase
Amounts in respect of Leases that have been reacquired, if any, for such Due
Period. The Servicer hereby represents and warrants that such calculations will
be correct and accurate, and the Servicer shall be fully responsible for, and
shall reimburse and indemnify each Indemnified Party for, any loss resulting
from such Indemnified Party's reliance on any such calculations which are not
correct.
(d) The Servicer shall deliver to the Issuer and the Trustee, with
a copy to each Rating Agency and the Insurer, within 135 days following the end
of each fiscal year of the Servicer, beginning with the Servicer's fiscal year
ending September 30, 1999, an Officers' Certificate stating that the Servicer
has fulfilled its obligations under the Assignment and Servicing Agreement in
all material respects throughout the preceding twelve (12) months (or, in the
case of the first such certificate, the period from the Issuance Date) or if
there has been any material default under the Assignment and Servicing Agreement
or the Indenture, describing such default.
(e) The Servicer shall deliver to the Issuer and the Trustee, with
a copy to each Rating Agency and the Insurer, within 120 days following the end
of each fiscal year of the Servicer, beginning with the Servicer's fiscal year
ending September 30, 1999, a report (the "Supplementary Report") signed by an
Authorized Officer on behalf of the Servicer and dated as of the last day of
such fiscal year, stating that (a) a review of the activities of the Servicer
and the Servicer's performance under the Assignment and Servicing Agreement and
the Indenture for the previous 12-month period (or, in the case of the first
such report, the period from the Issuance Date) has been made under such
officer's supervision and (b) nothing has come to such officer's attention to
indicate that a Servicer Event of Default has occurred, or, if any Servicer
Event of
28
<PAGE>
Default has occurred and is continuing, specifying each such event known to the
officer, the nature and status thereof and the steps necessary to remedy such
event.
(f) If any funds are to be withdrawn from the Collection Account
other than as provided in Section 3.03(b) of the Indenture, the Servicer shall
submit with the related Servicing Report the certificate required by Section
3.03(d) of the Indenture.
(g) Within the prescribed period of time for tax reporting
purposes after the end of each calendar year, the Servicer on behalf of the
Issuer, will provide to the Noteholders a statement containing the distribution
amount with respect to each class of Notes and the distribution amount allocable
to interest for that calendar year and any other information required by
applicable tax laws, for the purpose of the Noteholders' preparation of federal
income tax returns.
(h) The Servicer shall deliver to the Trustee and the Insurer and
each of the Rating Agencies, within three days after obtaining knowledge of the
occurrence thereof, written notice of any event which with the giving of notice
or the lapse of time would become an Event of Default under any of clauses (c),
(d), (e) or (f) of Section 7.01 of the Indenture, its status and what action the
Issuer or the Servicer is taking or proposes to take with respect thereto.
6.02 Annual Independent Public Accountant's Report.
---------------------------------------------
The Servicer shall cause a firm of independent public accountants (who
may also render other services to the Servicer, the Seller or the Originator) to
deliver to the Trustee, with a copy to the Insurer and each Rating Agency,
within 135 days following the end of each fiscal year of the Servicer, beginning
with the Servicer's fiscal year ending September 30, 1999, a written statement
to the effect that such firm has (a) obtained from the Servicer a copy of the
monthly status report pursuant to Section 6.01 for each of three months during
the previous calendar year, such three months to be selected at random by such
firm of independent public accountants; (b) compared the information contained
in such monthly status report and in the monthly summaries prepared by the
Servicer in support of such monthly status report to the computer printouts and
accounts prepared by the Servicer and supporting such reports; and (c) selected,
at random, 100 Leases included in the Asset Pool and compared the activity in
the files maintained by the Servicer for such Leases to the activity as reported
for those Leases to the monthly summaries prepared by the Servicer and
supporting the monthly status report, and that, on the basis of such examination
and comparison, such firm is of the opinion that the Servicer has prepared such
monthly status report and summaries in agreement with the computer printouts,
accounts and individual Lease files, except in each case for (x) such exceptions
as such firm shall believe to be immaterial and (y) such other exceptions as
shall be set forth in such statement. In the event such firm of independent
public accountants requires the Trustee to agree to the procedures performed by
such firm, the Servicer shall direct the Trustee in writing to so agree; it
being understood and agreed that the Trustee shall deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and the
Trustee makes no independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures.
29
<PAGE>
SECTION 7. THE SERVICER
7.01 Merger or Consolidation of the Servicer.
---------------------------------------
So long as the Notes remain outstanding, the Servicer will keep in
full force and effect its existence, rights and franchise as a corporation under
the laws of its jurisdiction of incorporation and will preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is necessary to protect the validity and enforceability
of any of the Leases or to permit performance of the Servicer's duties under
this Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Servicer shall not merge
or consolidate with any other Person unless (i) the entity surviving such merger
or consolidation is a corporation organized under the laws of the United States
or any jurisdiction thereof and (ii) the surviving entity, if not the Servicer,
shall execute and deliver to the Issuer, the Servicer and the Trustee, in form
and substance satisfactory to each of them, (a) an instrument expressly assuming
all of the obligations of the Servicer hereunder and (b) an opinion of counsel
to the effect that (i) such Person is a corporation of the type described in the
preceding clause (i); (ii) such Person has effectively assumed the obligations
of the Servicer hereunder and (iii) all conditions precedent to such action have
been satisfied. Upon the occurrence of any such merger or consolidation, the
Servicer shall give notice promptly to the Rating Agencies.
7.02 Limitation on Liability of the Servicer and Others.
--------------------------------------------------
Neither the Servicer nor any of the directors, officers, employees or
agents of the Servicer shall incur any liability to the Issuer, the Trustee, the
Insurer or the holders of the Notes for any action taken or not taken in good
faith pursuant to the terms of this Assignment and Servicing Agreement with
respect to any Lease (including any Non-Performing Lease) or the Equipment
subject thereto; provided, however, that this provision shall not protect the
-------- -------
Servicer or any such person against any breach of warranties, representations or
covenants made by it herein or in any certificate delivered in conjunction with
the purchase of the Notes or for any liability which would otherwise be imposed
for any action or inaction resulting from willful misconduct or bad faith or for
negligence in the performance or nonperformance of its duties hereunder.
7.03 Servicer Not to Resign or Be Removed.
------------------------------------
The Servicer shall not resign from the servicing obligations and
duties hereby imposed on it except upon determination that such duties hereunder
are no longer permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced by an opinion of
independent counsel to the Servicer, in form and substance satisfactory to the
Insurer (so long as the Policy is outstanding) or the Trustee (if the Policy is
not outstanding), to such effect delivered to the Trustee and the Insurer with a
copy to each Rating Agency.
Except as provided in Section 10.02 hereof, the Servicer shall not be
removed or be replaced as Servicer with respect to any Lease or any of the
Equipment.
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<PAGE>
No resignation or removal of the Servicer shall in any event (i)
become effective until the Trustee or a successor servicer shall have assumed
the Servicer's servicing responsibilities and obligations in accordance with
Section 10.02 hereof, or (ii) affect the Originator's obligations pursuant to
Section 5 hereof.
7.04 Financial and Business Information.
----------------------------------
The Servicer will deliver to the Issuer and the Trustee, and the
Trustee upon receipt thereof shall deliver to the Insurer and each Rating Agency
and upon request, to any holder of outstanding Notes evidencing not less than
25% of the Outstanding Principal Amount of the Notes (and, upon the request of
any holder of Outstanding Notes evidencing not less than 25% of the Outstanding
Principal Amount of the Notes, to any prospective transferee of any Notes):
(a) Quarterly Statements - within 45 days after the end of each of
--------------------
the first three quarterly fiscal periods in each fiscal year of the Servicer, a
copy of:
(1) a consolidated balance sheet of the Servicer (or its parent) and
its consolidated subsidiaries at the end of such quarter, and
(2) consolidated statements of income, retained earnings and cash
flow of the Servicer (or its parent) and its consolidated subsidiaries for
that quarter and for the portion of the fiscal year ending with such
quarter,
accompanied by a certificate signed by a principal financial officer of the
Servicer stating that such financial statements present fairly the financial
condition of the Servicer and its consolidated subsidiaries and have been
prepared in accordance with generally accepted accounting principles
consistently applied;
(b) Annual Statements - within 135 days after the end of each
-----------------
fiscal year of the Servicer, a copy of:
(1) a consolidated balance sheet of the Servicer (or its parent)
and its consolidated subsidiaries, at the end of that year, and
(2) consolidated statements of income, retained earnings and cash
flow of the Servicer (or its parent) and its consolidated subsidiaries for
that year, setting forth in each case in comparative form the figures for
the previous fiscal year,
all in reasonable detail and accompanied by an opinion of a firm of independent
certified public accountants of recognized national standing stating that such
financial statements present fairly the financial condition of the Servicer and
its consolidated subsidiaries and have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur and footnote), and that
the examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
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<PAGE>
(c) Notice of Servicer Event of Default - immediately upon the
-----------------------------------
Servicer's becoming aware of the existence of any condition or event which
constitutes a Servicer Event of Default, a written notice, by certified
mail return receipt requested, hand delivery or overnight courier,
describing its nature and period of existence and what action the Servicer
is taking or proposes to take with respect thereto;
(d) SEC and Other Reports - promptly upon their becoming available,
---------------------
one copy of each report (including the Servicer's annual report to
shareholders and reports on Form 8-K, 10-K, and 10-Q), proxy statement,
registration statement, prospectus and notice filed with or delivered to
any securities exchange, the Securities and Exchange Commission or any
successor agencies; and
(e) Report on Proceedings - promptly upon the Servicer becoming
---------------------
aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or conditions (financial
or otherwise) of the Servicer, a written notice specifying the nature of such
investigation or proceeding and what action the Servicer is taking or proposes
to take with respect thereto and evaluating its merits.
7.05 Officers' Certificates.
----------------------
With each set of financial statements delivered pursuant to Section
7.04, the Servicer will deliver an Officers' Certificate stating (i) that the
officers signing such Officers' Certificate have reviewed the relevant terms of
this Assignment and Servicing Agreement and have made, or caused to be made
under such officers' supervision, a review of the activities of the Servicer
during the period covered by the statements then being furnished, (ii) that the
review has not disclosed the existence of any Servicer Event of Default or, if a
Servicer Event of Default exists, describing its nature and what action the
Servicer has taken and is taking with respect thereto, and (iii) that on the
basis of such review the officers signing such certificate are of the opinion
that during such period the Servicer has serviced the Leases in compliance with
the procedures hereof except as described in such certificate.
7.06 Inspection.
----------
The Servicer will permit, on reasonable prior notice, the
representatives of the Issuer, the Trustee, the Insurer (so long as the Policy
is outstanding) and, if the Policy is no longer outstanding, the holder of any
Notes evidencing not less than 25% of the Outstanding Principal Amount of the
Notes to inspect the servicing operations and discuss the servicing operations
of the Servicer with any of its officers or employees all at such reasonable
times and as often as may be reasonably requested for the purpose of reviewing
the Servicer or the Servicer's performance of its duties and obligations
hereunder. Any expense incident to the exercise by the Issuer, the Trustee, the
Insurer, or any holder of the Notes during the continuance of any Servicer Event
of Default, or any event or condition which with the giving of notice or the
32
<PAGE>
lapse of time or both would become a Servicer Event of Default, of any right
under this Section 7.06 shall be borne by the Servicer.
7.07 Servicer Records.
----------------
The Servicer will indicate in its records that it is servicing and
administering each Lease in its capacity as Servicer hereunder, and to the
extent it is in possession of any original Lease agreement, will hold such
Lease, subject to the provisions of the Indenture as custodian for the Trustee.
SECTION 8. THE ORIGINATOR
8.01 Merger or Consolidation of the Originator.
-----------------------------------------
So long as the Notes remain outstanding, the Originator will keep in
full force and effect its existence, rights and franchise as a corporation under
the laws of its jurisdiction of incorporation and will preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is necessary to protect the validity and enforceability
of any of the Leases or to permit performance of the Originator's duties under
this Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Originator shall not
merge or consolidate with any other Person unless (i) the entity surviving such
merger or consolidation is a corporation organized under the laws of the United
States or any jurisdiction thereof and (ii) the surviving entity, if not the
Originator, shall execute and deliver to the Seller, the Issuer, the Servicer,
the Trustee and the Insurer (so long as the Policy is outstanding), in form and
substance satisfactory to each of them, (a) an instrument expressly assuming all
of the obligations of the Originator hereunder and (b) an Opinion of Counsel to
the effect that such Person is a corporation of the type described in the
preceding clause (i) and has effectively assumed the obligations of the
Originator hereunder.
8.02 Control of Seller.
-----------------
So long as the Notes remain outstanding, the Originator will not (i)
sell, pledge or otherwise transfer any membership interest in the Seller held by
the Originator or any capital stock of IKON Receivables Funding Inc. (the
manager of the Seller and the Issuer) held by the Originator or (ii) vote such
membership interests in the Seller in favor of any amendment to or alteration of
the certificate of formation or limited liability company agreement of the
Seller or any such capital stock of IKON Receivables Funding Inc. in favor of
any amendment to or alteration of the certificate of incorporation or by-laws of
the Manager.
8.03 Financial and Business Information.
----------------------------------
The Originator will deliver to the Issuer, the Trustee and the Insurer
(so long as the Policy is outstanding):
(a) Notice of Servicer Event of Default - immediately upon the
-----------------------------------
Originator becoming aware of the existence of any condition or event which
constitutes a Servicer Event of
33
<PAGE>
Default, a written notice (with a copy to each Rating Agency) describing
its nature and period of existence and what action the Originator is taking
or proposes to take with respect thereto;
(b) SEC and Other Reports - promptly upon their becoming available,
---------------------
one copy of each report (including the Originator's annual report to
shareholders and reports on Form 8-K, 10-K, and 10-Q), proxy statement,
registration statement, prospectus, prospectus supplement and notice filed
with or delivered to any securities exchange, the Securities and Exchange
Commission or any successor agencies;
(c) Report on Proceedings - promptly upon the Originator becoming
---------------------
aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding,
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition
(financial or otherwise) of the Originator, a written notice specifying the
nature of such investigation or proceeding and what action the Originator
is taking or proposes to take with respect thereto and evaluating its
merits;
(d) ERISA - (i) promptly and in any event within ten days after the
-----
Originator knows or has reason to know of the occurrence of a Reportable
Event with respect to a Pension Plan with regard to which notice must be
provided to the PBGC, a copy of such materials required to be filed with
the PBGC with respect to such Reportable Event and in each such case a
statement of the chief financial officer of the Originator setting forth
details as to such Reportable Event and the action which the Originator
proposes to take with respect thereto; (ii) at least ten days prior to the
filing by any plan administrator of a Pension Plan of a notice of intent to
terminate such Pension Plan, a copy of such notice; (iii) upon request of
the Issuer and the Trustee, and in no event more than ten days after such
request, copies of each annual report which is filed on Form 5500, together
with certified financial statements for the Pension Plan (if any) as of the
end of such year and actuarial statements on Schedule B to such Form 5500;
(iv) promptly and in any event within ten days after it knows or has reason
to know of any event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan, a statement of the chief financial
officer of the Originator describing such event or condition; (v) promptly
and in no event more than ten days after receipt thereof by the Originator
or any Related Person, each notice received by the Originator or any
Related Person concerning the imposition of any withdrawal liability under
Section 4202 of ERISA; and (vi) promptly after receipt thereof a copy of
any notice the Originator or any Related Person may receive from the PBGC
or the Internal Revenue Service with respect to any Pension Plan; provided,
--------
however, that this subsection (vi) shall not apply to notices of general
-------
application promulgated by the PBGC or the Internal Revenue Service or
notices which would not require any material payment by the Originator or
any Related Person; and
(e) Requested Information - with reasonable promptness, any other
---------------------
data and information which may be reasonably requested by such parties from
time to time.
34
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Compliance by the Servicer with the requirements of Sections 7.04(c),
7.04(d) or 7.04(e) shall be deemed to be compliance by the Originator with the
corresponding requirements of Section 8.03(a), 8.03(b) or 8.03(c), as the case
may be, and vice versa, so long as IOS Capital is the Servicer hereunder.
---- -----
8.04 Officers' Certificates.
----------------------
With each set of financial statements delivered pursuant to Section
8.03, the Originator will deliver an Officers' Certificate stating that the
officers signing such Certificate have reviewed the relevant terms of this
Assignment and Servicing Agreement and have made, or caused to be made under
such officers' supervision, a review of the activities of the Originator during
the period covered by the income statements then being furnished and, so long as
the Originator is Servicer hereunder, that the review has not disclosed the
existence of any Servicer Event of Default or, if a Servicer Event of Default
exists, describing its nature and what action the Originator has taken and is
taking with respect thereto.
8.05 Books and Records.
-----------------
The Originator will clearly mark its books and records to reflect the
contributions of Leases and Equipment pursuant to this Agreement.
8.06 Communications.
--------------
The Originator will reply to all inquiries by third parties with
respect to the transactions contemplated by this Agreement by indicating that it
has transferred the Leases and its right, title and interest in the related
Equipment and that the Issuer now holds title to the Leases and such interests
(other than ownership interests) in the Equipment.
SECTION 9. THE SELLER
9.01 Merger or Consolidation of the Seller.
-------------------------------------
So long as the Notes remain outstanding, the Seller will keep in full
force and effect its existence, rights and franchise as a limited liability
company under the laws of its jurisdiction of organization and will preserve its
qualification to do business as a foreign limited liability company in each
jurisdiction in which such qualification is necessary to protect the validity
and enforceability of any of the Leases or to permit performance of the Seller's
duties under this Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Seller shall not merge or
consolidate with any other Person.
9.02 Control of Issuer.
-----------------
So long as any of the Notes remain outstanding, the Seller will not
(i) sell, pledge or otherwise transfer any of its membership interests in the
Issuer or (ii) vote such beneficial interests in favor of any amendment to or
alteration of the certificate of formation or limited liability company
agreement of the Issuer.
35
<PAGE>
9.03 Information.
-----------
The Seller will deliver to the Issuer, the Trustee and the Insurer (so
long as the Policy is outstanding):
(a) Notice of Servicer Event of Default - immediately upon becoming
-----------------------------------
aware of the existence of any condition or event which constitutes a
Servicer Event of Default, a written notice (with a copy to each Rating
Agency) describing its nature and period of existence and what action the
Seller is taking or proposes to take with respect thereto;
(b) Report on Proceedings - promptly upon the Seller's becoming
---------------------
aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding,
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Seller, a written notice specifying the nature of such
investigation or proceeding and what action the Seller is taking or proposes to
take with respect thereto and evaluating its merits;
(c) Requested Information - with reasonable promptness, any other
---------------------
data and information which may be reasonably requested by such parties from
time to time.
9.04 Inspection.
----------
The Seller will permit, on reasonable prior notice, the
representatives of the Issuer, the Servicer, the Trustee, the Insurer (so long
as no Insurer Default has occurred and is continuing), or, if an Insurer Default
has occurred and is continuing, any holder of the Notes evidencing not less than
25% of the Outstanding Principal Amount of any class of Notes to examine and
discuss the operations of the Seller with any of its officers or employees all
at such reasonable times and as often as may be reasonably requested for the
purpose of reviewing Seller's performance of its duties and obligations
hereunder. Any expense incident to the exercise by the Issuer, the Trustee or
any holder of the Notes during the continuance of any default by the Seller in
any of its obligations hereunder of any right under this Section 9.04 shall be
borne by the Seller.
9.05 Books and Records.
-----------------
The Seller will clearly mark its books and records to reflect each
contribution of a Lease and of its right, title, and interest (other than its
ownership interest) in the Equipment subject thereto to the Issuer.
9.06 Communications.
--------------
The Seller will reply to all inquiries by third parties with respect
to the transactions contemplated by this Agreement by indicating that it has
contributed to the Issuer
36
<PAGE>
the Leases and its right, title and interest (other than its ownership interest)
in the related Equipment.
SECTION 10. DEFAULT
10.01 Servicer Events of Default.
---------------------------
The following events and conditions shall constitute Servicer Events
of Default hereunder:
(i) failure on the part of the Servicer to deposit to the Collection
Account, or other applicable account in accordance with the terms of the
Indenture within three Business Days following the receipt thereof any
monies received by the Servicer (including, without limitation, any Lease
Payments on Performing Leases or Non-Performing Leases) and required to be
deposited thereunder and hereunder;
(ii) failure on the part of the Servicer to pay to the Trustee on the
date when due in accordance with the terms hereof, any payment required to
be made by the Servicer pursuant to Section 5 hereof;
(iii) failure on the part of either the Servicer or (so long as the
Originator is the Servicer) the Originator to observe or perform in any
material respect any other of their respective covenants or agreements in
this Assignment and Servicing Agreement which failure continues unremedied
for a period of 30 days after the earlier of (A) the date it first becomes
known to any officer of the Originator or the Servicer, as the case may be,
and (B) the date on which written notice thereof requiring the same to be
remedied shall have been given to the Originator or the Servicer, as the
case may be, by the Trustee, or to the Originator or the Servicer, as the
case may be, and the Trustee by the Seller, the Issuer, the Insurer or any
holder of the Notes;
(iv) if any representation or warranty made by the Originator in this
Assignment and Servicing Agreement or in any certificate or other writing
delivered pursuant hereto or made by any successor Servicer in connection
with such successor Servicer's assumption of the duties of the Servicer
shall prove to be incorrect in any material respect as of the time when the
same shall have been made; provided, however, that the breach of any
-------- -------
representation or warranty made by the Originator or Servicer in this
Assignment and Servicing Agreement will be deemed to be "material" only if
it affects the Noteholders, the Insurer or the enforceability of the
Indenture or of the Notes; and provided, further, that a material breach of
-------- -------
any representation or warranty made by the Originator in this Assignment
and Servicing Agreement with respect to any of the Leases or the Equipment
subject thereto will not constitute a Servicer Event of Default if the
Originator purchases such Lease and the Issuer's interest in the Equipment
in accordance with this Assignment and Servicing Agreement;
37
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(v) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Servicer in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law or (B) a decree or order
adjudging the Servicer bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment, or
composition of or in respect of the Servicer under any applicable federal
or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator, or other similar official of the Servicer or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 60
consecutive days;
(vi) the commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Servicer in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, or the
consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or similar official of the Servicer or of any substantial
part of its property, or the making by it of an assignment for the benefit
of creditors, or the failure by the Servicer to pay its debts generally as
they become due, or the taking of corporate action by the Servicer in
furtherance of any such action;
(vii) the failure of the Servicer to make one or more payments due
with respect to aggregate recourse debt or other obligations exceeding
$5,000,000, or the occurrence of any event or the existence of any
condition, the effect of which event or condition is to cause (or permit
one or more Persons to cause) more than $5,000,000 of aggregate recourse
debt or other obligations of the Servicer to become due before its (or
their) stated maturity or before its (or their) regularly scheduled dates
of payment so long as such failure, event or condition shall be continuing
and shall not have been waived by the Person or Persons entitled to
performance;
(viii) a final judgment or judgments (or decrees or orders) for the
payment of money aggregating in excess of $5,000,000 and any one of such
judgments (or decrees or orders) has remained unsatisfied and in effect for
any period of 60 consecutive days without a stay of execution;
(ix) so long as IOS Capital is the Servicer, a downgrading of the
long-term debt rating assigned by Moody's or S&P to IOS Capital to Ba2 or
below or BB or below, respectively;
38
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(x) for any three consecutive Due Periods, the average of the
Annualized Default Rates for such Due Periods shall be greater than 8.00%;
or
(xi) for any three consecutive Due Periods, the average of the
Delinquency Rates for such Due Periods shall be greater than 10.00%.
10.02 Termination.
-----------
So long as a Servicer Event of Default shall be continuing, the
Trustee (with the written consent of the Insurer, if no Insurer Default has
occurred and is continuing) may, and, upon the written instructions of the
Insurer (if no Insurer Default has occurred and is continuing) or the holders of
66-2/3% in Outstanding Principal Amount of the Notes (if an Insurer Default has
occurred and is continuing), shall, by notice in writing to the Servicer
terminate all of the rights and obligations of the Servicer (but not the
Originator's obligations which shall survive any such termination) under this
Assignment and Servicing Agreement. On the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Assignment
and Servicing Agreement to take any action with respect to any Lease or
Equipment shall cease and the same shall pass to and be vested in the Trustee or
other successor Servicer appointed pursuant to and under this Section and the
Indenture; and, without limitation, the Trustee or such successor Servicer is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and assignment of any Lease and the related
Equipment, or otherwise.
10.03 Trustee to Act; Appointment of Successor.
----------------------------------------
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 10.02 hereof, the Trustee or other successor
Servicer, subject to the terms of Section 6.01 of the Indenture, shall be the
successor in all respects to the Servicer in its capacity as servicer of the
Leases under this Assignment and Servicing Agreement and, to such extent, shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof (but not the
obligations of the Originator contained in Section 5 hereof which shall survive
any such termination as above provided) and shall be entitled to receive from
the Issuer the Servicing Fee provided for in Section 4.04 hereof; provided that
--------
the Trustee shall in no way be responsible or liable for any action or
actions of the Servicer before the time the Servicer receives such a notice of
termination.
(b) Notwithstanding the above, the Trustee (with the written consent
of the Insurer, if no Insurer Default has occurred and is continuing) may,
if it shall be unwilling to so act, or shall, if it is unable to so act,
give notice of such fact to the Insurer (if no Insurer Default has occurred
and is continuing) or to each holder of the Notes (if an Insurer Default
has occurred and is continuing) and (i) appoint an established institution
satisfactory to the Insurer (if no Insurer Default has occurred and is
continuing) or to the holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes (if an Insurer Default has occurred and is continuing)
as the successor to the Servicer hereunder to assume all of the rights and
obligations of the Servicer hereunder, including, without limitation, the
Servicer's right hereunder to receive the Servicing Fee (but not the
obligations of the Originator contained in Section 5 hereof), or (ii) if
39
<PAGE>
no such institution satisfactory to the Insurer (if no Insurer Default has
occurred and is continuing) or to the holders of 66-2/3% of the then
Outstanding Principal Amount of the Notes (if an Insurer Default has
occurred and is continuing) is so appointed within 60 days following the
giving of such notice, appoint a bank or other established institution,
which has experience in servicing lease contracts and equipment similar to
the Leases and Equipment and as to which each of S&P and Moody's has
indicated in writing that the appointment of such Person, as the successor
to the Servicer hereunder will not result in the reduction or withdrawal of
such Rating Agency's then-current rating of the Notes, or (iii) if no such
institution is so appointed, petition a court of competent jurisdiction to
appoint an institution meeting such criteria as the Servicer hereunder.
Pending appointment of a successor to the Servicer hereunder, the Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the Trustee shall cause such successor to the
Servicer to enter into a servicing agreement substantially in the form of
this Assignment and Servicing Agreement except that such agreement shall
not include any of the Originator's representations, warranties or
obligations and the Trustee may make arrangements for the compensation of
such successor out of payments on Leases as it and such successor shall
agree; provided, however, that no such compensation shall be in excess of
-------- -------
that provided for a successor to the Servicer in Section 4.04 hereof. In no
event shall the Trustee be liable for any servicing fee or for any
difference in the amount of the servicing fee payable hereunder and the
amount necessary to induce any successor Servicer to act as successor
Servicer under this Agreement and the transactions set forth or provided
for herein. The Trustee shall provide the Rating Agencies with prior
written notice of the appointment of any successor to the Servicer.
10.04 Servicer to Cooperate.
---------------------
The Servicer hereby agrees to cooperate with the Trustee and any
successor to the Servicer appointed in accordance with Section 10.03 hereof, as
applicable, in effecting the termination and transfer of the responsibilities
and rights of the Servicer hereunder to the Trustee or any successor to the
Servicer, including, without limitation, the execution and delivery of
assignments of Financing Statements, and the transfer to the Trustee or the
successor to the Servicer for administration by it of all amounts which shall at
the time be held by the Servicer or thereafter received with respect to the
Leases. The Servicer hereby agrees to transfer to any successor to the Servicer
its electronic records and all other records, correspondence and documents
relating to the Leases and Equipment in the manner and at such times as the
successor to the Servicer shall reasonably request. The Servicer hereby
designates the Trustee and any successor to the Servicer its agent and attorney-
in-fact to execute transfers of Financing Statements and any other filings or
instruments which may be necessary or advisable to effect such transfer of the
Servicer's responsibilities and rights hereunder.
10.05 Notification to Noteholders.
---------------------------
Upon any such termination or appointment of a successor to the
Servicer, the Issuer shall cause the Trustee to give prompt written notice
thereof to each Rating Agency and to each holder of the Notes in the manner
provided in the Indenture.
40
<PAGE>
10.06 Remedies Not Exclusive.
----------------------
Nothing in the preceding provisions of this Section 10 shall be
interpreted as limiting or restricting any rights or remedies which the Issuer,
the Trustee or any other Person would otherwise have at law or in equity on
account of the breach or violation of any provision of this Assignment and
Servicing Agreement by the Servicer, including, without limitation, the right to
recover full and complete damages on account thereof to the extent not
inconsistent with Section 7.02 hereof.
SECTION 11. SUBSTITUTION AND ADDITION OF LEASES
11.01 Substitution and Addition.
-------------------------
(a) Subject to the satisfaction of the requirements set forth in
Section 11.01(b) hereof, the Originator will have the right (but not the
obligation) at any time to substitute one or more Eligible Leases and the
Equipment subject thereto (each, a "Substitute Lease") for a Lease (for purposes
of this Section 11 referred to as a "Predecessor Lease") and the Equipment
subject thereto if:
(i) the Predecessor Lease became (A) a Non-Performing Lease,
(B) a Warranty Lease or (C) an Adjusted Lease during the immediately
preceding Due Period;
(ii) the aggregate Discounted Present Value of the
Non-Performing Leases that have become Predecessor Leases during the
term of this Agreement shall not in the aggregate exceed 10% of the
Discounted Present Value of the Leases on the Cut-Off Date; and
(iii) the aggregate Discounted Present Value of the Adjusted
Leases and Warranty Leases that have become Predecessor Leases during
the term of this Agreement shall not exceed 10% of the Discounted
Present Value of the Leases on the Cut-off Date.
Subject to the satisfaction of the requirements set forth in Section 5 and
Section 11.01(b) hereof, in the event of an Early Lease Termination resulting in
the prepayment in full of the related Early Termination Lease, the Seller will
have the option to transfer to the Issuer an additional Eligible Lease (each, an
"Additional Lease"), together with all right, title and interest in and to the
Equipment (other than the Seller's ownership interests therein).
(b) Each transfer of Substitute Leases and addition of Additional
Leases will be subject to the satisfaction of the following conditions
precedent:
(i) the final payment on such Substitute Lease or Additional
Lease must be on or prior to June 2005.
(ii) after giving effect to such additions and substitutions
and any adjustments pursuant to Section 5.02 hereof the aggregate
amount of Lease Payments through the term of the Leases (including
the Substitute Leases and the
41
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Additional Leases) will not be materially less than the aggregate Lease
Payments of the Leases prior to such substitution or addition or
adjustment; and
(iii) after giving effect to such adjustments, additions and
substitutions, the Discounted Present Value of the Performing Leases must
not be less than the Discounted Present Value of the Performing Leases
prior to such adjustment, substitution or addition.
(iv) after giving effect to such adjustments, additions, and
substitutions pursuant to Section 11, the weighted average remaining term
of the Performing Leases must not be greater than the weighted average
remaining term of the Performing Leases prior to such adjustment, addition,
and substitution.
(c) Each addition and substitution pursuant to this Section 11.01 shall
include the right to all Related Interests in respect of each Substitute Lease
being substituted or Additional Leases being transferred. At the time of each
such addition or substitution, all Lease Payments with respect to the related
Substitute Leases and/or Additional Leases actually received by the Originator
or the Seller which became due during the then current Due Period shall be
transferred to the Collection Account and all security deposits with respect
thereto shall be transferred to the Security Deposit Account.
(d) To the extent the Originator does not substitute a Substitute Lease
for Leases for which any of the representations and warranties made by the
Originator in Sections 2.04, 205(b) and 2.08 are breached, the Originator shall
purchase such Leases pursuant to the provisions of Section 5.04.
11.02 Procedure.
---------
(a) By 11:00 A.M. on the third Business Day following each Determination
Date, the Originator or the Seller, as the case may be, shall give written
notice to the Servicer of any substitution pursuant to Section 11.01 of
Substitute Leases for Predecessor Leases or addition of Additional Leases for
Early Termination Leases which have been prepaid in full during the preceding
Due Period. By 11:00 A.M. on the fourth Business Day following each Payment
Date, the Originator or the Seller, as the case may be, shall deliver to the
Servicer and the Trustee and, to the extent not included in the Servicer Report,
the Trustee shall promptly deliver to the Insurer and each Rating Agency (i) a
supplement to Exhibit A hereto setting forth the information shown thereon for
each such Substitute Lease and Additional Lease, (ii) an Officer's Certificate
(A) certifying that each such Substitute Lease and Additional Lease is an
"Eligible Lease", (B) specifying each Predecessor Lease for which a substitution
has been made and each Early Termination Lease which is being replaced by an
Additional Lease and the amount of each periodic Lease Payment under each such
Predecessor Lease and Early Termination Lease and the amount of each periodic
Lease Payment under each Additional Lease and Substitute Lease being transferred
thereby and (C) that all conditions precedent to such addition or substitution
have been satisfied and (iii) such additional information concerning such
Additional Leases, Substitute Leases, Early Termination Leases or Predecessor
Leases as may be needed for the Servicer to prepare its monthly reports pursuant
to Section 6.01 hereof and to otherwise carry out its duties as Servicer
hereunder.
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(b) Subject to the provisions of Section 11.03, the delivery of any
Officer's Certificate and supplement to Exhibit A pursuant to Section 11.02(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Due Period (i) the Originator contributed as a
contribution to capital to the Seller pursuant to Section 11.01 hereof all of
the Originator's right, title and interest in and to the Substitute Leases and
Additional Leases identified in such supplement, and the related rights
described in Section 11.01 hereof, and contemporaneously the Seller contributed
as a contribution to capital to the Issuer pursuant to Section 11.01 hereof all
of the Seller's right, title and interest in and to the Substitute Leases and
Additional Leases identified in such supplement, and the related rights
described in Section 11.01 hereof, (ii) the Originator transferred to the
Seller, as a contribution of capital, all of the Originator's right, title and
interest in and to the Equipment subject to such Substitute Leases and
Additional Leases and contemporaneously the Seller pledged to the Issuer all of
the Seller's right, title and interest in and to the Equipment subject to such
Substitute Leases and Additional Leases, and (iii) the Issuer assigned and
transferred to the Seller, without representation or warranty, all of the
Issuer's right, title and interest in and to the Predecessor Leases and Early
Termination Leases identified in such Officer's Certificate and released its
security interest in the Equipment relating thereto and contemporaneously the
Seller assigned to the Originator, without representation or warranty, all of
the Seller's right, title and interest in and to the Predecessor Leases and
Early Termination Leases identified in such Officer's Certificate and all the
Seller's right, title and interest in and to the related Equipment. The
Originator shall promptly deliver to the Servicer (or, if the Originator is the
Servicer, retain in accordance with this Assignment and Servicing Agreement in
its capacity as Servicer) the original executed copy of each Substitute Lease
and Early Termination Lease assigned to the Issuer pursuant to Section 11.01
hereof and the Issuer shall promptly request the Trustee (or, if the Servicer is
acting as the custodian, the Servicer) in writing to deliver to or upon the
order of the Seller the original executed counterpart of each Predecessor Lease
for which substitution has been made pursuant to Section 11.01 hereof and
contemporaneously the Seller shall promptly deliver to the Originator the
original executed counterpart of each Predecessor Lease for which substitution
has been made pursuant to Section 11.01 hereof.
11.03 Objection and Purchase.
----------------------
If the Insurer (if no Insurer Default has occurred and is continuing)
or any holder of the Notes (if an Insurer Default has occurred and is
continuing) objects to any substitution of Leases within ten days of receipt of
the Servicer's monthly report providing notice thereof pursuant to Section 6.01
above, on the grounds either that any Substitute Lease or Additional Lease is
not an Eligible Lease within the meaning of the definition thereof or that such
substitution or addition is otherwise not permitted under the provisions of
Section 11.01 hereof, the Originator shall be entitled to present such
additional information as it deems appropriate in an effort to demonstrate that
such Lease is an Eligible Lease and that such substitution is permitted under
the provisions of Section 11.01 hereof. Following such presentation, the
substitution shall remain effective if each person originally objecting to the
substitution withdraws the objection. If the conditions specified in the
preceding sentence are not satisfied, or if at any time it is established that
any lease was not, at the time of substitution, an Eligible Lease, then the
Originator shall be required to purchase such Lease in accordance with the
provisions of Section 5.04 hereof.
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11.04 Originator's, Seller's and Servicer's Subsequent Obligations.
------------------------------------------------------------
Upon any substitution or addition of Leases in accordance with the
provisions of this Section 11, the Originator's, Seller's and the Servicer's
obligations hereunder with respect to the Predecessor Lease or the applicable
Early Termination Lease shall cease but the Originator, Seller and the Servicer
shall each thereafter have the same obligations with respect to the Substitute
Lease or Additional Lease substituted or added as it has with respect to all
other Leases subject to the terms hereof.
SECTION 12. ASSIGNMENT
12.01 Assignment to Trustee.
---------------------
It is understood that this Assignment and Servicing Agreement and all
rights of the Issuer hereunder, but none of its duties or obligations, will be
assigned by the Issuer to the Trustee pursuant to the Indenture, for the benefit
of the holders from time to time of the Notes and the Insurer as provided in the
Indenture, and may be subsequently assigned by the Trustee to any successor
Trustee or as otherwise provided in the Indenture. Each of the Originator, the
Seller and the Servicer hereby expressly agrees to each such assignment and
agrees that all of its duties, obligations, representations and warranties
hereunder shall be for the benefit of, and may be enforced by, the Trustee, the
Insurer, the holders from time to time of the Notes, and any successor to or
assignee of any thereof.
12.02 Assignment by Originator, Seller or Servicer.
--------------------------------------------
None of the respective rights or obligations of the Originator, the
Seller or the Servicer hereunder may be assigned (other than the assignment by
the Seller to the Issuer of the covenants, representations, warranties and
obligations of the Originator pursuant to Section 12.01 and the assignment by
the Issuer to the Trustee of the rights of the Issuer hereunder pursuant to the
Indenture as contemplated in Section 12.01) without the prior written consent of
the Issuer and the Trustee (acting upon the written instructions of the Insurer
(if no Insurer Default has occurred and is continuing) or the holders of 66-2/3%
of the then aggregate unpaid Outstanding Principal Amount of the Notes (if an
Insurer Default has occurred and is continuing); provided, that nothing herein
--------
shall preclude the Servicer from performing its duties hereunder through the use
of agents to the extent that such use is consistent with the Servicer's business
practices in dealing with leases and equipment for its own account.
SECTION 13. NATURE OF OBLIGATIONS AND SECURITY THEREFOR
13.01 Obligations Absolute.
--------------------
The obligations of the Originator and Seller hereunder, and the rights
of the Trustee, as assignee of the Issuer, in and to all amounts payable by the
Originator or the Seller hereunder, shall be absolute and unconditional and
shall not be subject to any abatement, reduction, setoff, defense, counterclaim
or recoupment whatsoever, including, without limitation, abatements, reductions,
setoffs, defenses, counterclaims or recoupments due or alleged to be due to, or
by reason of, any past, present or future claims which the Originator or the
Seller may have against the Servicer, the Issuer, the Insurer, the Trustee, and
any holder of the Notes or any other
44
<PAGE>
Person for any reason whatsoever; nor, except as otherwise expressly provided
herein, shall this Assignment and Servicing Agreement terminate, or the
respective obligations of the Issuer, the Originator, the Seller or the Servicer
be otherwise affected, by reason of any defect in any Lease or in any unit of
Equipment or in the respective rights and interests of the Issuer, the
Originator, the Seller, the Insurer and the Trustee therein, or by reason of any
Liens with respect to any Lease or any unit of Equipment, or any failure by the
Issuer or the Servicer to perform any of its obligations herein contained, or by
reason of any other indebtedness or liability, howsoever and whenever arising,
of the Issuer, the Servicer, the Trustee, the Insurer, or any holder of the
Notes to the Originator, the Seller or any other Person or by reason of any
insolvency, bankruptcy, or similar proceedings by or against the Originator, the
Seller, the Servicer, the Issuer, the Insurer, the Trustee or any other Person
or for any other cause whether similar or dissimilar to the foregoing, any
present or future law to the contrary notwithstanding, it being the intention of
the parties hereto that all obligations of the Originator or the Seller
hereunder and all amounts payable by the Originator or the Seller hereunder
shall continue to be due and payable in all events and in the manner and at the
times herein provided unless and until the obligation to perform or pay the same
shall be terminated or limited pursuant to the express provisions of this
Assignment and Servicing Agreement.
13.02 Security for Obligations.
------------------------
As security for the full and timely performance by the Originator, the
Seller and the Servicer of each of their respective obligations hereunder, and
by the Issuer of each of its obligations hereunder and under the Notes and the
Indenture, each of the Originator and the Seller hereby pledges and grants to
the Trustee (as a precaution in the event that, contrary to the intent of the
parties to the transactions contemplated hereby, it is contended that either has
any continuing interest in any Lease, that the Originator has any continuing
interest in any Equipment or that the security interest granted to the Issuer by
the Seller in the Seller's interest in the Equipment is invalid or ineffective
in whole or in part) a first priority Lien on and security interest in all
right, title and interest of the Originator or the Seller now or hereafter
acquired in and to each Lease (including all Related Interests) and the
Originator's and the Seller's interests in each item of Equipment at any time
subject to the Indenture. The foregoing security interest is granted upon and
is subject to the same terms and provisions as are set forth in the Indenture
and shall continue in full force and effect until the Indenture is discharged in
accordance with the terms thereof, notwithstanding any waiver or modification of
any of the terms hereof or thereof or of any of the Notes, whether with or
without the consent of the Originator or the Seller.
13.03 Further Assurances; Financing Statements.
----------------------------------------
Each of the Originator, the Seller and the Servicer severally agrees
that at any time and from time to time, at its expense, it shall promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable or that the Issuer, the Trustee or
the Insurer may request to perfect and protect the assignments and security
interests granted or purported to be granted herein with respect to the Leases
and the Lease Payments or to enable the Issuer, the Trustee or the Insurer to
exercise and enforce its rights and remedies under this Agreement with respect
to any Leases and the Lease Payments and, subject to the penultimate sentence of
Section 1.04(d), the Equipment. Without limiting the generality of the
foregoing, each of the Originator and the Seller shall execute and file such
45
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financing or continuation statements, or amendments thereto, and such other
instruments or notices as may be necessary or desirable or that the Issuer, the
Trustee or the Insurer may request to protect and preserve the assignments and
security interests granted by this Agreement with respect to the Leases and,
subject to the penultimate sentence of Section 1.04(d), the Equipment.
SECTION 14. DEFINITIONS
As used in this Assignment and Servicing Agreement, the following
terms have the respective meanings set forth below or set forth in the Section
hereof or in any other agreement indicated:
Accumulated Funding Deficiency - a funding deficiency described in
------------------------------
Section 302 of ERISA.
Additional Lease - Section 11.01(a) hereof.
----------------
Adjusted Lease - a Lease which has had one or more non-credit related
--------------
terms adjusted or modified by the Servicer.
Affiliate - Section 1.01 of the Indenture.
---------
Annualized Default Rate - for any Due Period, the sum of the
-----------------------
Discounted Present Value as of the related Determination Date of all Leases that
became Non-Performing Leases during such Due Period minus the sum of the
recoveries on Non-Performing Leases received during such Due Period, divided by
the Discounted Present Value of the Leases on the Determination Date immediately
preceding such Determination Date, multiplied by twelve.
Asset Pool - Granting Clause of the Indenture.
----------
Authorized Officer - in respect of the Servicer, any officer of or
------------------
other Person representing the Servicer who is authorized to act for the
Servicer.
Available Funds - Granting Clause of the Indenture.
---------------
Base Prospectus - the prospectus, dated May 7, 1999, included in the
---------------
Registration Statement.
Business Day - any day that is not a Saturday, Sunday or other day on
------------
which commercial banking institutions in the city in which the Corporate Trust
Office or the Servicer is located are authorized or obligated by law or
executive order to remain closed.
Casualty Payment - any payment pursuant to a Lease on account of the
----------------
loss, theft, condemnation, governmental taking, destruction, or damage beyond
repair of any item of Equipment subject thereto which results, in accordance
with the terms of the Lease, in a reduction in the number or amount of any
future Lease Payments due thereunder or in the termination of the Lessee's
obligation to make future Lease Payments thereunder.
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Class A-1 Notes - the Issuer's 6.14125% Class A-1 Lease-Backed Notes,
---------------
Series 1999-2.
Class A-2 Notes - the Issuer's 6.31% Class A-2 Lease-Backed Notes,
---------------
Series 1999-2.
Class A-3a Notes - the Issuer's 6.59% Class A-3a Lease-Backed Notes,
----------------
Series 1999-2.
Class A-3b Notes - the Issuer's Class A-3b Lease-Backed Notes, Series
----------------
1999-2.
Class A-4 Notes - the Issuer's 6.88% Class A-4 Lease-Backed Notes,
---------------
Series 1999-2.
Code - the Internal Revenue Code of 1986, as amended.
----
Collection Account - Section 1.01 of the Indenture.
------------------
Corporate Trust Office - Section 1.01 of the Indenture.
----------------------
Cut-Off Date - the opening of business on September 1, 1999.
------------
Delinquency Rate - for any Due Period, the sum of the Discounted
----------------
Present Value as of the related Determination Date of all Leases that are 61 or
more days delinquent, as of such Determination Date, divided by the Discounted
Present Value of the Leases on such Determination Date.
Determination Date - Section 1.01 of the Indenture.
------------------
Discounted Present Value of the Delinquent Leases - Section 1.01 of
-------------------------------------------------
the Indenture.
Discounted Present Value of the Performing Leases - Section 1.01 of
-------------------------------------------------
the Indenture.
Due Period - with respect to any Payment Date and the related
----------
Determination Date with respect thereto, the calendar month prior to the month
in which such Payment Date and Determination Date occur.
Early Lease Termination - the termination of a Lease by reason of the
-----------------------
prepayment in full thereof prior to its original stated maturity.
Early Termination Lease - a Lease as to which there has been an Early
-----------------------
Lease Termination.
Eligible Lease - a Lease that satisfies the representations and
--------------
warranties set forth in Section 2.04, 2.05(b) and 2.08 and, in the case of a
Substitute Lease or Additional Lease, the applicable requirements of Section 11.
47
<PAGE>
Equipment - all units or items of equipment and related property from
---------
time to time subject to any Lease.
ERISA - the Employee Retirement Income Security Act of 1974, as
-----
amended.
Event of Default - Section 1.01 of the Indenture.
----------------
Excess Copy Charges - Section 1.01 of the Indenture.
-------------------
Filing States - (a) in the case of the Financing Statements referred
-------------
to in clauses (i) and (ii) of the definition of Required Financing Statements,
each of the fifty states of the United States, and (b) in the case of the
Financing Statements referred to in clause (iii) of the definition of Required
Financing Statements, the State of Georgia.
Financing Statement - a statement filed pursuant to the UCC which
-------------------
evidences a perfected security interest in an asset.
Governmental Authority: - any court or federal or state regulatory
----------------------
body, administrative agency or other tribunal or other governmental
instrumentality.
Indemnified Party - Section 5.03 hereof.
-----------------
Indenture - the Indenture dated as of October 1, 1999, between the
---------
Issuer and the Trustee, as the same may be supplemented, modified or amended
from time to time in accordance with the terms thereof.
Insurer - Ambac Assurance Corporation, a Wisconsin stock insurance
-------
corporation, and any successor.
Issuance Date - October 7, 1999.
-------------
Issuer - IKON Receivables, LLC , a Delaware special purpose limited
------
liability company, and any successor.
Leases - collectively, (i) each lease agreement, conditional sale
------
contract and other agreement creating a contractual obligation to which the
Originator is a party, to the extent that such lease agreement, conditional sale
contract or other agreement is described in Exhibit A hereto (as such Exhibit A
--------- ---------
may be amended from time to time in accordance with this Assignment and
Servicing Agreement), including, without limitation, each Additional Lease and
Substitute Lease; (ii) each schedule or supplement to each such lease agreement,
conditional sale contract or other agreement (and each master lease agreement
insofar as it relates to any such schedule or supplement); and (iii) any and all
amendments or modifications from time to time to each such lease agreement,
conditional sale contract or other agreement, or to any schedule or supplement,
in accordance with this Assignment and Servicing Agreement.
Lease Delinquency Payment - Section 1.01 of the Indenture.
-------------------------
48
<PAGE>
Lease Guaranty - with respect to any Lease, any guaranty of payment or
--------------
performance of the whole or any part of the liabilities or obligations of the
Lessee under such Lease.
Lease Payment - Section 1.01 of the Indenture.
-------------
Lease Purchase Amount - Section 1.01 of the Indenture.
---------------------
Lessee - each lessee under a Lease.
------
Lien - means a security interest, lien, charge, pledge, equity (except
----
the Seller's equity in any Equipment), or encumbrance of any kind other than tax
liens, mechanics liens, and any liens that attach to a Lease or any item of
Equipment by operation of law.
Maintenance Charges - Section 1.01 of the Indenture.
-------------------
Non-Performing Lease - Section 1.01 of the Indenture.
--------------------
Noteholder - at any time, any Person in whose name a note is
----------
registered in the Note Register (as defined in the Indenture).
Notes - the Class A-1 Notes, the Class A-2 Notes, the Class A-3a
-----
Notes, the Class A-3b Notes and the Class A-4 Notes issued pursuant to the
Indenture and all notes issued in exchange therefor pursuant to the Indenture.
Officers' Certificate - with respect to the Seller, Servicer or
---------------------
Originator, a certificate signed by the Chairman, the President or a Vice
President, and by at least one other Person who is a Vice President, the
Treasurer, an Assistant Treasurer, the Secretary, or an Assistant Secretary, of
the Seller, Servicer or Originator, as the case may be.
Originator - IOS Capital, Inc. and any successor thereto in accordance
----------
with the provisions hereof.
Originator Collateral - Section 1.03 hereof.
---------------------
Originator's Purchase Obligation - the obligation of the Originator to
--------------------------------
purchase Leases and Equipment interests pursuant to Section 5.04.
Other Lease Payments - Section 1.01 of the Indenture.
--------------------
Outstanding - Section 1.01 of the Indenture.
-----------
Outstanding Principal Amount - Section 1.01 of the Indenture.
----------------------------
Payment Date - the 15th day of each calendar month (or the next
------------
Business Day thereafter if such day is not a Business Day).
PBGC - the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA.
49
<PAGE>
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.
Policy - Section 1.01 of the Indenture.
-------
Pool Factor - a seven-digit decimal, which the Servicer will compute
-----------
on each Determination Date, for each class of Notes, indicating the remaining
outstanding principal balance of such class of Notes as of the applicable
Payment Date, as a fraction of the initial outstanding principal balance of such
class of Notes. Each Pool Factor will be initially 1.0000000, and thereafter
will decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes.
Predecessor Lease - Section 11.01 hereof.
-----------------
Prohibited Transaction - any transaction described in Section 406 of
----------------------
ERISA which is not exempt by reason of Section 408 of ERISA or the transitional
rules set forth in Section 414(c) of ERISA and any transaction described in
Section 4975(c) of the Code which is not exempt by reason of Section 4975(c)(2)
or Section 4975(d) of the Code, or the transitional rules of Section 2003(c) of
ERISA.
Prospectus - the form of final prospectus (including the Base
----------
Prospectus and Prospectus Supplement) to be used in connection with the public
offering of the Notes as filed with the Securities and Exchange Commission
pursuant to Rule 424(b).
Prospectus Supplement - the prospectus supplement relating to the
---------------------
offering of the Notes, dated September 30, 1999, accompanying the Base
Prospectus.
Purchase Obligation - the Originator's obligation to purchase any
-------------------
Lease pursuant to the provisions of Section 5.04 hereof.
Rating Agency - Standard & Poor's Ratings Services, a division of the
-------------
McGraw-Hill Companies or Moody's Investors Service Inc. and their respective
successors.
Registration Statement - the Registration Statement (File No. 333-
----------------------
71073), as amended and supplemented from time to time, relating to the offering
from time to time of up to $1,825,000,000 aggregate principal amount of the
Issuer's Lease-Backed Notes.
Related Interests - with respect to any Lease, (i) all Lease Payments,
-----------------
Casualty Payments, Retainable Deposits and Termination Payments in respect of
such Lease, (ii) all rights under any Lease Guarantees with respect to such
Lease, (iii) all rights and interests in any collateral with respect to such
Lease, including any security deposit (whether or not such security deposit
shall have become a Retainable Deposit) and any security interest in the
Equipment securing the obligations of the related Lessee under such Lease, and
(iii) all other amounts due or becoming due with respect to such Lease or any of
the foregoing, except Maintenance Charges and Excess Copy Charges.
50
<PAGE>
Related Person - any Person (whether or not incorporated) which is
--------------
under common control with the Originator or the Seller within the meaning of
Section 414(c) of the Internal Revenue Code of 1986, as amended, or of Section
4001(b) of ERISA.
Reportable Event - any of the events set forth in Section 4043(c) of
----------------
ERISA or the regulations thereunder, a withdrawal from a Pension Plan described
in Section 4063 of ERISA, or a cessation of operations described in Section
4062(e) of ERISA.
Required Financing Statements - Financing Statements filed in the
-----------------------------
appropriate UCC filing offices in the Filing States (i) naming the Originator as
debtor and the Seller as secured party and the Originator Collateral as the
collateral, (ii) naming the Seller as debtor, the Issuer as secured party, the
Trustee as assignee and the Seller Collateral as the collateral, and (iii)
naming the Issuer as debtor and the Trustee as secured party and the assets
comprising the Asset Pool as the collateral.
Reserve Account - Section 1.01 of the Indenture.
---------------
Seller - IKON Receivables-1 LLC, a Delaware limited liability company,
------
and any successor.
Seller Collateral - Section 1.03 hereof.
-----------------
Servicer - the corporation so identified in the first paragraph of
--------
this Assignment and Servicing Agreement and any successor thereto in accordance
with the provisions hereof.
Servicer Event of Default - Section 10.01 hereof.
-------------------------
Servicing Fee - Section 4.04(a) hereof.
-------------
Servicing Report - Section 6.01(b) hereof.
----------------
Substitute Lease - Section 11.01(a) hereof.
----------------
Supplementary Report - Section 6.01(e) hereof.
--------------------
Terminated Lease - a lease that is terminated prior to its original
----------------
stated maturity (but not on account of casualty or a Lease default).
Termination Payment - a payment payable by a Lessee under a Lease upon
-------------------
the early termination of such Lease (but not on account of a casualty or a Lease
default) which may be agreed upon by the Servicer, acting in the name of the
Issuer, and the Lessee in accordance with the provisions of Section 5.02 of this
Assignment and Servicing Agreement.
Transaction Payment Amount - Section 1.01 of the Indenture.
--------------------------
Transfer Taxes - Section 2.20 hereof.
--------------
Trustee - Harris Trust and Savings Bank, and any successor thereto, as
-------
Trustee under the Indenture.
51
<PAGE>
Trustee Fee - the fixed, scheduled fees and expenses from time to time
-----------
payable to the Trustee pursuant to the fee agreement between the Issuer and the
Trustee.
Underwriting Agreement - the Underwriting Agreement dated September
----------------------
30, 1999 among the Issuer, IOS Capital and the several Underwriters named
therein for the purchase and sale of the Notes.
Uniform Commercial Code or UCC - with respect to a particular
------------------------------
jurisdiction, the Uniform Commercial Code, as in effect from time to time in
such jurisdiction, or any successor statute thereto.
Warranty Lease - Section 1.01 of the Indenture.
--------------
SECTION 15. MISCELLANEOUS
15.01 Continuing Obligations.
----------------------
This Assignment and Servicing Agreement shall continue in full force
and effect until, and shall terminate when, each of the Notes and any other
amounts due to any holder of the Notes and the Insurer have been paid in full
and all other obligations, if any, secured by the Lien of the Indenture have
been fully satisfied.
15.02 GOVERNING LAW.
-------------
THIS ASSIGNMENT AND SERVICING AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK. IF ANY PROVISION OF THIS ASSIGNMENT AND
SERVICING AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE BALANCE OF THIS
ASSIGNMENT AND SERVICING AGREEMENT.
15.03 Successors and Assigns.
----------------------
This Assignment and Servicing Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the Originator,
the Issuer, the Seller, and the Servicer and shall inure to the benefit of the
successors and assigns of the holders, from time to time, of the Notes.
15.04 Modification.
------------
The terms of this Assignment and Servicing Agreement shall not be
waived, modified or amended without the written consent of the party against
whom such waiver, modification or amendment is claimed and, in any case, the
Trustee (acting upon the written instructions of the Insurer (so long as no
Insurer Default has occurred and is continuing) or the holders of 66-2/3% of the
then aggregate unpaid Outstanding Principal Amount of the Notes (if an Insurer
Default has occurred and is continuing)).
52
<PAGE>
15.05 No Proceedings.
--------------
The Originator and the Seller each hereby agrees that it will not,
directly or indirectly, or direct or cause its officers, directors, or employees
to, aid, institute, or cause to be instituted, against the Issuer, and the
Originator hereby agrees that it will not, directly or indirectly, or direct or
cause its officers, directors or employees to, aid, institute, or cause to be
instituted, against the Seller, any proceeding of the type referred to in
Section 7.01(d) or (e) of the Indenture so long as there shall not have elapsed
one year plus one day since the latest maturing Notes have been paid in full in
cash.
15.06 Notices.
-------
All notices and other communications given in connection with this
Assignment and Servicing Agreement shall be sufficient for every Person
hereunder (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid or certified mail return receipt requested, or sent
by private courier or confirmed telecopy, in case of the Originator, to 1738
Bass Road, P.O. Box 9115, Macon, Georgia 31208, Attention: Harry G. Kozee,
Vice President - Finance, with a copy to the General Counsel (telecopy: (912)
471-2375), in the case of the Seller, to 1738 Bass Road, P.O. Box 9115, Macon,
Georgia 31208, Attention: Robert McLain (telecopy: (912) 471-2375, and in the
case of the Issuer, the Servicer and the Trustee and the holders of the Notes,
to such addresses as are provided pursuant to Sections 1.05 and 1.06 of the
Indenture or to such other address as either party may specify to the other from
time to time in accordance with this Section 15.06.
15.07 Counterparts.
------------
This Assignment and Servicing Agreement may be executed in any number
of counterparts, each counterpart constituting an original, but all together
constituting only one Agreement.
15.08 Nonpetition Covenant.
--------------------
Neither the Originator nor the Seller shall petition or otherwise
invoke the process of any Governmental Authority for the purpose of commencing
or sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its respective property, or ordering the winding up or
liquidation of the affairs of the Issuer. Neither the Originator nor the Seller
shall petition or otherwise invoke the process of any Governmental Authority for
the purpose of commencing or sustaining a case against the Issuer under any
federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its respective property, or ordering
the winding up or liquidation of the affairs of the Issuer.
15.09 Benefits of Agreement.
---------------------
The Trustee and the Insurer and their respective successors and
assigns shall be third-party beneficiaries to the provisions of this Agreement,
and shall be entitled to rely upon
53
<PAGE>
and directly to enforce such provisions so long, in the case of the Insurer,
that no Insurer Default has occurred and is continuing. Nothing in this
Agreement, express or implied, shall give to any other Person any benefit or any
legal or equitable right, remedy or claim under this Agreement. The Insurer may
disclaim any of its rights and powers under this Agreement (in which case the
Trustee may exercise such rights and powers hereunder), but not its duties and
obligations under the Policy, upon delivery of a written notice to the Trustee
and the parties hereto.
[Balance of Page Intentionally Left Blank]
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Servicing Agreement as of the date and year first written above.
IOS CAPITAL, INC., as
Originator and Servicer
By: /s/ J.F. Quinn
---------------------------------
Name: J.F. Quinn
Title: Treasurer
IKON RECEIVABLES-1 LLC
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By: /s/ Thomas P. Sheehan
-------------------------------------
Name: Thomas P. Sheehan
Title: Treasurer
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By: /s/ Thomas P. Sheehan
-------------------------------------
Name: Thomas P. Sheehan
Title: Treasurer
The undersigned hereby acknowledges
receipt of a copy of the foregoing
Assignment and Servicing Agreement and
agrees to, and to be bound by, each of
the provisions thereof applicable to the
undersigned.
Harris Trust and Savings Bank,
not in its individual capacity, but
solely as Trustee
By: /s/ Robert D. Foltz
-----------------------------------
Name: Robert D. Foltz
Title: Vice President
<PAGE>
EXHIBIT A
---------
SCHEDULE OF LEASES AND EQUIPMENT
ON FILE WITH INDENTURE TRUSTEE
A-1
<PAGE>
EXHIBIT B
---------
Form of Servicing Report
[To be updated and conformed]
Line
1 Transaction Cash Flow - see computer detail
1/1 Beginning Net Present Value
1/2 Less: - current month
1/3 Add: Actual Interest Payment (Weighted Avg. A notes)
1/4 Add: 0.75% Servicing Component
1/5 Less: Current month Non-Performing
1/5a Less: Warranty Leases
1/6 Less: Amounts on Early Terminations
1/7 Add: Amounts due to Substitutions
1/8 Add: Amounts due to Additional leases (Prepaid leases)
1/9 Ending Net Present Value
2 Overdue Lease Payments - see computer detail
2/1 Beginning Balance
2/2 (Memo) Overdue Payments Received
2/3 Less: Reimbursed Per This Report
2/4 Less: Past Dues on Disqualified Leases - Early Terminations
2/5 Less: Past Dues on Disqualified Leases - Non-Performing and Warranty
2/6 Add: Last Month's Current Payments that became Past due
2/7 Add: Received on Replacements Leases
2/8 (MEMO) Net New Advances
2/9 Ending Balance
3 Collection account-Advance Lease Payments
4/1 Beginning Balance
4/2 Less: Applied to Current from Prepaid
4/3 Less: Advance on Disqualified Leases
4/4 Add: Received This Month
4/5 Add: Received on Replacement Leases
4/6 Ending Balance
4 Cash Reserve Account
6/1 Beginning Balance
6/2 Less: New Obligations: Total Shortfall (B9)
6/3 Plus: Interest earned on Cash Reserve Acct.
6/4 Ending Balance
6/5 ___% of Outstanding Note Value
6/6 Lesser of 1% of Discounted Present Value of Leases as of the Cut-Off
Date and the Outstanding Principal Amount
6/7 Target Cash Reserve (Greater of 6/5 & 6/6)
6/8 Cash Reserve Release (6/4-6/7)
6/9 Ending Balance Cash Reserve Account
B-1
<PAGE>
5 Non-Performing Leases
8/1 Beginning Balance of Non-Performing Leases
8/2 Plus Current Month Additions
8/3 Plus Past Due Payments on Non-Performing Leases
8/4 Less Current Month Recoveries
8/5 Ending Balance
Cash Receipts
Line
A/1 Regular monthly payments
A/2 Overdue payments
A/3 Overdue Payments due on Early Termination and Termed Out Leases (From
Originator)
A/4 Advance Payments of monthly rentals
A/5 Residual Values
A/6 Recoveries on Non-Performing Leases
A/7 Proceeds from investment of Collection Accounts funds
A/8 Casualty and Termination Payments
A/9 Servicer Advances
A/10 Total Receipts
Disbursement Requirements
Line
B/1 Past Due Payments Collected, Due Servicer (COLLECTION ACCT)
B/2 Overdue Payments Advanced, on Disqualified Leases (COLLECTION ACCT)
B/3 Servicing Fee (COLLECTION ACCT)
B/4 Advanced Payments on Disqualified Leases (COLLECTION ACCT)
B/5 Total to Servicer
B/6 Collection Account - Advanced Rents (Monthly-Increase/(Decrease))
B/7 Net cash receipts
B/8 Shortfall
B/9 Draw on Cash Reserve
B/10 Total Available Funds
C Noteholders
C/1 Class [A-1] Interest Paid 6.14125%
C/2 Class [A-2] Interest Paid 6.31%
C/3 Class [A-3a] Interest Paid 6.59%
C/3 Class [A-3b] Interest Paid
C/4 Class [A-4] Interest Paid 6.88%
C/9 Beginning Class [A-1] Note Balance
C/10 Class [A-1] Note Value Target
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-3a Note Balance]
C/17 Class [A-3a] Note Value
C/18 Ending Class [A-3a] Note Balance
C/19 Class [A-3a] Principal Paid
C/20 Beginning Class [A-3b] Note Balance
B-2
<PAGE>
C/21 Class [A-3b] Note Value
C/22 Ending Class [A-3b] Note Balance
C/23 Class [A-3b] Principal Paid
C/24 Beginning Class [A-4] Note Balance
C/25 Class [A-4] Note Value
C/26 Class [A-4] Principal Paid
C/27 Ending Class [A-4] Note Balance
C/28 Balance Available for Distribution to IOS Capital
D Miscellaneous Tracking Items
D/1 % of Total Non-Performing and Warranty substituted as per Initial Outs,
Note Value
D/2 (MEMO) Cumulative amounts on Early Lease Terminations due to
modification of leases
D/3 (MEMO) Cumulative amounts of additional leases purchased
B-3
<PAGE>
Exhibit 10.2
------------
Execution Copy
--------------
AMBAC ASSURANCE CORPORATION,
----------------------------
and
---
LEHMAN BROTHERS INC.,
---------------------
CHASE SECURITIES INC.,
----------------------
DEUTSCHE BANC ALEX. BROWN
-------------------------
AND
---
PNC CAPITAL MARKETS, INC.
-------------------------
INDEMNIFICATION AGREEMENT
-------------------------
$699,595,000 in aggregate principal amount of
---------------------------------------------
IKON RECEIVABLES, LLC LEASE-BACKED NOTES
----------------------------------------
Dated as of October 7, 1999
---------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
(This Table of Contents is for convenience of reference only and shall
not be deemed to be part of this Agreement. All capitalized terms used in this
Agreement and not otherwise defined shall have the meanings set forth in Article
I of this Agreement.)
Page
----
Section 1. Defined Terms......................................... 1
Section 2. Other Definitional Provisions......................... 1
Section 3. Representations and Warranties of the Underwriters.... 1
Section 4. Representations and Warranties of the Insurer......... 2
Section 5. Indemnification....................................... 3
Section 6. Amendments, Etc....................................... 4
Section 7. Notices............................................... 4
Section 8. Severability.......................................... 5
Section 9. Governing Law......................................... 5
Section 10. Counterparts.......................................... 5
Section 11. Headings.............................................. 5
<PAGE>
INDEMNIFICATION AGREEMENT, dated as of October 7, 1999, by and among Ambac
Assurance Corporation, as Insurer, and Lehman Brothers Inc., Chase Securities
Inc., Deutsche Banc Alex. Brown and PNC Capital Markets, Inc., as the
Underwriters.
Section 1. Defined Terms. Unless the context clearly requires otherwise,
all capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Insurance and Indemnity Agreement, the
Certificate Guaranty Insurance Policy No. AB0306BE issued by the Insurer in
favor of the Trustee (the "Note Policy") or the Financial Guaranty Insurance
Policy No. SF0276BE issued by the Issuer in favor of Lehman Brothers Financial
Products Inc. (the "Swap Policy" and together with the Note Policy, the
"Policies"). For purposes of this Indemnification Agreement, the following
terms shall have the following meanings:
"Indenture" means the Indenture dated as of October 1, 1999 among the
---------
Issuer, the Indenture Trustee and the Servicer.
"Insurance and Indemnity Agreement" means the Insurance and Indemnity
---------------------------------
Agreement (as may be amended, modified or supplemented from time to time), dated
as of October 7, 1999, by and among the Insurer, the Seller, the Issuer, IOS
Capital, and the Indenture Trustee.
"Insurer" means Ambac Assurance Corporation, a Wisconsin domiciled stock
-------
insurance company, or any successor thereto, as issuer of the Policy.
"Insurer Information" has the meaning given such term in Section 4.
-------------------
"Notes" means any notes authorized by, and authenticated and delivered
-----
under the Indenture.
"Underwriter Information" has the meaning given such term in Section 3.
-----------------------
"Underwriters" means Lehman Brothers Inc., Chase Securities Inc., Deutsche
------------
Banc Alex. Brown and PNC Capital Markets, Inc.
Section 2. Other Definitional Provisions. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Indemnification
Agreement shall refer to this Indemnification Agreement as a whole and not to
any particular provision of this Indemnification Agreement, and Section,
subsection, Schedule and Exhibit references are to this Indemnification
Agreement unless otherwise specified. The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms of such
terms. The words "include" and "including" shall be deemed to be followed by
the phrase "without limitation."
Section 3. Representations and Warranties of the Underwriters. Each of
the Underwriters, severally and not jointly, represents and warrants as of the
Closing Date as follows:
<PAGE>
(a) Offering Document. The Underwriters will not use, or distribute to
other broker-dealers for use, any Offering Document in connection with the
offer and sale of the Notes unless such Offering Document includes such
information relating to the Insurer as has been furnished by the Insurer
for inclusion therein and has been approved by the Insurer.
(b) Underwriter Information. As to each Underwriter, all material
provided in writing to the Company for inclusion in the Offering Document
(as revised from time to time, and as included in such Offering Document or
any other Offering Document), such information being the second, third,
fifth and sixth paragraphs of the section headed "Underwriting" in the
Prospectus Supplement dated September 30, 1999 with respect to the Notes
(the "Underwriter Information"), insofar as such information relates to
such Underwriter, shall be true and correct in all material respects.
(c) Compliance with Laws. Each Underwriter will comply in all material
respects with all legal requirements in connection with its offers and
sales of the Securities and will make such offers and sales in the manner
provided in the Offering Document.
Section 4. Representations and Warranties of the Insurer. The Insurer
represents and warrants to the Underwriters as follows:
(a) Organization and Licensing. The Insurer is a duly organized and
validly existing Wisconsin stock insurance corporation.
(b) Corporate Power. The Insurer has the corporate power and authority
to issue the Policies and execute and deliver this Indemnification
Agreement and the Insurance Agreement and to perform all of its obligations
hereunder and thereunder.
(c) Authorization; Approvals. Proceedings legally required for the
issuance of the Policies and the execution, delivery and performance of
this Indemnification Agreement and the Insurance and Indemnity Agreement
have been taken and licenses, orders, consents or other authorizations or
approvals of any governmental boards or bodies legally required for the
enforceability of the Policies have been obtained or are not material to
the enforceability of the Policies.
(d) Enforceability. The Policies, when issued, and this Indemnification
Agreement and the Insurance and Indemnity Agreement will each constitute a
legal, valid and binding obligation of the Insurer, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and subject
to principles of public policy limiting the right to enforce the
indemnification provisions contained therein and herein, insofar as such
provisions relate to indemnification for liabilities arising under federal
securities laws.
<PAGE>
(e) Financial Information. The balance sheet of the Insurer as of
December 31, 1998 and the related statements of income, stockholder's
equity and cash flows for the three fiscal years ended December 31, 1998,
and the accompanying footnotes, and the unaudited balance sheet of the
Insurer as of June 30, 1999, and the unaudited related statements of
income, stockholder's equity and cash flows for the six month period ending
June 30, 1999, fairly present in all material respects the financial
condition of the Insurer as of such dates and for the periods covered by
such statements in accordance with generally accepted accounting principles
consistently applied. Any future financial statements of the Insurer
incorporated by reference into the Offering Document relating to the Notes
will fairly present in all material respects the financial condition of the
Insurer as of their dated dates in accordance with generally accepted
accounting principles consistently applied. Since June 30, 1999, there has
been no change in such financial condition of the Insurer that would
materially and adversely affect its ability to perform its obligations
under the Policies.
(f) Insurer Information. The information relating to the Insurer
in the Prospectus Supplement dated September 30, 1999 as of the date hereof
under the caption "The Insurer and the Policy" and the financial statements
of the Insurer incorporated by reference into the Offering Document
(together the "Insurer Information") are true and correct in all material
respects and do not contain any untrue statement of a material fact.
Section 5. Indemnification.
(a) Each of the Underwriters agrees, severally and not jointly, to
pay, and to protect, indemnify and save harmless, the Insurer and its
officers, directors, shareholders, employees, agents and each Person, if
any, who controls the Insurer within the meaning of either Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act, from and
against, any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or by
reason of any untrue statement of a material fact contained in the
Underwriter Information with respect to such Underwriter or a breach of any
of the representations and warranties of such Underwriter contained in
Section 3.
(b) The Insurer agrees to pay, and to protect, indemnify and save
harmless, each of the Underwriters and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls the
Underwriters within the meaning of either Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act from and against, any and all
claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including reasonable fees
and expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or by reason of any untrue
statement of a material fact contained in the Insurer Information or a
breach of any of the representations and warranties of the Insurer
contained in Section 4.
<PAGE>
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party" and, collectively, the "Indemnified
Parties") in respect of which the indemnity provided in this Section 5(a)
or (b) may be sought from the Underwriters, on the one hand, or the
Insurer, on the other (each, an "Indemnifying Party") hereunder, each such
Indemnified Party shall promptly notify the Indemnifying Party in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel satisfactory to the Indemnified Party and the payment
of all expenses. The Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof at the expense of the Indemnified Party; provided, however, that
the fees and expenses of such separate counsel shall be at the expense of
the Indemnifying Party if (i) the Indemnifying Party has agreed to pay such
fees and expenses, (ii) the Indemnifying Party shall have failed to assume
the defense of such action or proceeding and employ counsel reasonably
satisfactory to the Indemnified Party in any such action or proceeding or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying
Party, and the Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to it which are different
from or additional to those available to the Indemnifying Party (in which
case, if the Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Indemnified Parties,
which firm shall be designated in writing by the Indemnified Party). The
Indemnifying Party shall not be liable for any settlement of any such
action or proceeding effected without its written consent to the extent
that any such settlement shall be prejudicial to the Indemnifying Party,
but, if settled with its written consent, or if there is a final judgment
for the plaintiff in any such action or proceeding with respect to which
the Indemnifying Party shall have received notice in accordance with this
subsection (c), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party (other
than due to application of this Section), each Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis of
the relative fault of the Indemnifying Party, on the one hand, and the
Indemnified Party, on the other hand. The relative fault of each
Indemnifying Party, on the one hand, and each Indemnified Party, on the
other, shall be determined by reference to, among other things, whether the
breach of, or alleged breach of, any of its representations and warranties
set forth within
<PAGE>
the control of, the Indemnifying Party or the Indemnified Party, and the
parties relative intent, knowledge, access to information and opportunity
to correct or prevent such breach. No person guilty of fraudulent
misrepresentation (within the meaning Section (11)(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. No Underwriter shall be responsible
for any amount in excess of an amount equal to the excess of the sales
price to the public of the Notes purchased by such Underwriter over the
price paid therefor by such Underwriter.
Section 6. Amendments, Etc. This Indemnification Agreement may be
amended, modified, supplemented or terminated only by written instrument or
written instruments signed by the parties hereto.
Section 7. Notices. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered and
telecopied to the recipient as follows:
(a) To the Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department
Facsimile: (212) 208-3547
(b) To the Underwriters:
c/o Lehman Brothers Inc.
3 World Financial Center
200 Vesey Street
New York, New York 10285
Attention: Legal Department
Facsimile: 212-526-7010
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 8. Severability. In the event that any provision of this
Indemnification Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
<PAGE>
Section 9. Governing Law. This Indemnification Agreement shall be governed
by and construed in accordance with the laws of the State of New York (without
giving effect to the conflict of laws provisions thereof).
Section 10. Counterparts. This Indemnification Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 11. Headings. The headings of Sections and the Table of Contents
contained in this Indemnification Agreement are provided for convenience only.
They form no part of this Indemnification Agreement and shall not affect its
construction or interpretation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all as of
the day and year first above mentioned.
Ambac Assurance Corporation,
as Insurer
By: /s/ Barry S. Schofield
-------------------------------
Name: Barry S. Schofield
Title: Vice President
<PAGE>
Lehman Brothers Inc.
as an Underwriter
By: /s/ Paul E. Sveen
------------------------------
Name: Paul E. Sveen
Title: Managing Director
<PAGE>
Chase Securities Inc.,
as an Underwriter
By: /s/ Brad Dansker
------------------------------
Name: Brad Dansker
Title: Vice President
<PAGE>
Deutsche Banc Alex. Brown,
as an Underwriter
By: /s/ David A. Cobb
------------------------------
Name: David A. Cobb
Title: Vice President
By: /s/ David S. Bondy
------------------------------
Name: David S. Bondy
Title: Director
<PAGE>
PNC Capital Markets, Inc.,
as an Underwriter
By: /s/ James Shoff
------------------------------
Name: James Shoff
Title: Managing Director
<PAGE>
Exhibit 10.3
------------
Execution Copy
INSURANCE AND INDEMNITY AGREEMENT
AMBAC ASSURANCE CORPORATION,
as Insurer,
IKON RECEIVABLES, LLC,
as Issuer,
IKON RECEIVABLES-I, LLC,
as Seller,
IOS CAPITAL, INC.,
as Originator and as Servicer,
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
IKON RECEIVABLES, LLC LEASE-BACKED NOTES
Dated as of October 7, 1999
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall not
be deemed to be part of this Agreement. All capitalized terms used in this
Agreement and not otherwise defined shall have the meanings set forth in Article
I of this Agreement.)
Page
----
ARTICLE I 1
DEFINITIONS 1
Section 1.01. Defined Terms 1
Section 1.02. Other Definitional Provisions. 4
ARTICLE II 5
REPRESENTATIONS, WARRANTIES AND COVENANTS 5
Section 2.01. Representations and Warranties of IOS Capital 5
Section 2.02. Affirmative Covenants of IOS Capital 6
Section 2.03. Negative Covenants of IOS Capital 7
Section 2.04. Representations and Warranties of the Insurer 8
Section 2.05. Representations and Warranties and Covenants of the Seller 10
Section 2.06. Representations and Warranties of the Issuer 10
Section 2.07. Affirmative Covenants of the Issuer 13
Section 2.08. Negative Covenants of the Issuer 15
ARTICLE III 16
THE POLICIES; REIMBURSEMENT 16
Section 3.01. Issuance of the Policies 16
Section 3.02. Payment of Fees and Premium 18
Section 3.03. Reimbursement Obligation 19
Section 3.04. Indemnification 20
Section 3.05. Payment Procedure 22
ARTICLE IV 23
FURTHER AGREEMENTS 23
Section 4.01. Effective Date; Term of the Insurance Agreement 23
Section 4.02. Further Assurances and Corrective Instruments 23
Section 4.03. Obligations Absolute 24
Section 4.04. Assignments; Reinsurance; Third-Party Rights 26
Section 4.05. Liability of the Insurer 27
Section 4.06. Annual Servicing Audit and Certification 27
ARTICLE V 27
DEFAULTS AND REMEDIES 27
Section 5.01. Defaults 27
Section 5.02.Remedies; No Remedy Exclusive 28
Section 5.03. Waivers 29
ARTICLE VI 30
MISCELLANEOUS 30
Section 6.01. Amendments, Etc 30
Section 6.02. Notices 30
Section 6.03. Severability 32
Section 6.04. Governing Law 32
Section 6.05. Consent to Jurisdiction 32
Section 6.06. Consent of the Insurer 33
Section 6.07. Counterparts 33
Section 6.08. Headings 33
<PAGE>
Section 6.09. Trial by Jury Waived 34
Section 6.10. Limited Liability 34
Section 6.11. Entire Agreement 34
Section 6.12. Indenture Trustee 34
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT (as it may be amended, modified or
supplemented from time to time, this "Insurance Agreement"), dated as of October
7, 1999, by and among IOS Capital, Inc., as Originator and as Servicer, Ambac
Assurance Corporation, as Insurer, IKON Receivables, LLC, as Issuer, IKON
Receivables-I, LLC, as Seller, and Harris Trust and Savings Bank, as Indenture
Trustee.
PRELIMINARY STATEMENTS
A. The Indenture, dated as of October 1, 1999, relating to the IKON
Receivables, LLC Lease-Backed Notes, Series 1999-2, by and among the Issuer, the
Servicer and the Indenture Trustee (as it may be amended, modified or
supplemented from time to time as set forth therein) provides for, among other
things, the issuance of the Notes.
B. The Insurer has issued the Policy, pursuant to which it has agreed to
pay to the Indenture Trustee for the benefit of the Holders certain payments in
respect of the Notes.
C. The Insurer shall be paid a Premium as set forth herein.
D. IOS Capital, Inc., the Issuer, the Seller and the Indenture Trustee
have undertaken certain obligations in consideration for the Insurer's issuance
of its Policy.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms. Unless the context clearly requires otherwise,
all capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Indenture or, if not defined therein, in the
Policy described below. For purposes of this Insurance Agreement, the following
terms shall have the following meanings:
"Closing Date" means October 7, 1999.
"Commission" means the Securities and Exchange Commission.
"Company Documents" means the Indenture, this Insurance Agreement, the
Notes, the Swap Documents and the Assignment and Servicing Agreement.
<PAGE>
"Counterparty" means Lehman Brothers Financial Products Inc., a Delaware
corporation, or its permitted successors or assigns under the Swap Documents.
"Default" means any event which results, or which with the giving of notice
or the lapse of time or both would result, in an Event of Servicing Termination.
"Documents" means the Company Documents and any other information relating
to the Asset Pool, IOS Capital, the Seller or the Issuer furnished to the
Insurer by IOS Capital, the Seller or the Issuer.
"Event of Servicing Termination" means any Event of Servicing Termination
specified in Section 5.01 of this Insurance Agreement.
"Financial Statements" means, with respect to IOS Capital, the consolidated
statements of financial condition as of September 30, 1998 and the statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended September 30, 1998 and the notes thereto.
"Holder" has the meaning given such term in the Policy.
"Indemnification Agreement" means the Indemnification Agreement dated as of
October 7, 1999 among the Insurer and the Underwriters.
"Indenture Trustee" means Harris Trust and Savings Bank, as indenture
trustee under the Indenture, and any successor thereto under the Indenture.
"Insurance Agreement" has the meaning given such term in the initial
paragraph hereof.
"Insurer" means Ambac Assurance Corporation, a Wisconsin domiciled stock
insurance corporation, or any successor thereto, as issuer of the Policy.
"Insurer Information" has the meaning given such term in Section 3.04(a)(v).
"Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IOS Capital" means IOS Capital, Inc., and any successors thereto, as the
Originator and the Servicer.
"Issuer" means IKON Receivables, LLC, a Delaware limited liability company,
or any successor thereto as provided for in the Indenture.
<PAGE>
"Late Payment Rate" means the lesser of (a) the greater of (i) the per annum
rate of interest publicly announced from time to time by Citibank, N.A. as its
prime or base lending rate (any change in such rate of interest to be effective
on the date such change is announced by Citibank, N.A.), plus 2% per annum and
(ii) the then applicable highest rate of interest on the Notes and (b) the
maximum rate permissible under applicable usury or similar laws limiting
interest rates. The Late Payment Rate shall be computed on the basis of the
actual number of days elapsed over a year of 360 days.
"Material Adverse Change" means, in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person on a consolidated basis with its subsidiaries or
(ii) the ability of such Person to perform its obligations under any of the
Company Documents.
"Moody's" means Moody's Investors Service, Inc., and any successor thereto.
"Notes" has the meaning given such term in the Indenture.
"Offering Document" means the Prospectus dated May 7, 1999, the Preliminary
Prospectus Supplement dated September 24, 1999, and the Prospectus Supplement
dated September 30, 1999, each in respect of the Notes, and any amendment or
supplement thereto, and any other offering document in respect of the Notes
prepared by IOS Capital that makes reference to the Policy.
"Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, partnership or
other organization or entity (whether governmental or private).
"Policy" means each of the following: (a) the certificate guaranty
insurance policy, #AB0306BE, together with all endorsements thereto, issued by
the Insurer to the Indenture Trustee, for the benefit of the Holders of the
Notes (the "Note Policy") and (b) the financial guaranty insurance policy,
SF0276BE, issued by the Insurer to the Counterparty (the "Swap Policy").
"Policies" means both of the Note Policy and the Swap Policy.
"Premium" means the premium payable in accordance with the Policy, with
respect to any Payment Date, the amount calculated by multiplying the Premium
Percentage by the Outstanding Principal Amount of the Notes on such Payment Date
prior to the distribution of any principal with respect to the Notes on such
Payment Date. All calculations of the Premium shall be based upon twelve 30-day
months and a 360-day year.
"Premium Percentage" shall mean 0.18% per annum.
"Registration Statement" means the registration statement on Form S-3 (No.
333-71073), including the prospectus, relating to the Notes, at the time it
became effective.
<PAGE>
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., and any successor thereto.
"Transaction" means the transactions contemplated by the Company Documents,
including the transactions described in the Offering Document.
"Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Underwriters" means, collectively, Lehman Brothers Inc., Chase Securities
Inc., Deutsche Banc Alex. Brown and PNC Capital Markets, Inc.
"Underwriting Agreement" means the Underwriting Agreement dated September
30, 1999 between Lehman Brothers Inc., as representative of the several
Underwriters named in Schedule 1 to the Underwriting Agreement, and IOS Capital
with respect to the offer and sale of the Notes, as amended, modified or
supplemented from time to time.
"Underwriters' Information" has the meaning given such term in the
Indemnification Agreement.
Section 1.02. Other Definitional Provisions. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Insurance
Agreement shall refer to this Insurance Agreement as a whole and not to any
particular provision of this Insurance Agreement, and Section, subsection,
Schedule and Exhibit references are to this Insurance Agreement unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The words
"include" and "including" shall be deemed to be followed by the phrase "without
limitation."
<PAGE>
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of IOS Capital. IOS Capital
hereby makes to and for the benefit of the Insurer each of the representations
and warranties made by IOS Capital in the Indenture and the Assignment and
Servicing Agreement, including, but not limited to, Section 2 of the Assignment
and Servicing Agreement. Such representations and warranties are incorporated
herein by this reference as if fully set forth herein, and may not be amended
except by an amendment complying with the terms of Section 6.01. In addition,
IOS Capital represents and warrants as of the Closing Date as follows:
(a) Due Authorization. The execution, delivery and performance by IOS
Capital of the Company Documents to which it is a party, have been duly
authorized by all necessary corporate action and do not require any
additional approvals or consents, or other action by or any notice to or
filing with any Person, including any governmental entity or any of the
stockholders of IOS Capital, which have not previously been obtained or
given.
(b) Noncontravention. The execution and delivery by IOS Capital of
the Company Documents to which it is a party, the consummation of the
Transaction and the satisfaction of the terms and conditions of the Company
Documents do not and will not:
(i) conflict with or result in any breach or violation of
any provision of the charter or bylaws of IOS Capital or any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to IOS
Capital or any of its respective material properties, including
regulations issued by any administrative agency or other governmental
authority having supervisory powers over IOS Capital;
(ii) constitute a default by IOS Capital under, result in
the acceleration of any obligation under, or breach any provision of
any loan agreement, mortgage, indenture or other agreement or
instrument to which IOS Capital is a party or by which any of its
properties are or may be bound or affected; or
(iii) result in or require the creation of any lien upon or
in respect of any assets of IOS Capital, except as expressly
contemplated by the Company Documents.
(c) Valid and Binding Obligations. When executed and delivered by
IOS Capital, the Company Documents to which IOS Capital is a party will
constitute the legal, valid and binding obligations of IOS Capital
enforceable in
<PAGE>
accordance with their respective terms, except as such enforceability may
be limited by insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles and
public policy considerations as to rights of indemnification for violations
of federal securities laws. The Notes, when executed, authenticated and
delivered in accordance with the Indenture, will be validly issued and
outstanding and entitled to the benefits of the Indenture. IOS Capital will
not at any time in the future deny that the Company Documents constitute
the legal, valid and binding obligations of IOS Capital.
(d) Compliance With Securities Laws. The offer and sale of the Notes
comply in all material respects with all requirements of law, including all
registration requirements of applicable securities laws. The Indenture is
required to be qualified and has been qualified under the Trust Indenture
Act and the Issuer is not required to be registered as an "investment
company" under the Investment Company Act. IOS Capital will satisfy any of
the information reporting requirements of the Securities Exchange Act
arising out of the Transaction to which it, the Issuer or the Seller are
subject.
Section 2.02. Affirmative Covenants of IOS Capital. IOS Capital hereby
makes, to and for the benefit of the Insurer, all of the covenants made by IOS
Capital as Originator and Servicer in the Indenture and the Assignment and
Servicing Agreement, including, but not limited to, Sections 4, 5, 6, 7 and 8 of
the Assignment and Servicing Agreement (but with respect to such covenants made
by IOS Capital as Servicer, only for so long as IOS Capital is the Servicer).
Such covenants are hereby incorporated herein by this reference as if fully set
forth herein, and may not be amended except by an amendment complying with the
terms of Section 6.01. In addition, IOS Capital hereby agrees that during the
term of this Insurance Agreement, unless the Insurer shall otherwise expressly
consent in writing:
(a) Compliance With Agreements and Applicable Laws. IOS Capital shall
comply with the terms and conditions of and perform its obligations under
the Company Documents to which it is a party in all cases in which failure
to so comply or perform would result in a default thereunder and shall
comply with all material requirements of any law, rule or regulation
applicable to it.
(b) Access to Records; Discussions with Officers and Accountants. On
an annual basis, or upon the occurrence of a Material Adverse Change, IOS
Capital shall, upon the reasonable request of the Insurer, permit the
Insurer or its authorized agents:
(i) to inspect the books and records of IOS Capital as they
may relate to the Notes, the obligations of IOS Capital under the
Company Documents and the Transaction;
<PAGE>
(ii) to discuss the affairs, finances and accounts of IOS
Capital with the Chief Operating Officer and the Chief Financial
Officer of IOS Capital; and
(iii) with IOS Capital's consent, which consent shall not
be unreasonably withheld or delayed, to discuss the affairs, finances
and accounts of IOS Capital with IOS Capital's independent
accountants, provided that an officer of IOS Capital shall have the
right to be present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours at the Insurer's expense and shall not unreasonably disrupt
the business of IOS Capital.
(c) Retirement of Notes. IOS Capital shall instruct the Indenture
Trustee in writing, upon a retirement or other payment of all of the Notes,
to surrender the Policy to the Insurer for cancellation.
(d) Disclosure Document. Each Offering Document delivered with
respect to the Notes shall clearly disclose that the Policy is not covered
by the property/casualty insurance security fund specified in Article 76 of
the New York Insurance Law.
(e) Third-Party Beneficiary. IOS Capital agrees that the Insurer
shall have all rights of a third-party beneficiary in respect of the
Indenture, and the Assignment and Servicing Agreement.
(f) Closing Documents. IOS Capital shall provide or cause to be
provided to the Insurer an executed original copy of each document executed
in connection with the Transaction within 30 Business Days after the date
of closing.
Section 2.03. Negative Covenants of IOS Capital. IOS Capital hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Impairment of Rights. IOS Capital shall not take any action, or
fail to take any action, if such action or failure to take action may
result in a Material Adverse Change specified in clause (ii) of the
definition of Material Adverse Change with respect to IOS Capital, or may
not interfere with the enforcement of any rights of the Insurer under or
with respect to any of the Company Documents. IOS Capital shall give the
Insurer written notice of any such action or failure to act on the earlier
of: (i) the date upon which any publicly available filing or release is
made with respect to such action or failure to act or (ii) promptly prior
to the date of consummation of such action or failure to act. IOS
<PAGE>
Capital shall furnish to the Insurer all information requested by it that
is reasonably necessary to determine compliance with this paragraph.
(b) Amendments, Etc. IOS Capital shall not modify or amend, or
consent to any modification or amendment of, any of the terms, provisions
or conditions of the Company Documents to which it is a party without the
prior written consent of the Insurer thereto, but excluding any amendment
to the Offering Document required by law and excluding any modifications or
amendments to which, pursuant to the terms of the Company Documents,
Insurer's consent is not required.
(c) Successors. Except as provided in Section 10.02 of the Assignment
and Servicing Agreement or Section 8.08 of the Indenture, as applicable,
neither the Indenture Trustee nor IOS Capital shall terminate or designate,
or consent to the termination or designation of, any successor Servicer or
Indenture Trustee without the prior written approval of the Insurer, which
approval shall not be unreasonably withheld, conditioned or delayed.
Section 2.04. Representations and Warranties of the Insurer. The Insurer
represents and warrants to the Indenture Trustee (on behalf of the Noteholders),
the Issuer and IOS Capital as follows:
(a) Organization and Licensing. The Insurer is a duly organized and
validly existing Wisconsin stock insurance company duly qualified to
conduct an insurance business in the State of Illinois.
(b) Corporate Power. The Insurer has the corporate power and
authority to issue each Policy and execute and deliver this Insurance
Agreement and to perform all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. All proceedings legally required for
the issuance of the Policies and the execution, delivery and performance of
this Insurance Agreement have been taken and all licenses, orders, consents
or other authorizations or approvals of the Insurer's Board of Directors or
stockholders or any governmental boards or bodies legally required for the
enforceability of the Policies have been obtained; any proceeding not taken
and any license, authorization or approvals not obtained are not material
to the enforceability of the Policies.
(d) Enforceability. Each Policy, when issued, and this Insurance
Agreement will each constitute a legal, valid and binding obligation of the
Insurer, enforceable in accordance with its terms, subject to insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and subject
to principles of public policy limiting the right to enforce the
indemnification provisions contained
<PAGE>
therein and herein, insofar as such provisions relate to indemnification
for liabilities arising under federal securities laws.
(e) Financial Information. The consolidated financial statements of
the Insurer and its subsidiaries as of December 31, 1998 and 1997, and for
the three years ended December 31, 1998, included in the Annual Report on
Form 10-K of Ambac Financial Group, Inc. (which was filed with the
Commission on March 30, 1999, Commission File Number 1-10777), and the
unaudited consolidated financial statements of the Insurer and its
subsidiaries as of June 30, 1999 and for the periods ending June 30, 1999
and June 30, 1998, included in the Quarterly Report on Form 10-Q of Ambac
Financial Group, Inc. (which was filed with the Commission on August 13,
1999), are hereby incorporated by reference into the Prospectus Supplement
dated September 30, 1999 relating to the Notes and shall be deemed to be a
part hereof. Since June 30, 1999, there has been no Material Adverse Change
with respect to the financial condition of the Insurer that would affect
its ability to perform its obligations under the Policy.
(f) Insurer Information. The Insurer Information is true and correct
in all material respects and does not contain any untrue statement of a
material fact.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge,
threatened against it at law or in equity or before or by any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would result in a Material Adverse Change or would
materially and adversely affect its ability to perform its obligations
under the Policies or this Insurance Agreement.
(h) No Conflict. The execution by the Insurer of this Insurance
Agreement will not, and the satisfaction of the terms hereof will not,
conflict with or result in a breach of any of the terms, conditions or
provisions of the Certificate of Incorporation or By-Laws of the Insurer,
or any restriction contained in any contract, agreement or instrument to
which the Insurer is a party or by which it is bound or constitute a
default under any of the foregoing.
(i) Confidential Information. The Insurer agrees that it and its
shareholders, directors, agents, accountants and attorneys shall not use or
disclose any information provided to the Insurer pursuant to or in
connection with this Insurance Agreement or the issuance of the Policies or
otherwise related to the Transactions, including any matter of which it
becomes aware during the inspections conducted or discussions had pursuant
to Section 2.02(b), unless such information is readily available from
public sources or except as may be otherwise required by regulation, law or
court order or requested by appropriate governmental authorities or as
necessary to preserve its rights or security under or to enforce the
Company Documents; provided, however, that the foregoing shall
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<PAGE>
not limit the right of the Insurer to make such information available to
its regulators, securities rating agencies, reinsurers, credit and
liquidity providers, counsel and accountants. If the Insurer is requested
or required (by oral questions, interrogatories, requests for information
or documents subpoena, civil investigative demand or similar process) to
disclose any information provided to the Insurer pursuant to or in
connection with this Insurance Agreement or the issuance of the Policies or
otherwise related to the Transactions, including any information of which
it becomes aware through such inspections or discussions, the Insurer will
promptly notify IOS Capital of such request(s) so that IOS Capital may seek
an appropriate protective order and/or waive the Insurer's compliance with
the provisions of this Insurance Agreement. If, in the absence of a
protective order or the receipt of a waiver hereunder, the Insurer is,
nonetheless, in the opinion of its counsel (which shall be delivered to IOS
Capital), compelled to disclose such information to any tribunal or else
stand liable for contempt or suffer other censure of significant penalty,
the Insurer may disclose such information to such tribunal that the Insurer
is compelled to disclose, provided that the Insurer shall promptly notify
IOS Capital that the Insurer has been compelled to so disclose and that the
Insurer shall use best efforts to provide to IOS Capital prior to
disclosure a copy of all information to be so disclosed.
(j) Rating. The Insurer is not aware of any facts that if disclosed
to Moody's or S&P would be reasonably expected to result in a downgrade of
the rating of the financial strength of the Insurer by either of such
Rating Agencies.
(k) 1933 Act Registration. Each Policy is exempt from registration
under the Act.
Section 2.05. Representations and Warranties and Covenants of the Seller.
The Seller hereby makes to and for the benefit of the Insurer each of the
representations and warranties and covenants made by the Seller in the
Assignment and Servicing Agreement, including, but not limited to, Section 3 and
Section 9 of the Assignment and Servicing Agreement. Such representations,
warranties and covenants are incorporated herein by this reference as if fully
set forth herein, and may not be amended except by an amendment complying with
the terms of Section 6.01.
Section 2.06. Representations and Warranties of the Issuer. The Issuer
hereby makes, to and for the benefit of the Insurer, each of the representations
and warranties made by the Issuer in the Indenture. Such representations and
warranties are incorporated herein by this reference as if fully set forth
herein, and may not be amended except by an amendment complying with the terms
of Section 6.01. In addition, the Issuer represents and warrants as of the
Closing Date as follows:
(a) Due Organization and Qualification. The Issuer is a limited
liability company, duly organized, validly existing and in good standing
under the laws of Delaware and the United States of America. The Issuer is
duly qualified to do business, is in good standing and has obtained all
necessary licenses,
<PAGE>
permits, charters, registrations and approvals (together, "approvals")
necessary for the conduct of its business as currently conducted and as
described in the Offering Document and the performance of its obligations
under the Company Documents in each jurisdiction in which the failure to be
so qualified or to obtain such approvals would render any Company Document
unenforceable in any respect or would have a material adverse effect upon
the Transaction.
(b) Power and Authority. The Issuer has all necessary limited
liability company power and authority to conduct its business as currently
conducted and as described in the Offering Document, to execute, deliver
and perform its obligations under the Company Documents and to consummate
the Transaction.
(c) Due Authorization. The execution, delivery and performance of the
Company Documents by the Issuer has been duly authorized by all necessary
limited liability company action and does not require any additional
approvals or consents, or other action by or any notice to or filing with
any Person, including any governmental entity or any beneficial owner of
the Trust, which have not previously been obtained or given by the Trust.
(d) Noncontravention. The execution and delivery by the Issuer of the
Company Documents to which it is a party, the consummation of the
Transaction and the satisfaction of the terms and conditions of the Company
Documents do not and will not:
(i) conflict with or result in any breach or violation of
any provision of the Amended and Restated Limited Liability Company
Agreement of the Issuer or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently in
effect having applicability to the Issuer or any of its respective
material properties, including regulations issued by any
administrative agency or other governmental authority having
supervisory powers over the Issuer;
(ii) constitute a default by the Issuer under, result in
the acceleration of any obligation under, or breach any provision of
any loan agreement, mortgage, indenture or other agreement or
instrument to which the Issuer either is a party or by which any of
their properties are or may be bound or affected; or
(iii) result in or require the creation of any lien upon or
in respect of any assets of the Issuer, except as otherwise expressly
contemplated by the Company Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or administrative agency
or arbitrator
<PAGE>
against or affecting the Issuer, any properties or rights of the Issuer or
any of the Asset Pool pending or threatened, which, in any case, if decided
adversely to the Issuer could result in a Material Adverse Change with
respect to the Issuer.
(f) Valid and Binding Obligations. The Company Documents, when
executed and delivered by the Issuer, will constitute the legal, valid and
binding obligations of the Issuer, enforceable in accordance with their
respective terms, except as such enforceability may be limited by
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable principles and public
policy considerations as to rights of indemnification for violations of
federal securities laws. The Notes, when executed, authenticated and
delivered in accordance with the Indenture, will be validly issued and
outstanding and entitled to the benefits of the Indenture.
(g) Compliance with Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Issuer in the conduct of its
business violates any law, regulation, judgment, agreement, order or decree
applicable to the Issuer that, if enforced, could result in a Material
Adverse Change with respect to the Issuer.
(h) Accuracy of Information. None of the Documents, as amended,
supplemented or superseded, furnished to the Insurer by the Issuer contains
any statement of a material fact which was untrue or misleading in any
material respect when made. Since the furnishing of the Documents, there
has been no change nor any development or event involving a prospective
change known to the Issuer that would render any of the Documents untrue or
misleading in any material respect.
(i) Compliance With Securities Laws. The offer and sale of the Notes
comply in all material respects with all requirements of law, including all
registration requirements of applicable securities laws. Without limiting
the foregoing, the Offering Document does not contain any untrue statement
of a material fact and does not omit to state a material fact necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading; provided, however, that no representation
is made with respect to the Insurer Information or with respect to the
Underwriters' Information. Neither the offer nor sale of the Notes by the
Issuer has been or will be in violation of the Securities Act or any other
federal or state securities laws. The Indenture is required to be qualified
under the Trust Indenture Act. The Issuer is not required to be registered
as an "investment company" under the Investment Company Act. The Issuer
will satisfy any of the information reporting requirements of the
Securities Exchange Act arising out of the Transaction to which it or the
Trust are subject.
<PAGE>
(j) Solvency; Fraudulent Conveyance. The Issuer is solvent and will
not be rendered insolvent by the Transaction and, after giving effect to
the Transaction, the Issuer will not be left with an unreasonably small
amount of capital with which to engage in its business, and the Issuer does
not intend to incur, or believe that it has incurred, debts beyond its
ability to pay as they mature. The Issuer does not contemplate the
commencement of insolvency, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Issuer or any of their assets. The Issuer is not
pledging the Asset Pool under the Indenture with any intent to hinder,
delay or defraud any of the Issuer's creditors.
(k) Principal Place of Business. The principal place of business of
the Issuer is 1738 Bass Road, Macon, Georgia 31210.
Section 2.07. Affirmative Covenants of the Issuer. The Issuer hereby makes,
to and for the benefit of the Insurer, all of the covenants of the Issuer set
forth in the Indenture, including, but not limited to, Section 9 of the
Indenture. Such covenants are incorporated herein by this reference, and may not
be amended except by an amendment complying with the terms of Section 6.01. In
addition, the Issuer hereby agrees that during the term of this Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Issuer shall
comply with the terms and conditions of and perform its respective
obligations under the Company Documents to which it is a party in all cases
in which failure to so comply or perform would result in a default
thereunder and shall comply with all material requirements of any law, rule
or regulation applicable to it.
(b) Existence. The Issuer and its successors and permitted assigns
shall maintain its existence as a limited liability company and shall at
all times continue to be duly organized under the laws of the State of
Delaware and duly qualified and duly authorized (as described in
subsections 2.06(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its Amended and Restated Limited Liability
Company Agreement.
(c) Access to Records; Discussions with Officers and Accountants. On
an annual basis, or upon the occurrence of a Material Adverse Change, the
Issuer shall, upon the reasonable request of the Insurer, permit the
Insurer or its authorized agents:
(i) to inspect the books and records of the Issuer as they
may relate to the Notes, the obligations of the Issuer under the
Company Documents and the Transaction;
<PAGE>
(ii) to discuss the affairs, finances and accounts of the
Issuer with IOS Capital on behalf of the Issuer; and
(iii) with the Issuer's consent, which consent shall not be
unreasonably withheld or delayed, to discuss the affairs, finances and
accounts of the Issuer with the Issuer's independent accountants,
provided that an officer of the Issuer and IOS Capital shall have the
right to be present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the
Issuer.
(d) Notice of Material Events. The Issuer shall be obligated
promptly to inform the Insurer in writing of the occurrence of any of the
following:
(i) the submission of any claim or the initiation or threat
of any legal process, litigation or administrative or judicial
investigation, or rule making or disciplinary proceeding by or against
the Issuer that (A) could reasonably be required to be disclosed to
the Commission or (B) would likely result in a Material Adverse Change
with respect to the Issuer, or the promulgation of any proceeding or
any proposed or final ruling in connection with any such litigation,
investigation or proceeding which would likely result in a Material
Adverse Change with respect to the Issuer;
(ii) any change in the location of the principal office of
the Issuer;
(iii) the occurrence of any Default or Event of Servicing
Termination, or any Material Adverse Change in respect of the Issuer;
(iv) the commencement of any proceedings by or against the
Issuer under any applicable reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may be,
appointed or requested for the Issuer or any of their assets; or
(v) the receipt of notice that (A) any license, permit,
charter, registration or approval necessary for the conduct of the
Issuer's business are to be, or may be suspended or revoked or (B) the
Issuer is to cease and desist any practice, procedure or policy
employed by the Issuer in the conduct of its business, and such
cessation may result in a Material Adverse Change with respect to the
Issuer.
<PAGE>
(e) Financing Statements and Further Assurances. The Issuer shall,
upon the request of the Insurer, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, within
ten days of such request, such amendments hereto and such further
instruments and take such further action as may be reasonably necessary to
effectuate the intention, performance and provisions of the Company
Documents. In addition, the Issuer agrees to cooperate with S&P and Moody's
in connection with any review of the Transaction, conducted during normal
business hours and in a manner that does not unreasonably disrupt the
business of IOS Capital, that may be undertaken by S&P and Moody's after
the date hereof upon reasonable notice.
(f) Maintenance of Licenses. The Issuer shall maintain all licenses,
permits, charters and registrations which are material to the conduct of
its business.
(g) Third-Party Beneficiary. The Issuer agrees that the Insurer
shall have all rights of a third-party beneficiary in respect of the
Indenture.
Section 2.08. Negative Covenants of the Issuer. The Issuer hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Impairment of Rights. The Issuer shall not take any action, or
fail to take any action, if such action or failure to take action may
result in a Material Adverse Change specified in clause (ii) of the
definition of Material Adverse Change with respect to the Issuer or may not
interfere with the enforcement of any rights of the Insurer under or with
respect to any of the Company Documents. The Issuer shall give the Insurer
written notice of any such action or failure to act on the earlier of: (i)
the date upon which any publicly available filing or release is made with
respect to such action or failure to act or (ii) promptly prior to the date
of consummation of such action or failure to act. The Issuer shall furnish
to the Insurer all information requested by it that is reasonably necessary
to determine compliance with this paragraph.
(b) Amendments, Etc. The Issuer shall not modify or amend, or
consent to any modification or amendment of, any of the terms, provisions
or conditions of the Company Documents to which it is a party without the
prior written consent of the Insurer thereto, but excluding any amendment
to the Offering Document required by law and excluding any modifications or
amendments to which, pursuant to the terms of the Company Documents,
Insurer's consent is not required.
(c) Limitation on Mergers, Etc. The Issuer shall not consolidate
with or merge with or into any Person or transfer all or substantially all
of its
<PAGE>
assets to any Person or liquidate or dissolve except as provided in the
Indenture or as permitted hereby. The Issuer shall furnish to the Insurer
all information requested by it that is reasonably necessary to determine
compliance with this paragraph.
(d) Successors. Except as provided in Section 10.02 of the
Assignment and Servicing Agreement or Section 8.08 of the Indenture, as
applicable, neither the Trustee nor IOS Capital shall terminate or
designate, or consent to the termination or designation of, any successor
Servicer or Trustee without the prior written approval of the Insurer,
which approval shall not be unreasonably withheld, conditioned or delayed.
ARTICLE III
THE POLICIES; REIMBURSEMENT
Section 3.01. Issuance of the Policies. The Insurer agrees to issue each
Policy on the Closing Date subject to satisfaction of the conditions precedent
set forth below:
(a) Payment of Initial Premium and Expenses. The applicable parties
shall have been paid by IOS Capital their related fees and expenses payable
in accordance with Section 3.02 within 5 Business Days of receipt of the
related invoice;
(b) Company Documents. The Insurer shall have received a copy of
each of the Company Documents, in form and substance reasonably
satisfactory to the Insurer, duly authorized, executed and delivered by
each party thereto;
(c) Certified Documents and Resolutions. The Insurer shall have
received a copy of the charter and bylaws of IOS Capital and the limited
liability company agreement and certificate of each of Seller and Issuer,
and (ii) a certificate of the Secretary or Assistant Secretary of IOS
Capital stating that attached thereto is a true, complete and correct copy
of resolutions duly adopted by the Board of Directors or a duly authorized
committee of IOS Capital, or the Managing Member of the Seller and the
Issuer, as the case may be, authorizing the execution, delivery and
performance by IOS Capital, the Seller or the Issuer, as the case may be,
of the Company Documents to which it is a party and the consummation of the
Transaction and that such charter, bylaws, limited liability company
agreements, certificates of formation and resolutions are in full force and
effect without amendment or modification on the Closing Date;
<PAGE>
(d) Incumbency Certificate. The Insurer shall have received a
certificate of the Secretary or an Assistant Secretary of each of IOS
Capital, the Seller and the Issuer certifying the names and signatures of
the officers of such entity authorized to execute and deliver the Company
Documents to which it is a party;
(e) Representations and Warranties; Certificate. The representations
and warranties of IOS Capital, the Seller and the Issuer set forth or
incorporated by reference in this Insurance Agreement shall be true and
correct on and as of the Closing Date as if made on the Closing Date, and
the Insurer shall have received a certificate of appropriate officers of
IOS Capital, the Seller and the Issuer to that effect;
(f) Opinions of Counsel. The Insurer shall have received all
opinions of counsel addressed to any of Moody's, S&P, the Indenture
Trustee, IOS Capital, the Issuer, the Seller, or the Underwriters in
respect of the Transaction, in form and substance reasonably satisfactory
to the Insurer, addressed to the Insurer and addressing such matters as the
Insurer may reasonably request, and the counsel providing each such opinion
shall have been instructed by its client to deliver such opinion to the
addressees thereof;
(g) Approvals, Etc. The Insurer shall have received true and correct
copies of all approvals, licenses and consents, if any, including any
required approval of the shareholders of IOS Capital, required in
connection with the Transaction;
(h) No Litigation, Etc. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, shall be
pending or threatened before any court, governmental or administrative
agency or arbitrator in which it is sought to restrain or prohibit or to
obtain damages or other relief in connection with any of the Company
Documents or the consummation of the Transaction;
(i) Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court that would make the Transaction illegal or
otherwise prevent the consummation thereof;
(j) Satisfaction of Conditions of the Underwriting Agreement. All
conditions in the Underwriting Agreement relating to the Underwriters'
obligation to purchase the Notes shall have been satisfied, without taking
into account any waiver by any Underwriter of any condition unless such
waiver has been approved by the Insurer. The Insurer shall have received
copies of each of the documents, and shall be entitled to rely on each of
the documents, required to be delivered to any Underwriter pursuant to the
Underwriting Agreement;
<PAGE>
(k) Issuance of Ratings. The Insurer shall have received
confirmation that the risk secured by the Note Policy constitutes a "BBB"
risk by S&P and a "Baa2" risk by Moody's and that the Notes, when issued,
will be rated "AAA" by S&P and "Aaa" by Moody's (or A-1+ by S&P and P-1 by
Moody's in the case of the Class A-1 Notes);
(l) No Default. No Default or Event of Servicing Termination shall
have occurred;
(m) Additional Items. The Insurer shall have received such other
documents, instruments, approvals or opinions reasonably requested by the
Insurer as may be reasonably necessary to effect the Transaction, including
evidence reasonably satisfactory to the Insurer that the conditions
precedent, if any, in the Company Documents have been satisfied; and
(n) Satisfactory Documentation. The Insurer and its counsel shall
have determined that all documents, Notes and opinions to be delivered in
connection with the Notes and the Swap Documents conform to the terms of
the Indenture, the Registration Statement, the Offering Document, the Swap
Documents and this Insurance Agreement.
Section 3.02. Payment of Fees and Premium.
(a) Legal and Accounting Fees. IOS Capital shall pay or cause to be
paid, within 5 Business Days of receipt of the related invoice, reasonable
legal fees, auditors' fees in connection with the provision of information
or any consent in connection with the Offering Document and disbursements
incurred by the Insurer in connection with the issuance of the Policies.
Any reasonable additional fees of the Insurer's counsel or auditors payable
in respect of any amendment or supplement to the Offering Document incurred
after the Closing Date shall be paid by IOS Capital on demand.
(b) Rating Agency Fees. IOS Capital shall promptly pay the initial
fees of S&P and Moody's with respect to the Notes and the transactions
contemplated hereby following receipt of a statement with respect thereto.
IOS Capital shall pay any subsequent fees of S&P or Moody's with respect
to, and directly allocable to, the Notes to the extent that such fees and
expenses result from actions of S&P or Moody's that are requested by IOS
Capital. The Insurer shall not be responsible for any fees or expenses of
S&P or Moody's. The fees for any other rating agency shall be paid by the
party requesting such other agency's rating.
(c) Premium.
<PAGE>
(i) In consideration of the issuance by the Insurer of the
Policies, the Insurer shall be entitled to receive the Premium as and
when due in accordance with and from the funds specified by Section
3.03 of the Indenture.
(ii) The Premium paid under the Indenture shall be nonrefundable
without regard to whether any Notice for Payment is delivered to the
Insurer requiring the Insurer to make any payment under either Policy
or any other circumstances relating to the Notes or provision being
made for payment of the Notes prior to maturity.
Section 3.03. Reimbursement Obligation.
(a) As and when due, from, and only from, the funds specified in
Section 3.03 of the Indenture, the Insurer shall be entitled to
reimbursement for any payment made by the Insurer under either Policy,
which reimbursement shall be due and payable on the date that any amount is
paid thereunder, in an amount equal to the amount so paid and all amounts
previously paid that remain unreimbursed, together with interest on any and
all amounts remaining unreimbursed (to the extent permitted by law, if in
respect of any unreimbursed amounts representing interest) from the date
such amounts became due until paid in full (after as well as before
judgment), at a rate of interest equal to the Late Payment Rate.
(b) IOS Capital agrees to pay to the Insurer, within 5 Business Days
of receipt of an invoice, as follows: any and all charges, fees, costs and
expenses that the Insurer may reasonably pay or incur, including reasonable
attorneys' and accountants' fees and expenses, in connection with (i) the
enforcement, defense or preservation of any rights in respect of any of the
Company Documents, including defending, monitoring or participating in any
litigation or proceeding (including any insolvency proceeding in respect of
any Transaction participant or any affiliate thereof) relating to any of
the Company Documents, any party to any of the Company Documents (in its
capacity as such a party) or the Transaction, or (ii) any amendment, waiver
or other action with respect to, or related to, any Company Document,
whether or not executed or completed.
(c) IOS Capital agrees to pay to the Insurer, within 5 Business Days
of receipt of an invoice, as follows: interest on any and all amounts
described in subclause (b) of this Section 3.03 from the date payable or
paid by such party until payment thereof in full, and interest on any and
all amounts described in Section 3.02 (a) from the date due until payment
thereof in full and interest on any and all
<PAGE>
amounts described in Section 3.04 from the date due until payment thereof
in full, in each case, payable to the Insurer at the Late Payment Rate.
Section 3.04. Indemnification.
(a) In addition to any and all of the Insurer's rights of
reimbursement, indemnification, subrogation and to any other rights of the
Insurer pursuant hereto or under law or in equity, IOS Capital agrees to
pay, and to protect, indemnify and save harmless, the Insurer and its
officers, directors, shareholders, employees, agents and each Person, if
any, who controls the Insurer within the meaning of either Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act from and
against, any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or
relating to the transactions contemplated by the Company Documents by
reason of:
(i) any omission or action (other than of or by the Insurer
(including any Insurer Information, as defined below) or the
Underwriters) by IOS Capital in connection with the offering,
issuance, sale or delivery of any of the Notes prior to the completion
of the initial offering and distribution of the Notes;
(ii) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director, officer,
employee or agent of IOS Capital in connection with any Transaction
arising from or relating to the Company Documents;
(iii) the violation by IOS Capital of any domestic or
foreign law, rule or regulation, or any judgment, order or decree
applicable to it;
(iv) the breach by IOS Capital of any representation,
warranty or covenant under any of the Company Documents or the
occurrence, in respect of IOS Capital, under any of the Company
Documents of any Event of Servicing Termination or any event which,
with the giving of notice or the lapse of time or both, would
constitute any Event of Servicing Termination (exclusive of clause (c)
of Section 5.01 hereof); or
(v) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document or the Registration
Statement or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were
<PAGE>
made, not misleading, except insofar as such claims, losses,
liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of
investigations) arise out of or are based upon any untrue statement or
omission in the an Offering Document other than the Underwriters'
Information and information furnished by the Insurer in writing
expressly for use therein (all such information so furnished being
referred to herein as "Insurer Information"), it being understood
that, in respect of the initial Offering Document, the Insurer
Information is limited to the information with respect to the Insurer
included under the caption "THE INSURER AND THE POLICY."
(b) The Insurer agrees to pay, and to protect, indemnify and save
harmless, IOS Capital and its respective officers, directors, shareholders,
employees, agents and each Person, if any, who controls IOS Capital within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act from and against, any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of investigations)
of any nature arising out of or by reason of any untrue statement or
alleged untrue statement of a material fact contained in the Insurer
Information in any Offering Document or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading or a breach of any of the representations and
warranties of the Insurer contained in Section 2.04.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person
(individually, an "Indemnified Party" and, collectively, the "Indemnified
Parties") in respect of which the indemnity provided in Section 3.04(a) or
(b) may be sought from IOS Capital, on the one hand, or the Insurer, on the
other (each, an "Indemnifying Party") hereunder, each such Indemnified
Party shall promptly notify the Indemnifying Party in writing, and the
Indemnifying Party shall assume the defense thereof, including the
employment of counsel satisfactory to the Indemnified Party and the payment
of all expenses. The Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof at the expense of the Indemnified Party; provided, however, that
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the fees and expenses of such separate counsel shall be at the expense of
the Indemnifying Party if (i) the Indemnifying Party has agreed to pay such
fees and expenses, (ii) the Indemnifying Party shall have failed to assume
the defense of such action or proceeding and employ counsel reasonably
satisfactory to the Indemnified Party in any such action or proceeding or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying
Party, and the Indemnified Party shall have been advised by
<PAGE>
counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Indemnifying
Party (in which case, if the Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense
of the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Indemnified Parties,
which firm shall be designated in writing by the Indemnified Party). The
Indemnifying Party shall not be liable for any settlement of any such
action or proceeding effected without its written consent to the extent
that any such settlement shall be prejudicial to the Indemnifying Party,
but, if settled with its written consent, or if there is a final judgment
for the plaintiff in any such action or proceeding with respect to which
the Indemnifying Party shall have received notice in accordance with this
subsection (c), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
(d) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party (other
than due to application of this Section), each Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis of
the relative fault of the Indemnifying Party, on the one hand, and the
Indemnified Party, on the other hand. The relative fault of each
Indemnifying Party, on the one hand, and each Indemnified Party, on the
other, shall be determined by reference to, among other things, whether the
breach of, or alleged breach of, any of its representations and warranties
set forth are within the control of, the Indemnifying Party or the
Indemnified Party, and the parties relative intent, knowledge, access to
information and opportunity to correct or prevent such breach.
No Person guilty of fraudulent misrepresentation (within the
meaning of Section (11)f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
Section 3.05. Payment Procedure. In the event of any payment to the
Insurer, the Indenture Trustee and IOS Capital agree to accept the voucher or
other evidence of payment as prima facie evidence of the propriety thereof and
the liability, if any, described in Section 3.03 therefor to the Insurer. All
payments to be made to the Insurer under this Insurance Agreement shall be made
to the Insurer in lawful currency of the United States of America in immediately
available funds at the notice address for the Insurer as specified in the
Indenture on the date when due or as the Insurer shall otherwise
<PAGE>
direct by written notice to the other parties hereto. In the event that the date
of any payment to the Insurer or the expiration of any time period hereunder
occurs on a day that is not a Business Day, then such payment or expiration of
time period shall be made or occur on the next succeeding Business Day with the
same force and effect as if such payment was made or time period expired on the
scheduled date of payment or expiration date.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of the Insurance Agreement. This
Insurance Agreement shall take effect on the Closing Date and shall remain in
effect until the later of (a) such time as the Insurer is no longer subject to a
claim under either Policy and each Policy shall have been surrendered to the
Insurer for cancellation and (b) all amounts payable to the Insurer by IOS
Capital and the Issuer hereunder or from any other source hereunder or under the
Company Documents and all amounts payable under the Notes have been paid in
full; provided, however, that the provisions of Sections 3.02, 3.03 and 3.04
-------- -------
hereof shall survive any termination of this Insurance Agreement.
Section 4.02. Further Assurances and Corrective Instruments.
(a) Except at such times as an Insurer Default (as defined in the
Indenture) shall exist or shall have occurred, neither IOS Capital nor the
Indenture Trustee shall grant any waiver of rights under any of the Company
Documents to which any of them is a party without the prior written consent
of the Insurer, which shall not be unreasonably withheld, conditioned or
delayed and any such waiver without prior written consent of the Insurer
shall be null and void and of no force or effect.
(b) To the extent permitted by law, IOS Capital agrees that it will,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such supplements hereto and such
further instruments as the Insurer may reasonably request and as may be
required in the Insurer's reasonable judgment to effectuate the intention
of or facilitate the performance of this Insurance Agreement.
(c) IOS Capital will not cause or permit (i) the Seller to assign or
transfer any of its assets to any party, other than the transfers to the
Issuer in connection with the
<PAGE>
Transaction, or to issue any notes or other evidences of indebtedness, or
to otherwise incur any indebtedness, or (ii) the Issuer to issue any notes
or other evidences of indebtedness, or to otherwise incur any indebtedness,
other than the indebtedness represented by the Notes, and the Issuer agrees
that it will not issue any notes or other evidences of indebtedness, or
otherwise incur any indebtedness, other than the indebtedness represented
by the Notes, in any such case, without the prior written consent of the
Insurer, such consent not to be unreasonably withheld.
Section 4.03. Obligations Absolute.
(a) The obligations of IOS Capital, the Seller and the Issuer
hereunder shall be absolute and unconditional and shall be paid or
performed strictly in accordance with this Insurance Agreement under all
circumstances irrespective of:
(i) any lack of validity or enforceability of, or any
amendment or other modifications of, or waiver, with respect to any of
the Company Documents or the Notes;
(ii) any exchange or release of any other obligations hereunder;
<PAGE>
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right that IOS Capital may have at any time against
the Insurer or any other Person;
(iv) any document presented be forged, fraudulent, in connection
with invalid or insufficient either Policy proving to in any respect
or any statement therein being untrue or inaccurate in any respect;
(v) any payment by the Insurer under either Policy against
presentation of a certificate or other document that does not strictly
comply with the terms of such Policy;
(vi) any failure of IOS Capital to receive the proceeds from the
sale of the Notes; and
(vii) any other circumstances, other than payment in full, that
might otherwise constitute a defense available to, or discharge of,
IOS Capital in respect of any Company Document.
(b) IOS Capital, the Seller and the Issuer and any and all others who
are now or may become liable for all or any part of the obligations of IOS
Capital, the Seller and the Issuer under this Insurance Agreement
(including any successor to IOS Capital as Servicer) agree to be bound by
this Insurance Agreement and (i) to the extent permitted by law, waive and
renounce any and all redemption and exemption rights and the benefit of all
valuation and appraisement privileges against the indebtedness and
obligations evidenced by any Company Document or by any extension or
renewal thereof; (ii) waive presentment and demand for payment, notices of
nonpayment and of dishonor, protest of dishonor and notice of protest;
(iii) waive all notices in connection with the delivery and acceptance
hereof and all other notices in connection with the performance, default or
enforcement of any payment hereunder, except as required by the Company
Documents; (iv) waive all rights of abatement, diminution, postponement or
deduction, or to any defense other than payment, or to any right of setoff
or recoupment arising out of any breach under any of the Company Documents,
by any party thereto or any beneficiary thereof, or out of any obligation
at any time owing to IOS Capital; (v) agree that its liabilities hereunder
shall, except as otherwise expressly provided in this Section 4.03, be
unconditional and without regard to any setoff, counterclaim or the
liability of any other Persons for the payment hereof, (vi) agree that any
consent, waiver or forbearance hereunder with respect to an event shall
operate only for such event and not for any subsequent event; (vii) consent
to any and all extensions of time that may be granted by the Insurer with
respect to any payment hereunder or other provisions hereof and to
<PAGE>
the release of any security at any time given for any payment hereunder, or
any part thereof, with or without substitution, and to the release of any
Person or entity liable for any such payment; and (viii) consent to the
addition of any and all other makers, endorsers, guarantors and other
obligors for any payment hereunder, and to the acceptance of any and all
other security for any payment hereunder, and agree that the addition of
any such obligors or security shall not affect the liability of the parties
hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting IOS Capital or
the Indenture Trustee from pursuing any rights or remedies it may have
against any Person in a separate legal proceeding.
Section 4.04. Assignments; Reinsurance; Third-Party Rights.
(a) This Insurance Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. None
of IOS Capital, the Seller or the Issuer may assign its rights under this
Insurance Agreement, or delegate any of its duties hereunder, without the
prior written consent of the Insurer. Any assignments made in violation of
this Insurance Agreement shall be null and void.
(b) The Insurer shall have the right to give participations in its
rights under this Insurance Agreement and to enter into contracts of
reinsurance with respect to the Policy upon such terms and conditions as
the Insurer may in its discretion determine; provided, however, that no
-------- -------
such participation or reinsurance agreement or arrangement shall relieve
the Insurer of any of its obligations hereunder or under either Policy and
provided further that any reinsurer or participant will not have any rights
against IOS Capital, the Noteholders or the Indenture Trustee and that IOS
Capital, the Noteholders and the Indenture Trustee shall have no obligation
to have any communication or relationship with any reinsurer or participant
in order to enforce the obligations of the Insurer hereunder and under
either Policy.
(c) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any right,
remedy or claim, express or implied, upon any Person, including,
particularly, any Holder, other than the Insurer against IOS Capital or IOS
Capital against the Insurer and all the terms, covenants, conditions,
promises and agreements contained herein shall be for the sole and
exclusive benefit of the parties hereto and their successors and permitted
assigns. Neither the Indenture Trustee nor any Holder shall have any right
to payment from any Premiums paid or payable hereunder or under the
Indenture or from any amounts paid by IOS Capital pursuant to Sections 3.02
or 3.03 hereof.
<PAGE>
Section 4.05. Liability of the Insurer. Unless the Insurer shall have been
grossly negligent or guilty of wrongful misconduct, neither the Insurer nor any
of its officers, directors or employees shall be liable or responsible for: (a)
the use that may be made of the Policy by the Trust or for any acts or omissions
of the Trust in connection therewith; or (b) the validity, sufficiency, accuracy
or genuineness of documents delivered to the Insurer in connection with any
claim under either Policy, or of any signatures thereon, even if such documents
or signatures should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged (unless the Insurer shall have actual
knowledge thereof). In furtherance and not in limitation of the foregoing, the
Insurer may accept documents that appear on their face to be in order, without
responsibility for further investigation.
Section 4.06. Annual Servicing Audit and Certification. The annual
servicing audit required pursuant to Section 6.02 of the Servicing Agreement
shall be performed by an independent third party acceptable to the Insurer. Any
one of the five major nationally recognized firms of independent public
accountants is deemed to be acceptable.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01. Defaults. The occurrence of any of the following events
shall constitute an Event of Servicing Termination hereunder:
(a) Any representation or warranty made by IOS Capital, the Seller or
the Issuer hereunder or under the Company Documents, or in any certificate
furnished hereunder or under the Company Documents, shall prove to be
untrue or incomplete in any material respect; provided, however, that if
-------- -------
IOS Capital, the Seller or the Issuer effectively cures any such defects in
any representation or warranty under any Transaction Document or
certificate or report furnished under any Company Document, within the time
period specified in the related document as the cure period therefor, such
defect shall not in and of itself constitute an Event of Servicing
Termination;
(b) (i) IOS Capital shall fail to pay when due any amount payable by
IOS Capital unless such amounts are paid in full within the cure period
therefor, respectively, hereunder or (ii) a legislative body has enacted
any law that declares or a court of competent jurisdiction shall find or
rule that this Insurance Agreement or the Indenture is not valid and
binding on IOS Capital or the Issuer;
(c) The occurrence and continuance of a Servicer Event of Default
under the Assignment and Servicing Agreement;
<PAGE>
(d) Any failure on the part of IOS Capital, the Seller or the Issuer
duly to observe or perform in any material respect any other of the
covenants or agreements on the part of IOS Capital, the Seller or the
Issuer contained in this Insurance Agreement or in any other Company
Document which continues unremedied beyond any cure period provided
therein, or, in the case of this Insurance Agreement, for a period of 30
days after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to IOS Capital by the Insurer
(with a copy to the Indenture Trustee) or by the Indenture Trustee (with a
copy to the Insurer); provided, further, that if such failure shall be of a
--------- -------
nature that it cannot be cured within 30 days, such failure shall not
constitute an Event of Servicing Termination hereunder, if within such 30-
day period IOS Capital, the Seller or the Issuer, as the case may be, shall
have given written notice to the Insurer and the Indenture Trustee of
corrective action it proposes to take, which corrective action is agreed in
writing by the Insurer to be satisfactory and IOS Capital, the Seller or
the Issuer shall thereafter pursue such corrective action diligently until
such default is cured;
(e) A decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any
present or future federal or state insolvency or similar law or the
appointment of a conservator or receiver or liquidator or other similar
official in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against IOS Capital, the Seller or the
Issuer and such decree or order shall have remained in force undischarged
or unstayed for a period of 90 consecutive days;
(f) IOS Capital, the Seller or the Issuer shall consent to the
appointment of a conservator or receiver or liquidator or other similar
official in any involuntary insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to IOS
Capital, the Seller or the Issuer or of or relating to all or substantially
all of their respective property and if IOS Capital, the Seller or the
Issuer shall fail to take appropriate action resulting in the withdrawal or
dismissal of such proceeding within 30 Business Days; or
(g) IOS Capital, the Seller or the Issuer shall admit in writing its
inability to pay their debts generally as they become due, file a petition
to take advantage of or otherwise voluntarily commence a case or proceeding
under any applicable insolvency, reorganization or other similar statute,
make an assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations.
Section 5.02. Remedies; No Remedy Exclusive.
(a) Upon the occurrence of an Event of Servicing Termination, the
Insurer may take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the amounts, if any, then
due under this
<PAGE>
Insurance Agreement, the Assignment and Servicing Agreement or the
Indenture or to enforce performance and observance of any obligation,
agreement or covenant of IOS Capital, the Seller or the Issuer under this
Insurance Agreement, the Assignment and Servicing Agreement or the
Indenture.
(b) Unless otherwise expressly provided, no remedy herein conferred
or reserved is intended to be exclusive of any other available remedy, but
each remedy shall be cumulative and shall be in addition to other remedies
given under this Insurance Agreement, the Assignment and Servicing
Agreement the Indenture or existing at law or in equity. No delay or
omission to exercise any right or power accruing under this Insurance
Agreement, the Assignment and Servicing Agreement or the Indenture upon the
happening of any event set forth in Section 5.01 shall impair any such
right or power or shall be construed to be a waiver thereof, but any such
right and power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Insurer to exercise any remedy
reserved to the Insurer in this Article, it shall not be necessary to give
any notice, other than such notice as may be required by this Article.
Section 5.03. Waivers.
(a) No failure by the Insurer to exercise, and no delay by the
Insurer in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by the Insurer of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein
to the Insurer are declared in every case to be cumulative and not
exclusive of any remedies provided by law or equity.
(b) The Insurer shall have the right, to be exercised in its complete
discretion, to waive any Event of Servicing Termination hereunder, by a
writing setting forth the terms, conditions and extent of such waiver
signed by the Insurer and delivered to IOS Capital and the Indenture
Trustee. Unless such writing expressly provides to the contrary, any
waiver so granted shall extend only to the specific event or occurrence
which gave rise to the Event of Servicing Termination so waived and not to
any other similar event or occurrence which occurs subsequent to the date
of such waiver.
<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc. This Insurance Agreement may be amended,
modified, supplemented or terminated only by written instrument or written
instruments signed by the parties hereto. No consent of any re-insurer or
participant contracted with by the Insurer pursuant to Section 4.04(b) hereof
shall be required for any amendment, modification, supplement or termination
hereof. IOS Capital agrees to provide a copy of any amendment to this Insurance
Agreement promptly to the Indenture Trustee and the rating agencies maintaining
a rating on any of the Notes at the request of IOS Capital. The Insurer agrees
to provide reasonable notice to the rating agencies maintaining a rating on any
of the Notes with respect to any proposed amendment. No act or course of
dealing shall be deemed to constitute an amendment, modification, supplement or
termination hereof.
Section 6.02. Notices. All demands, notices and other communications
to be given hereunder shall be in writing (except as otherwise specifically
provided herein) and shall be mailed by registered mail or personally delivered
and telecopied to the recipient as follows:
(a) To the Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department - ABS
Telecopy No.: 212-208-3547
Confirmation: 212-668-0340
(in each case in which notice or other communication to the
Insurer refers to an Event of Servicing Termination, a claim on
either Policy or with respect to which failure on the part of the
Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication
should also be sent to the attention of the general counsel of
each of the Insurer and the Trustee and shall be marked to
indicate "URGENT MATERIAL ENCLOSED.")
<PAGE>
(b) To IOS Capital:
IOS Capital, Inc.
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31210
Attention: Harry G. Kozee
Vice President - Finance,
with a copy to the General Counsel
Facsimile: (912) 471-2375
with a copy to:
IKON Office Solutions, Inc.
70 Valley Stream Road
Malvern, PA 19355
Attention: General Counsel
Facsimile: (610) 408-7264
(c) To the Issuer:
IKON Receivables, LLC
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31210
Attention: Robert McLain
Facsimile: (912) 471-2375
with a copy to:
IKON Office Solutions, Inc.
70 Valley Stream Road
Malvern, PA 19355
Attention: General Counsel
Facsimile: (610) 408-7264
<PAGE>
(d) To the Seller:
IKON Receivables-I, LLC
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31210
Attention: Robert McLain
Facsimile: (912) 471-2375
with a copy to:
IKON Office Solutions, Inc.
70 Valley Stream Road
Malvern, PA 19355
Attention: General Counsel
Facsimile: (610) 408-7264
(e) To the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Facsimile: (312) 461-3525
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. Severability. In the event that any provision of this
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 6.04. Governing Law. This Insurance Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
Section 6.05. Consent to Jurisdiction.
(a) The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of the United States District Court for the Southern District
of
<PAGE>
New York and any court in the State of New York located in the City and
County of New York, and any appellate court from any thereof, in any
action, suit or proceeding brought against it and to or in connection with
any of the Company Documents or the Transaction or for recognition or
enforcement of any judgment, and the parties hereto hereby irrevocably and
unconditionally agree that all claims in respect of any such action or
proceeding may be heard or determined in such New York state court or, to
the extent permitted by law, in such federal court. The parties hereto
agree that a final unappealable judgment in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. To the
extent permitted by applicable law, the parties hereto hereby waive and
agree not to assert by way of motion, as a defense or otherwise in any such
suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such courts, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that the related documents or the subject matter
thereof may not be litigated in or by such courts.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of
any such court by any court of any other nation or jurisdiction which may
be called upon to grant an enforcement of such judgment.
(c) Service on IOS Capital may be made by mailing or delivering
copies of the summons and complaint and other process which may be served
in any suit, action or proceeding to the Servicer at the related addresses
listed in Section 6.02(b) and (c) herein. Such address may be changed by
the applicable party or parties, with the prior written consent of the
Insurer, by written notice to the other parties hereto.
(d) Nothing contained in this Insurance Agreement shall limit or
affect any party's right to serve process in any other manner permitted by
law or to start legal proceedings relating to any of the Company Documents
against any other party or its properties in the courts of any
jurisdiction.
Section 6.06. Consent of the Insurer. In the event that the consent of the
Insurer is required under any of the Company Documents, the determination
whether to grant or withhold such consent shall be made by the Insurer in its
sole discretion without any implied duty towards any other Person, except as
otherwise expressly provided therein.
Section 6.07. Counterparts. This Insurance Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 6.08. Headings. The headings of Articles and Sections and the
Table of Contents contained in this Insurance Agreement are provided for
convenience only. They form no part of this Insurance Agreement and shall not
affect its construction or interpretation.
<PAGE>
Section 6.09. Trial by Jury Waived. Each party hereby waives, to the
fullest extent permitted by law, any right to a trial by jury in respect of any
litigation arising directly or indirectly out of, under or in connection with
any of the Company Documents or any of the transactions contemplated thereunder.
Each party hereto (A) certifies that no representative, agent or attorney of any
party hereto has represented, expressly or otherwise, that it would not, in the
event of litigation, seek to enforce the foregoing waiver and (B) acknowledges
that it has been induced to enter into the Company Documents to which it is a
party by, among other things, this waiver.
Section 6.10. Limited Liability. No recourse under any Company Document
or the Underwriting Agreement shall be had against, and no personal liability
shall attach to, any officer, employee, director, affiliate or shareholder of
any party hereto, as such, by the enforcement of any assessment or by any legal
or equitable proceeding, by virtue of any statute or otherwise in respect of any
of the Company Documents or the Underwriting Agreement, the Notes or the
Policies, it being expressly agreed and understood that each Company Document or
the Underwriting Agreement is solely a corporate obligation of each party
hereto, and that any and all personal liability, either at common law or in
equity, or by statute or constitution, of every such officer, employee,
director, affiliate or shareholder for breaches of any party hereto of any
obligations under any Company Document or the Underwriting Agreement is hereby
expressly waived as a condition of and in consideration for the execution and
delivery of this Insurance Agreement.
Section 6.11. Entire Agreement. This Insurance Agreement and the Policies
set forth the entire agreement between the parties with respect to the subject
matter hereof and thereof, and this Insurance Agreement supersedes and replaces
any agreement or understanding that may have existed between the parties prior
to the date hereof in respect of such subject matter.
Section 6.12. Indenture Trustee. The Indenture Trustee hereby acknowledges
and agrees to perform all its obligations and duties pursuant to the Company
Documents to which it is a party thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all as
of the day and year first above mentioned.
Ambac Assurance Corporation,
as Insurer
By: /s/ Barry Schofield
-----------------------------
Name: Barry Schofield
---------------------------
Title: Vice President
--------------------------
<PAGE>
IOS Capital, Inc.,
as Originator and as Servicer
By: /s/ Jack Quinn
-----------------------------
Name: Jack Quinn
---------------------------
Title: Treasurer
--------------------------
<PAGE>
IKON Receivables, LLC,
as Issuer
By: IKON Receivables Funding, Inc.
By: /s/ Thomas Sheehan
-----------------------------
Name: Thomas Sheehan
---------------------------
Title: Treasurer
--------------------------
IKON Receivables-I, LLC,
By: IKON Receivables Funding, Inc.
By: /s/ Thomas Sheehan
-----------------------------
Name: Thomas Sheehan
---------------------------
Title: Treasurer
--------------------------
<PAGE>
Harris Trust and Savings Bank,
not in its individual capacity,
but solely as Indenture Trustee
By: /s/ Robert D. Foltz
-----------------------------
Name: Robert D. Foltz
---------------------------
Title: Vice President
--------------------------
<PAGE>
Exhibit 10.4
(Multicurrency -- Cross Border)
ISDA
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of October 7, 1999
Lehman Brothers Financial Products, Inc. and IKON Receivables, LLC
- ------------------------------------------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. Obligations.
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than
by payment), such delivery will be made for receipt on the due date in
the manner customary for the relevant obligations unless otherwise
specified in the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.
<PAGE>
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii) above
will not, or will cease to, apply to such Transactions from such date). This
election may be made separately for different groups of Transactions and will
apply separately to each pairing of Offices through which the parties make and
receive payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such deduction
or withholding is required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, then in effect. If a part is so
required to deduct or withhold, then that party ("X") will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be deducted or
withheld from any additional amount paid by X to Y under this Section 2(d))
promptly upon the earlier of determining that such deduction or withholding is
required or receiving notice that such amount has been assessed against Y:
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount actually
received by Y (free and clear of Indemnifiable Taxes, whether assessed against X
or Y) will equal the full amount Y would have received had no such deduction or
withholding been required. However, X will not be required to pay any
additional amount to Y to the extent that it would not be required to be paid
but for:--
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4 (a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure would not have occured
but for (1) any action taken by a taxing authority, or brought in a court of
competent jurisdiction, on or after the date on which a Transaction is entered
into regardless of whether such action is taken or brought with respect to a
party to this Agreement) or (II) a Change in Tax Law.
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(ii) Liability. If:--
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to make
any deduction or withholding in respect of which X would not be
required to pay an additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax. Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence of effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws
of the jurisdiction of its organisation or incorporation and, if
relevant under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorise such execution, delivery and
performance;
(iii) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment of
any court or other agency of government applicable to it or any of its
assets or any of its assets or any contractual restriction binding on or
affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required
to have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and
any Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors, rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
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(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body,agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representations. Each representation
specified in the Schedule as being made by it for the purpose of this Section
3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cased under subparagraph (iii) below, to such government or taxing
authority as the other party reasonable directs:--
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation:
(ii) any other documents specified in the Schedule or any Confirmation:
and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonable requested in writing in order to allow
such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any
deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of such
demand), with any such form or document to be accurate and completed in a
manner reasonably satisfactory to such other party and to be executed and
to be delivered with any reasonably required certification.
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,
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organised, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the third
Local Business Day after notice of such failure is given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment under
this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a
Termination Event or any agreement or obligation under Section 4(a)(i),
4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance
with this Agreement if such failure is not remedied on or before the thirtieth
day after notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be complied with
or performed by it in accordance with any Credit Support Document if such
failure is continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case other than in
accordance with its terms) prior to the satisfaction of all obligations of such
party under each Transaction to which such Credit Support Document relates
without the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have been
made or repeated;
(v) Default under Specific Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation of, an
acceleration of obligations under, or an early termination of, that Specified
Transaction, (2) defaults, after giving effect to any applicable notice
requirement or grace period, in making any payment or delivery due on the last
payment, delivery or exchange date of, or any payment on early termination of, a
Specified Transaction (or such default continues for at least three Local
Business Days if there is no applicable notice requirement or grace period) or
(3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity appointed
or empowered to operate it or act on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event of
default or other similar condition or event (however
<PAGE>
described) in respect of such party, any Credit Support Provider of such party
or any applicable Specified Entity of such party under one or more agreements
or instruments relating to Specified Indebtedness of any of them (individually
or collectively) in an aggregate amount of no less than the applicable Threshold
Amount (as specified in the Schedule) which has resulted in such Specified
Indebtedness becoming, or becoming capable at such time of being declared, due
and payable under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit Support
Provider or such Specified Entity (individually or collectively) in making one
or more payments on the due date thereof in an aggregate amount of not less than
the applicable Threshold Amount under such agreements or instruments ( after
giving effect to any applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or any
applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation, amalgamation or
merger); (2) becomes insolvent or is unable to pay its debts or fails or
admits in writing its inability generally to pay its debts as they become
due; (3) makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (4) institutes or has instituted against
it a proceeding seeking a judgement of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or similar law
affecting creditors' rights, or a petition instituted or presented against
it, such proceeding or petition (A) results in a judgement of insolvency
or bankruptcy or the entry of an order for relief or the making of an
order for its winding-up or liquidation or (B) is not dismissed,
discharged, stayed or restrained in each case within 30 days of the
institution or presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes subject to
the appointment of an administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar official for it or for all
or substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a distress,
execution, attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its assets and
such secured party maintains possession, or any such process is dismissed,
discharged, stayed or restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to it which, under the
applicable laws of jurisdiction, has an analogous effect to any of the
events specified in clauses (1) to (7) (inclusive); or (9) takes any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider of
such party consolidates or amalgamates with or merges with or into, or transfers
all or substantially all its assets to, another entity and, at the time of such
consolidation, amalgamation, merger or transfer:--
(1) the resulting, surviving or transferee entity fails to assume all the
obligations of such party or such Credit Support Providers under this
Agreement or any Credit Support Document to which it or its predecessor
was a party by operation of law pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend (without
the consent of the other party) to the performance by such resulting,
surviving or transferee entity of its obligations under this Agreement.
(h) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event
<PAGE>
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:--
(i) Illegality. Due to the adoption of, or any change in, any applicable law
after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court, tribunal or
regulatory authority with competent jurisdiction of any applicable law after
such date, it becomes unlawful (other than as a result of a breach by the party
of Section 4(b)) for such party (which will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a payment or
delivery or to receive a payment or delivery in respect of such Transaction or
to comply with any other material provision of this Agreement relating to such
Transaction; or
(2) to perform, or for any Credit Support Provider of such party to perform, any
contingent or other obligation which the party (or such Credit Support Provider)
has under any Credit Support Document relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or brought in
a court of competent jurisdiction, on or after the date on which a Transaction
is entered into (regardless of whether such action is taken or brought with
respect to a party to this Agreement) or (y) a Change in Tax Law, the party
(which will be the Affected Party) will, or there is a substantial likelihood
that it will, on the next succeeding Scheduled Payment Date (1) be required to
pay to the other party an additional amount in respect of an Indemnifiable Tax
under Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required tp
be deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e))and no additional amount is
required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than
by reason of Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4)
(except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2)
receive a payment from which an amount has been deducted or withheld for or on
account of any Indemnifiable Tax in respect of which the other party is not
required to pay an additional amount (other than by reason of Section
2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or
amalgamating with, or merging with or into, or transferring all or substantially
all its assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the
Schedule as applying to the party, such party ("X"), any Credit Support Provider
of X or any applicable Specified Entity of X consolidates or amalgamates with,
or merges with or into, or transfers all or substantially all its assets to,
another entity and such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or transferee
entity is materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action (and, in
such event, X or its successor or transferee, as appropriate, will be the
Affected Party); or
(v) Additional Termination Event. If any "Additional Termination Event" is
specified in the Schedule or any Confirmation as applying, the occurrence of
such event (and, in such event, the Affected Party or Affected Parties shall be
as specified for such Additional Termination Event in the Schedule or such
Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
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6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice, If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as the
other party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an illegality under
Section 59(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, of if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party will, as a condition to its right to designate an Early
Termination Date under Section 6(b)(iv), use all reasonable efforts
(which will not require such party to incur a loss, excluding immaterial,
incidental expenses) to transfer within 20 days after it gives notice
Section 6(b)(i) all its rights and obligations under this Agreement in
respect of the Affected Transactions to another of its Offices or
Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) Two Affected Parties. If an illegality under Section 5(b)(i)(1) or
a Tax Event occurs and there are two Affected Parties, each party will
use all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) Right to Terminate. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected Party.
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a
Credit Event Upon Merger or an Additional Termination Event if there is
only one Affected Party may, by not more than 20 days notice to the other
party and provided that the relevant Termination Event is then
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount,
if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence
of written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such
quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment) in
the Termination Currency, from (and including) the relevant Early
Termination Date to (but excluding) the date such amount is paid, at the
Applicable Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results form an
event of Default.--
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the Non-
defaulting Party the excess, if a positive number, of (A) the sum of
the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party
over (B) the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this
Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the
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Non-defaulting Party) in respect of the Terminated Transactions and
the Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party less (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party. If
that amount is a positive number, the Defaulting Party will pay it
to the Non-defaulting Party, if it is a negative number, the Non-
defaulting Party will pay the absolute value of that amount to the
Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute
value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotations applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and
to the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the
Transactions are being terminated. Loss shall be calculated in
respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal to (I) the sum of (a) one-half
of the difference between the Settlement Amount of the party
with the higher Settlement Amount ("X") and the Settlement
Amount of the party with the lower Settlement Amount ("Y") and
(b) the Termination Currency Equivalent of the Unpaid Amounts
owing to X less (II) the Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all Terminated
Transactions) and an amount will be payable equal to one-half of
the difference between the Loss of the party with the higher
Loss ("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if
it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for the loss of bargain and
the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
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7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that: --
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this
Agreement will be made in the relevant currency specified in this Agreement for
that payment (the "Contractual Currency"). To the extent permitted by
applicable law, any obligation to make payments under this Agreement in the
Contractual Currency will not be discharged or satisfied by any tender in any
currency other than the Contractual Currency, except to the extent such tender
results in the actual receipt by the party to which payment is owed, acting in a
reasonable manner and in good faith in converting the currency so tendered into
the Contractual Currency, of the full amount in the Contractual Currency of all
amounts payable in respect of this Agreement. If for any reason the amount in
the Contractual Currency so received falls short of the amount in the
Contractual Currency payable in respect of this Agreement, the party required to
make the payment will, to the extent permitted by applicable law, immediately
pay such additional amount in the Contractual Currency as may be necessary to
compensate for the shortfall. If for any reason the amount in the Contractual
Currency so received exceeds the amount in the Contractual Currency payable in
respect of this Agreement, the party receiving the payment will refund promptly
the amount of such excess.
(b) Judgments. To the extent permitted by applicable law, if any
judgment or order expressed in a currency other than the Contractual Currency
is rendered (i) for the payment of any amount owing in respect of this
Agreement, (ii) for the payment of any amount relating to any early termination
in respect of this Agreement or (iii) in respect of a judgment or order of
another court for the payment of any amount described in (i) or (ii) above, the
party seeking recovery, after recovery in full of the aggregate amount to which
such party is entitled pursuant to the judgment or order, will be entitled to
receive immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency and will refund promptly to the other party any excess of
the Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and
costs of exchange payable in connection with the purchase of or conversion into
the Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law,
these indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
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9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and may
be executed and delivered in counterparts (including by facsimile transmission)
or be created by an exchange of telexes or by an exchange of electronic messages
on an electronic messaging system, which in each case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. The parties will
specify therein or through another effective means that any such counterpart,
telex or electronic message constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organisation of such party, the
obligations of such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be deemed to be
repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
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<PAGE>
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date the mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Address. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section (3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdiction preclude the bringing of Proceedings
in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any
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reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgement) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
<PAGE>
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement, but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such
recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or a Credit Support Document).
"Law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"Lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (for gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-
of-pocket expenses referred to under Section 11. A party will determine its Loss
as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
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been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but without limitation, any payment or delivery that would, but for the
relevant Early Termination Date, have been required (assuming satisfaction of
each applicable condition precedent) after that Early Termination Date is to be
included. The Replacement Transaction would be subject to such documentation as
such party and the Reference Market-maker may, in good faith, agree. The party
making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (without regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotations in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable from among such
dealers having an office in the same city.
"Relevent Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through wich such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of: .
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for wich a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
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"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only on
party is obliged to make a determination under Section 6(e), be selected in good
faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by such delivery to such party on or prior to such Early Termination
Date and which has not been so settled as at such Early Termination Date, an
amount equal to the fair market
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value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b)
above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
<TABLE>
<S> <C>
Lehman Brothers Financial Products, Inc. IKON Receivables, LLC
----------------------------------------- ----------------------------------------------
(Name of Party) (Name of Party)
By: /s/ Florence D. Nolan By: /s/ Thomas Sheehan
----------------------------------------- ----------------------------------------------
Name: Florence D. Nolan Name: Thomas Sheehan
Title: Vice President Title: Treasurer
Date: Date:
</TABLE>
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Schedule
to the
Master Agreement
dated as of October 7, 1999
between
Lehman Brothers Financial Products Inc. and IKON Receivables, LLC
("Party A") ("Party B")
Part 1
Termination Provisions
In this Agreement:
(a) Specified Entity. "Specified Entity" is not applicable to Party A or Party
B.
(b) Specified Transactions. "Specified Transaction" has the meaning specified
in Section 14.
(c) Breach of Agreement. The "Breach of Agreement" provision of Section
5(a)(ii) will not apply to either Party A or Party B.
(d) Credit Support Default. The "Credit Support Default" provision of Section
5(a)(iii) is hereby amended by adding, at the end thereof, the following:
"provided that, not withstanding anything to the contrary contained in this
Agreement or this Section 5, an Event of Default relative to the Credit
Support Provider will not constitute an Event of Default with respect to
Party B."
(e) Misrepresentation. The "Misrepresentation" provision of Section 5(a)(iv)
will not apply to either Party A or Party B.
(f) Default under Specified Transaction. The "Default under Specified
Transaction" provision of Section 5(a)(v) will not apply to either Party A
or Party B.
(g) Cross Default. The "Cross Default" provisions of Section 5(a)(vi) will not
apply to either Party A or Party B.
(h) Tax Event. The "Tax Event" provisions of Section 5(b)(ii) will not apply
to either Party A or Party B.
(i) Tax Event Upon Merger. The "Tax Event Upon Merger" provision of Section
5(b)(iii) will not apply to either Party A or Party B.
(j) Credit Event upon Merger. The "Credit Event Upon Merger" provision
(Section 5(b)(iv)) will not apply to Party A or Party B.
(k) Automatic Early Termination. The "Automatic Early Termination" provision
of Section 6(a) will not apply to Party A or Party B.
<PAGE>
(l) Payments on Early Termination. For the purpose of Section 6(e) but subject
to part 5 of this Schedule:
(i) Market Quotation will apply, other than for an Additional Termination
Event.
(ii) The Second Method will apply, other than for an Additional
Termination Event.
(m) Termination Currency. "Termination Currency" shall be United States
Dollars.
(n) Additional Termination Event. Additional Termination Event will apply as
follows. The occurrence of any of the following events (each a
"Downgrade") shall be an Additional Termination Event, with Party A as the
sole Affected Party, and notwithstanding anything to the contrary in this
Agreement, the provisions of Part 1(o) of this Schedule will apply if any
Additional Termination Event occurs:
(i) Party A (including any successor to Party A under this Agreement as a
result of any merger, consolidation or transfer of assets involving
Party A) at any time is rated below the applicable Specified Rating
(as so defined) by any of the Rating Agencies (as so defined); or
(ii) any of the Rating Agencies withdraws its rating for the Specified
Rating of Party A.
For purposes of this Agreement, "Rating Agency" means each of Standard & Poor's
Rating Services ("S&P"), and Moody's Investors Service, Inc. ("Moody's"), and
the "Specified Rating" of Party A and related "Specified Ratings" are as
follows:
Specified Rating Specified Rating and Rating Agency
---------------- ----------------------------------
long-term credit rating "A-" -- S&P
"A3" -- Moody's
(o) Termination Rights and Consequences of an Additional Termination Event.
Section 6(b) is hereby amended, at the end thereof, by the insertion of the
following: "notwithstanding anything to the contrary in this Agreement or
this Section 6(b), neither party may designate an Early Termination Date in
connection with an Event of Default relating to the Credit Support
Provider."
Notwithstanding Section 6(b)(iv) of this Agreement, upon the occurrence of any
of the Additional Termination Events listed in Part 1(n) of this Schedule:
(A) Party A shall promptly, but in any event, not later than two (2) Local
Business Days following a Downgrade, give Party B notice of the
circumstances constituting the relevant Downgrade.
(B) In the event of a Downgrade, Party A shall, at its own cost or
benefit, either (x) on or before the 30th day after the date of such
Downgrade, cause a substitute swap counterparty ("X") that (i) is
reasonably acceptable to Party B and the Credit Support Provider, (ii) has
a long-term unsecured debt rating (or a counterparty or financial program
rating, or the equivalent) sufficient to maintain the then-current ratings
of the Notes as required by each of the Rating Agencies to assume the
obligations of Party A under the Transaction or replace the Transaction
with a transaction on identical terms, with X to be "Party A"; or (y) on or
before the 7th business day after the date of such Downgrade, deliver
credit support to the extent set forth in the Credit Support Annex (the
"Credit Support Annex") between Party A and Party B, which will reflect the
terms of that certain letter agreement dated as of the date hereof between
the Credit Support Provider and Party A and which will be completed by
November 1, 1999 and will be attached hereto, in either case in such manner
as is necessary for the Rating Agencies to confirm not later than that day
that the arrangements and/or credit support delivered are sufficient to
maintain or, if applicable, restore
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<PAGE>
their respective ratings of the Notes to the ratings in effect immediately
before the Downgrade. For this purpose, "Notes" means the IKON Receivables,
LLC Lease-Backed Notes, Series 1999-2.
(C) If Party A shall fail to comply with the requirements of subparagraph
(B) above and Party B designates an Early Termination Date as a result of
the failure, Party B will calculate and certify to Party A the sum of the
Loss, costs and expenses actually incurred by Party B as a result of the
early termination.
Part 2
Tax Representations
(a) Payer Tax Representations. For the purpose of Section 3(e), Party A makes
the following representation:
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant Jurisdiction
to make any deduction or withholding for or on account of any Tax from any
payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) or
amounts treated as interest under applicable tax laws) to be made by it to
the other party under this Agreement. In making this representation, it
may rely on:
(i) the accuracy of any representation made by the other party pursuant
to Section 3(f);
(ii) the satisfaction of the agreement of the other party contained in
Section 4(a)(i) or 4(a)(iii) and the accuracy and effectiveness of
any document provided by the other party pursuant to Section 4(a)(i)
or 4(a)(iii); and
(iii) the satisfaction of the agreement of the other party contained in
Section 4(d);
provided that it shall not be a breach of this representation where
reliance is placed on clause (ii), and the other party does not deliver a
form or document under Section 4(a)(iii) by reason of material prejudice to
its legal or commercial position.
(b) Payee Tax Representations. For the purpose of Section 3(f), Party A makes
no Payee Tax Representation. For the purpose of Section 3(f), Party B
makes no Payee Tax Representation.
Part 3
Agreement to Deliver Documents
For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable (and each party's
representation in Section 3(d) will apply to each document required from it as
provided below, other than any opinion of counsel):
(a) Documents to be delivered by Party B: (1) the Indenture dated as of
October 1, 1999 among Party B, IOS Capital, Inc. ("IOS") and Harris Trust
and Savings Bank (the "Indenture") and (2) the Assignment and Servicing
Agreement dated as of October 1, 1999 among Party B, IOS Capital, Inc. and
IKON Receivables-1, LLC (the "Assignment and Servicing Agreement").
(b) Other documents to be delivered by Party A and Party B: evidence reasonably
satisfactory to the other party as to the authority, incumbency and
specimen signature of each person executing any document on its behalf in
connection with this Agreement, Confirmation of the Transaction and any
Credit Support Document.
3
<PAGE>
Part 4
Miscellaneous
(a) Addresses for Notices. For the purpose of Section 12(a):
(i) Addresses for notices or communications to Party A:
Lehman Brothers Financial Products Inc.
3 World Financial Center, 8th Floor
New York, New York 10285
(ii) Address for notices or communications to Party B:
IKON Receivables, LLC
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31208
With a copy to:
General Counsel
IKON Office Solutions, Inc.
70 Valley Stream Parkway
Malvern, Pennsylvania 19355
With a copy to the Credit Support Provider:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: General Counsel
(b) Process Agent. For the purpose of Section 13(c):
Party A appoints as its Process Agent: None.
Party B appoints as its Process Agent: None.
(c) Offices. The provisions of Section 10(a) will apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10(c):
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A unless Party A is a
Defaulting Party, in which case Party B or its designee will be the
Calculation Agent.
(f) Credit Support Document.
With respect to Party A: the Credit Support Annex.
With respect to Party B: that certain Financial Guaranty Insurance Policy
issued by Ambac Assurance Corporation in favor of Party A dated as of
October 7, 1999 (the "Policy"), as the same may be amended from time to
time.
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<PAGE>
(g) Credit Support Provider.
Credit Support Provider in relation to Party A: Not applicable.
Credit Support Provider in relation to Party B: Ambac Assurance
Corporation, a Wisconsin stock insurance corporation, pursuant to the
Policy.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the law of the State of New York, without reference to
choice of laws doctrine.
(i) Netting of Payments. Sub-paragraph (ii) of Section 2(c) of this Agreement
will apply.
(j) Affiliate. Affiliate will have (i) with respect to Party A, the meaning
specified in Section 14, and (ii) with respect to Party B, is not
applicable.
Part 5
Other Provisions
(a) Set-off. The definition of "Set-off" is hereby amended to mean the set-
off, offset, combination of accounts, right of retention or withholding or
similar right or requirement to which the payer of an amount under Section
6 is entitled or subject, arising under this Agreement that is exercised
by, or imposed on, such payer. Neither Party A nor Party B may Set-off
amounts which may arise under another contract or agreement between such
parties against obligations under this Agreement.
(b) Covenant Not to Institute Proceedings. Prior to the date that is one year
and one day after the date on which all of the Notes (as defined in the
Indenture) have been paid in full, Party A shall not acquiesce, petition or
otherwise invoke or cause Party B to invoke the process of any bankruptcy
court of other governmental authority for the purpose of commencing or
sustaining a case against Party B under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of Party B or
any substantial part of their respective properties or the winding up or
liquidation of affairs of Party B. Party A acknowledges that Party B is a
legal entity separate from any other entity and that the holders of the
Notes have relied on such separateness, and Party A agrees, which agreement
shall be enforceable by such holders at law or through an action for
specific performance, not to seek or support the substantive consolidation
of Party B with any other entity as long as the Notes remain outstanding.
The provisions of this clause (b) shall survive any termination of this
Agreement.
(c) Successors. Notwithstanding any limitation imposed by Section 7 of this
Agreement or any other provision of this Agreement to the contrary, the
term "Party B" shall include all successors in interest to Party B pursuant
to its limited liability company agreement, and no consent of Party A shall
be required for any transfer or assignment to such successor in interest.
(d) Limited Recourse; No Petition for Bankruptcy. Notwithstanding the
provisions of this Agreement which impose on Party B an obligation
(including any indemnity given hereunder) at any time to make any payment
to Party A, the rights of recourse of Party A for the obligations of Party
B hereunder shall be limited to amounts available under the terms of the
Indenture and Assignment and Servicing Agreement. Accordingly, Party A
shall have no claim for recourse against Party B or any of its directors,
officers, or affiliates, in respect of any amount which is or remains
unsatisfied after the application of those funds and any obligations
hereunder of Party B not so satisfied will automatically be extinguished.
Party A, by entering into this Agreement, hereby covenants and agrees that,
in connection with any obligations of Party B under this Agreement, Party A
will not institute against Party B, or join in any institution against
Party B of, any proceeding under any bankruptcy, insolvency or similar law
until the Notes have been paid in full and the longest applicable
preference period has lapsed. The provisions of this clause (e) shall
survive any termination of this Agreement.
5
<PAGE>
(e) Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDINGS ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT, ANY CREDIT SUPPORT DOCUMENT OR THE
TRANSACTION.
(f) Swap Exemption. Each party hereto represents to the other party on and as
of the date hereof and on each date on which a Transaction is entered into
between them hereunder, in connection with the negotiation of, the entering
into, and the execution of this Agreement, any Credit Support Document to
which it is a party, each Transaction and any other documentation relating
to this Agreement to which it is a party, that:
(i) This Agreement and each Transaction constitute a "swap agreement"
within the meaning of the United States Commodity Futures Trading
Commission Regulations ("CFTC Regulations") Section 35.1(b)(1),
Section 101(53)(B) of the U.S. Bankruptcy Code and the CFTC Policy
Statement concerning Swap Transactions, 54 Fed. Reg. 30694 (July 21,
1989) (the "CFTC Swap Policy Statement").
(ii) It is an "eligible swap participant" as defined in Section 35.1(b)(2)
of the CFTC Regulations.
(iii) Neither this Agreement nor any Transaction is one of a fungible class
of agreements that are standardized as to their material economic
terms, with the meaning of Section 35.2(b) of the CFTC Regulations.
(iv) The economic terms of this Agreement, any Credit Support Document to
which it is a party and the Transaction have been individually
tailored and negotiated by it, and the creditworthiness of the other
party was a material consideration in its entering into or
determining the terms of this Agreement, any such Credit Support
Document and the Transaction (including, without limitation, pricing,
cost and credit enhancement terms), within the meaning of Section
35.2(c) of the CFTC Regulations.
(v) It has entered into this Agreement and the Transaction in conjunction
with a line of its business (including financial intermediation
services) or the financing of its business, within the meaning of the
CFTC Swap Policy Statement.
(g) Relationship between Parties. In connection with the negotiation of, the
entering into, and the confirming of this Agreement, and any other
documentation relating to this Agreement, including any Credit Support
Document, to which it is a party or that it is required by this Agreement
to deliver, each party hereby represents and warrants, and, in connection
with the negotiation of, the entering into and the confirming of the
execution of the Transaction, each party will be deemed to represent, to
the other party as of the date hereof (or in connection with the
Transaction, as of the date which it entered into the Transaction) that
(absent a written agreement between the parties that expressly imposes
affirmative obligations to the contrary for the Transaction):
(i) Non Reliance. It is acting for its own account, and it has made its
own independent decisions to enter into the Transaction and as to
whether the Transaction is appropriate or proper for it based upon
its own judgment and upon advice from such advisers as it has deemed
necessary. It is not relying on any communication (written or oral)
of the other party as investment advice or as a recommendation to
enter into the Transaction; it being understood that information and
explanations related to the terms and conditions of the Transaction
shall not be considered investment advice or a recommendation to
enter into the Transaction. No communications (written or oral)
received from the other party shall be deemed to be an assurance or
guarantee as to the expected results of the Transaction.
(ii) Assessment and Understanding. It is capable of assessing the merits
of and understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms,
conditions and risks of the Transaction. It is also capable of
assuming, and assumes, the risks of the Transaction. It has
determined to its
6
<PAGE>
satisfaction whether or not the rates, prices or amounts and other
economic terms of the Transaction and the indicative quotations (if
any) provided by the other party reflect those in the relevant market
for similar transactions, and all trading decisions have been the
result of arm's length negotiations between the parties.
(iii) Status of Parties. The other party is not acting as a fiduciary for
or an adviser to it in respect of the Transaction.
(h) Applicable Only to One Rate Swap Transaction. This Agreement shall be
effective only for a single rate swap transaction between the parties
hereto with a specified Effective Date identical to the issue date for the
Notes (as defined in Part 1(o) of this Schedule) (the "Transaction").
(i) Amendments/waivers. Section 9(b) of this Agreement is hereby amended by
(i) adding the words "or any Credit Support Documents" after the word
"Agreement" in the first line thereof and (ii) by adding the words "and the
Credit Support Provider" after the word "parties" on the third line
thereof.
(j) Payments on Early Termination. Notwithstanding the printed provisions of
this Agreement, Party B shall be under no obligation to make a payment to
Party A pursuant to Section 6(e) of this Agreement as modified by this
Schedule unless such termination is at the direction of the Credit Support
Provider pursuant to Part 5(r)(i) of this Schedule.
(k) Confidential Information. Each party may share any information concerning
the other party with any of its Affiliates.
(l) Consent to Telephonic Recording. Each party consents to the monitoring or
recording, at any time and from time to time and to the extent lawful, by
the other party of the telephone conversations of trading and marketing
personnel of the parties and their authorized representatives in connection
with this Agreement or the Transaction; and the parties waive any further
notice of such monitoring or recording and agree and to the extent lawful
to give proper notice and obtain any necessary consent of such personnel
for any such monitoring or recording, provided that, each party shall have
the right to receive a copy of any such recording upon which the other
party would seek to rely in the event of a dispute.
(m) Change of Account. Section 2(b) of this Agreement is hereby amended by the
addition of the following after the word "delivery" in the first line
thereof:
"to another account in the same legal and tax jurisdiction as the original
account."
(n) Information Relating to Assets. Party A may request Party B to obtain the
Servicer Report (as defined in the Assignment and Servicing Agreement) and
any other reasonably available reports, notices, financial statements or
other information in respect of the assets of Party B that are to be
amounts available under the Indenture for payments due to Party A under
this Agreement.
(o) Transfers/Assignments. Prior notice of any transfer of rights, obligations
or interests under or in this Agreement must be given to the Rating
Agencies and the Credit Support Provider.
(p) Notwithstanding anything to the contrary in this Agreement, Party B will in
no circumstances be required to make any payment of additional amounts of
the kinds contemplated in Section 2(d) of this Agreement.
(q) Amendments. Notwithstanding anything to the contrary contained in the
Agreement, Party A and Party B may not amend the terms of the Transaction
in a material way without first obtaining written confirmation from each
Rating Agency that such amendment will not result in a reduction, downgrade
or withdrawal of the then current rating of the Notes by such Rating
Agency.
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<PAGE>
(r) Credit Support Provider.
(i) If any event which would have been an Event of Default under Section
5(a) occurs with respect to Party B as the Defaulting Party, then the
Credit Support Provider shall have the right (but not the obligation)
upon notice to Party A, to designate an Early Termination Date with
respect to Party B, with the same effect as if such designation were
made by Party A.
(ii) Notwithstanding Section 2(e), the Credit Support Provider shall not
have any obligation to pay any additional amount calculated by
application of the Default Rate on any amount which accrued under
this Agreement, provided that, the Credit Support Provider shall be
obligated to pay interest on such amounts at the Default Rate minus
1.00%.
(iii) Party A and Party B hereby acknowledge and agree that (a) the Credit
Support Provider shall be a third party beneficiary under this
Agreement and under the Confirmation, entitled to enforce its rights
hereunder and thereunder and (b) the Credit Support Provider's
obligations with respect to this Agreement and the Confirmation shall
be limited to the terms of the Policy.
(iv) Party A and Party B hereby acknowledge that to the extent of payment
made by the Credit Support Provider to Party A under the Policy, the
Credit Support Provider shall be fully subrogated to the rights of
Party A against Party B under the Transaction to which such payments
relate, including, but not limited to, the right to receive payment
from Party B and the enforcement of any remedies. Party A hereby
agrees to assign to the Credit Support Provider its right to receive
payment from Party B under the Transaction to the extent of any
payment thereunder by the Credit Support Provider to Party A. Party B
hereby acknowledges and consents to the assignment by Party A to the
Credit Support Provider of any rights and remedies that Party A has
under the Transaction or any other document executed in connection
herewith.
(v) The representations of Section 3 made by each party to the other
party shall also be deemed made to the Credit Support Provider as
provided in Section 3.
(vi) Section 10 is hereby amended to add the following subsection:
"(c) Any notice that is required to be given to any party shall also
be given to the Credit Support Provider."
(vii) Party A and Party B hereby confirm that in the event Party B fails to
make a payment required by this Agreement or the Confirmation and the
Credit Support Provider makes such payment on behalf of Party B
pursuant to the Policy, such non-payment by Party B shall not
constitute an Event of Default with respect to Party B under this
Agreement or the Confirmation.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Schedule to
be duly executed by their officer, hereunto duly authorized, with effect from
the date specified on the first page of this Schedule.
IKON RECEIVABLES, LLC, as Issuer
By: IKON RECEIVABLES FUNDING, INC., its
Manager
By /s/ Thomas Sheehan
----------------------------------------
Name: Thomas Sheehan
Title: Treasurer
LEHMAN BROTHERS FINANCIAL PRODUCTS
INC.
By /s/ Florence D. Nolan
----------------------------------------
Name: Florence D. Nolan
Title: Vice President
9
<PAGE>
October 7, 1999
Rate Swap Transaction
IKON RECEIVABLES, LLC, a Delaware
Limited Liability Company (the "Issuer"),
formed pursuant to that certain Limited
Liability Company Agreement dated as of
April 23, 1999 between IKON Receivables
Funding, Inc., as Manager and IKON
Receivables-1, LLC.
Ladies and Gentlemen:
The purpose of this letter agreement (this "Confirmation") is to confirm
the terms and conditions of the transaction entered into between us on the Trade
Date specified below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Master Agreement specified below.
The definitions and provisions contained in the 1998 Supplement to the 1991
ISDA Definitions and the 1991 ISDA Definitions (each, as published by the
International Swaps and Derivatives Association, Inc.) are incorporated into
this Confirmation (referred to herein as the "1998 ISDA Definitions" and the
"1991 ISDA Definitions" respectively, or collectively referred to as the "ISDA
Definitions"). For these purposes, all references in those Definitions to a
"Swap Transaction" shall be deemed to apply to the Transaction referred to
herein. In the event of any inconsistency between the 1998 ISDA Definitions and
the 1991 ISDA Definitions, the 1998 ISDA Definitions shall prevail. In the
event of any inconsistency between the ISDA Definitions and this Confirmation,
this Confirmation will govern. Each party represents and warrants to the other
that (i) it is duly authorized to enter into the Transaction and to perform its
obligations hereunder and (ii) the person executing and delivering this
Confirmation on behalf of the party is duly authorized to execute and deliver
it.
1. This Confirmation supplements, forms part of, and is subject to, the
Master Agreement dated as of October 7, 1999, as amended and supplemented from
time to time (the "Agreement"), between the Issuer and Lehman Brothers Financial
Products Inc. ("LBFP"). All provisions contained in the Agreement govern this
Confirmation except as expressly modified below.
<PAGE>
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
Notional Amount: For each Calculation Period, the aggregate outstanding
principal balance of the IKON Receivables, LLC Lease-Backed
Notes, Series 1999-2 Class A-3b Notes (the "Issuer
Securities") used as the basis for calculating the regularly
scheduled Class A-3b Interest Payments thereunder for the
interest period thereunder scheduled to begin and end on the
first and last days, respectively, of that Calculation
Period, as such Interest Payment amount is identified
(subject to part 5b hereof) to LBFP by the entity acting at
the relevant time as the servicer under the Assignment and
Servicing Agreement (the "Servicer"). The Notional Amount
for the initial Calculation Period is U.S.$240,891,000.
Trade Date: September 30, 1999.
Effective Date: October 7, 1999.
Termination Date: The earlier of the date on which the Notional Amount is
reduced to zero, and August 15, 2003, subject to adjustment
in accordance with the Following Business Day Convention.
Fixed Amounts:
- -------------
Fixed Rate Payer: The Issuer.
Fixed Rate: 6.27% per annum.
Day Count Fraction: 30/360
Fixed Rate Payer
Period End Dates: The 15th calendar day of each month in each year prior
to and including the Termination Date, commencing on
November 15, 1999, with No Adjustment.
Fixed Rate Payer
Payment Dates: Each Fixed Rate Payer Period End Date, subject to
adjustment in accordance with the Following Business Day
Convention.
Fixed Rate Payer
Initial Calculation Period: Accrues from and including October 7, 1999 to but
excluding November 15, 1999, with No Adjustment of
Period End Dates.
2
<PAGE>
Floating Amounts:
- ----------------
Floating Rate Payer: LBFP.
Floating Rate Payer
Period End Dates
and Payment Dates: Same as Fixed Rate Payer Period End Dates and Payment
Dates. Accrues from and including October 7, 1999, to
but excluding, November 15, 1999, with No Adjustment of
Period End Dates.
Floating Rate
Payer Initial Calculation Period: Accrues from and including October 7, 1999,
to but excluding, November 15, 1999, with No
Adjustment of Period End Dates.
Floating Rate Option USD-LIBOR-BBA
Designated Maturity One Month
Spread: None
Floating Rate
Day Count Fraction: Actual /360
Reset Dates: The first day of each Calculation Period.
Business Days: New York.
Calculation Agent: LBFP, except as otherwise provided in the Agreement.
3. Account Details
Account for Payments to the Issuer:
Harris Trust and Savings Bank
ABA# 071-000-288
DDA# 109-211-3
Reference: Collection Account; IKON Receivables, LLC Lease-Backed
Notes, Series 1999-2
Account for Payments to LBFP:
The Chase Manhattan Bank
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<PAGE>
ABA # 021-000-021
Account # 066-289-009
Reference: IKON Receivables, LLC Lease-Backed Notes, Series 1999-2
4. Offices
The Office of LBFP for the Transaction is its New York Branch, at the
address specified for notices to it in the Schedule to the Agreement. The Office
of the Issuer for the Transaction is its office at the address specified for
notices to it in the Schedule to the Agreement.
5. Other Terms
The Assignment and Servicing Agreement dated as of October 7, 1999 (the
"Assignment and Servicing Agreement") by and among IKON Receivables, LLC, IOS
Capital, Inc., as originator and servicer, and IKON Receivables-1 LLC, as
seller, sets forth the agreement of IOS Capital, Inc., as Servicer, with respect
to its duties to communicate to the Issuer and LBFP information relating to the
interest scheduled to be paid by the Issuer from time to time under the Issuer
Securities. Neither party to the Transaction will have any responsibility to the
other in connection with any failure by the servicer to perform any of those
duties or any delay by it in doing so. Nothing in this provision shall affect
the rights of the parties hereto against the servicer for the failure by it to
perform its obligations under the Assignment and Servicing Agreement as set
forth herein.
THE AGREEMENT AND THIS CONFIRMATION REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR CONTEMPORANEOUS
WRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates agreement to
those terms.
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<PAGE>
Yours sincerely,
LEHMAN BROTHERS FINANCIAL PRODUCTS INC.
By: /s/ Florence D. Nolan
---------------------
Name: Florence D. Nolan
Title: Vice President
Confirmed as of the date first
above written:
IKON RECEIVABLES, LLC, as Issuer
By: IKON RECEIVABLES FUNDING, INC., its Manager
By: /s/ Thomas Sheehan
------------------
Name: Thomas Sheehan
Title: Treasurer
5
<PAGE>
October 7, 1999
Rate Swap Transaction
Ladies and Gentlemen:
The purpose of this letter agreement (this "Confirmation") is to confirm
the terms and conditions of the transaction entered into between us on the Trade
Date specified below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Master Agreement specified below.
The definitions and provisions contained in the 1998 Supplement to the
1991 ISDA Definitions and the 1991 ISDA Definitions (each, as published by the
International Swaps and Derivatives Association, Inc.) are incorporated into
this Confirmation (referred to herein as the "1998 ISDA Definitions" and the
"1991 ISDA Definitions" respectively, or collectively referred to as the "ISDA
Definitions"). For these purposes, all references in those Definitions to a
"Swap Transaction" shall be deemed to apply to the Transaction referred to
herein. In the event of any inconsistency between the 1998 ISDA Definitions and
the 1991 ISDA Definitions, the 1998 ISDA Definitions shall prevail. In the event
of any inconsistency between the ISDA Definitions and this Confirmation, this
Confirmation will govern. Each party represents and warrants to the other that
(i) it is duly authorized to enter into the Transaction and to perform its
obligations hereunder and (ii) the person executing and delivering this
Confirmation on behalf of the party is duly authorized to execute and deliver
it.
1. This Confirmation supplements, forms part of, and is subject to, the
Master Agreement dated as of November 1, 1997, as amended and supplemented from
time to time (the "Agreement"), between Lehman Brothers Special Financing Inc.
("Party A") and IOS Capital Inc. ("Party B"). All provisions contained in the
Agreement govern this Confirmation except as expressly modified below.
<PAGE>
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
Trade Date: September 30, 1999
Effective Date: October 7, 1999.
Termination Date: August 15, 2003, subject to adjustment in accordance
with the Following Business Day Convention.
Notional Amount: For each Calculation Period, the difference between (a)
the aggregate outstanding principal balance of the IKON
Receivables, LLC Lease-Backed Notes, Series 1999-2
Class A-3(b) Notes (the "Issuer Securities") used as
the basis for calculating the regularly scheduled Class
A-3(b) Interest Payments thereunder for the interest
period thereunder scheduled to begin and end on the
first and last days, respectively, of that Calculation
Period, as such Interest Payment amount is identified
(subject to part 5b hereof) by the entity acting at the
relevant time as the servicer under the Assignment and
Servicing Agreement (the "Servicer"); and (b) the
Scheduled Notional in the attached schedule ("Annex
I"). The Notional Amount for the Initial Calculation
Period is U.S.$0.00.
Fixed Amounts -
- ---------------
Fixed Rate Payer: On the first day of each Calculation Period, if the
Notional Amount for a Calculation Period is a positive
number, Party A shall pay such amount to Party B on the
Fixed Rate Payer Payment Date. If the Notional Amount
for a Calculation Period is a negative number, Party B
shall pay the absolute value of such amount to Party A
on the Fixed Rate Payer Payment Date.
Fixed Rate: 6.22%
Fixed Rate
Day Count Fraction: 30/360
Fixed Rate Payer
Period End Dates: The fifteenth calendar day of each month in each year
prior to and including the Termination Date, commencing
on November 15, 1999, with No Adjustment of Period End
Dates
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<PAGE>
Fixed Rate Payer
Payment Dates: Each Fixed Rate Payer Period End Date, subject to
adjustment in accordance with the Following Business
Day Convention
Fixed Rate Payer initial
Calculation Period: Accrues from and including October 7, 1999, to but
excluding November 15, 1999, with No Adjustment of
Period End Dates
Floating Amounts -
Floating Rate Payer: On the first day of each Calculation Period, if the
Notional Amount for a Calculation Period is a positive
number, Party B shall pay such amount to Party A on the
Floating Rate Payer Payment Date. If the Notional
Amount for a Calculation Period is a negative number,
Party A shall pay the absolute value of such amount to
Party B on the Floating Rate Payer Payment Date.
Floating Rate Payer
Period End Dates
and Payment Dates: Same as Fixed Rate Payer Period End Dates and Payment
Dates.
Floating Rate Payer initial
Calculation Period: Accrues from and including October 7, 1999, to but
excluding November 15, 1999, with No Adjustment of
Period End Dates
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: One month
Spread: None
Floating Rate
Day Count Fraction: Actual/360
Reset Dates: The first day of each Calculation Period
Business Days: New York.
Calculation Agent: Party A, except as otherwise provided in the Agreement.
Credit Support Document: With respect to Party A, the Guarantee of Lehman
Brothers Holdings Inc. provided by Party A
3. Account Details
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<PAGE>
Account for Payment to IOS Capital:
Account for Payments to LBSF: Chase Manhattan Bank
ABA # 021 000 021
Lehman Brothers Special Financing Inc.
Account # 066-143543
4. Offices
The Office of Party A for the Transaction is its New York Branch, at the
address specified for notices to it in the Schedule to the Agreement. The Office
of Party B for the Transaction is its office at the address specified for
notices to it in the Schedule to the Agreement.
THE AGREEMENT AND THIS CONFIRMATION REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR
CONTEMPORANEOUS WRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates agreement to
those terms.
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<PAGE>
Annex I Ref: 80361/80363
Initial Date of
Calculation
Period Notional Amount
- -------------------------------------------
10/7/99 $240,891,000
11/15/99 $240,891,000
12/15/99 $240,891,000
1/15/00 $240,891,000
2/15/00 $240,891,000
3/15/00 $240,891,000
4/15/00 $240,891,000
5/15/00 $240,891,000
6/15/00 $240,891,000
7/15/00 $240,891,000
8/15/00 $240,891,000
9/15/00 $240,891,000
10/15/00 $240,891,000
11/15/00 $240,125,844
12/15/00 $228,027,385
1/15/01 $216,074,313
2/15/01 $204,301,936
3/15/01 $192,706,693
4/15/01 $181,334,925
5/15/01 $170,134,015
6/15/01 $159,134,268
7/15/01 $148,335,211
8/15/01 $137,769,162
9/15/01 $127,384,946
10/15/01 $117,249,714
11/15/01 $107,310,050
12/15/01 $ 97,577,824
1/15/02 $ 88,152,304
2/15/02 $ 79,029,068
3/15/02 $ 70,263,912
4/15/02 $ 62,011,402
5/15/02 $ 54,173,103
6/15/02 $ 46,753,790
7/15/02 $ 39,794,554
8/15/02 $ 33,159,187
9/15/02 $ 26,721,422
10/15/02 $ 20,555,063
11/15/02 $ 14,571,521
12/15/02 $ 8,761,151
1/15/03 $ 3,219,836
2/15/03 $0
3/15/03 $0
4/15/03 $0
5/15/03 $0
6/15/03 $0
Page 1 of 2
<PAGE>
Annex I Ref: 80361/80363
7/15/03 $0
8/15/03 $0
Page 2 of 2
<PAGE>
Yours sincerely,
LEHMAN BROTHERS SPECIAL FINANCING INC.
By: /s/ Sherri Venokur
------------------
Name: Sherri Venokur
Title: Vice President
Confirmed as of the date first
above written:
IOS Capital Inc.
By: /s/ J. F. Quinn
---------------
Name: J. F. Quinn
Title: Treasurer
LB Ref: 80361/80363 - Global 36517/36521
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