<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000
REGISTRATION STATEMENT NO. 333-91599
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT No. 1 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
IKON RECEIVABLES, LLC
(exact name of registrant as specified in charter)
Delaware 1738 Bass Road 23-2990188
P.O. Box 9115
(state or jurisdiction Macon, GA 31208 (I.R.S. Employer
of organization) Identification No.)
(Address, including zip code, and telephone number,
including area code, of registrants principal executive
offices)
______________________
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(Name, address and telephone number, including area code, of agent for service)
______________________
Copies to:
Harry G. Kozee Dominic Liberatore, Esq. Peter Humphreys, Esq.
IOS Capital, Inc. IKON Office Solutions, Inc. Dewey Ballantine LLP
1738 Bass Road 70 Valley Stream Parkway 1301 Avenue of the Americas
P.O. Box 9115 Malvern, PA 19355 New York, New York 10019
Macon, Georgia 31208
_____________________
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is filed as a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of Securities Amount Proposed Maximum Aggregate Proposed Maximum Aggregate Amount
Being Registered To Be Price Per Unit(1) Offering Price(1) Of Registration Fee
Registered
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lease-Backed Notes (the "Notes") $2,000,000,000(2) 100% $2,000,000,000 $528,000(3)
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) In accordance with Rule 429 of the Securities and Exchange Commission's
Rules and Regulations under the Securities Act of 1933, as amended, the
Prospectus included herein is a combined prospectus which also relates to
the Registrant's Registration Statement on Form S-3 (Registration No, 333-
71073) (the "Prior Registration Statement"). The amount of securities
eligible to be sold under the Prior Registration Statement ($373,763,000 as
of April 1, 2000) shall be carried forward to this Registration Statement.
<PAGE>
(3) The amount of $429,062.57 is paid pursuant to this Amendment No. 1. The
amount of $278 was paid previously in connection with the prior filing of
this Registration Statement. The amount of $103,906.11 was paid in
connection with the registration of the amount of securities sold under the
Prior Registration Statement.
------------------------
Pursuant to Rule 429 of the Securities and Exchange Commission's Rules and
Regulations under the Securities Act of 1933, as amended, the Prospectus
contained in this Registration Statement also relates to the Registrant's
Registration Statement on form S-3 (333-71073).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
FORM OF PROSPECTUS SUPPLEMENT
- -----------------------------
IKON Receivables, LLC $_______________
Issuer Lease-Backed Notes, Series 2000-1
IOS Capital, Inc.
Originator and Servicer
- -----------------------------
- --------------------------------------------------------------------------------
[IOS LOGO]
You should read the section entitled "Risk Factors" starting on page S-10 of
this prospectus supplement and page 7 of the prospectus and consider these
factors before making a decision to invest in the notes.
The notes represent asset-backed debt secured only by the pledged assets and are
not interests in or obligations of any other person.
Neither the notes nor the underlying leases will be insured or guaranteed by any
governmental agency or instrumentality.
This Prospectus Supplement may be used to offer and sell the notes only if
accompanied by the Prospectus.
- --------------------------------------------------------------------------------
IKON Receivables, LLC, as issuer, will issue [_______] classes of notes backed
solely by a pledge of the assets of the asset pool. The assets of the asset pool
will consist of a pool of office equipment leases or contracts and related
assets.
The notes --
o The ________ classes of notes set forth in the table below are
offered by this prospectus supplement.
o Interest and principal on the notes is scheduled to be paid monthly,
on the __th day of the month, or the business day immediately
following such __th day. The first scheduled payment date is
________ , 2000.
Credit enhancement --
o
Underwriting --
o The underwriters will offer the public the notes at the following
prices:
Initial
Aggregate Price
Note to Underwriting
Class Balance Note Rate Public Discount Depositor(1)
- ----- ------- --------- ------ -------- ------------
(1) Before deducting expenses, estimated to be $________.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus supplement. Any representation to the
contrary is a criminal offense.
[ underwriter(s) ]
The date of this prospectus supplement is ________, 2000
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS
We provide information to you about the notes in two separate documents
that progressively provide more detail: (1) the accompanying prospectus , which
provides general information, some of which may not apply to your series of
notes, and (2) this prospectus supplement, which describes the specific terms of
your series of notes.
This prospectus supplement does not contain complete information about the
offering of the offered notes. Additional information is contained in the
prospectus . You are urged to read both this prospectus supplement and the
prospectus in full. We cannot sell the offered notes to you unless you have
received both this prospectus supplement and the prospectus.
To the extent the prospectus contemplates different or multiple options,
you should rely on the information in this prospectus supplement as to the
application option.
The issuer has filed with the Securities and Exchange Commission (the
"Commission") a registration statement under the Securities Act of 1933, as
amended, with respect to the offered notes offered pursuant to this prospectus
supplement. This prospectus supplement and the prospectus, which form a part of
the registration statement, omit certain information contained in such
registration statement pursuant to the rules and regulations of the Commission.
You may inspect and copy the registration statement at the Public Reference Room
at the Commission at 450 Fifth Street, N.W., Washington, D.C., and the
Commission's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You can obtain copies of such materials at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission
maintains a site on the World Wide Web containing reports, proxy materials,
information statements and other items. The address is http://www.sec.gov.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
TABLE OF CONTENTS
Page
----
SUMMARY......................................................................S-4
RISK FACTORS................................................................S-11
THE ASSET POOL..............................................................S-13
THE ISSUER..................................................................S-13
THE LEASES..................................................................S-14
USE OF PROCEEDS.............................................................S-19
THE ORIGINATOR..............................................................S-19
THE SELLER..................................................................S-19
THE INDENTURE TRUSTEE.......................................................S-20
DESCRIPTION OF THE NOTES....................................................S-20
DESCRIPTION OF THE TRANSACTION DOCUMENTS....................................S-24
MATERIAL FEDERAL INCOME TAX CONSEQUENCES....................................S-32
ERISA CONSIDERATIONS........................................................S-32
S-2
<PAGE>
RATINGS.....................................................................S-33
PLAN OF DISTRIBUTION........................................................S-34
LEGAL OPINIONS..............................................................S-34
S-3
<PAGE>
SUMMARY
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need to
consider in making your investment decision. To understand all of the
terms of the offering of the notes, read carefully this entire prospectus
supplement and the accompanying prospectus.
o This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in
this prospectus supplement and the accompanying prospectus.
o You can find a listing of the pages where capitalized terms used in this
prospectus supplement summary are defined under the caption "Index of
Principal Defined Terms" beginning on page S-36 in this prospectus
supplement and under the caption "Index of Terms" beginning on page 47 in
the accompanying prospectus.
PARTIES
Issuer
IKON Receivables, LLC is a Delaware limited liability company. The issuer's
activities will be limited by the terms of its organizational documents and the
transaction documents to acquiring, holding and managing the lease receivables,
issuing and making payments on the notes and other activities related thereto.
For more information about the issuer, you should read the section titled "The
Issuer" herein.
Originator
IOS Capital, Inc., is a Delaware corporation formerly known as IKON Capital
Inc., a wholly-owned subsidiary of IKON Office Solutions, Inc. The originator's
principal executive offices are located at 1738 Bass Road, Macon, Georgia 31208
and its telephone number is (912) 471-2300.
For more information about the originator, you should read the section titled
"The Originator's Leasing Business," in the Prospectus.
Seller
IKON Receivables-1, LLC, is a Delaware special purpose corporation. The issuer
will acquire the lease receivables from the seller pursuant to the assignment
and servicing agreement. The seller's principal executive offices are located at
1738 Bass Road, Macon, Georgia 31208.
For more information about the role of the seller, you should read the section
titled "The Seller," herein.
Servicer
IOS Capital, Inc. will be the servicer of lease receivables under the assignment
and servicing agreement. The servicer's principal executive offices are located
at 1738 Bass Road, Macon, Georgia 31208.
For more information about the role of the servicer, you should read the section
titled "Description of the Transaction Documents--The Servicer," herein and in
the prospectus.
Indenture Trustee
__________, a banking corporation organized under the laws of ________ . The
corporate trust offices of the indenture trustee are located at ________.
Cut-Off Date
The cut-off date is the [close] of business on _____, [ ____ ] (the "cut-off
date").
S-4
<PAGE>
Closing Date
The closing date is _______, 2000 (the "closing date").
DESCRIPTION OF THE NOTES
o The issuer will issue [___ ] classes of lease-backed notes (the "notes").
o The notes are designated as the class A notes and could involve other
classes. The class A notes, together with any such other classes, are
collectively referred to as the notes.
o The notes will be backed solely by a pledge of a segregated pool of assets
of the issuer, which will consist primarily of a pool of office equipment
leases or contracts and related assets, [leases intended as security
agreements], [installment sale contracts], rental stream obligations, and
the seller's interests (other than its ownership interest in the
underlying equipment) and related assets.
o Each class of notes will have the initial principal amount and interest
rate set forth in the following table. The dates on which the final
payment of principal and interest on each class of notes is expected to be
made and must ultimately be made are also set forth in the following
table.
<TABLE>
<CAPTION>
Initial Note
Principal Expected Final Legal Final
Class Balance Note Rate Payment Date Maturity Date CUSIP Number
----- ------- --------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
[A] $[ ] [ ]% _____ __, ____ _______ ____ [ ]
[B] $[ ] [ ]% _____ __, ____ _______ ____ [ ]
</TABLE>
The aggregate initial note principal balance of the notes is equal to $[ ] (the
"initial note principal balance"), which represents the sum of the initial note
principal balance of each class of notes.
The notes will be issued in book-entry form only, through the facilities of The
Depository Trust Company. The notes will be issued in minimum denominations of
[$1,000] and multiples of [$1,000] in excess thereof, [with the exception of one
note in each class which will be issued in an odd amount].
PAYMENTS ON THE NOTES
Payment Date
Principal and interest is scheduled to be paid to the noteholders on the [15]th
day of each month, or, if such day is not a business day, on the next succeeding
business day, commencing on _______, 2000.
Record Date
The indenture trustee will make payments to the noteholders of record as of the
close of business on the last business day of the month preceding the month in
which such payment date occurs (or in the case of the initial payment date, the
closing date).
Remittance Period
Payments made on each payment date will relate to the collections received in
respect of the leases during the period beginning on the opening of business on
the [second] day of the immediately preceding calendar month and ending on the
close of business on the [first day] of the calendar month in which such payment
date occurs.
Cross-Collateralization
o As described in the related transaction document, the source of payment
for notes
S-5
<PAGE>
of each series will be the assets pledged to the related asset pool only.
o Certain of the notes include the right to receive monies from a common
pool of credit enhancement. No payment received on any lease receivable
backing an asset pool may be applied to the payment of notes backed by any
other asset pool.
Interest
[Information on the interest payable to Noteholders will be provided in
accordance with the structuring of the transaction.]
Principal
[Information on the interest payable to Noteholders will be provided in
accordance with the structuring of the transaction.]
Available Funds
With respect to each payment date, the funds received on or prior to the last
day of the month preceding the month of such payment date (the "calculation
date"). These funds relate to payments on the leases, proceeds from casualties,
terminations or repurchases of leases, recoveries on defaulted leases, advances
made by the servicer to cover delinquent leases and investment proceeds thereon
(excluding certain amounts specified in the indenture) shall constitute
available funds which are available for distribution by the indenture trustee on
such payment date.
Priority of Payments
On each payment date, amounts received during the related remittance period in
respect of the lease receivables are to be paid, until such amounts are
exhausted, in the following order of priority:
first [ ];
second [ ];
third [ ];
fourth [ ];
fifth [ ];
sixth [ ].
o However, if an event of default and acceleration of the notes has occurred
or a restricted event has occurred:
first [ ];
second [ ];
third [ ];
fourth [ ];
fifth [ ];
sixth [ ].
seventh [ ].
o restricting event means the occurrence of any of:
(i) an event of default by the servicer under the assignment and
servicing agreement;
(ii) events of default; and
(iii) replacement of the servicer.
Events of Default
"Events of default" under the related transaction documents will consist of any
one or more of the following:
o a default for [five] days or more in the payment of any interest on any
note;
o a default in the payment of the principal of or any installment of the
principal of any note when the same becomes due and payable;
o default in the observance or performance in any material respect of any
covenant or agreement of the transaction made in the transaction
documents, or any representation or warranty made by the issuer in the
transaction documents or in any certificate delivered pursuant thereto or
in connection therewith having been incorrect as of the time made, and the
continuation of any such
S-6
<PAGE>
default or the failure to cure such breach of a representation or warranty
for a period of 30 days after notice thereof is given to the issuer by the
indenture trustee or the issuer and the indenture trustee by the holders
of at least 25% in principal amount of the notes then outstanding; or
o certain events of bankruptcy, insolvency, receivership or liquidation of
the issuer.
If an event of default should occur and be continuing with respect to the notes,
the indenture trustee or a majority (by outstanding principal amount) of the
noteholders may declare the principal of the notes to be immediately due and
payable. Such declaration may, under certain circumstances, be rescinded by a
majority of the noteholders.
o Outstanding principal amount means with respect to any class of notes and
any date of determination the difference between (a) the initial principal
amount of the notes of such class at the issuance thereof, less (b) all
amounts previously distributed with respect to such class as principal.
The information described above is qualified in its entirety by the more
detailed description of the flow of funds set forth herein under "Description of
the Notes--Flow of Funds."
CREDIT ENHANCEMENT
The credit enhancement available to the noteholders will consist of [more
information will be provided upon the structuring of the transaction].
Subordination
[The credit enhancement available for the benefit of any class of notes is
provided by each class of notes having a lower priority of payment than such
class of notes.]
Asset Pool
General
The property comprising the asset pool will consist of:
o A portfolio of chattel paper composed of leases, leases intended as
security agreements, installment sales contracts, or rental stream
obligations, together with all monies received relating thereto (the
"leases");
o The seller's security or other interests (other than its ownership
interest) in the underlying equipment, property and proceeds relating to
the leases (the "equipment" and together with the leases, the "lease
receivables"). However, the asset pool will not have any residual interest
in the related equipment after the related lease receivable has been paid
in full.
o All amounts held in accounts established by the servicer pursuant to the
transaction documents.
o All the rights to proceeds and recoveries on insurance policies covering
the equipment and on the disposition of repossessed equipment.
o Credit enhancement with respect to an asset pool or any class of notes.
o The interest of the issuer in any proceeds from recourse to lessees on
lease payments.
o Other rights of the issuer under the assignment and servicing
agreement.
o All proceeds of the foregoing.
The Leases
o The leases are obligations for the lease or purchase of the equipment, or
evidence borrowings used to acquire or refinance the equipment, entitling
the obligee thereunder (the "lessor") to receive a stream of
S-7
<PAGE>
scheduled payments (the "scheduled payments") and related payments and, in
some cases, to either the return of the equipment at the termination of
the related lease or, with respect to certain of the leases, the payment
of a purchase price for the equipment at the election of the obligor
thereunder (the "lessee").
o The originator will transfer the lease receivables comprising each asset
pool to the seller and the seller will transfer such lease receivables to
the issuer pursuant to an Assignment and Servicing Agreement (as defined
herein). The issuer will then pledge all of its right, title and interest
in and to such lease receivables to an indenture trustee on behalf of
noteholders pursuant to an indenture. The leases transferred to the issuer
and pledged to the indenture trustee shall have a discounted lease balance
(as defined below).
o The "discounted lease balance" of a lease as of any cut-off date is the
present value of all of the remaining payments scheduled to be made with
respect to such lease, discounted at a rate and frequency specified below.
o The "discounted present value of the leases", at any given time, shall
equal the future remaining scheduled payments (not including delinquent
amounts, excess copy charges, maintenance charges and fee per scan
charges) from the leases (including non-performing leases), discounted at
a rate equal to ____ %, which rate is equal to the sum of (a) the weighted
average interest rate of the various classes of notes, each weighted by
(i) the initial principal amount of such note classes and (ii) the
expected weighted average life (under a zero prepayment, and no loss
scenario) of each note class, as applicable, and (b) the servicing fee
rate of ____ %per annum.
o For more information about the leases, you should read the section titled
"The Leases" herein.
Origination and Acquisition
Each lease was previously originated by either:
o the originator; or
o acquired by the originator from other originators of leases.
For all of the leases:
o the leases are valid and enforceable, and unconditionally require the
lessee to make periodic lease payments (including taxes);
o the leases are noncancellable and do not contain early termination options
(unless the early termination or prepayment clauses require the lessee to
pay all remaining scheduled payments under such lease);
o all payments payable under the leases are absolute, unconditional
obligations of the lessees;
o all of the leases require the lessee or a third party to maintain the
equipment in good working order, to pay all the costs of operating the
equipment, including taxes and insurance;
o the leases do not materially violate any U.S. or state laws;
o the leases provide for periodic payments;
o in the event of a casualty loss, the lessee, at its expense, must replace
the equipment with like equipment in good repair, acceptable to the
originator or pay at a minimum the outstanding principal or net book value
of the leases and any applicable make-whole premium;
o the leases have been sold to the issuer free and clear of any liens and
are assignable without prior written consent of the lessee;
S-8
<PAGE>
o the leases are denominated in U.S. dollars and the lessor and each lessee
are located in the United States;
o the lease is not a consumer lease;
o the lease is not subject to any guaranty by the originator;
o the party transferring the lease to the issuer did not use adverse
selection when choosing the lease for transfer to the issuer;
o the lessee has represented to the originator that it has accepted the
equipment;
o the lessee is not a subject of an insolvency or bankruptcy proceeding at
the time of the transfer;
o the leases are not defaulted leases;
o each lease is not more than 60 days past due at the time of transfer to
the issuer;
o require the periodic, scheduled payment of rent or other payments on a
monthly, quarterly, semi-annual, or annual basis, in arrears or in
advance.
Servicing
The servicer is responsible for servicing, managing and administering the leases
and the equipment and enforcing and making collections on the leases. The
servicer is required to exercise the degree of skill and care in performing
these functions that it customarily exercises with respect to similar property
owned or serviced by the servicer.
For a further description of the Servicer and the Servicer's delinquency and
loss experience, you should read the section titled "The Servicer" herein.
Lease Substitution
Subject to certain limitations, the originator may substitute an eligible lease
for any defaulted lease, prepaid lease, or lease that has had its terms modified
or adjusted in accordance with the transaction documents. The substitute lease
must be at least equal in discounted lease balance and comparable in terms of
credit quality, monthly payment, and other characteristics; provided, that in no
event shall the maturity date of any lease substituted for a lease removed from
the related asset pool be later than the last maturity date of any lease
receivable.
For a further description of Originator's Substitution Option, you should read
the section titled "The Leases--Substitutions" herein.
Repurchases for Breaches of Representations and Warranties
The originator will be obligated to repurchase from the issuer the issuer's
interest in any lease if the noteholders' interest in the lease is materially
adversely affected by a breach of any representation or warranty made by the
originator, which representation or warranty has been assigned to the issuer by
the seller, with respect to such lease receivable, which breach has not been
cured as of 30 days following the discovery by or notice to the issuer of the
breach.
For a further description of Originator's repurchase obligations, you should
read the section titled "Description of the Notes--Representations and
Warranties of Originator" herein.
Advances
In the event that any obligor fails to make its full scheduled payment due on
time, the servicer may make an advance from its own funds of an amount equal to
such unpaid scheduled payment, if the servicer, in its sole discretion,
determines that the servicer is likely to be repaid from collections from or on
behalf of the related obligor and that such amount has not been deposited in the
collection account by three business days prior to the payment date.
The indenture provides for the reimbursement of the servicer for such advances.
S-9
<PAGE>
For a further description of the servicer's obligation to make advances, you
should read the section titled "Description of the Notes--Servicer Advances"
herein.
Certain Legal Aspects of the Lease
With respect to the transfer of the leases to the seller by the originator and
then by the seller to the issuer pursuant to the assignment and servicing
agreement and the pledge of the issuer's right, title and interest in and to
such leases on behalf of noteholders pursuant to the indenture, the originator,
the seller and the issuer, respectively, will warrant that:
o the transfer of the leases is a valid transfer and assignment of the
leases or the grant of a security interest in the leases, except for the
ownership interest in the equipment, which the seller is not transferring
to the issuer; and
o if the transfer of the leases to the issuer is deemed to be a grant to the
issuer of a security interest in the leases, then the issuer will have a
perfected security interest therein.
The servicer will be required to take such action as is required to perfect the
issuer's interest in the leases. If the issuer, the servicer or the indenture
trustee, while in possession of the leases, sells or pledges and delivers such
leases to another party, in violation of the indenture and the assignment and
servicing agreement, there is a risk that the purchaser could acquire an
interest in such leases having priority over the issuer's interest and thus the
related asset pool's interest.
UCC financing statements will not be filed to perfect any security interest in
the Equipment. Thus, in the event of repossession and resale of equipment, it
may be subject to a senior lien, with such senior lienholder possibly entitled
to full payment of its debt before any payments could be made on the debt owed
to the issuer.
Optional Redemption
The notes may be redeemed in whole by the servicer on any payment date on which
the aggregate discounted lease principal balance is less than 10% of the
aggregate discounted lease principal balance as of the closing date so long as
the servicer deposits or causes to be deposited in the collection account the
aggregate amounts owed on the notes as of such payment date.
Material Federal Income Tax Consequences
Dewey Ballantine LLP, special tax counsel to the issuer and counsel to the
underwriter, is of the opinion that the notes will be characterized as debt for
federal income tax purposes.
For additional information concerning the application of federal income tax
laws, you should read the section titled "Material Federal Income Tax
Consequences" herein.
ERISA Considerations
Subject to the considerations and conditions described under "ERISA
Considerations" herein, we expect that pension, profit-sharing or other employee
benefit plans, as well as individual retirement accounts and certain types of
Keogh Plans, may purchase the notes. Investors should consult with their counsel
regarding the applicability of the provisions of ERISA before purchasing a
note.
Rating of the Notes
The notes must receive at least the following ratings from [the rating
agencies]:
For additional information concerning the ratings, you should read the section
titled "Ratings" herein.
S-10
<PAGE>
RISK FACTORS
In addition to the risk factors discussed in the Prospectus, prospective
offered Noteholders should consider, among other things, the following
additional factors in connection with the purchase of the notes:
<TABLE>
<S> <C>
Risk of Downgrade of Initial Ratings It is a condition to the issuance of the notes
Assigned to Notes that they receive the ratings from the rating
agencies set forth in the summary under the
heading "rating of the notes." A rating is not a
recommendation to purchase, hold or sell the
notes, inasmuch as such rating does not comment
as to market price or suitability for a
particular investor. The ratings of the notes
address the likelihood of the timely payment of
interest on and the ultimate repayment of
principal of the notes pursuant to their
respective terms. There is no assurance that a
rating will remain for any given period of time
or that a rating will not be lowered or withdrawn
entirely by a rating agency if in its judgment
circumstances in the future so warrant. The
ratings of the notes are based primarily on the
rating agencies' analysis of the leases and the
equipment, and, with respect to the [class A]
notes, the subordination provided by the
subordinate notes.
Transfer of Servicing May Delay If IOS Capital were to cease acting as servicer,
Payments delays in processing payments on the leases and
information in respect thereof could occur and
result in delays in payments to the noteholders.
Risks Associated with Inability of IOS Capital, as originator or as servicer, as the
IOS Capital to Reacquire Leases and case may be, will make representations and
the Related Equipment warranties with respect to certain matters
relating to the leases. In certain
circumstances, IOS Capital will be required to
reacquire from the asset pool leases with respect
to which such representations and warranties have
been breached. In the event that IOS Capital is
incapable of complying with its obligations to
reacquire the leases and no other party is
obligated to perform or satisfy such obligations,
the noteholders may be subject to delays in
receiving payments and suffer loss of their
investment in the notes.
Geographic Concentrations of Leases As of the applicable cut-off date, obligors with
respect to approximately [ ]%, [ ]% and[ ]% of
the leases were located in the States of [ ], [ ]
and [ ], respectively. To the extent adverse
events or economic conditions were particularly
severe in such geographic regions or in the event
an obligor or group of obligors under the leases
in such geographic regions were to experience
financial difficulties due to the economic
conditions specific to such obligor's region, the
delinquency and loss
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
experience of the leases could be adversely impacted
with a potential negative effect on the timing or
ultimate payment of the amounts due to the noteholders.
The originator is unable to determine and has no
basis to predict, with respect to any state or
region, whether any such events have occurred or
may occur, or to what extent any such events may
affect the leases or the repayment of amounts due
under the notes. Accordingly, adverse economic
conditions or other factors particularly
affecting these states could adversely affect the
delinquency, loss or repossession experience of
the asset pool with respect to the leases. See
the "Leases" herein.
</TABLE>
S-12
<PAGE>
THE ASSET POOL
The Asset Pool will consist of (i) a pool of Leases, (ii) all moneys
(including accrued interest) due thereunder on or after the Cut-off Date, (iii)
such amounts as from time to time may be held in one or more accounts
established and maintained by the Servicer pursuant to the related Transaction
Document, as described below, (iv) the Seller's interests (other than ownership
interests), in the Equipment relating to such pool of Leases, (v) the rights of
the Issuer under the Assignment and Servicing Agreement, and (vi) interest
earned on certain short-term investments held by the Issuer. The Asset Pools
will not have any residual interest in the equipment underlying an operating
lease.
The Equipment underlying the Lease Receivables included in the Asset Pool
generally will be limited to personal property which is leased or financed by
the Originator to the Lessee pursuant to Leases which either are "chattel paper"
(as defined in the Uniform Commercial Code) or are leases that are not treated
materially differently from "chattel paper" for purposes of title transfer,
security interests or remedies on default. The Asset Pool will not have any
residual interest in the Equipment after the related Lease Receivable has been
paid in full.
The Lease Receivables will be acquired by the Seller from the Originator
under an Assignment and Servicing Agreement among the Seller, the Originator and
the Issuer (the "Assignment and Servicing Agreement"). Contemporaneously, the
Lease Receivables will be transferred by the Seller to the Issuer pursuant to
the Assignment and Servicing Agreement. The Leases included in the Asset Pool
will be selected from Leases held by the Originator based on the criteria
described in the Prospectus under "The Leases--Eligible Leases."
On or prior to the Closing Date on which the Notes are delivered to the
holders of the Notes (the "Noteholders"), the Issuer will form the Asset Pool by
(i) acquiring Lease Receivables pursuant to the Assignment and Servicing
Agreement between the Issuer and the Seller and (ii) entering into an Indenture
with an Indenture Trustee, relating to the issuance of the Notes, secured by the
Asset Pool.
The Lease Receivables comprising the Asset Pool will generally have been
originated by the Originator or acquired by the Originator in accordance with
the Originator's specified underwriting criteria. The underwriting criteria
applicable to the Lease Receivables included in the Asset Pool is described in
all material respects under the heading "IOS Capital's Leasing Business" in the
Prospectus.
THE ISSUER
The Issuer is a Delaware limited liability company all of the membership
interest in which will be held by the Seller. The Issuer was organized solely
for the limited purpose of engaging in the type of transactions described herein
and any activities incidental to and necessary or convenient for the
accomplishment of such purposes and is restricted by its organizational
documents and under the Assignment and Servicing Agreement from engaging in
other activities. In addition, its organizational documents and the Assignment
and Servicing Agreement it is required to operate in a manner such that it
should not be consolidated in the bankruptcy estate of the Originator or its
Affiliates in the event that one of them becomes subject to bankruptcy or
insolvency proceedings. The Issuer's address is 1738 Bass Road, Macon, Georgia
31210.
The Issuer does not have, nor is it expected in the future to have, any
significant assets other than the Asset Pools. The Servicer with respect to any
series of Notes may be the Originator or another affiliate of the Issuer. As
described under "Description of the Transaction Documents -- Acquisition of the
Leases Pursuant to an Assignment and Servicing Agreement", in addition to the
acquisition of Lease
S-13
<PAGE>
Receivables from the Seller, the Issuer may acquire Lease Receivables through or
from an affiliate of the Originator.
The Issuer will pledge its interest in the Lease Receivables to the
Indenture Trustee for the benefit of an Asset Pool and issue the Notes pursuant
to an indenture between the between the Issuer and the Indenture Trustee (the
"Indenture").
If the protection provided to the Noteholders of a given class by the
subordination of another Class of Notes is insufficient, the Issuer must rely
solely on the payments from the Lessees on the related Leases, and the proceeds
from the sale of Equipment which secures or is leased under the Defaulted
Leases. In such event, certain factors may affect such Issuer's ability to
realize on the collateral securing such Leases, and thus may reduce the proceeds
to be distributed to the Noteholders.
THE LEASES
Portfolio Parameters
As described below, Leases in the aggregate shall be required to comply
with certain portfolio concentration criteria (the "Portfolio Concentration
Criteria"): [more information will be provided upon the structuring of the
transaction]
The Lease Receivable Statistical Information
Following is certain statistical information relating to the Lease
Receivable pool, calculated as of the Calculation Date and assuming a discount
rate of [ ]%. Certain columns may not total 100% due to rounding.
S-14
<PAGE>
DISTRIBUTION OF LEASES BY DISCOUNTED LEASE BALANCE
<TABLE>
<CAPTION>
Sum of Discounted Percentage of Aggregate
Discounted Lease Balances Number of Leases Lease Balances Discounted Lease Balance
------------------------- ---------------- -------------- ------------------------
Less Than
Greater Than or Equal to
------------ -----------
<S> <C> <C> <C>
$ 1 $ 5,000
5,000 10,000
10,000 15,000
15,000 20,000
20,000 25,000
25,000 30,000
30,000 35,000
35,000 40,000
40,000 45,000
45,000 50,000
50,000 55,000
55,000 60,000
60,000 65,000
65,000 70,000
70,000 75,000
75,000 80,000
80,000 85,000
85,000 90,000
90,000 95,000
95,000 100,000
100,000 150,000
150,000 200,000
200,000 250,000
250,000 300,000
300,000 350,000
350,000 400,000
400,000 450,000
450,000 500,000
500,000 600,000
600,000 750,000
Total.................................................................... 100%
</TABLE>
S-15
<PAGE>
DISTRIBUTION OF THE LEASES BY STATE
<TABLE>
<CAPTION>
Number Sum of Discounted Lease Percentage of Aggregate
State of Leases Balances Discounted Lease Balance
----- --------- -------- ------------------------
<S> <C> <C> <C>
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
Washington, D.C.
West Virginia
Wisconsin
Wyoming
</TABLE>
S-16
<PAGE>
DISTRIBUTION OF LEASES BY REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage of
Percentage of Discounted Discounted Original Original
Number of Number of Present Value Percent Value Equipment Equipment
Remaining Term Leases Leases of Leases of Leases Cost Cost
-------------- ------ ------ --------- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1 - 12
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 84
- ---------------------------------------------------------------------------------------------------------------------
Total...................... 100.00% 100.00% 100.00%
=====================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage of
Percentage of Discounted Discounted Original Original
Number of Number of Present Value Percent Value Equipment Equipment
Original Term Leases Leases of Leases of Leases Cost Cost
------------- ------ ------ --------- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1 - 12
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 84
- ---------------------------------------------------------------------------------------------------------------------
Total...................... 100.00% 100.00% 100.00%
=====================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage of
Percentage of Discounted Discounted Original Original
Classification Number of Number of Present Value Percent Value Equipment Equipment
Type Leases Leases of Leases of Leases Cost Cost
---- ------ ------ --------- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Finance Lease
Operating Lease
- ---------------------------------------------------------------------------------------------------------------------
Total...................... 100.00% 100.00% 100.00%
=====================================================================================================================
</TABLE>
S-17
<PAGE>
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage of
Percentage of Discounted Discounted Original Original
Purchase Number of Number of Present Value Percent Value Equipment Equipment
Option Leases Leases of Leases of Leases Cost Cost
------ ------ ------ --------- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Nominal Buyout
Fair Market Value
Fixed Purchase Option
- ---------------------------------------------------------------------------------------------------------------------
Total...................... 100.00% 100.00% 100.00%
=====================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage of
Percentage of Discounted Discounted Original Original
Equipment Number of Number of Present Value Percent Value Equipment Equipment
Type Leases Leases of Leases of Leases Cost Cost
---- ------ ------ --------- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Total...................... 100.00% 100.00% 100.00%
=====================================================================================================================
</TABLE>
S-18
<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the Notes will be applied by the Issuer to
the acquisition of the related Lease Receivables from the Seller and applied by
the Seller to the acquisition thereof from the Originator.
THE ORIGINATOR
IOS Capital, Inc. ("IOS Capital" or the "Originator"), formerly known as
IKON Capital, Inc., was formed in 1987 to provide lease financing to customers
of IKON Office Solutions, Inc. ("IKON"). The Originator is a wholly-owned
subsidiary of IKON. The Originator's corporate headquarters are located at 1738
Bass Road, Macon, Georgia 31208. The Originator's securities are registered
under the 1934 Act and is subject to the reporting requirements of the 1934 Act
and, in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). The Originator filed an
Annual Report on Form 10-K for the fiscal year ending September 30, 1999 and a
Quarterly Report on Form 10-Q for the three-month period ending December 31,
1999. A copy of the reports, including the exhibits thereto, will be provided
without charge to any person to whom this Offering Circular is delivered upon
written request. Requests for such copies should be directed to IOS Capital,
Inc., 1738 Bass Road, P.O. Box 9115, Macon, Georgia 31208, Attn: Harry Kozee.
Loss and Delinquency Experience
Delinquencies remained at a consistent level for fiscal 1999, 1998 and
1997. During this two-year period, accounts classified as current (less that 30
days past due) ranged from 85% and 91% of the total portfolio balance on a
monthly basis. The aging of the Originator's lease portfolio receivables at
September 30, 1999 (excluding $275 million of net lease receivables sold under
an asset securitization agreement being serviced by the Originator) was as
follows:
The following table sets forth amounts of leases held in Originator's
lease servicing portfolio and the combined delinquency and foreclosure
experience of leases in the servicing portfolio for the periods indicated:
[Tables to be provided]
THE SELLER
IKON Receivables-1, LLC, the Seller, is a wholly-owned bankruptcy remote
subsidiary of IOS Capital, Inc. The Seller was organized for the limited purpose
of engaging in the type of transactions described herein and any activities
incidental to and necessary or convenient for accomplishment of such purposes
and is restricted by its organizational documents and under the Assignment and
Servicing Agreement from engaging in other activities. In addition, its
organizational documents and the Assignment and Servicing Agreement require that
it operate in a manner such that it should not be consolidated in the bankruptcy
estate of IOS Capital, Inc. or its affiliates in the event that one of them
becomes subject to bankruptcy or insolvency proceedings. The Seller's address is
1738 Bass Road, Macon, Georgia 31210.
S-19
<PAGE>
THE INDENTURE TRUSTEE
General
The Indenture Trustee, [_________] is a banking corporation organized
under the laws of ________. The Indenture Trustee may resign, subject to the
conditions set forth below, at any time upon written notice to the Issuer and
the Servicer, in which event the Servicer will be obligated to appoint a
successor Indenture Trustee. If no successor Indenture Trustee shall have been
so appointed and have accepted such appointment within 30 days after the giving
of such notice of resignation, the resigning Indenture Trustee may petition a
court of competent jurisdiction for the appointment of a successor Indenture
Trustee. Any successor Indenture Trustee shall meet the financial and other
standards for qualifying as a successor Indenture Trustee under the Indenture.
The Servicer may and shall at the direction of the Noteholders evidencing more
than 25% of the aggregate outstanding note principal balances of all classes of
notes (the "Percentage Interests") may, also remove the Indenture Trustee if the
Indenture Trustee ceases to be eligible to continue as such under the Indenture
and fails to resign after written request therefor.
Duties and Immunities of the Indenture Trustee
The Indenture Trustee will make no representations as to the validity or
sufficiency of the Assignment and Servicing Agreement, the Notes (other than the
authentication thereof) or of any Lease Receivable or related document and will
not be accountable for the use or application by the Servicer or the Issuer of
any funds paid to the Issuer in consideration of the sale of any Notes. If no
Event of Servicing Termination has occurred, then the Indenture Trustee will be
required to perform only those duties specifically required of it under the
Assignment and Servicing Agreement. However, upon receipt of the various
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments required to be furnished to it, the Indenture Trustee will be
required to examine them to determine whether they conform as to form to the
requirements of the Assignment and Servicing Agreement.
No recourse is available based on any provision of the Assignment and
Servicing Agreement, the Notes or any Lease Receivable or assignment thereof
against [_________], in its individual capacity, and [_________] shall not have
any personal obligation, liability or duty whatsoever to any Noteholder or any
other person with respect to any such claim and such claim shall be asserted
solely against the Servicer or any indemnitor, except for such liability as is
determined to have resulted from the Indenture Trustee's own negligence or
willful misconduct.
The Indenture Trustee will be entitled to receive, pursuant to the
priority set forth in the Indenture, (a) reasonable compensation for its
services (the "Indenture Trustee Fee"), (b) reimbursement for its reasonable
expenses and (c) indemnification for loss, liability or expense incurred without
negligence or bad faith on its part, arising out of performance of its duties
thereunder ((b) and (c) collectively, the "Indenture Trustee Expenses").
DESCRIPTION OF THE NOTES
The Notes will be issued pursuant to the Indenture to be entered into by
the Issuer and the Indenture Trustee. The Servicer will provide a copy of the
Indenture to subsequent Noteholders without charge on written request addressed
to it at 1738 Bass Road, P.O. Box 9115, Macon, Georgia 31208 Attn: Harry Kozee.
S-20
<PAGE>
General
The obligations evidenced by the Notes are recourse to the assets pledged
to the relevant Asset Pool only and are not recourse to the Originator, the
Seller, the Servicer, the Indenture Trustee, the Issuer, or any other Person.
The Issuer will agree in the Indenture and in the respective Notes to pay
to the Noteholders (i) an amount of principal equal to the Initial Note
Principal Balance and (ii) monthly interest at the times, from the sources and
on the terms and conditions set forth in the Indenture and in the respective
Notes.
Collections
The Indenture Trustee shall deposit the following funds into the
Collection Account ("Available Funds"), which funds received on or prior to the
last day of the prior calendar month (the "Calculation Date") shall be available
for distribution, pursuant to the Indenture, on the next succeeding Payment
Date:
(a) Lease Payments (as defined below) due before each Cut-Off Date;
(b) recoveries from Defaulted Leases (as defined below) to the
extent the Originator has not substituted Substitute Leases for such
Defaulted Leases (except to the extent required to reimburse unreimbursed
Servicer Advances);
(c) proceeds from repurchases by the Seller of Leases as a result of
breaches of representations and warranties by the Seller (such breach a
"Warranty Event") to the extent the Originator has not substituted
Substitute Leases for such Leases;
(d) proceeds from investment of funds in the Collection Account;
(e) Casualty Payments (as defined below);
(f) Termination Payments (as defined below); and
(g) Servicer Advances (as defined below).
A "Lease Payment" is each periodic installment of rent payable by a Lessee
under a Lease. Casualty Payments, Termination Payments, prepayments of rent
required pursuant to Termination Payments, prepayments of rent required pursuant
to the terms of a Lease at or before the commencement of the term of such lease,
payments becoming due before each Cut-Off Date and supplemental or additional
payments required by the terms of such a Lease with respect to taxes, insurance,
maintenance, or other specific charges shall not be considered Lease Payments
hereunder.
A "Casualty Payment" is any payment pursuant to a Lease on account of the
loss, theft, condemnation, governmental taking, destruction, or damage beyond
repair of any item of Equipment subject thereto which results, in accordance
with the terms of such Lease (such event a "Casualty Loss"), 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.
A "Termination Payment" is a payment payable by a Lessee under a Lease
upon the early termination of such Lease ( such Lease, an "Early Termination
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 beneficial owner thereof,
and the Lessee.
S-21
<PAGE>
"Defaulted Leases" are (i) Leases that have become more than 120 days
delinquent or (ii) Leases that have been charged off by the Servicer.
Distributions
Unless an Event of Default and acceleration of the Notes has occurred or a
Restricting Event has occurred, on or before each Payment Date, the Servicer
will instruct the Indenture Trustee to apply or cause to be applied the
Available Funds to make the following payments in the following priority:
(a) [ ];
(b) [ ];
(c) [ ];
(d) [ ]; and
(e) [ ].
If an Event of Default and acceleration of the Notes has occurred or a
Restricting Event has occurred, on or before each Payment Date, the Servicer
will instruct the Indenture Trustee to apply or cause to be applied the
Available Funds to make the following payments in the following priority:
(a) [ ];
(b) [ ];
(c) [ ];
(d) [ ];
(e) [ ];
(f) [ ]; and
(g) [ ].
"Restricting Events" with respect to any series include the following:
(a) an event of default by the Servicer under the Assignment and
Servicing Agreement;
(b) Events of Default (as defined herein); and
(c) replacement of the Servicer.
"Outstanding Principal Amount" means with respect to any Class of Notes
and any date of determination the difference between (a) the initial principal
amount of the Notes of such Class at the issuance thereof, less (b) all amounts
previously distributed with respect to such Class as principal.
S-22
<PAGE>
Prepayment and Yield Considerations
The rate of principal payments on the Notes, the aggregate amount of each
interest payment on the Notes and the yield to maturity of the Notes are
directly related to the rate of payments on the underlying Leases. The payments
on the Leases may be in the form of scheduled payments, prepayments or
liquidations due to default, casualty and other events, which cannot be
specified at present. Any such prepayments or liquidations will result in
distributions to Noteholders of amounts which would otherwise have been
distributed over the remaining term of the Leases. In general, the rate of such
payments may be influenced by a number of other factors, including general
economic conditions. The rate of Principal Payments with respect to any series
may also be affected by any repurchase of the underlying Leases by the
Originator pursuant to the Assignment and Servicing Agreement. In such event,
the application of the repurchase price will decrease the aggregate Discounted
Lease Balance, causing the corresponding weighted average life of the Notes to
decrease.
Subject to certain limitations, the Originator will have the option to
substitute Eligible Leases having similar characteristics (each a "Substitute
Lease") for (i) Non-Performing Leases, (ii) Leases subject to repurchase as a
result of a breach of a representation and warranty by the Originator under the
Transaction Documents which breach has not been cured following discovery/notice
of such breach (each, a "Warranty Lease") and (iii) Leases following a
modification or adjustment to the terms of such Lease (each an "Adjusted
Lease"). The Originator may substitute Substitute Leases for Non-Performing
Leases, Adjusted Leases or Warranty Leases in amounts not to exceed ______% of
the Discounted Present Value of the Leases as of the original Cut-Off Date. In
addition, in the event of a Lease that terminates early or which has been
prepaid in full (each, an "Early Termination Lease"), the Originator will have
the option to transfer an additional lease of similar characteristics (each, an
"Additional Lease"). The Substitute Leases and Additional Leases must have a
Discounted Present Value of not less than the Discounted Present Value of the
Leases being replaced and the monthly payments on the Substitute Leases or
Additional Leases must be at least equal to those of the replaced Leases through
the term of such replaced Leases. In the event that a Substitute Lease is not
provided for a Non-Performing Lease, the Discounted Present Value of the Leases
in the Asset Pool will be reduced in an amount at least equal to the Discounted
Present Value of the Non-Performing Lease, plus any delinquent payments.
The effective yield to holders of the Notes will depend upon, among other
things, the rate at which principal is paid to such Noteholders. The after-tax
yield to Noteholders may be affected by lags between the time interest income
accrues to Noteholders and the time the related interest income is received by
the Noteholders.
The Scheduled Final Payment Date for the Notes is [ ]. This date is the
date on which the note principal balance would be reduced to zero, assuming,
among other things, (i) prepayments with respect to the Leases are received at a
rate of [ ]% CPR and (ii) the modeling assumptions apply. The weighted average
life of the Notes is likely to be shorter than would be the case if payments
actually made on the Leases conformed to the foregoing assumptions, and the
final Payment Date with respect to the Notes could occur significantly earlier
than such final scheduled Payment Dates due to defaults, and because the
Originator is obligated to repurchase Leases in the event of breaches of
representations and warranties.
"Weighted average life" refers to the average amount of time from the date
of issuance of a security until each dollar of principal of such security will
be repaid to the investor. The weighted average lives of the Notes will be
influenced by the rate at which principal payments (including Lease payments and
prepayments) on the Leases are made. Principal payments on Leases may be in the
form of scheduled amortization or prepayments (for this purpose, the term
"prepayment" includes prepayments and liquidations due to a default or other
dispositions of the Leases). The weighted average lives of the Notes will also
be influenced by delays associated with realizing on Defaulted Leases. The
prepayment
S-23
<PAGE>
model used in this Prospectus Supplement, the "Conditional Prepayment Rate" or
"CPR", represents an assumed annualized rate of prepayment relative to the then
outstanding balance on a pool of Leases. The CPR assumes that a fraction of the
outstanding Lease Pool is prepaid on each Payment Date, which implies that each
Lease in the Lease Pool is equally likely to prepay. This fraction, expressed as
a percentage, is annualized to arrive at the CPR for the Lease Pool. The CPR
measures prepayments based on the outstanding principal on the previous Payment
Date. The CPR further assumes that all Leases are the same size and amortize at
the same rate and that each Lease will be either paid as scheduled or prepaid in
full.
Weighted Average Lives of the Notes
The following tables set forth the percentages of the initial principal
amount of the Notes that would be outstanding after each of the dates shown,
assuming a CPR of [ ]%.
PERCENTAGE OF INITIAL NOTE
PRINCIPAL BALANCE OUTSTANDING
Notes
Prepayment Speed (CPR)
<TABLE>
<S> <C> <C> <C> <C> <C>
Payment
Date 0% 2% 4% 6% 8%
- ----------------------------------------------------------------------------------------------------------------------
Closing
Date
- ----------------------------------------------------------------------------------------------------------------------
Weighted Average
</TABLE>
The Leases will not have the characteristics assumed above, and there can
be no assurance that (i) the Leases will prepay at any of the rates shown in the
tables or at any other particular rate or will prepay proportionately or (ii)
the weighted average lives of the Notes will be as calculated above. Because the
rate of distributions of principal of the Notes will be a result of the actual
amortization (including prepayments) of the Leases, which will include Leases
that have remaining terms to stated maturity shorter or longer than those
assumed, the weighted average lives of the Notes will differ from those set
forth above, even if all of the Leases prepay at the indicated constant
prepayment rates.
The effective yield to Noteholders will depend upon, among other things,
the price at which such Notes are purchased, and the amount of and rate at which
principal, including both scheduled and Lease Payments thereof, is paid to the
Noteholders. See "Special Considerations -- Maturity and Prepayment
Considerations" in the Prospectus.
DESCRIPTION OF THE TRANSACTION DOCUMENTS
The following summary describes certain terms of each Transaction Document
pursuant to which the Asset Pool will be created and the Notes will be issued.
For purposes of this Prospectus Supplement, the term "Transaction Document" as
used with respect to the Asset Pool means, collectively, and except as otherwise
specified, any and all agreements relating to the establishment of the Asset
Pool, the servicing of the related Lease Receivables and the issuance of the
Notes, including, without limitation, the Indenture, pursuant to which any Notes
shall be issued. The summary does not purport to be complete. It is qualified in
its entirety by reference to the provisions in each respective Transaction
Document.
S-24
<PAGE>
Acquisition of the Lease Receivables Pursuant to an Assignment and Servicing
Agreement
On the Closing Date, the Lease Receivables will be acquired by the Seller
from the Originator under the Assignment and Servicing Agreement among the
Seller, the Originator and the Issuer. Contemporaneously, the Lease Receivables
will be transferred by the Seller to the Issuer pursuant to the Assignment and
Servicing Agreement. The Leases included in the Asset Pool will be selected from
Leases held by the Originator based on the criteria described under "The
Leases--Eligible Leases."
On or prior to the date of issuance of the Notes to the holders of Notes,
the Issuer will form the Asset Pool by (i) acquiring Lease Receivables pursuant
to the Assignment and Servicing Agreement and (ii) entering into an Indenture
with the Trustee, relating to the issuance of the Notes.
Repurchase Obligation
The Originator will be obligated to repurchase from the Issuer its
interest in any Lease transferred to the Issuer or pledged to an Indenture
Trustee on behalf of the Noteholders, in which any representation or warranty of
the Originator under the Transaction Documents has been breached, which breach
has not been cured following discovery of such breach (each a "Warranty Lease").
In addition, the Originator may from time to time reacquire certain Leases or
substitute other Substitute Leases for such Leases subject to specified
conditions set forth in the related Transaction Documents.
The Indenture Trustee will have possession of the Leases and the documents
in the files relating thereto (the "Lease Files") not retained by the Servicer
for its servicing purposes, and the Servicer will retain copies of any other
documents which relate to the Lease Receivables, any related evidence of
insurance and payment, delinquency and related reports maintained by the
Servicer in the ordinary course of business with respect to each Lease
Receivable. Prior to transfer of the Lease Receivables to the Issuer, the
Servicer will cause its electronic ledger to be marked to show that such Lease
Receivables have been transferred to the Seller and then to the Issuer, and the
Originator and the Seller will file UCC financing statements reflecting the sale
and assignment of the Lease Receivables in certain jurisdictions, as required by
the Assignment and Servicing Agreement. See "Certain Legal Aspects of the Lease
Receivables" in the Prospectus.
Substitutions
Pursuant to the Transaction Documents, in addition to Warranty Leases, the
Originator will have the option to substitute Eligible Leases for Defaulted
Leases, Leases which have undergone modifications or adjustments to the terms of
such leases (each an "Adjusted Lease"), and Leases that have prepaid, up to a
maximum of [ %] of the aggregate Discounted Lease Balance of the Leases
contributed to the pool, provided the following conditions are met:
(i) At the time of substitution, the substituted Eligible Leases
have in the aggregate Discounted Lease Balances of not less than the
Discounted Lease Balance of the Leases being replaced;
(ii) Substitutions by the Originator shall be approximately the same
weighted average life of the remaining originally scheduled Lease payments
in the pool and shall not extend the final maturity of the pool beyond the
original maturity of the initial Leases in the pool.
Each Substitute Lease shall be a Lease, satisfying certain representations
and warranties set forth in the Indenture and the Assignment and Servicing
Agreement (a "Substitute Lease") as of the related Substitute Lease Cut-Off
Date. In addition, the following conditions must be satisfied:
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(i) as of the related Substitute Lease Cut-Off Date, the Substitute
Leases then being transferred have in the aggregate Discounted Lease
Balances that are not less than the aggregate of the Discounted Lease
Balances of the Leases being replaced; and
(ii) no substitution shall be permitted if, after giving effect to
such substitution, (x) the sum of the Lease Payments on all Leases due in
any Remittance Period thereafter would be less than (y) the sum of the
Lease Payments which would otherwise be due in such Remittance Period.
[Security Interest]
The Noteholders will be secured by [the security will be described when
the structuring of the transaction is available].
Representations and Warranties of the Originator and the Seller
[The representation and warranties will be described when the structuring
of the transaction is available.]
Indemnification
[The indemnification provisions will be described when the structuring of
the transaction is available.]
The Accounts
The Servicer will maintain an account (the "Collection Account") in the
name of the Indenture Trustee to which all Lease Payments received under each
Lease (including any residual proceeds and late charges), any recoveries for
Defaulted Leases if not substituted for, proceeds of Casualty Losses and Early
Termination Leases, and payments by the Seller in connection with a Warranty
Event will be directed within at least two (2) Business Days of receipt by the
Servicer, but excluding any Excluded Amounts.
Amounts exempt from deposit into the Collection Account ("Excluded
Amounts"), including (i) collections attributable to any taxes, fees or other
charges imposed by any governmental authority; (ii) collections representing
reimbursements of insurance premiums or payments for services that were not
financed by the Seller; (iii) other non-contract or rental charges reimbursable
to the Servicer in accordance with the Servicer's customary policies and
procedures; and (iv) collections with respect to repurchased Leases.
Available Funds
Available Funds for any Payment Date shall include funds received on or
prior to the related Calculation Date, net of any Excluded Amounts, will be
available for distribution by the Indenture Trustee on each Payment Date and
will include:
(i) Lease Payments (including residual proceeds and late charges);
(ii) Servicer Advances;
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(iii) recoveries on Defaulted Leases to the extent the Servicer has
not substituted an Eligible Lease for such Defaulted Lease;
(iv) proceeds from a Casualty Loss or Early Termination Lease;
(v) proceeds from repurchases by the Seller due to a Warranty Event;
and
(vi) proceeds from investment of funds in the Collection Account.
Priority of Payments
On each Payment Date prior to the occurrence and continuance of an Event
of Default and acceleration of the Notes or a Restricting Event, Available Funds
will be distributed by the Indenture Trustee in the following order of priority:
(i) [ ];
(ii) [ ];
(iii) [ ];
(iv) [ ];
(v) [ ].
On each Payment Date after the occurrence and during the continuance of an
Event of Default or Restricting Event, Available Funds will be distributed by
the Indenture Trustee in the following order of priority:
(i) [ ];
(ii) [ ];
(iii) [ ];
(iv) [ ];
(v) [ ];
(vi) [ ];
(vii) [ ];
(viii) [ ].
Any one or more of the following will be a Restricting Event under the
Indenture with respect to the Notes:
(i) an event of default by the servicer under the Assignment and
Servicing Agreement;
(ii) Events of Default (as defined herein);
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(iii) replacement of the servicer;
Interest
[Information on the interest payable to Noteholders will be provided in
accordance with the structuring of the transaction.]
Principal
[Information on the principal payable to Noteholders will be provided in
accordance with the structuring of the transaction.]
Withholding
The Indenture Trustee is required to comply with all applicable federal
income tax withholding requirements respecting payments to Noteholders of
interest with respect to the Notes. The consent of Noteholders is not required
for such withholding. In the event the Noteholder is other than DTC, then in the
event that the Indenture Trustee does withhold or causes to be withheld any
amount from interest payments or advances thereof to any Noteholders pursuant to
federal income tax withholding requirements, the Indenture Trustee shall
indicate the amount withheld annually to such Noteholders.
Optional Redemption
The Servicer will have the option, subject to certain conditions, to
redeem all, but not less than all, of the Notes as of any Payment Date on which
the aggregate Discounted Lease Balance as of the related Calculation Date is
less than or equal to 10 % of the aggregate Discounted Lease Balance as of the
Cut-off Date.
The Servicer
IOS Capital, Inc. in its servicing role (the "Servicer") will service the
Lease Receivables comprising an Asset Pool pursuant to the Assignment and
Servicing Agreement. The Servicer may delegate its servicing responsibilities to
one or more sub-Servicers, but will not be relieved of its liabilities with
respect thereto.
The Servicer will make certain representations and warranties regarding
its authority to enter into, and its ability to perform its obligations under,
the related Transaction Documents An uncured breach of such a representation or
warranty that in any respect materially and adversely affects the interests of
the Noteholders will constitute a Servicer Default by the Servicer under the
related Transaction Documents.
Assignment and Servicing Agreement
The Assignment and Servicing Agreement will further detail the procedures
for Lease Payment collections and Equipment remarketing. In general, the
Servicer in accordance with the Servicer's policies and procedures will manage,
service, administer, collect and enforce the Leases on behalf of the Issuer in
accordance with its customary procedures, and shall have full power and
authority to do any and all things in connection with such managing, servicing,
administration, and collection that it deems necessary or desirable. The
Servicer's duties will include collection and posting of all payments,
responding to inquiries of obligors regarding the Leases, investigating
delinquencies and making required Servicer Advances, remitting payments to the
Collection Account in a timely manner, furnishing monthly and annual statements
with respect to collections and payments, using commercially reasonable efforts
to
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dispose of any related Equipment that has been pledged to the Indenture Trustee
upon the expiration or termination of a Lease, and using its best efforts to
maintain the perfected security interest of the Indenture Trustee on behalf of
the Noteholders and their respective interests, if any, in the related Equipment
to the extent required herein.
Remittance and Other Servicing Procedures
[Information will be provided in accordance with the structuring of the
transaction.]
Servicing Compensation and Payment of Expenses
For its servicing of the Leases, the Servicer will receive servicing
compensation including a monthly fee (the "Servicer Fee") for each Remittance
Period (payable on the next succeeding Payment Date) and Servicing Charges.
The servicing compensation will compensate the Servicer for customary
equipment Lease servicing activities to be performed by the Servicer for the
Issuer, additional administrative services performed by the Servicer on behalf
of the Issuer, and expenses paid by the Servicer on behalf of the Issuer.
The Servicer, as an independent contractor on behalf of the Issuer for the
benefit of the Noteholders, will be responsible for the managing, servicing and
administering the Lease Receivables and enforcing and making collections on the
Leases and for the enforcing of any security interest in any item of Equipment,
all as set forth in the Assignment and Servicing Agreement. The Servicer's
responsibilities will include collecting and posting of all payments, responding
to inquiries of Lessees, investigating delinquencies, accounting for
collections, furnishing monthly and annual statements to the Indenture Trustee,
making advances (each a "Servicer Advance"), providing appropriate federal
income tax information for use in providing information to Noteholders,
collecting and remitting sales and property taxes on behalf of taxing
authorities and maintaining the perfected security interest of the Issuer in the
Equipment and the Leases.
Reports to Noteholders
On or prior to each Payment Date, the Servicer or the Indenture Trustee,
as applicable, will forward or cause to be forwarded to each holder of record of
such class of Notes a statement or statements with respect to the Asset Pool
setting forth the information specifically described in the Transaction Document
(such statements, collectively, the "Servicer Reports") which generally will
include the following information:
(i) the amount of the distribution with respect to each class of
Notes;
(ii) the amount of such distribution allocable to principal;
(iii) the amount of such distribution allocable to interest;
(iv) the Asset Pool balance, if applicable, as of the close of
business on the last day of the related Remittance Period;
(v) the aggregate outstanding principal balance and the Pool Factor
for each Class of Notes after giving effect to all payments reported under
(ii) above on such Payment Date;
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(vi) the amount paid to the Servicer, if any, with respect to the
related Remittance Period; and
(vii) the amount of the aggregate purchase amounts for Lease
Receivables that have been reacquired, if any, for such Remittance Period.
Each amount set forth pursuant to clauses (i), (ii), (iii) and (v) with
respect to the Notes of any series will be expressed as a dollar amount per
$1,000 of the initial principal balance of such Notes, as applicable.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year, the Issuer, or the Servicer on behalf of the Issuer,
will provide to the Noteholders a statement containing the amounts described in
(ii) and (iii) above for that calendar year and any other information required
by applicable tax laws, for the purpose of the Noteholders' preparation of
federal income tax returns.
The "Note Factor" is the seven digit decimal number that the Servicer will
compute or cause to be computed for each Remittance Period and will make
available on the related Calculation Date representing the ratio of (x) the note
principal balance which will be outstanding on the next Payment Date (after
taking into account all distributions to be made on such Payment Date) to (y)
the Initial Note Principal Balance.
The "Pool Factor" is the seven digit decimal number that the Servicer will
compute or cause to be computed for each Remittance Period and will make
available on the related Calculation Date representing the ratio of (x) the
aggregate Discounted Lease Balance as of the end of the immediately preceding
Remittance Period to (y) the aggregate Discounted Lease Balance as of the
Cut-Off Date.
[In addition, by _______ of each calendar year following any year during
which the Notes are outstanding, commencing ________, _____, the Indenture
Trustee will furnish to each Noteholder of record at any time during such
preceding calendar year, information as to the aggregate of amounts reported
pursuant to items (a) and (b) above for such calendar year to enable Noteholders
to prepare their federal income tax returns.]
Evidence as to Compliance
The Assignment and Servicing Agreement requires that the Servicer cause an
independent accountant (who may also render other services to the Servicer) to
prepare a statement to the Indenture Trustee and each Rating Agency dated not
later than [ ], and annually as of the same month thereafter, to the effect that
the independent accountant has examined the servicing procedures, manuals,
guides and records of the Servicer and the accounts and records of the Servicer
relating to the Lease Receivables and the Lease Files (which procedures,
manuals, guides and records shall be described in one or more schedules to such
statement), that such firm has compared the information contained in the
Servicer's certificates delivered in the relevant period with information
contained in the accounts and records for such period and that, on the basis of
such examination and comparison, nothing has come to the independent
accountant's attention to indicate that the Servicer has not, during the
relevant period, serviced the Lease Receivables in compliance with such
servicing procedures, manuals and guides and in the same manner required by the
Servicer's standards and with the same degree of skill and care consistent with
that which the Servicer customarily exercises with respect to similar property
owned by it, that such accounts and records have not been maintained in
accordance with the Assignment and Servicing Agreement, that the information
contained in the Servicer's certificates does not reconcile with the information
contained in the accounts and records or that such certificates, accounts and
records have
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not been properly prepared and maintained in all material respects, except in
each case for (a) such exceptions as the independent accountant shall believe to
be immaterial and (b) such other exceptions as shall be set forth in such
statement. On or before [ ] of each year, commencing on [ ], the Servicer shall
deliver to the Indenture Trustee and each Rating Agency a copy of such
statement.
The Assignment and Servicing Agreement will also provide for annual
delivery of a report (the "Supplementary Report") by the Servicer to the
Indenture Trustee not later than 120 days after the end of each fiscal year,
signed by an authorized officer of the Servicer (a "Servicing Officer") on
behalf of the Servicer and dated as of the last day of such fiscal year, stating
that (a) a review of the activities of the Servicer and the Servicer's
performance under the Assignment and Servicing Agreement for the previous
12-month period has been made under such Servicing Officer's supervision and (b)
nothing has come to such Servicing Officer's attention to indicate that an Event
of Servicing Termination has occurred, or, if such Event of Servicing
Termination has so occurred and is continuing, specifying each such event known
to the officer, the nature and status thereof and the steps necessary to remedy
such event.
The Assignment and Servicing Agreement will provide that the Servicer,
upon request of the Indenture Trustee, will furnish to the Indenture Trustee
such underlying data necessary for administration of the Trust or enforcement
actions as can be generated by the Servicer's existing data processing system.
Certain Matters Relating to the Servicer
The Assignment and Servicing Agreement will provide that the Servicer may
not resign from its obligations and duties as Servicer thereunder, except upon a
determination that the Servicer's performance of such duties is no longer
permissible under applicable law. The Servicer can only be removed pursuant to
an Event of Servicing Termination as discussed below.
Events of Servicing Termination
[Information will be provided upon the structuring of the transaction.]
[Rights Upon an Event of Servicing Termination]
[Information will be provided upon the structuring of the transaction.]
Events of Default
[Information will be provided upon the structuring of the transaction.]
Early Retirement of the Notes
[Information will be provided upon the structuring of the transaction.]
Amendment
Each of the Transaction Documents may be amended by the parties thereto,
without the consent of the Noteholders, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of such
Transaction Documents or of modifying in any manner the rights of such
Noteholders; provided that such action will not, in the opinion of counsel
satisfactory to the Indenture Trustee materially and adversely affect the
interests of any such Noteholder. The Transaction Documents may also be amended
by the Issuer, the Servicer, and/or the Indenture Trustee, as applicable, with
the consent of the holders of Notes evidencing at least a majority of the voting
rights of such then outstanding
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Notes for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of such Transaction Documents or of modifying
in any manner the rights of such Noteholders; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on the related Lease Receivables
or distributions that are required to be made for the benefit of such
Noteholders or (ii) reduce the aforesaid percentage of the Notes which are
required to consent to any such amendment, without the consent of all of the
Noteholders.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
General
The following paragraphs together with the description of federal income
tax consequences detailed in the Prospectus under the heading "Material Federal
Income Tax Consequences" sets forth a general discussion of the material
anticipated federal income tax considerations to investors of the purchase,
ownership and disposition of the notes offered hereby. The discussion is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change. The discussion below and the Prospectus does not purport to
deal with all federal tax considerations applicable to all categories of
investors, some of which may be subject to special rules. Investors should
consult their own tax advisors in determining the federal, state, local and any
other tax consequences to them of the purchase, ownership and disposition of the
notes.
The following discussion addresses lease-backed notes such as the Notes
that are intended to be treated for federal income tax purposes as indebtedness
secured by the underlying Lease Receivables.
[Additional disclosure will be provided based on the structuring of the
transaction.]
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing, or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for those persons. ERISA also imposes
certain duties on persons who are fiduciaries of plans subject to ERISA,
including the duty to make investments that are prudent, diversified (except if
prudent not to do so) and in accordance with governing plan documents. Under
ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a plan is considered to be a
fiduciary of the plan (subject to certain exceptions not here relevant).
Employee benefit plans that are government plans (as defined in Section 3(32) of
ERISA) and certain church plans (as defined in Section 3(33) of ERISA), are not
subject to ERISA or Section 4975 of the Code; however, those plans may be
subject to comparable federal, state or local law restrictions.
Some transactions involving the Issuer might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the Issuer were
deemed to be "plan assets" of an employee benefit plan subject to ERISA or the
Code, or an individual retirement account (an "IRA"), or any entity whose
underlying assets are deemed to be assets of an employee benefit plan or an IRA
by reason of the employee benefit plan's or the IRA's investment in that entity
(each a "Benefit Plan"). Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of the Issuer
would be treated as plan assets of a Benefit Plan for the purposes of ERISA and
the Code only if the Benefit Plan acquired an "equity interest" in the Issuer
and none of the exceptions contained in the Plan Assets Regulation were
applicable. An equity interest is defined under the Plan Assets Regulation as
an
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interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. The Notes
should be treated as indebtedness without substantial equity features for
purposes of the Plan Assets Regulation. This determination is based in part upon
the traditional debt features of the Notes, including the reasonable expectation
of purchasers of Notes that the Notes will be repaid when due, as well as the
absence of conversion rights, warrants and other typical equity features. The
debt treatment of the Notes for ERISA purposes could change if the Issuer
incurred losses. However, without regard to whether the Notes are treated as an
equity interest for these purposes, the acquisition or holding of Notes by or on
behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Issuer or any of its Affiliates is or becomes a party in
interest or disqualified person with respect to such Benefit Plan. In this case,
certain exemptions from the prohibited transaction rules could be applicable
depending on the type and circumstances of the plan fiduciary making the
decision to acquire a Note. Included among these exemptions are: Prohibited
Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance
company pooled separate accounts; PTCE 91-38, regarding investments by banks,
collective investment funds; PTCE 95-60, regarding investments by insurance
company general accounts; PTCE 96-23, regarding transactions by "in-house asset
managers"; and PTCE 84-14, regarding transactions by "qualified professional
assets managers". Each investor using the assets of a Benefit Plan which
acquires the Notes, or to whom the Notes are transferred, will be deemed to have
represented that the acquisition and continued holding of the Notes will be
covered by a Department of Labor class exemption.
Due to the complexity of the applicable rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, any
Benefit Plan fiduciary considering the purchase of a Note with plan assets
should consult with its counsel with respect to the potential applicability of
ERISA and the Code to the investment. Moreover, each Benefit Plan fiduciary
should determine whether, under the general fiduciary standards of investment
prudence and diversification, an investment in the Notes is appropriate for the
Benefit Plan, taking into account the overall investment policy of the Benefit
Plan and the composition of the Benefit Plan's investment portfolio.
The sale of Notes to a Benefit Plan is in no respect a representation by
the Issuer or the Underwriters that this investment meets all relevant legal
requirements with respect to investments by Benefit Plans generally or by a
particular Benefit Plan, or that this investment is appropriate for Benefit
Plans generally or any particular Benefit Plan.
RATINGS
It is a condition to the issuance of the Notes that the [Class A] Notes be
rated [ ] by _______ and [ ] by _________, and the [Class __ ] Notes be rated [
] by ________ and [ ] by ______. The ratings are not a recommendation to
purchase, hold or sell the Notes, inasmuch as such ratings do not comment as to
market price or suitability for a particular investor. Each rating may be
subject to revision or withdrawal at any time by the assigning Rating Agency.
There is not assurance that any such rating will continue for any period of time
or that it will not be lowered or withdrawn entirely by the Rating Agency if, in
its judgment, circumstances so warrant. A revision or withdrawal of such rating
may have an adverse effect on the market price of the Notes. The rating of the
Notes addresses the likelihood of the timely payment of interest and the
ultimate payment of principal on the Notes pursuant to their terms. The rating
does not address the rate of prepayments that may be experienced on the Leases
and, therefore, does not address the effect of the rate of prepayments on the
return of principal to the Noteholders.
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PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") for the sale of the Notes dated [ ], the Issuer
has agreed to sell and [ ______ ] (the "Underwriter") has agreed to purchase,
the Notes. The Issuer is affiliated with IOS Capital.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions therein, to purchase all the Notes offered hereby if any of
such Notes are purchased.
The Underwriter has advised the Issuer that it proposes to offer the Notes
purchased by the Underwriter for sale from time to time in one or more
negotiated transactions or otherwise, at market prices prevailing at the time of
sale, at prices related to such market prices or at negotiated prices. The
Underwriter may effect such transactions by selling such Notes to or through a
dealer, and such dealer may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriters or purchasers of the
Notes for whom they may act as agent. Any dealers that participate with the
Underwriter in the distribution of the Notes purchased by the Underwriter may be
deemed to be underwriters, and any discounts or commissions received by them or
the Underwriter, and any profit on the resale of Notes by them or the
Underwriter may be deemed to be underwriting discounts or commissions under the
Securities Act of 1933, as amended (the "Securities Act"). Noteholders should
consult with their legal advisors in this regard prior to any such reoffer or
sale.
In connection with this offering, the underwriters may over-allot or
effect transactions which stabilize or maintain the market prices of the offered
notes at levels above those which might otherwise prevail in the open market.
Such stabilizing, if commenced, may be discontinued at any time.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and the related Prospectus Supplement and, if given or made, such
information or representations must not be relied upon. Neither the delivery of
this Prospectus nor any sale made hereunder shall under any circumstances create
an implication that there has been no change in the affairs of the Seller or the
Issuer or any affiliate thereof or the Leases since the date hereof. This
Prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so to anyone to whom it
is unlawful to make such offer or solicitation.
The Transaction Documents and the Underwriting Agreement provide that the
Servicer and Issuer will indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriter may be required to make in respect thereof.
For further information regarding any offer or sale of the Notes pursuant
to this Prospectus Supplement and the Prospectus, see "Underwriting" in the
Prospectus.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Issuer by Don H. Liu,
Esq., General Counsel of the Originator and IKON Office Solutions, the parent
company of the Originator, and for the Underwriters by Dewey Ballantine LLP, New
York, New York. As of the date of this Prospectus, Mr. Liu is a full-time
employee and an officer of IKON Office Solutions and a beneficial owner of
shares of common stock of IKON Office Solutions and options to purchase shares
of common stock of IKON Office Solutions.
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INDEX OF PRINCIPAL DEFINED TERMS
Page
----
Additional Lease.............................................................23
Adjusted Lease...........................................................23, 25
Assignment and Servicing Agreement...........................................13
Available Funds..............................................................21
Benefit Plan.................................................................33
Calculation Date.............................................................21
Casualty Loss................................................................21
Casualty Payment.............................................................21
Collection Account...........................................................26
Commission................................................................2, 19
Conditional Prepayment Rate..................................................24
CPR..........................................................................24
Defaulted Leases.............................................................22
Early Termination Lease..................................................21, 23
Excluded Amounts.............................................................26
IKON.........................................................................19
Indenture Trustee Expenses...................................................20
Indenture Trustee Fee........................................................20
IOS Capital..................................................................19
IRA..........................................................................32
Leases.......................................................................11
Note Factor..................................................................30
Noteholders..................................................................13
Originator...................................................................19
Outstanding Principal Amount.................................................22
Percentage Interests.........................................................20
Plan Assets Regulation.......................................................33
Pool Factor..................................................................30
Portfolio Concentration Criteria.............................................14
PTCE.........................................................................33
Restricting Events...........................................................22
Securities Act...............................................................34
Servicer.....................................................................28
Servicer Advance.............................................................29
Servicer Fee.................................................................29
Servicer Reports.............................................................29
Servicing Officer............................................................31
Substitute Lease.........................................................23, 26
Supplementary Report.........................................................31
Termination Payment..........................................................21
Transaction Document.........................................................24
Underwriting Agreement.......................................................34
Warranty Event...............................................................21
Warranty Lease...........................................................23, 25
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Prospectus
- --------------------------------------------------------------------------------
$ 2,000,000,000
IKON Receivables, LLC Lease-Backed Notes
Issuer Issuable in Series
- --------------------------------------------------------------------------------
You should read the From time to time the issuer may sell a series of its
section entitled "Risk notes that --
Factors" starting on
page 7 of this . will represent debt obligations solely of the
prospectus and consider issuer; and
these factors before
making a decision to . will consist of one or more classes on terms to be
invest in the notes. determined at the time of sale.
The notes of each The assets backing the notes may consist of any
series will be debt combination of --
solely of the issuer
and will be payable . leases;
only from the pledged
assets of the issuer . installment sale contracts;
and any credit
enhancement for such . rental stream obligations;
series.
. monies received relating to the leases, agreements,
Retain this prospectus contracts and obligations;
for future reference.
This prospectus may not . funds on deposit in one or more accounts; and
be used to consummate
sales of securities . one or more forms of credit enhancement.
unless accompanied by
the prospectus The terms of your series of notes are described in this
supplement relating to prospectus and the accompanying prospectus supplement.
the offering of such
securities.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is April 28, 2000.
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Important Information about this Prospectus and the Accompanying Prospectus Supplement.. 3
Prospectus Summary....................................................................... 4
Risk Factors............................................................................. 7
Where You Can Find More Information...................................................... 11
The Issuer............................................................................... 12
The Asset Pools.......................................................................... 12
Management's Discussion and Analysis of Financial Condition.............................. 13
Directors and Executive Officers of the Manager of the Issuer............................ 13
Pool Factors............................................................................. 17
Use of Proceeds.......................................................................... 17
The Originator's Leasing Business........................................................ 17
The Trustee.............................................................................. 21
Description of the Notes................................................................. 21
Description of the Transaction Documents................................................. 28
Legal Aspects of the Lease Receivables................................................... 33
Material Federal Income Tax Consequences................................................. 36
Ratings.................................................................................. 40
ERISA Considerations..................................................................... 40
Plan of Distribution..................................................................... 40
Legal Opinions........................................................................... 41
Experts.................................................................................. 41
Index Of Terms........................................................................... 42
</TABLE>
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Important Information about this
Prospectus and the Accompanying Prospectus Supplement
If the terms of your series of notes vary between this prospectus and
the accompanying prospectus supplement, you should rely on the information in
the prospectus supplement.
The prospectus supplement for your series of notes will state among
other things:
. the aggregate principal amount, interest rate and authorized
denominations of the notes;
. specific information concerning the characteristics of the lease
receivables;
. the terms of any credit enhancement with respect to the notes;
. information concerning any other assets backing the notes,
including any reserve fund;
. the final scheduled payment date of the notes;
. how and when principal is to be paid on the notes on each payment
date, the timing of the application of principal and the order of
priority of the applications of the principal to the respective
classes of such notes;
. the federal income tax characterization of the notes;
. the terms of any subordination relating to the notes;
. the terms of any cross-collateralization relating to the notes;
. the terms of any redemptions and the related redemption prices
relating to the notes;
. servicing terms relating to the notes;
. the presence of any prefunding feature relating to the notes;
. the length and terms of any revolving period relating to the notes;
and
. additional information on the plan of distribution of the notes.
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Prospectus Summary
. This summary highlights select information from this prospectus and does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of the
notes, read carefully this entire prospectus and the accompanying
prospectus supplement.
. This summary provides an overview of calculations, cash flows and other
information to aid your understanding. To understand all of the terms of
the offering, carefully read this entire document and, in particular, the
full description of these calculations, cash flows and other information in
this prospectus.
Lease-Backed Notes
Issuable in Series
Issuer
IKON Receivables, LLC, a Delaware limited liability company.
Originator
IOS Capital, Inc., a Delaware corporation formerly known as IKON Capital Inc.
and a wholly-owned subsidiary of IKON Office Solutions, Inc.
Seller
IKON Receivables-1, LLC, a Delaware special purpose limited liability company.
Servicer
The servicer will be IOS Capital unless otherwise specified in the related
prospectus supplement.
Trustee
For any series of notes, the trustee named in the related prospectus supplement.
The Notes
. The notes of each series will be secured solely by office equipment leases
or contracts and related assets. The assets will be pledged by the issuer to a
trustee under an indenture for the benefit of noteholders of that series.
. The transaction documents relating to each series of notes will describe
the rights of each of the related classes of notes to the funds derived from the
related asset pool.
. The notes are fixed income securities, having a principal balance and a
specified interest rate.
. Each class of notes may have a different interest rate, which may be a
fixed or floating interest rate. The related prospectus supplement will specify
the interest rate for each series or class of notes, or the initial interest
rate and the method for determining subsequent changes to the interest rate.
. A series may include one or more classes of notes which are:
. stripped of regular interest payments and entitled only to
principal distributions, with disproportionate, nominal or no
interest distributions; or
. stripped of regular principal payments and entitled only to
interest distributions, with disproportionate, nominal or no
principal distributions.
. A series of notes may include two or more classes of notes with different
terms including different interest rates and different timing, sequential order
or priority of payments, amount of principal or interest or both.
. A series may provide that distributions of principal or interest or both on
any class may be made:
. upon the occurrence of specified events;
. in accordance with a schedule or formula; or
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. on the basis of collections from designated portions of the
related asset pool.
. Any series may include one or more classes of notes which will not
distribute accrued interest but rather will add the accrued interest to the note
principal balance, or nominal balance, in the manner described in the related
prospectus supplement.
. A series may include one or more other classes of notes that are senior to
one or more other classes of notes in respect of distributions of principal and
interest and allocations of losses on the related asset pool.
The Asset Pools
. As specified in the related prospectus supplement, the pledged pool of
assets securing a series of notes may consist of:
. leases which may include any combination of leases, leases
intended as security agreements, installment sale contracts or
rental stream obligations, together with certain monies due on
these leases and agreements and related guarantees;
. interests other than ownership interests in the underlying
equipment and related property, together with the proceeds from
disposal of the equipment, if any;
. amounts held in any collection, reserve, prefunding or other
accounts established pursuant to the transaction documents;
. proceeds and recoveries on insurance policies and the disposition
of repossessed equipment;
. credit enhancement for an asset pool or any class of notes; and
. interest earned on certain short-term investments.
. If the related prospectus supplement specifies, the trustee may acquire
additional leases and equipment during a specified pre-funding period following
the issuance of the notes from monies in a pre-funding account.
. If the related prospectus supplement specifies, the notes may have a
revolving period. During a revolving period, the issuer may acquire additional
leases and interests in equipment from the proceeds of payments on existing
lease payments. The notes may not pay principal during this period.
Payment Date
As described in the related prospectus supplement, the notes will pay principal
and/or interest on specified dates. Payment dates will occur monthly,
quarterly, or semi-annually.
Due Period
The calendar month preceding the month in which a payment date occurs is the due
period. As the related prospectus supplement will more fully describe, the
servicer will remit collections received in respect of the due period to the
trustee prior to the related payment date. The collections may be used to fund
payments to noteholders on such payment date or to acquire additional lease
receivables.
Record Date
The related prospectus supplement will describe a date preceding the payment
date, as of which the issuer or its paying agent will fix the identity of the
holders of the notes. Noteholders whose identities are fixed on this date will
receive payments on the next succeeding payment date.
Registration of Notes
The issuer will initially issue the notes as global notes registered in the name
of Cede & Co. as nominee of The Depository Trust Company, or another nominee.
Noteholders will not receive definitive notes representing their interests,
except in certain limited circumstances described in the related prospectus
supplement.
Credit Enhancement
. As described in the related prospectus supplement, credit enhancement for
an asset pool or any class of notes may include any one or more of the
following:
. a policy issued by an insurer specified in the related prospectus
supplement;
. overcollateralization;
. subordination of certain classes of notes;
. a reserve account;
. letters of credit;
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. credit or liquidity facilities;
. third party payments or other support; and
. cash deposits or other similar arrangements.
. The prospectus supplement will describe any limitations and exclusions from
coverage.
Optional or Mandatory Termination
. Under the circumstances described in this prospectus and the related
prospectus supplement, the servicer, the seller, the issuer or other entities
may, at their respective options, cause the early retirement of a series of
notes at the price or prices indicated in the related prospectus supplement.
. The related prospectus supplement may describe circumstances under which
the issuer, servicer or other entities will be required to retire early all or
any portion of a series of notes. An indenture may require these parties to
solicit competitive bids for the purchase of the related asset pool or
otherwise.
Tax Considerations
For federal income tax purposes, Dewey Ballantine LLP, special tax counsel to
the issuer, will render an opinion upon issuance of a series of notes that the
notes will be treated as debt and the issuer will not be treated as an
association (or publicly traded partnership) taxable as a corporation. You
should consult your tax advisors.
ERISA Considerations
Subject to the considerations and conditions described under "ERISA
Considerations" in this prospectus and the related prospectus supplement,
pension, profit-sharing or other employee benefit plans, as well as individual
retirement accounts and certain types of Keogh Plans, may purchase the notes.
You should consult with your counsel regarding the applicability of the
provisions of ERISA before purchasing a note.
Ratings
. The issuer will not issue the notes unless a rating agency rates them in
one of the four highest rating categories.
. You must not assume that the rating agency will not lower, qualify or
withdraw its rating.
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Risk Factors
You should carefully consider, among other things, the following risk factors
before deciding to invest in the notes offered by this prospectus.
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You May Not Be Able to Sell Your There is currently no public market for the notes. If no public market
Notes develops, you may not be able to sell your notes. The underwriters expect
to make a market in the notes but they are not required to do so. There
is no assurance that any market will be created or, if created, will
continue.
Prepayments and Related Reinvestment In the case of notes purchased at a discount, you should consider the risk
May Reduce Your Yield that slower than anticipated rates of prepayments on the leases could
result in an actual yield that is less than the anticipated yield.
Conversely, you should consider the risk that in the case of notes
purchased at a premium, a faster than the anticipated rate of prepayments
could result in an actual yield that is less than the anticipated yield.
Be aware that you bear the risk of reinvesting unscheduled distributions
resulting from prepayments of the notes.
The rate of payment of principal is unpredictable because the rate on the
notes will depend on, among other things, the rate of payment on the
underlying leases. In addition to the normally scheduled payments on the
leases, payments may come from a number of different sources, including
the following:
. prepayments permitted by the servicer;
. payments as a result of leases which are defaulted;
. payments as a result of leases accelerated by the servicer;
. payments due to loss, theft, destruction or other casualty; and
. payments upon repurchases by IOS Capital on account of a breach of
representations and warranties.
Subject to limitations, IOS Capital may elect to reinvest the proceeds of
a lease which has been partially or fully repaid or upgraded in one or
more additional leases and to substitute leases for defaulted, repurchased
or modified or adjusted leases. Reinvestments and substitutions may
affect the rate or amount of payments on the leases as a whole, the rate
at which funds are distributed on the notes and the yield to noteholders.
The rate of early terminations of leases due to prepayments and various
non-payments may be influenced by a variety of economic and other factors.
For example, adverse economic conditions and natural disasters such as
floods, hurricanes, earthquakes and tornadoes may affect prepayments.
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No Ownership Interest in the Neither the issuer nor the trustee for the benefit of noteholders will
Equipment; Certain Security have any ownership interest in any equipment, including any residual
Interests are Not Perfected and interest in the equipment at the end of the related lease term. Also, IOS
Other Creditors May Have Rights to Capital has not filed and will not file financing statements to perfect
the Equipment any security interest it may have in any of the equipment. Although any
security interest of IOS Capital in the equipment will be assigned by IOS
Capital to the seller and by the seller to the issuer, none of IOS
Capital, the seller, the issuer nor the trustee will have a perfected
security interest in the equipment against lessees. This lack of a
perfected security interest in the equipment may result in other creditors
of the related lessees acquiring rights in the equipment superior to those
of the issuer or the trustee and may adversely affect the ability of the
issuer or the trustee on behalf of noteholders to recover any monies on
the equipment following a lease default. This could reduce the funds
available to pay the notes. Accordingly, noteholders should not rely on
the sale, release or other disposition of any leased equipment for payment
on the notes.
State Laws and Other Factors May State laws impose requirements and restrictions on foreclosure sales and
Impede Recovery Efforts and Affect obtaining deficiency judgments and may prohibit, limit or delay
the Ability of the Issuer to Recoup repossession and sale of equipment to recover losses on non-performing
the Full Amount Due on the Leases leases.
Additional factors that may affect the issuer's ability to recoup the full
amount due on a lease include:
. the issuer's lack of any ownership interest in any of the equipment;
. the issuer's failure to file financing statements to perfect its security
interest in equipment against a lessee;
. depreciation;
. obsolescence;
. damage or loss of any item of equipment; and
. the application of federal and state bankruptcy and insolvency laws.
As a result, the noteholders may be subject to delays in receiving
payments and losses.
Possession of the Leases by and the Any insolvency by the issuer, the servicer, the originator or the seller,
Insolvency of the Issuer, while in possession of the leases may result in competing claims to
Originator, Seller or Servicer May ownership or security interests in the leases which could result in delays
Result in Reduced or Delayed in payments on the notes, losses to the noteholders or an acceleration of
Payments to Noteholders the repayment of the notes.
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Commingling of Funds with IOS If bankruptcy or reorganization proceedings are commenced with respect to
Capital May Result in Reduced or the servicer, any funds then held by the servicer may be unavailable to
Delayed Payments to Noteholders noteholders. If those funds are not transferred to the trustee, as
required by the indenture, payments to noteholders could be delayed or
reduced if the servicer becomes bankrupt or insolvent.
Insolvency of IOS Capital or IKON In some circumstances, a bankruptcy of IOS Capital or IKON Receivables-1,
Receivables-1, LLC May Reduce LLC may reduce payments to noteholders. IOS Capital and IKON
Payments to Noteholders Receivables-1, LLC believe that each contribution of the leases should be
treated as an absolute and unconditional assignment.
However, in the event of an insolvency of IOS Capital or IKON
Receivables-1, LLC, a court or bankruptcy trustee could attempt to:
. recharacterize the contribution of the related leases by IOS Capital to
IKON Receivables-1, LLC as a loan from IKON Receivables-1, LLC to IOS
Capital secured by a pledge of the leases; or
. recharacterize the contribution of the related leases by IKON
Receivables-1, LLC to the issuer as a loan from the issuer to IKON
Receivables-1, LLC secured by a pledge of the leases; or
. consolidate the assets of the issuer with those of IOS Capital because IOS
Capital will indirectly own all of the membership interests in the issuer;
or
. consolidate the assets of the issuer with those of IKON Receivables-1, LLC
because IKON Receivables-1, LLC will own all of the membership interests
in the issuer.
If either recharacterization or consolidation were successful, the
bankruptcy trustee could repudiate any leases that are considered to be
operating leases for bankruptcy law purposes and all obligations relating
to such operating leases. An attempt to recharacterize the transactions,
even if unsuccessful, could result in delays in payments to you. If
either attempt were successful, the notes would be accelerated, and the
trustee's recovery on your behalf could be limited to the then current
value of the leases or the underlying equipment. Consequently, you could
lose the right to future payments and you may not receive your anticipated
principal and interest on the notes.
Although IOS Capital and IKON Receivables-1, LLC both believe that the
contribution of the leases should be treated as an absolute and
unconditional assignment, for accounting purposes the leases will be
treated as assets of IOS Capital on the tax return of its consolidated
group and for tax purposes, no such assignment will be recognized. This
treatment of the assets might increase the risk of recharacterization of
the transfer to the issuer as a financing.
Transfer of Servicing May Delay If IOS Capital were to cease servicing the leases, delays in processing
Payments to Noteholders payments on the leases and information regarding lease payments could
occur. This could delay payments to the noteholders.
</TABLE>
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<TABLE>
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Default or Insolvency of Lessees May If lessees default on the leases, lease payments will decrease and funds
Reduce Payments to Noteholders available for payment to you will be reduced.
No Recourse Against Affiliates of There is no recourse against any affiliates of the issuer. The notes
the Issuer represent debt of the issuer payable solely from the related asset pool
and any applicable credit enhancement. If the lease payments, any other
assets pledged to secure the notes and any applicable credit enhancement
are insufficient to pay the notes in full, you have no rights to obtain
payment from IOS Capital or any of its affiliates other than the issuer.
The issuer is a limited liability company with limited assets.
Losses and Delinquencies on the We cannot guarantee that the delinquency and loss levels of leases in the
Leases May Differ From the asset pools will correspond to the historical levels the originator
Originator's Historical Loss and experienced on its equipment lease portfolio. There is a risk that
Delinquency Levels delinquencies and losses could increase or decline significantly for
various reasons including:
. changes in the federal income tax laws; or
. changes in the local, regional or national economies.
The Addition and Substitution of If a significant number of leases are added or replaced, this could affect
Leases May Adversely Affect the rate at which funds are distributed on the notes and decrease the
Cashflow and May Decrease the Yield yield to noteholders. The transaction documents will permit IOS Capital
on the Notes under certain circumstances, to substitute or add qualifying leases. The
addition or substitution of leases may include leases that have different
payment due dates, installment amounts and maturity dates than the
existing or substituted leases.
IOS Capital may only add or substitute leases that meet qualifying
characteristics and conditions. The ability of IOS Capital to acquire
such leases depends upon its ability to originate enough leases that meet
the specified eligibility criteria. This may be affected by a variety of
social and economic factors, including interest rates, unemployment
levels, the rate of inflation and public perception of economic conditions
generally. The addition or substitution of leases could increase the
geographic, equipment or other concentrations of the related asset pool.
Consequently, any adverse economic or social factors that particularly
affect a particular geographic area, certain types of equipment or other
concentrations of leases in the related asset pool may adversely affect
the performance of the asset pool, which, in turn, could affect the rating
of the notes.
Technological Obsolescence of If technological advances relating to office equipment cause leased
Equipment May Reduce Value of equipment to become obsolete, the value of the equipment will decrease.
Collateral This will reduce the amount of monies recoverable should the equipment be
sold following a lease default and you may not recover the full amount due
on your notes.
</TABLE>
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Where You Can Find More Information
The issuer or the servicer will file with the SEC all required annual,
quarterly and special reports, proxy statements and other information about the
notes. You can read and copy these documents at the public reference facility
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, NW, Room 1024,
Washington, DC 20549. You can also copy and inspect such reports, proxy
statements and other information at the following regional offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. SEC filings are also available to the public on the
SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus. Information that we file later with
the SEC will automatically update the information in this Prospectus. In all
cases, you should rely on the later information over different information
included in this Prospectus or the Prospectus Supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy materials
filed by or on behalf the issuer until we terminate our offering of the notes.
We filed a registration statement relating to the notes with the SEC.
This Prospectus is part of the registration statement but the registration
statement includes additional information. As a recipient of this Prospectus,
you may request a copy of the registration statement and any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling
us at:
IOS Capital, Inc.
Attn: Harry Kozee
1738 Bass Road
P.O. Box 9115
Macon, GA 31208
(912) 471-2300
You should rely only on the information incorporated by reference or
provided in this prospectus or the accompanying Prospectus Supplement. We have
not authorized anyone else to provide you with different information. You
should not assume that the information in this Prospectus is accurate as of any
date other than the date on the cover page of this Prospectus or the
accompanying Prospectus Supplement.
You can find a listing of the pages where capitalized terms are
defined under "Index of Terms" beginning on page 42 in this Prospectus.
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The Issuer
IKON Receivables, LLC (the "Issuer") is a Delaware limited liability company all
of the membership interests in which will be held by IKON Receivables-1, LLC, a
special purpose Delaware limited liability company (the "Seller"). All of the
membership interests in the Seller will, in turn, be held by IOS Capital, Inc.
("IOS Capital" or the "Originator"). The Issuer was organized for the limited
purpose of engaging in the transactions described herein and any activities
incidental to and necessary or convenient for the accomplishment of such
purposes and is restricted by its organizational documents and certain
agreements from engaging in other activities. In addition, its organizational
documents and certain agreements require it to operate in a manner such that it
should not be consolidated in the bankruptcy estate of the Originator or its
affiliates in the event that one of them becomes subject to bankruptcy or
insolvency proceedings. The Issuer's address is 1738 Bass Road, Macon, Georgia
31208.
The Issuer will from time to time sell a series of Notes consisting of
one or more classes on terms to be determined at the time of sale and described
in a related Prospectus Supplement. The Notes of each series will be secured
solely by the related Asset Pool (as defined herein). The Issuer does not have,
nor is it expected in the future to have, any significant assets other than the
Asset Pools. The servicer of any Asset Pool relating to any series of Notes may
be IOS Capital or another affiliate of the Issuer (IOS Capital or such other
servicer, in its capacity as servicer, the "Servicer").
The Issuer will pledge its interests in an Asset Pool to a Trustee in
respect of the related series of Notes pursuant to an Indenture between the
Issuer and such Trustee.
The financial statements of the Issuer for its fiscal year ended
September 30, 1999 are hereby incorporated by reference to the Issuer's Form 10-
K filed on December 28, 1999. The unaudited financial statements for the
quarter ended December 31, 1999 are hereby incorporated by reference to the
Issuer's Form 10-Q-A filed on February 22, 2000.
The Asset Pools
The Notes of each series will be secured by a segregated pool of
equipment leases or contracts and related assets (an "Asset Pool"). The
property comprising each Asset Pool may include (i) a pool of leases, which may
include any combination of leases, leases intended as security agreements,
installment sale contracts or rental stream obligations (each, a "Lease"), (ii)
certain monies due under the Leases on or after a specified date (the "Cut-off
Date"), (iii) monies held from time to time in one or more accounts established
and maintained pursuant to the related Transaction Documents (as defined
herein), (iv) a security interest in the Seller's interests in the underlying
equipment and related property relating to such pool of Leases (such equipment
and related property, the "Equipment"), (v) the rights of the Issuer under the
Assignment and Servicing Agreement (as defined herein) relating to the Asset
Pool, and (vi) investment earnings on certain accounts created under the related
Indenture. The Leases, including the Issuer's security interest in the
underlying equipment and other property relating to the Leases, in an Asset Pool
are referred to as the "Lease Receivables."
The Issuer will not have and the Asset Pools will not include any
residual interest in any Equipment after the related Lease has been paid in
full.
The Equipment generally will be limited to personal property which is
leased or financed by the Originator to lessees (each a "Lessee" and,
collectively, "Lessees") pursuant to Leases which either are "chattel paper" (as
defined in the Uniform Commercial Code) or are Leases that are not treated
materially differently from "chattel paper" for purposes of title transfer,
security interests or remedies on default.
The Lease Receivables will be acquired by the Seller from the
Originator under an Assignment and Servicing Agreement among the Seller, the
Originator and the Issuer (the "Assignment and Servicing Agreement").
Contemporaneously, the Lease Receivables will be transferred by the Seller to
the Issuer pursuant to the Assignment and Servicing Agreement. The Leases
included in an Asset Pool will be selected from Leases held by the Originator
based on the criteria described under "The Leases--Eligible Leases."
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On or prior to the date of issuance of the Notes of any series to the
holders of Notes, the Issuer will form an Asset Pool by (i) acquiring Lease
Receivables pursuant to the related Assignment and Servicing Agreement and (ii)
entering into an Indenture with the Trustee, relating to the issuance of the
Notes.
The Leases in each Asset Pool will have been originated by the
Originator or acquired by the Originator in accordance with the Originator's
specified underwriting criteria. The material underwriting criteria applicable
to the Leases are described under "Originator's Leasing Business."
Management's Discussion and Analysis of Financial Condition
As of the date of this Prospectus, the Issuer has limited operating
history. The net proceeds of the sale of the Notes of each series will be used
to fund any applicable reserve or other accounts and to make distributions to
the owner of the Issuer. See "Use of Proceeds." The Issuer is prohibited by
its Limited Liability Company Agreement from engaging in business other than (i)
the purchase of equipment leases and Lease Receivables from IOS Capital and its
affiliates, (ii) the issuance of notes collateralized by its assets and (iii)
engaging in acts incidental, necessary or convenient to the foregoing and
permitted under Delaware law. The Issuer's ability to incur, assume or guaranty
indebtedness for borrowed money is also restricted by its Limited Liability
Company Agreement to only such activities that relate to the Lease
Receivables.
Directors and Executive Officers of the Manager of the Issuer
The following table sets forth the executive officers and directors of
IKON Receivables Funding Inc., the manager of the Issuer ("Manager"), and their
ages and positions as of April 25, 2000. Because the Issuer is organized as a
special purpose company and will be largely passive, it is expected that the
officers and directors of the Manager will participate in the management of the
Issuer only to a limited extent. Most of the actions related to maintaining and
servicing the assets will be performed by the Servicer.
- --------------------------------------------------------------------------------
Name Age Position
- --------------------------------------------------------------------------------
Russell Slack 42 President & Director
Harry Kozee 44 Chief Financial Officer, Vice President & Director
J. F. Quinn 44 Vice President, Treasurer & Director
Michael H. Dudek 44 Vice President - Finance
Robert C. Campbell 42 Director
Robert W. Grier 41 Director
Don H. Liu 38 Secretary
Dominic Liberatore 37 Assistant Secretary
Russell S. Slack has served as President and Director of IKON
Receivables Funding, Inc. since being elected on January 1, 2000. Mr. Slack has
served as the President of IOS Capital, Inc. since 1999. Mr. Slack joined IOS
Capital in 1996. Prior to Mr. Slack's appointment as President of IOS Capital,
Mr. Slack served as the Director of Portfolio Quality. Prior to joining IOS
Capital, Mr. Slack was an Assistant Vice President for Citicorp from 1993
through 1996. Prior to joining Citicorp, Mr. Slack spent approximately 11 years
in the leasing and financial services industry.
Harry Kozee has served as Chief Financial Officer, Vice President and
Director of IKON Receivables Funding, Inc. since being elected on January 1,
2000. Mr. Kozee has served as Vice President-Finance of IOS Capital, Inc. since
1993. Mr. Kozee joined IOS Capital in 1991 and was promoted to Controller in
1992. Prior to joining IOS Capital, Mr. Kozee spent 15 years in auditing and in
the financial services industry.
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J.F. Quinn has served as Vice President, Treasurer and Director of
IKON Receivables Funding, Inc. since being elected on January 1, 2000. Mr.
Quinn has served as Treasurer of IKON Office Solutions, Inc. from November 1997
to the present. Prior to assuming his current position, Mr. Quinn served as
Assistant Treasurer from January 1996 through November 1997 and Manager, Foreign
Exchange and Cash Management from June 1994 through January 1996. Before
joining IKON Office Solutions, Mr. Quinn served as Manager, Foreign Exchange for
ARCO Chemical Company, Manager, Financial Services for the Columbia Gas System,
Inc. and Supervising Senior Auditor for Peat, Marwick, Mitchell & Co.
Michael H. Dudek has served as Vice President-Finance of IKON
Receivables Funding, Inc. since being elected on January 1, 2000. Mr. Dudek has
served as Vice-President - Finance for IKON Office Solutions, Inc. from August
1998 to the present. Prior to assuming his current position, Mr. Dudek held the
following positions with IKON Office Solutions (and its predecessor, Alco
Standard Corporation): Vice-President - Acquisition from 1993 to July 1998,
Director of Financial Operations from 1991 to 1993, and Manager - Internal Audit
from 1994 to 1991. Prior to joining IKON Office Solutions, Mr. Dudek spent five
years with the Internal Revenue Service.
Robert C. Campbell has served as an Independent Director of IKON
Receivables Funding, Inc. since being elected on April 9, 1999. Mr. Campbell,
the Co-founder and Managing Director of Entity Services Group, L.L.C., advises
corporations on structural and tax ramifications arising from their holding
companies.
Mr. Campbell, a Certified Public Accountant, has also served as a Tax
Manager at KPMG LLP where he advised corporate clients on tax planning and
compliance issues. Prior to joining KPMG LLP, Mr. Campbell worked at the
captive-finance subsidiary of Sears Roebuck & Co.
Robert W. Grier has served as an Independent Director of IKON
Receivables Funding, Inc. since being elected on April 9, 1999. Presently, Mr.
Grier is Executive Vice President of Entity Services Group, L.L.C. Mr. Grier
has previously served as a Senior Tax Manager at KPMG LLP, where he advised
companies, ranging from closely-held to multi-national corporations, on
compliance and tax planning issues. Prior to joining KPMG LLP, Mr. Grier was
employed by Simon, Master & Sidlow, P.A., a Wilmington accounting firm.
Don H. Liu has served as Secretary of IKON Receivables Funding, Inc.
since being elected on January 1, 2000. Mr. Liu serves as Senior Vice
President, General Counsel, Secretary and Chair of the Diversity Council at IKON
Office Solutions, Inc. Prior to joining IKON Office Solutions in March of 1999,
he was Vice President and Deputy Chief Legal Officer at Aetna U. S. Healthcare
from 1992-1999. Before joining Aetna U.S. Healthcare, Mr. Liu practiced law in
New York City in the areas of mergers and acquisitions and general corporate
law.
Dominic A. Liberatore has served as Assistant Secretary of IKON
Receivables Funding, Inc. since being elected on January 1, 2000. Mr.
Liberatore serves as Counsel to IOS Capital, Inc. Mr. Liberatore joined IKON
Office Solutions, Inc. in September of 1999. Prior to joining IKON Office
Solutions, Mr. Liberatore was Counsel to Copelco Financial Services Group, Inc.
from 1995 through 1999. Before joining Copelco Financial Services Group, Inc.,
Mr. Liberatore spent 9 years practicing law in the areas of finance, leasing and
general corporate law.
The Lease Information with respect to the Lease Receivables in each
Asset Pool will be set forth in the related Prospectus Supplement, including the
composition of such Lease Receivables and the distribution of such Lease
Receivables by equipment type, payment frequency and Discounted Present Value of
the Leases (as defined herein) as of the applicable Cut-Off Date. As of the
date of issuance of the Notes of any series, no more than 5% of the Lease
Receivables in the related Asset Pool (as measured by Discounted Present Value
of the Leases) will deviate from the characteristics of the Lease Receivables
described in the related Prospectus Supplement.
Eligible Leases
All Leases have been originated or acquired in the ordinary course of
the Originator's business and comply with the Originator's credit and
collections policies. In addition, the following eligibility requirements apply
or will apply to all Leases on or prior to the related Cut-Off Date
(collectively, "Eligible Leases"):
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(i) The Leases are valid and enforceable, and unconditionally
obligate the Lessee to make periodic Lease Payments (as defined herein)
(including taxes);
(ii) The Leases are noncancellable by the Lessee and do not contain
early termination options (except for Leases which contain early termination or
prepayment clauses that require the Lessee to pay all remaining scheduled
payments under such Lease upon early termination or prepayment);
(iii) All payments payable under the Leases are absolute,
unconditional obligations of the Lessees;
(iv) All of the Leases require the Lessee or a third party to
maintain the Equipment in good working order, to bear all the costs of operating
the Equipment, including taxes and insurance relating thereto;
(v) The Leases do not materially violate any U.S. or state laws;
(vi) In the event of a Casualty (as defined herein), the Lessee is
required to pay at a minimum the outstanding principal or net book value of the
Leases and any applicable make-whole premium;
(vii) The Leases have been transferred to the Issuer free and clear
of any liens and are assignable without prior written consent of the Lessee;
(viii) The Leases are U.S. dollar-denominated and the lessor and each
Lessee are located in the United States;
(ix) The Lease is not a consumer lease;
(x) No more than three percent (3%) of the Leases in any Asset
Pool will consist of Leases with government entities as the obligor;
(xi) The Lease is not subject to any guaranty by the Lessor or
Originator but may be subject to the guaranty of others;
(xii) No adverse selection was used in selecting the Lease for
transfer to the Issuer;
(xiii) The Lessee has represented to the Originator that it has
accepted the Equipment;
(xiv) The Lessee is not a subject of an insolvency or bankruptcy
proceeding at the time of the transfer;
(xv) The Leases are not Non-Performing Leases (as defined herein);
and
(xvi) Each Lease is not more than 61 days past due at time of
transfer to the Issuer.
Accounting Characteristics
The Leases consist of finance leases for accounting purposes. In a
finance lease, the lessor transfers substantially all benefits and risks of
ownership of the underlying equipment to the lessee. In accordance with
Statement of Financial Accounting Standards No. 13, a lease is classified as a
finance lease if the collectibility of lease payments are reasonably certain and
it meets one of the following criteria: (1) the lease transfers title and
ownership of the equipment to the lessee by the end of the lease term; (2) the
lease contains a bargain purchase option; (3) the lease term at inception is at
least 75% of the estimated life of the equipment; or (4) the present value of
the minimum lease payments is at least 90% of the fair market value of the
equipment at inception of the lease.
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Although the Leases are finance leases for accounting purposes, some
or all of the Leases may be considered operating or non-finance leases for tax,
bankruptcy law or other purposes.
Discounted Present Value
The discounted present value of the Leases (the "Discounted Present
Value of the Leases"), at any given time, will equal the future remaining
scheduled payments (not including delinquent amounts, excess copy charges and
maintenance charges) from the Leases (including Non-Performing Leases),
discounted at the rate specified in the related Prospectus Supplement (the
"Discount Rate"). The discounted present value of the Performing Leases (the
"Discounted Present Value of the Performing Leases") equals the Discounted
Present Value of the Leases, reduced by all future remaining scheduled payments
on the Non-Performing Leases (not including delinquent amounts and maintenance
charges), discounted at the Discount Rate. The Discounted Present Value of the
Leases in respect of each Asset Pool as of the initial Cut-Off Date, calculated
at the Discount Rate, will be specified in the related Prospectus Supplement.
In connection with all calculations required to be made pursuant to an
Indenture or an Assignment and Servicing Agreement with respect to the
determination of the Discounted Present Value of the Leases at any given time,
it will be assumed that:
(i) Lease Payments are due on the last day of the period from and
including the first day of each calendar month to and including the last
day of the calendar month immediately preceding the related Payment Date;
(ii) Lease Payments are discounted on a monthly basis using a 30-
day month and a 360-day year; and
(iii) Lease Payments are discounted to the last day of the calendar
month prior to the relevant calculation date.
In addition, each Indenture and Assignment and Servicing Agreement
will provide that any calculation of future remaining scheduled payments made on
or with respect to any date will be calculated after giving effect to any
payments received prior to the date of that calculation to the extent such
payments relate to scheduled payments due and payable with respect to the
related Due Period (as defined herein) and all prior Due Periods.
Delinquencies and Gross Losses
Information relating to the Originator's delinquency and gross loss
experience with respect to leases it has originated or acquired will be set
forth in the related Prospectus Supplement. This information may include, among
other things, the experience with respect to all leases in the Originator's
portfolio during specified periods, including leases not included in any Asset
Pool and leases which may not meet the criteria for selection as a Lease
Receivable for an Asset Pool. There can be no assurance that the delinquency,
repossession and net loss experience on any Asset Pool will be comparable to the
Originator's prior experience.
Maturity and Prepayment Considerations
If a Lease permits a prepayment, the amount of the prepayment,
together with accelerated payments resulting from defaults, will, subject to the
use of those monies to acquire additional or substituted leases pursuant to the
terms of the applicable Transaction Documents, shorten the weighted average life
of the pool of Lease Receivables and the weighted average life of the Notes.
The rate of prepayments on the Lease Receivables may be influenced by a variety
of economic, financial and other factors. In addition, under certain
circumstances, the Originator will be obligated to reacquire Lease Receivables
from the Issuer pursuant to the applicable Transaction Documents as a result of
breaches of representations and warranties. Any reinvestment risks resulting
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from a faster or slower amortization of the Notes, which results from
prepayments, will be borne entirely by the Noteholders.
Acquisition of Lease Receivables
The Lease Receivables underlying the Notes will be acquired pursuant
to an Assignment and Servicing Agreement (i) by the Seller from the Originator
and (ii) by the Issuer from the Seller.
The Issuer expects that each Lease Receivable so acquired will have
been originated or acquired by the Originator in accordance with the
underwriting criteria specified herein and sold to the Seller. See "The
Originator's Leasing Business - Credit Policies and Loss Experience" herein.
Pursuant to the Assignment and Servicing Agreement, the Originator will make
certain representations and warranties to the Seller in respect of the related
Lease Receivables and the benefit of such representations and warranties will be
assigned to the Issuer pursuant to the Assignment and Servicing Agreement. The
Issuer will assign all its rights under the Assignment and Servicing Agreement
to the Trustee for the benefit of the Noteholders with the result that the
Originator will be liable to the Issuer and the Trustee for defective or missing
documents or an uncured breach of the Originator's representations or
warranties.
Pool Factors
A Noteholder's portion of the aggregate outstanding principal balance
of the related Class of Notes is the product of (i) the original outstanding
principal amount of such Noteholder's Notes and (ii) the applicable Pool Factor.
The "Pool Factor" for each Class of Notes will be a seven-digit decimal, which
the Servicer will compute on each determination date prior to each distribution
with respect to such Class of Notes, indicating the remaining outstanding
principal balance of such Class of Notes as of the applicable payment date (the
"Payment Date"), as a fraction of the initial outstanding principal balance of
such Class of Notes. Each Pool Factor will be initially 1.0000000, and
thereafter will decline to reflect reductions in the outstanding principal
balance of the applicable Class of Notes.
The Noteholders of record will receive reports on or about each
Payment Date concerning the payments received on the Lease Receivables, the
balance of Leases in the Asset Pool, the Pool Factor and various other items of
information. In addition, Noteholders of record during any calendar year will
be furnished information for tax reporting purposes not later than the latest
date permitted by law.
Use of Proceeds
The net proceeds from the sale of the Notes of each series will be
used to fund any applicable reserve or other accounts and to make distributions
by the Issuer to the Seller and by the Seller to the Originator.
The Originator's Leasing Business
The Originator, formerly known as IKON Capital, Inc., was formed in
1987 to provide lease financing to customers of IKON Office Solutions, Inc.
("IKON Office Solutions"). The Originator is a wholly-owned subsidiary of IKON
Office Solutions. The Originator's corporate headquarters are located at 1738
Bass Road, Macon, Georgia 31210. The Originator's securities are registered
under the Securities Exchange Act of 1934, as amended (the "1934 Act") and the
Originator is subject to the reporting requirements of the 1934 Act and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). The Originator filed an Annual
Report on Form 10-K for the fiscal year ended September 30, 1999. A copy of the
reports, including the exhibits thereto, are available to the public on the
SEC's web site at http://www.sec.gov. Requests for copies or other information
should be directed to IOS Capital, Inc., 1738 Bass Road, P.O. Box 9115, Macon,
Georgia 31210, Attn: Harry Kozee.
IKON Office Solutions is a public company headquartered in Malvern,
Pennsylvania operating a large network of independent copier and office
equipment marketplaces in North America and the United Kingdom.
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IKON Office Solutions has over 900 locations in the United States, Canada, the
United Kingdom, Germany, France, Denmark and Mexico. IKON Office Solutions also
provides equipment services and supplies, outsourcing and imaging services, such
as mailroom and copy center management, specialized document copying services
and electronic imaging and file conversion. IKON Office Solutions also offers
network consulting and design, hardware and software product interfaces,
computer networking, technology training and software solutions for the
networked office environment. IKON Office Solutions' fiscal 1999 gross revenues
were $5.5 billion.
The Originator is engaged in the business of arranging lease financing
exclusively for office equipment marketed by members of IKON Office Solutions'
independent dealer network ("IKON Marketplaces"), which sell and service copier
equipment and facsimile machines. The ability to offer lease financing on this
equipment through the Originator is considered a competitive marketing advantage
which more closely ties IKON Office Solutions to its customer base. During the
1999 fiscal year, 67% of new equipment sold by IKON marketplaces was financed
through the Originator. The Originator and IKON Office Solutions will seek to
increase this percentage in the future, as leasing enhances the overall profit
margin on equipment and is considered an important customer retention strategy.
For the fiscal years ended September 30, 1998 and 1997, the Originator's
operating revenues totaled approximately $289 million and $214 million,
respectively, with net income of approximately $63 million and $43 million,
respectively. For the fiscal year ended September 30, 1999, total operating
revenue equaled $299 million with net income of approximately $88 million.
The equipment financed by the Originator consists of copiers,
facsimile machines, and related accessories and peripheral equipment, the
majority of which are produced by major office equipment manufacturers.
Currently 62% of the equipment financed by the Originator represents copiers,
17% facsimile machines, and
21% other equipment. Although equipment models vary, IKON Office
Solutions is increasingly focusing its marketing efforts on the sale of higher
segment equipment, such as copiers which produce 50 or more impressions per
minute.
The Originator's customer base (which consists of the end users of the
equipment) is widely dispersed, with the ten largest customers representing less
than 7.5% of the Originator's total lease portfolio as of September 30, 1999.
The typical new lease financed by the Originator during fiscal year 1999
averaged $17,739 in amount and 47 months in duration. Although 94% of the
leases in the Originator's total lease portfolio as of September 30, 1999 are
scheduled for regular monthly payments, customers are also offered quarterly,
semi-annual and other customized payment terms. In connection with its leasing
activities, the Originator performs billing, collection, property and sales tax
filings, and provides quotes on equipment upgrades and lease-end notification.
The Originator also provides certain financial reporting services to the IKON
marketplaces, such as a monthly report of marketplace increases in leasing
activity and related statistics.
Types of Leases
The lease portfolio of the Originator consists of direct financing
leases and funded leases, although the Leases to be included in any Asset Pool
will consist solely of direct financing leases. Funded leases are contractual
obligations between IKON Office Solutions and IKON Marketplaces which have been
financed by the Originator. Direct financing leases are contractual obligations
between the Originator and the IKON Office Solutions customer and represent the
majority of the Originator's lease portfolio.
Funded leases and direct financing leases are structured as either tax
leases (from the Originator's perspective) or conditional sales contracts,
depending on the customer's needs. The customer decides which of the two
structures it desires. Under either structure, the total cost of the equipment
to the customer is substantially the same (assuming the exercise of the purchase
option).
Tax leases represented 96% of the Originator's total lease portfolio
as of September 30, 1999. The Originator is considered to be the owner of the
equipment for tax purposes during the life of these leases and receives the tax
benefit associated with equipment depreciation. Tax leases are structured with
a fair market value purchase option. Generally, the customer may return the
equipment, continue to rent the equipment or purchase the equipment for its fair
market value at the end of the lease.
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Each tax lease has an assumed equipment residual value generally
ranging from 0% to 25% of original retail price, depending on model and term.
Although an Asset Pool may include tax leases with residual values, such
residual values will not be available for the benefit of the Noteholders of such
Asset Pool.
Conditional sale contracts account for the remaining 4% of the total
leases in the Originator's portfolio. Under these arrangements, the customer is
considered to be the owner of the equipment for tax purposes and is entitled to
receive any tax benefit associated with equipment depreciation. Each
conditional sales contract has an assumed residual value of 0%. Conditional
sales contracts are customarily structured with higher monthly lease payments
than the tax leases and have a $1 purchase option for the equipment at the end
of the lease term. Although the customer has the option of returning or
continuing to rent the equipment at lease-end, the customer almost always
exercises the $1 purchase option at the end of the lease term.
Credit Policies and Loss Experience
General. Prior to January 1998, IKON Office Solutions maintained a
decentralized credit policy. Each IKON marketplace was responsible for
developing and maintaining a credit policy that governed credit practices and
procedures. The policies contained minimum credit standards. Credit authority
levels were established and maintained locally with ultimate authority vested in
the district presidents and district CFOs. The Originator provided credit
assistance through the support of an automated front-end lease application
tracking system ("CLAS").
Beginning in January 1998, IKON Office Solutions centralized its
credit policy. IKON Office Solutions' National Risk Management Policy
established minimum standards for all IKON Office Solutions leasing transactions
and vested all credit authority with the Originator. The policy uses a tiered
approach incorporating analyst reviews and credit scoring based on customer
exposure.
Origination. Lease packages are assembled by an IKON Office Solutions
sales representative and submitted to its respective IKON marketplace or
district processing center. The IKON marketplace and/or district have the
responsibility to review for accuracy and completeness prior to submission to
the Originator for funding. The marketplace and/or district administration
staff enter the lease applications into the CLAS program. The CLAS program
provides both the credit processing and lease administration module. When
applications have completed both modules, the documents have been reviewed and
the invoice has been prepared, the marketplace and/or district administration
staff forward the leasing package for funding review and transmit the CLAS
application to the Originator.
The Originator reviews all documents for completion, accuracy and
compliance. Any changes to the original document must be approved by the
Originator's contract and documentation review specialists. Each application is
checked for credit approval based on a comprehensive risk management policy.
When the transaction has completed final review the CLAS application is updated
and uploaded to the mainframe for activation, funding and invoicing.
Credit Processing. The Originator's credit process is segmented by
transaction size and approval authority. The "High Risk Review List" lists
industries or customers which are considered volatile and require special
attention. Guidelines are also established for automatic approvals which
require minimal information.
The IKON Office Solutions approval process is tiered based upon
customer exposure. Requests less than $50,000 use the CLAS credit scorecard for
approval. Credit scoring for smaller balance exposures provides the Originator
with the ability to adjust risk scores system-wide and monitor performance.
Exposures of $50,000 to $250,000 rely on the expertise of the Originator's
credit staff in analyzing and verifying information regarding bank
relationships, trade references, D&B Business Information Reports, and financial
statements and/or tax returns. Exposures of more than $250,000 benefit from the
combined resources of the districts and the Originator, while maintaining local
ownership of the customer. Ideally, the process will be transparent to the
customer yet provide the necessary and timely information required to understand
the risk factors of the exposure and those in the portfolio.
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Based upon the segmented approach, the following approval authorities
have been established:
. Customer Service Professional and/or Customer Service
Professional Manager
Dun & Bradstreet rated according to a decision matrix; up to
$50,000; no override authority.
. Business Credit Analysts
Up to high risk transactions.
. Senior Credit Analysts
Single signature for exposure up to $1 million; dual signature
for exposure up to $2 million.
. Director of Portfolio Quality & National Credit Coordinator
Single signature for exposure up to $2 million; dual signature
for exposure up to $5 million.
. Corporate
Exposure in excess of $5 million.
Challenges to the recommendations of the Originator's credit analysts
will be the responsibility of the IKON Office Solutions district presidents. In
the event the analyst does not agree with the actions recommended by the IKON
Office Solutions district, the Originator senior management will be requested to
intervene. Sole credit authority remains with the Originator, not IKON Office
Solutions. The requirements for the above approval categories for exposures
under $250,000 may be overridden with approval of a Senior Credit Analyst,
National Credit Coordinator, Director of Portfolio Quality or President of the
Originator. Justifications will be entered into CLAS.
Collections. The following minimum standards for collection activity
and contact are established for the organization. At 31 days past due, the
initial collection call or letter is sent, dependent on account balance, to
inquire as to payment status, determine reason for delinquency, and attempt to
obtain payment date. At 45 days past due, the first or second collection call
is made, depending on account balance. At 61 days past due, the second or third
collection call is made and the contract is reviewed for guarantors or
additional avenues of collection. At this point the approach is to be firm and
the collector must obtain a full understanding of any dispute that may exist. A
Collection Manager is notified of any problems at 61 days past due. At 75 days
past due, a third or fourth collection call is made and if payment arrangement
is not agreed upon, possibility of contract cancellation, supply or equipment
retrieval or foreclosure is raised. At 90 days past due, the customer is
advised that the equipment/supplies will be picked up and contract canceled if
payment is not received immediately. An acceleration letter is generally sent
within 10 days if payment is not received. A notice of repossession letter is
sent out at day 105 to the customer and the originating marketplace. Accounts
are generally scheduled for charge off at 120 days past due unless extenuating
circumstances (approved by a Collection Manager) warrants delay and additional
collection efforts. These actions are required during the indicated time frame,
and may be accelerated to an earlier time as deemed appropriate. All collection
activities are documented.
Delinquency and Loss Experience. Historical delinquency information
for leases not charged off and loss information for leases owned and included in
IOS Capital's servicing portfolio will be set forth in each Prospectus
Supplement. See "The Leases--Delinquencies and Gross Losses".
The Trustee
The Trustee for a series of Notes will be identified in the related
Prospectus Supplement. The Trustee's liability in connection with the issuance
and sale of the Notes will be limited solely to the express obligations of the
Trustee set forth in the Indenture. The Originator and its affiliates may from
time to time enter into normal banking and Trustee relationships with the
Trustee and its affiliates. The Trustee, the Servicer and any of their
respective affiliates may hold Notes in their own names. In addition, for
purposes of meeting the legal requirements of certain local jurisdictions, the
Trustee shall have the power to appoint a co-trustee or a separate Trustee under
the Indenture. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the Indenture will be
conferred or imposed upon the Trustee and such separate
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Trustee or co-Trustee jointly, or in any jurisdiction in which the Trustee shall
be incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee, who shall exercise and perform such rights, powers,
duties and obligations solely at the direction of the Trustee.
No resignation or removal of the Trustee and no appointment of a
successor Trustee will become effective until the acceptance of appointment by
the successor Trustee. The Trustee may resign at any time by giving written
notice thereof to the Issuer and the Servicer and by mailing notice of
resignation by first-class mail, postage prepaid, to the Noteholders of such
series at their addresses appearing on the security register. The Trustee may
be removed at any time by written notice of the holders of Notes evidencing more
than 66% of the voting rights thereof, delivered to the Trustee and the Issuer.
If the Trustee resigns, is removed, or becomes incapable of acting, or if a
vacancy shall occur in the office of the Trustee for any cause, the Issuer must
promptly appoint a successor Trustee. If no successor Trustee shall have been
so appointed by the Issuer or the Noteholders, or if no successor Trustee shall
have accepted appointment within 30 days after any such resignation or removal,
existence of incapability, or occurrence of such vacancy, the Trustee or any
Noteholder may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
The Trustee will make no representations as to the validity or
sufficiency of the Assignment and Servicing Agreement, the Notes (other than the
authentication thereof) or of any Lease Receivable or related document and will
not be accountable for the use or application by the Servicer or the Issuer of
any funds paid to the Issuer in consideration of the sale of any Notes. If no
Servicer Events of Default (as defined herein) have occurred, then the Trustee
will be required to perform only those duties specifically required of it under
the Assignment and Servicing Agreement. However, upon receipt of the various
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments required to be furnished to it, the Trustee will be required
to examine them to determine whether they conform as to form to the requirements
of the Assignment and Servicing Agreement.
No recourse is available based on any provision of the Assignment and
Servicing Agreement, the Notes or any Lease Receivable or assignment thereof
against the Trustee, in its individual capacity, and the Trustee will not have
any personal obligation, liability or duty whatsoever to any Noteholder or any
other person with respect to any such claim and such claim shall be asserted
solely against the Servicer or any indemnitor, except for such liability as is
determined to have resulted from the Trustee's own gross negligence or willful
misconduct.
The Trustee will be entitled to receive (a) reasonable compensation
for its services, (b) reimbursement for its reasonable expenses and (c)
indemnification for loss, liability or expense incurred without gross negligence
or bad faith on its part, arising out of performance of its duties thereunder.
Description of the Notes
General
Each series of the Notes will be issued pursuant to an Indenture. The
following summaries (together with additional summaries under "Description of
the Transaction Documents" below) describe all material terms and provisions of
the Notes. The summaries do not contain all the terms of the Notes and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the Transaction Documents and the Notes.
All of the Notes offered by this Prospectus will be rated in one of
the four highest rating categories by one or more nationally recognized
statistical rating organizations (each a "Rating Agency" and, collectively, the
"Rating Agencies").
The Notes will generally be styled as debt instruments, having a
principal balance and a specified floating or fixed interest rate. The Notes of
each series will represent debt secured by an Asset Pool comprised primarily of
the Lease Receivables described in the related Prospectus Supplement.
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General Payment Terms of Notes
As provided in the related Transaction Documents, Noteholders will be
entitled to receive payments on their Notes on the specified Payment Dates or on
the next day that is not a Saturday, Sunday or other day on which commercial
banking institutions located in the city or cities where the Corporate Trust
Office of the Trustee and the Servicer (and, if applicable, any credit
enhancement provider) are located are authorized or obligated by law or
executive order to be closed (each a "Business Day").
Neither the Notes nor the underlying Lease Receivables will be
guaranteed or insured by any governmental agency or instrumentality or the
Issuer, the Servicer, the Seller, any Trustee or any of their respective
affiliates.
Collections
The following funds will be deposited into the Collection Account (as
defined below):
(a) Lease Payments;
(b) recoveries from Non-Performing Leases (as defined below) to the
extent the Originator has not substituted Substitute Leases (as defined
below) for such Non-Performing Leases;
(c) late charges received on delinquent Lease Payments not advanced
by the Servicer;
(d) proceeds from purchases of Leases by the Originator as a result
of breaches of representations and warranties to the extent the Originator
has not substituted Substitute Leases for such Leases;
(e) proceeds from investment of funds in the Collection Account and
any other applicable Transaction Account (as defined below);
(f) Casualty Payments;
(g) Retainable Deposits (each as defined below);
(h) Servicer Advances (as defined below, if any);
(i) Termination Payments (as defined below), to the extent the Issuer
does not reinvest such Termination Payments in Additional Leases; and
(j) proceeds received to effect a redemption of the Notes pursuant to
the Indenture.
The foregoing funds on deposit in the Collection Account on each
determination date relating to a Payment Date, excluding Lease Payments not due
during the preceding calendar month (a "Due Period") or any prior Due Period,
together with any funds deposited into the Collection Account from any Reserve
Account as described below under "Distributions," will constitute available
funds ("Available Funds"). Available Funds do not include cash flows realized
from the sale or release of Equipment following the expiration date of the
related Lease other than Equipment subject to Non-Performing Leases (as defined
below) that have not been replaced.
The Servicer must deposit the funds referred to in clauses (a) through
(d), (f) and (i) above into the Collection Account within two Business Days of
receipt thereof by the Servicer. The funds referred to in clauses (e), (g), (h)
and (j) above are to be deposited into the Collection Account on or prior to the
related Payment Date.
A "Lease Payment" is 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 at or before the commencement of the term of such Lease,
security deposits, payments becoming due before each Cut-Off Date and
supplemental or additional payments required by
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the terms of a Lease with respect to taxes, insurance, maintenance or other
specific charges such as excess copy charges are not Lease Payments.
A "Casualty Payment" is any payment pursuant to a Lease on account of
the loss, theft, condemnation, governmental taking, destruction, or damage
beyond repair (each, a "Casualty") 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 or in the termination of the
Lessee's obligation to make future Lease Payments.
A "Retainable Deposit" is 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.
A "Termination Payment" is a payment payable by a Lessee under a Lease
upon the early termination of such Lease (other than on account of a Casualty or
a Lease default) which may be agreed upon by the Servicer, acting in the name of
the Issuer, and the Lessee.
"Non-Performing Leases" are (i) Leases that have become more than 120
days delinquent, (ii) Leases that have been accelerated by the Servicer or (iii)
Leases that the Servicer has determined to be uncollectible in accordance with
the Servicer's customary practices.
Distributions
On each Payment Date, Available Funds will be applied to make payments
of principal and interest due on the Notes, amounts owed to the Servicer,
Trustee (to the extent not payable by the Servicer) and other parties and for
other purposes as described and in the priority set forth in the related
Prospectus Supplement. If a Reserve Account is established for a series of
Notes, the related Prospectus Supplement will describe how much in that account
will be transferred to the Collection Account when there is a deficiency in
Available Funds otherwise available to make any payment due on each Payment
Date. Similarly, the related Prospectus Supplement will describe the extent to
which the proceeds of any applicable credit enhancement will be applied to make
up any such deficiency.
Prepayment and Yield Considerations
The rate of principal payments on the Notes, the aggregate amount of
each interest payment on the Notes and the yield to maturity of the Notes are
directly related to the rate of payments on the underlying Leases. The payments
on the Leases may be in the form of scheduled payments, prepayments or
liquidations due to default, casualty and other events, which cannot be
specified at present. Any prepayments or liquidations will result in
distributions to Noteholders of amounts which would otherwise have been
distributed over the remaining term of the Leases. The rate of such prepayments
and liquidations may be influenced by a number of other factors, including
general economic conditions. The rate of principal payments may also be
affected by any repurchase of the underlying Leases by the Originator or Seller
pursuant to the Assignment and Servicing Agreement. In such event, the
application of the repurchase price will decrease the Discounted Present Value
of the Performing Leases, causing the corresponding weighted average life of the
Notes to decrease.
Subject to certain limitations, the Originator will have the option to
substitute Eligible Leases having similar characteristics (each a "Substitute
Lease") for (i) Non-Performing Leases, (ii) Leases subject to repurchase as a
result of a breach of a representation and warranty by the Originator under the
Transaction Documents which breach has not been cured following discovery/notice
of such breach (each, a "Warranty Lease") and (iii) Leases following a
modification or adjustment to the terms of such Lease (each an "Adjusted
Lease"). The Originator may substitute Substitute Leases for Non-Performing
Leases, Adjusted Leases or Warranty Leases in amounts not to exceed specified
percentages (to be stated in the related prospectus supplement) of the
Discounted Present Value of the Leases as of the original Cut-Off Date. In
addition, in the event of a Lease that terminates early or which has been
prepaid in full (each, an "Early Termination Lease"), the Originator will have
the option to transfer an additional lease of similar characteristics (each, an
"Additional Lease"). The Substitute Leases and Additional Leases must have a
Discounted Present Value of not less than the Discounted Present Value of the
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Leases being replaced and the monthly payments on the Substitute Leases or
Additional Leases must be at least equal to those of the replaced Leases through
the term of such replaced Leases. In the event that a Substitute Lease is not
provided for a Non-Performing Lease, the Discounted Present Value of the Leases
in the related Asset Pool will be reduced in an amount at least equal to the
Discounted Present Value of the Non-Performing Lease, plus any delinquent
payments.
The effective yield to holders of the Notes will depend upon, among
other things, the rate at which principal is paid to such Noteholders. The
after-tax yield to Noteholders may be affected by lags between the time interest
income accrues to Noteholders and the time the related interest income is
received by the Noteholders.
Book-Entry Registration
Noteholders of a given series may hold their Notes through the
Depository Trust Company ("DTC") (in the United States) or Clearstream (defined
below) or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations that are participants in such systems.
Cede & Co. ("Cede"), as nominee for DTC, will hold the global Notes in
respect of given series. Clearstream and Euroclear will hold omnibus positions
on behalf of the Clearstream Participants (as defined below) and the Euroclear
Participants (as defined below) (collectively, the "Participants"),
respectively, through customers' securities accounts in Clearstream's and
Euroclear's names on the books of their respective depositories (collectively,
the "Depositories") which in turn will hold those positions in customers'
securities accounts in the Depositories' names on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of securities. Participants
include brokers and dealers, banks, trust companies and clearing corporations.
Indirect access to the DTC system also is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Clearstream Participants and Euroclear Participants
will occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depository; however, cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depository to take action
to effect final settlement on its behalf by delivering or receiving Notes in
DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Clearstream Participants and
Euroclear Participants may not deliver instructions directly to the
Depositories.
Because of time-zone differences, credits of Notes in Clearstream or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent Notes settlement processing, dated the Business Day
following the DTC settlement date, and those credits or any transactions in
those subsequent Notes will be reported to the relevant Clearstream Participant
or Euroclear Participant on that Business Day. Cash received in Clearstream or
Euroclear as a result of sales of Notes by or through a Clearstream Participant
or a Euroclear Participant to a DTC Participant will be received with value on
the DTC settlement date but will be available in the relevant Clearstream or
Euroclear cash account only as of the Business Day following settlement in
DTC.
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Noteholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Notes may do so only through Participants and Indirect Participants. In
addition, Noteholders will receive all distributions of principal and interest
through the Participants who in turn will receive them from DTC. Under a book-
entry format, Noteholders may experience some delay in their receipt of
payments, since the payments will be forwarded by the Issuer or note paying
agent to Cede, as nominee for DTC. DTC will forward the payments to its
Participants, which thereafter will forward them to Indirect Participants or the
Noteholders. It is anticipated that the only "Noteholder" in respect of any
series will be Cede, as nominee of DTC. Noteholders will not be recognized as
Noteholders, and the Noteholders will be permitted to exercise the rights of
Noteholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of Notes among Participants on whose behalf it acts with respect to the Notes
and to receive and transmit distributions of principal of, and interest on, the
Notes. Participants and Indirect Participants with which the Noteholders have
accounts with respect to the Notes similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
Noteholders. Accordingly, although such Noteholders will not possess Notes, the
Rules provide a mechanism by which Participants will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Noteholder
to pledge Notes to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Notes, may be limited due to
the lack of a physical certificate for such Notes.
DTC will advise the Issuer and/or Trustee in respect of each series
that it will take any action permitted to be taken by a Noteholder only at the
direction of one or more Participants to whose accounts with DTC the Notes are
credited. DTC may take conflicting actions with respect to other undivided
interests to the extent that such actions are taken on behalf of Participants
whose holdings include such undivided interests.
Clearstream Banking, societe anonyme ("Clearstream") is a limited
liability company (a societe anonyme) organized under the laws of Luxembourg as
a professional trust depository ("Trust Depository"). Clearstream holds notes
for its participating organizations ("Clearstream Participants") and facilitates
the clearance and settlement of notes transactions between Clearstream
Participants through electronic book-entry changes in accounts of Clearstream
Participants, thereby eliminating the need for physical movement of notes.
Transactions may be settled in Clearstream in any of 38 currencies, including
United States dollars. Clearstream provides to its Clearstream Participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a
professional Trust Depository, Clearstream is subject to regulation by the
Luxembourg Monetary Institute. Clearstream Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to Clearstream is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Clearstream Participant, either
directly or indirectly.
Euroclear was created in 1968 to hold notes for participants of the
Euroclear System ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
notes and any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 37 currencies, including United States
dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. Euroclear is operated by Morgan Guaranty Trust Company of
New York, Brussels, Belgium office, under contract with Euroclear Clearance
System, S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the Euroclear Operator (as defined below), and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters. Indirect access to the Euroclear System is also available
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to other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The "Euroclear Operator" is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of notes and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to Notes in the Euroclear System. All Notes in the Euroclear System are
held on a fungible basis without attribution of specific Notes to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants and has no record of
relationship with persons holding through Euroclear Participants.
DTC management is aware that some computer applications, systems and
the like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter Year 2000
problems. DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and interest payments) to Noteholders, book-entry
deliveries, and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to properly perform its services is also
dependent upon other parties, including, but not limited to, issuers and their
agents, as well as third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information and the
provision of services, including telecommunications and electrical utility
service providers, among others. DTC has informed the Industry that it is
contacting (and will continue to contact) third party vendors from whom DTC
acquires services to: (i) impress upon them the importance of such services
being Year 2000 compliant; and (ii) determine the extent of their efforts for
Year 2000 remediation (and, as appropriate, testing) of their services. In
additional, DTC is in the process of developing such contingency plans as it
deems appropriate.
According to DTC, the foregoing information with respect to DTC has
been provided to the Industry for informational purposes only and is not
intended to serve as a representation, warranty, or contract modification of any
kind.
Except as required by law, neither the Issuer nor any paying agent
will have any liability for any aspect of the records relating to or payments
made or account of beneficial ownership interests of the related Notes held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to beneficial ownership interests.
Definitive Notes
The Notes of any series will be issued in fully registered,
certificated form ("Definitive Notes") to the Noteholders or their nominees,
rather than to DTC or its nominee, only if (i) the Servicer advises in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as Trust Depository with respect to such Notes and such Issuer is unable to
locate a qualified successor, (ii) the Servicer, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence of an
"Event of Default" under the Indenture or a default by the Servicer under the
Assignment and Servicing Agreement. Noteholders representing at least a
majority of the outstanding principal amount of the Notes of that series advise
the Issuer through DTC in writing that the continuation of a book-entry system
through DTC (or a successor thereto) is no longer in such Noteholders' best
interest.
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Upon the occurrence of any event described in the immediately
preceding paragraph, the Trustee will be required to notify all affected
Noteholders through Participants of the availability of Definitive Notes. Upon
surrender by DTC of its Notes and receipt of instructions for reregistration,
the Issuer will reissue DTC's Notes as Definitive Notes to the Noteholders in
the amounts specified in the reregistration instructions.
Distributions of principal of, and interest on, Definitive Notes will
thereafter be made by the Issuer in accordance with the procedures set forth in
the Indenture directly to holders of Definitive Notes in whose names the
Definitive Notes were registered at the close of business on the applicable
Record Date. Distributions will be made by check mailed to the address of such
holder as it appears on the register maintained by the Trustee. The final
payment on any Definitive Note, however, will be made only upon presentation and
surrender of the Note at the office or agency specified in the notice of final
distribution to the applicable Noteholders.
Definitive Notes will be transferable and exchangeable at the offices
of the Issuer or Trustee or of a certificate registrar named in a notice
delivered to holders of the Definitive Notes. No service charge will be imposed
for any registration of transfer or exchange, but the Issuer or the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
Reports to Noteholders
On or prior to each Payment Date, the Servicer or the Trustee will
forward or cause to be forwarded to each holder of record of a Class of Notes a
statement or statements with respect to the related Asset Pool setting forth the
information specifically described in the Transaction Document which generally
will include the following information:
(i) the amount of the distribution with respect to that class of
Notes;
(ii) the amount of the distribution allocable to principal;
(iii) the amount of the distribution allocable to interest;
(iv) the Discounted Present Value of the Leases in the related
Asset Pool;
(v) the Asset Pool balance;
(vi) the aggregate outstanding principal balance and the Pool
Factor for such Class of Notes after giving effect to all payments reported
under (ii) above on such Payment Date;
(vii) the amount paid to or retained by the Servicer, if any, with
respect to the related Due Period; and
(viii) the aggregate purchase amounts for Lease Receivables that have
been reacquired, if any, for the related Due Period.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year, the Issuer or the Servicer will provide to the
Noteholders a statement containing the amounts described in (ii) and (iii) above
for that calendar year and any other information required by applicable tax
laws, for the purpose of the Noteholders' preparation of federal income tax
returns.
Description of the Transaction Documents
The following summary describes the material terms of each transaction
document pursuant to which an Asset Pool will be created and a series of Notes
will be issued. For purposes of this Prospectus, the term "Transaction
Documents" as used with respect to a series of Notes means the Indenture and
Assignment and Servicing Agreement relating to a series of Notes. Forms of the
Transaction Documents have been filed as exhibits
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to the Registration Statement of which this Prospectus forms a part. This
description is not a complete summary of all the provisions of the respective
Transaction Documents.
Assignment and Servicing Agreement
Acquisition of the Lease Receivables. On the Issuance Date, the
Seller will acquire the related Lease Receivables from the Originator pursuant
to an Assignment and Servicing Agreement in which the Originator will make
certain representations and warranties concerning the Lease Receivables. The
rights and benefits of the Seller under the Assignment and Servicing Agreement
will be assigned to the Issuer by the Seller pursuant to the Assignment and
Servicing Agreement and, in turn, pledged to the Trustee under an Indenture.
Contemporaneously, the Issuer will acquire the related Lease
Receivables from the Seller pursuant to the Assignment and Servicing Agreement.
The Issuer will pledge the Issuer's right, title and interests in and to the
Lease Receivables to the Trustee for the benefit of Noteholders under the
Indenture. The rights and benefits of the Issuer under the Assignment and
Servicing Agreement will be assigned to the Trustee on behalf of Noteholders as
collateral for the Notes by the Issuer under the Indenture.
Additions, Substitutions and Adjustments. The Originator will be
obligated to purchase from the Issuer its interest in any Lease in the Asset
Pool that has become a Warranty Lease unless an Eligible Lease is substituted
therefor in accordance with the related Assignment and Servicing Agreement.
Pursuant to the Assignment and Servicing Agreement, the Originator
will have the option to substitute Eligible Leases for Non-Performing Leases,
Adjusted Leases and Warranty Leases and to add Additional Leases. The
percentage of Leases in any Asset Pool that can be substituted for Non-
Performing Leases, Adjusted Leases and Warranty Leases will be limited, as
described in the related Prospectus Supplement, to a percentage of the aggregate
Discounted Present Value of the Leases in the Asset Pool as of the related Cut-
Off Date. See "Description of the Notes -- Prepayment and Yield
Considerations."
Servicing. The Servicer will service the Lease Receivables in an
Asset Pool pursuant to an Assignment and Servicing Agreement. The Servicer may
delegate its servicing responsibilities to one or more sub-servicers, but will
not be relieved of its liabilities with respect thereto.
The Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the Assignment and Servicing Agreement. An uncured breach of
such a representation or warranty that in any respect materially and adversely
affects the interests of the Noteholders will constitute a Servicer Event of
Default by the Servicer.
The Assignment and Servicing Agreement will provide that the Servicer
will take or cause to be taken all actions as are necessary or advisable to
service, administer and collect each Lease in accordance with customary and
prudent servicing procedures for leases of a similar type, and in accordance
with applicable laws, rules and regulations and, in any event, according to a
standard of care not less than that which it applies to leases it services for
its own account.
Advances by the Servicer. Prior to any Payment Date, with respect to
any series, the Servicer may, but will not be required to, advance (each, a
"Servicer Advance") to the Trustee an amount sufficient to cover delinquencies
on Leases with respect to the prior Due Period. The Servicer will be entitled
to reimbursement for Servicer Advances.
Servicing Compensation. The Servicer will be entitled to receive a
servicing fee for each Due Period (the "Servicing Fee") in an amount equal to a
specified percentage per annum of the Discounted Present Value of the Performing
Leases or the Outstanding Principal Amount of the Notes, as of the first day of
such Due Period. The Indenture will specify the priority of the Servicing Fee
in relation to payments to Noteholders and other persons. The Servicing Fee may
be paid prior to any distribution to the Noteholders.
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If so provided in the related Transaction Documents, the Servicer will
also be entitled to reimbursement of out-of-pocket expenses reasonably incurred
in the course of performance of its duties as Servicer and to collect and retain
any late fees, the penalty portion of interest paid on past due amounts and
other administrative fees or similar charges allowed by applicable law with
respect to the Lease Receivables and any prepayment premiums or other payments
in excess of the present value of all outstanding amounts owed under a Lease by
a Lessee as a result of the early termination thereof, and will be entitled to
reimbursement from the Issuer for certain liabilities. Payments by or on behalf
of Lessees will be allocated to scheduled payments and late fees and other
charges in accordance with the Servicer's normal practices and procedures.
The Servicing Fee will compensate the Servicer for performing the
functions of a third-party servicer of similar types of leases as an agent for
their beneficial owner. The Servicing Fee also will compensate the Servicer for
administering the Lease Receivables, accounting for collections and furnishing
statements to the Issuer and the Trustee with respect to distributions. The
Servicing Fee also will reimburse the Servicer for certain taxes, accounting
fees, outside auditor fees, trustees fees, data processing costs and other costs
incurred in connection with administering the Lease Receivables.
Statements to Trustees and Issuer. Prior to each Payment Date for a
series of Notes, the Servicer will provide to the Trustee as of the close of
business on the last day of the preceding related Due Period, a statement
setting forth substantially the same information as is required to be provided
in the periodic reports provided to Noteholders described under "Description of
the Notes--Reports to Noteholders."
Evidence as to Compliance. The Assignment and Servicing Agreement
will provide that a firm of independent public accountants will furnish to the
Issuer and the Trustee, annually, a statement as to compliance by the Servicer
during the preceding twelve months (or, in the case of the first such
certificate, the period from the applicable Issuance Date) with certain
standards relating to the servicing of the Lease Receivables.
The Assignment and Servicing Agreement will also provide for the
annual delivery to the Issuer and/or the Trustee of a certificate signed by an
officer of the Servicer stating that the Servicer either has fulfilled its
obligations under the Assignment and Servicing Agreement in all material
respects throughout the preceding 12 months (or, in the case of the first
certificate, the period from the applicable Issuance Date) or, if there has been
a default in the fulfillment of any obligation in any material respect,
describing each default. The Servicer also will agree to give the Trustee
notice of certain Servicer Events of Defaults (as defined below) under the
related Assignment and Servicing Agreement.
Copies of such statements and certificates may be obtained by
Noteholders owning at least 25% of the outstanding principal amount of the Notes
of the relevant series upon request in writing addressed to the Trustee or the
Servicer.
Certain Matters Regarding the Servicer. The Assignment and Servicing
Agreement will provide that the Servicer may not resign from its obligations and
duties as Servicer thereunder, except upon determination that the performance by
the Servicer of such duties is no longer permissible under applicable law. No
resignation by the Servicer will become effective until the Trustee or a
successor servicer has assumed the Servicer's servicing obligations and duties
under the Assignment and Servicing Agreement.
The Assignment and Servicing Agreement will further provide that
neither the Servicer nor any of its directors, officers, employees, or agents
will be under any liability to the Issuer or the Noteholders for taking any
action or for refraining from taking any action pursuant to the Assignment and
Servicing Agreement; provided, however, that neither the Servicer nor any of
-------- -------
those other persons will be protected against any liability that would otherwise
be imposed based on any breach of the warranties, representations or warranties
made by the Servicer in the Assignment and Servicing Agreement or by reason of
willful misfeasance, bad faith or negligence in the performance or non-
performance of duties.
Under the circumstances specified in the Assignment and Servicing
Agreement, any entity into which the Servicer may be merged or consolidated, or
any entity resulting from any merger or consolidation to which the Servicer is a
party, or any entity succeeding to the business of the Servicer or, with respect
to its
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obligations as Servicer, which corporation or other entity in each of the
foregoing cases assumes the obligations of the Servicer, will be the successor
to the Servicer under the Assignment and Servicing Agreement.
Servicer Events of Default. The following events and conditions, and
any additional events and conditions that are described in the related
Prospectus Supplement, will be defined in the Assignment and Servicing
Agreement as "Servicer Events of Default":
(a) failure on the part of the Servicer to remit to the Trustee
within three Business Days following the receipt thereof any
monies received by the Servicer required to be remitted to the
Trustee under the Assignment and Servicing Agreement;
(b) failure on the part of the Servicer to pay to the Trustee on the
date when due, any payment required to be made by the Servicer
pursuant to the Assignment and Servicing Agreement;
(c) default on the part of either the Servicer or (so long as IOS
Capital is the Servicer) IOS Capital in its observance or
performance in any material respect of certain covenants or
agreements in the Assignment and Servicing Agreement which
failure continues unremedied for a period of 30 days after the
earlier of (i) the date it first becomes known to any officer of
IOS Capital or the Servicer, as the case may be, and (ii) the
date on which written notice thereof requiring the same to be
remedied shall have been given to the Servicer or IOS Capital, as
the case may be, by the Trustee, or to the Servicer or IOS
Capital, as the case may be, and the Trustee by any Noteholder;
(d) if any representation or warranty of IOS Capital made in the
Assignment and Servicing Agreement proves to be incorrect in any
material respect as of the time made; provided, however, that the
-------- -------
breach of any representation or warranty made by IOS Capital in
such Assignment and Servicing Agreement will be deemed to be
"material" only if it affects the Noteholders or the
enforceability of the related Indenture or of the related Notes;
and provided, further, that a material breach of any
-------- -------
representation or warranty made by IOS Capital in an Assignment
and Servicing Agreement with respect to any of the Lease
Receivables subject thereto will not constitute a Servicer Event
of Default if IOS Capital purchases such Lease Receivable in
accordance with the Assignment and Servicing Agreement to the
extent provided therein;
(e) certain insolvency or bankruptcy events relating to the Servicer;
(f) the failure of the Servicer to make one or more payments due with
respect to aggregate recourse debt or other obligations exceeding
$5,000,000, or the occurrence of any event or the existence of
any condition, the effect of which event or condition is to cause
(or permit one or more persons to cause) more than $5,000,000 of
aggregate recourse debt or other obligations of the Servicer to
become due before its (or their) stated maturity or before its
(or their) regularly scheduled dates of payment so long as such
failure, event or condition shall be continuing and not waived by
the person or persons entitled to performance; or
(g) a final judgment or judgments (or decrees or orders) for the
payment of money aggregating in excess of $5,000,000 and any one
of such judgments (or decrees or orders) has remained unsatisfied
and in effect for any period of 60 consecutive days without a
stay of execution.
Rights upon Servicer Events of Default. As long as a Servicer Event
of Default under the Assignment and Servicing Agreement remains unremedied, the
Trustee may, and upon the instruction of holders of Notes evidencing not less
than 66-2/3% in principal amount of the Notes of the relevant series or, if and
to the extent described in the related Prospectus Supplement, any credit
enhancement provider, shall, terminate all the rights and obligations of the
Servicer, if any, under the related Assignment and Servicing Agreement,
whereupon a successor servicer appointed by such Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under the Assignment
and Servicing Agreement and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee or similar official has been
appointed for the Servicer, and no Servicer Event of Default other than the
appointment of a successor servicer has occurred, the bankruptcy trustee or
official may have the power to
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prevent the Trustee or the Noteholders from effecting a transfer of servicing.
In the event that the Trustee is unwilling or unable to so act, it may, subject
to certain limitations, appoint, or petition a court of competent jurisdiction
for the appointment of, a successor servicer. The Trustee may make arrangements
for compensation to be paid to the successor, which in no event may be greater
than the servicing compensation payable to the Servicer under the Assignment and
Servicing Agreement or such other amount indicated in the related Prospectus
Supplement.
Indenture
Accounts. The Trustee will establish and maintain one or more
accounts in the name of such Trustee on behalf of the Noteholders into which
payments made on or with respect to the related Lease Receivables shall be
deposited as provided in the related Transaction Documents (the "Collection
Account"). In addition, the Trustee may establish one or more other separate
accounts in the name of the Trustee for the benefit of the Noteholders, (i) for
the deposit of funds for distribution to the Noteholders (a "Distribution
Account"), (ii) to provide reserves to cover shortfalls in Available Funds (a
"Reserve Account"), (iii) to provide funds for the purchase of additional Lease
Receivables during any applicable pre-funding period (a "Pre-Funding Account"),
or (iv) for any other purpose (an "Additional Account").
Funds in the Collection Account and any Distribution Account, Reserve
Account, Pre-Funding Account or Additional Account (collectively, the
"Transaction Accounts") will be invested as provided in the related Indenture in
Eligible Investments. "Eligible Investments" are generally limited to
investments acceptable to the Rating Agencies as being consistent with the
rating of the Notes. Eligible Investments generally are limited to obligations
that mature not later than the Business Day immediately preceding the next
succeeding Payment Date.
The Transaction Accounts will be maintained as Eligible Accounts.
"Eligible Account" means either (a) an account maintained with a depository
institution or trust company acceptable to each of the Rating Agencies and any
credit enhancement provider, or (b) a trust account or similar account
maintained with a federal or state chartered depository institution, which may
be an account maintained with the Trustee.
Distributions. Beginning on the first Payment Date, distributions of
principal and interest (or, where applicable, of principal only or interest
only) on each Class of Notes entitled thereto will be made to the Noteholders.
The timing, calculation, allocation, order, source, priorities of, distribution
of, and requirements for each Class of Notes will be set forth in the related
Prospectus Supplement.
Credit Enhancements. The amounts and types of credit enhancement
arrangements, if any, and the provider thereof, if applicable, with respect to
each Class of Notes of a given series will be set forth in the related
Prospectus Supplement. If and to the extent provided in the related Prospectus
Supplement, credit enhancement may be in the form of an insurance policy,
subordination of one or more classes of Notes, reserve accounts,
overcollateralization, letters of credit, credit or liquidity facilities, third
party payments or other support, surety bonds, guaranteed cash deposits or such
other arrangements as may be described in the related Prospectus Supplement or
any combination of two or more of the foregoing. If specified in the related
Prospectus Supplement, credit enhancement for a Class of Notes may cover one or
more other classes of Notes of the same series, and credit enhancement for a
series of Notes may cover one or more other series of Notes.
The presence of credit enhancement for the benefit of any Class or
series of Notes is intended to enhance the likelihood of receipt by the
Noteholders of such Class or series of the full amount of principal and interest
due thereon and to decrease the likelihood that such Noteholders will experience
losses. As more specifically provided in the related Prospectus Supplement, the
credit enhancement for a Class or series of Notes will not provide protection
against all risks of loss and will not guarantee repayment of the entire
principal balance and interest thereon. If losses occur which exceed the amount
covered by any credit enhancement or which are not covered by any credit
enhancement, Noteholders of any Class or series will bear their allocable share
of deficiencies, as described in the related Prospectus Supplement. In
addition, if a form of credit enhancement covers more than one Class of Notes or
more than one series of Notes, Noteholders of any such Class or series will be
subject to the risk that such credit enhancement will be exhausted by the claims
of Noteholders of other series.
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If the protection provided to the Noteholders of a given Class of
Notes by any applicable credit enhancement or by the subordination of another
Class of Notes is insufficient, the Issuer must rely solely on the Asset Pool.
Modification of the Indenture. Under an Indenture, the rights and
obligations of the Issuer and the rights of the Noteholders may be modified by
the Issuer with the consent of the holders of not less than 66-2/3% in aggregate
principal amount of the Notes then outstanding under the Indenture or, if and to
the extent described in the related Prospectus Supplement, the consent of any
credit enhancement provider; but no such modification may be made if it would
result in the reduction or withdrawal of the then current ratings of the
outstanding related Notes and no such modification may be made without the
consent of the holder of each outstanding note affected thereby if it would: (a)
change the fixed maturity of any Note, or the principal amount or interest
amount payable thereof, or change the priority of payment thereof or reduce the
interest rate or the principal thereon or change the place of payment where, or
the coin or currency in which, any Note or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any payment on or
after the maturity thereof; or (b) reduce the above-stated percentage of Notes,
without the consent of the holders of all Notes then outstanding under that
Indenture or (c) modify the provisions of the Indenture restricting
modifications or waivers of the provisions of the Indenture except to increase
any percentage or fraction set forth therein or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each outstanding note affected thereby; or (d) modify or alter the
provisions of the Indenture treating Notes held by the Issuer or any affiliate
of the Issuer as not being "Outstanding" for certain purposes under the
Indenture; or (e) permit the creation of any lien ranking prior to or on a
parity with the lien of the Indenture with respect to any part of any Asset Pool
or, except as provided in the Indenture, terminate the lien of the Indenture on
any part of an Asset Pool at any time subject to the Indenture or deprive any
Noteholder of the security afforded by the lien of the Indenture.
Events of Default. "Events of Default" under an Indenture will
include, in addition to any other events or conditions described in the related
Prospectus Supplement: (i) a default for five days or more in the payment of
any interest on any Note issued under that Indenture; (ii) a default in the
payment of the principal of or any installment of the principal of any Note at
the stated maturity or when the same becomes due and payable; (iii) a default in
the observance or performance in any material respect of any covenant or
agreement regarding the contemplated transaction made in the related Transaction
Documents, or any representation or warranty made by the Issuer in the
Transaction Documents or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect as of the time made, and the
continuation of any default or the failure to cure a breach of a representation
or warranty for a period of 30 days (or in certain circumstances 90 days) after
notice thereof is given to the Issuer by the Trustee or the Issuer and the
Trustee by the holders of at least 25% in principal amount of the Notes then
outstanding; or (iv) certain events of bankruptcy, insolvency, receivership or
liquidation relating to the Issuer.
If an Event of Default occurs, the Trustee or, to the extent described
in the related Prospectus Supplement, any credit enhancement provider may, and
if so directed by holders of not less than 66-2/3% of the then outstanding
principal amount of the Notes, shall, declare the unpaid principal amount of the
related Notes to be immediately due and payable together with all accrued and
unpaid interest thereon. If the Event of Default involves other than non-
payment of principal or interest on the Notes, the Trustee may not sell the
related Lease Receivables unless the sale is for an amount greater than or equal
to the outstanding principal amount of the Notes unless directed to do so by the
holders of 66-2/3% of the then outstanding principal amount of the Notes.
Subsequent to an Event of Default and following any acceleration of
the Notes pursuant to the Indenture, any monies that may then be held or
thereafter received by the Trustee will be applied in the order of priority set
forth in the related Prospectus Supplement at the date or dates fixed by the
Trustee and, in case of the distribution of the entire amount due on account of
principal or interest, upon presentation and surrender of the Notes.
Each Indenture will provide that the holders of 66-2/3% in aggregate
principal amount of the Notes then outstanding or, if and to the extent
described in the related Prospectus Supplement, any credit enhancement provider
will have the right to waive certain defaults and, subject to certain
limitations, to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust power conferred
on the Trustee. The Indenture will provide that in case an Event of Default
shall occur (which shall
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not have been cured or waived), the Trustee will be required to exercise its
rights and powers under such Indenture and to use the degree of care and skill
in their exercise that a prudent man would exercise or use in the conduct of his
own affairs. Subject to these provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the Noteholders unless they shall have offered to the Trustee
security or indemnity satisfactory to the Trustee. Upon request of a Noteholder,
the Trustee will provide information as to the outstanding principal amount of
each Class of Notes.
Redemption. The Issuer may, at its option, redeem the Notes, as a
whole, at their principal amount, without premium, together with interest
accrued to the date fixed for redemption if on any payment date the Discounted
Present Value the Leases is less than or equal to 10% of the Discounted Present
Value of the Leases in the related Asset Pool as of the original Cut-Off Date.
The Issuer will give notice of redemption to each Noteholder and the Trustee at
least 30 days before the Payment Date fixed for prepayment. Upon deposit of
funds necessary to effect redemption, the Trustee shall pay the remaining unpaid
principal amount on the Notes and all accrued and unpaid interest as of the
Payment Date fixed for redemption.
Legal Aspects of the Lease Receivables
General
The Leases will either be "chattel paper" as defined in the Uniform
Commercial Code or Leases that are not treated materially differently from
"chattel paper" for purposes of title transfer, security interests or remedies
on default. Pursuant to the UCC for most purposes, a sale of chattel paper is
treated in a manner similar to a transaction creating a security interest in
chattel paper. In connection with the creation of an Asset Pool, the Issuer,
the Originator, the Servicer and/or the Seller will cause the filing of
appropriate UCC-1 financing statements with respect to the Leases to be made
with the appropriate governmental authorities. Under the Assignment and
Servicing Agreement, the Servicer will be obligated from time to time to take
any actions necessary to protect, perfect and preserve the Issuer's or the
Trustee's interests in the Leases and their proceeds, as the case may be.
The Leases are triple-net leases, requiring the Lessees to pay all
taxes, maintenance and insurance associated with the Equipment, and provide that
they are noncancellable by the Lessees.
The Leases are full payoff leases, under which the obligations of the
Lessee are absolute and unconditional, regardless of any defense, setoff or
abatement which the Lessee may have against IOS Capital, as Originator or
Servicer, the Issuer, or any other person or entity whatsoever.
Defaults under the Leases are generally the result of failure to pay
amounts when due, failure to observe other covenants in the Lease,
misrepresentations by, or insolvency, bankruptcy or appointment of a trustee or
receiver for, the Lessee under a Lease. The remedies of the lessor (and the
Issuer as assignee) following any applicable notice and cure period are
generally to enforce the performance by the Lessee of the terms and covenants of
the Lease (including the Lessee's obligations to make scheduled payments) or
recover damages of the breach thereof, to accelerate the balance of the
remaining scheduled payments paid or to terminate the rights of the Lessee under
such Lease. Although the Leases permit the lessor to repossess and dispose of
the related Equipment in the event of a lease default, and to credit the
proceeds against the Lessee's liabilities thereunder, these remedies may be
limited where the Lessee thereunder is subject to bankruptcy, or other
insolvency proceedings.
UCC and Bankruptcy Considerations
The Originator will transfer all the Originator's interest in the
Equipment to the Seller. The Seller will assign its interest as secured party
in the Equipment relating to the Leases to the Issuer, which in turn will pledge
that interest to the Trustee for the benefit of the Noteholders. The Seller
will not transfer any of its ownership interests in any of the Equipment.
Because of this, the Trustee, on behalf of the Noteholders, will have no
interest in or recourse to any of the Equipment other than by virtue of the
security interest granted to the Issuer in the Seller's interest in the
Equipment and the Issuer's pledge of that interest to the Trustee. As a result,
the Trustee may be unable to foreclose on the Equipment in the event of a
default by a Lessee on any Lease and Noteholders may experience delays in
receiving payments and suffer a loss of their investment in the Notes. UCC
financing
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statements will not be filed to perfect any security interest in the Equipment.
Moreover, Equipment may be subject to a superior lien. In this case, the senior
lienholder may be entitled to be paid the full amount of the indebtedness owed
to it out of the sale proceeds before the proceeds could be applied to the
payment of claims on behalf of the Issuer or Noteholders. In addition, in the
event of bankruptcy of the Originator or the Seller, the security interest in
the Equipment of the Issuer or Trustee may be subject to avoidance under the
Bankruptcy Code of 1978, as amended (the "Bankruptcy Code").
In the event of a default by the Lessee under a finance lease, the
Servicer may take action to enforce the Non-Performing Lease by repossession and
resale of the Equipment. Under the UCC in most states, a creditor can, without
prior notice to the debtor, repossess assets securing a defaulted contract by
the Lessee's voluntary surrender of such assets or by "self-help" repossession
that does not involve a breach of the peace or by judicial process.
In the event of a default by the Lessee under a finance lease, some
jurisdictions require that the Lessee be notified of the default and be given a
time period within which it may cure the default prior to repossession.
Generally, this right of reinstatement may be exercised on a limited number of
occasions in any one-year period.
The UCC and other state laws place restrictions on repossession sales,
including requirements that the secured party provide the Lessee with reasonable
notice of the date, time and place of any public sale and/or the date after
which any private sale of the collateral may be held and that any such sale be
conducted in a commercially reasonable manner. The Assignment and Servicing
Agreement may require the Servicer to sell promptly any repossessed item of
Equipment or re-lease such Equipment for the benefit of the Noteholders.
Under most state laws, a Lessee has the right to redeem collateral for
its obligations prior to actual sale by paying to the secured party the unpaid
balance of the obligation plus reasonable expenses for repossession, holding and
preparing the collateral for disposition and arranging for its sale, plus, to
the extent provided for in the written agreement of the parties, reasonable
attorneys' fees.
In addition, because the market value of the equipment of the type
subject to the Leases generally declines with age and because of obsolescence,
the net disposition proceeds of Equipment at any time during the term of a Lease
may be less than the outstanding balance of the Lease Payments. Because of
this, and because other creditors may have rights in the related Equipment
superior to those of the Issuer, the Servicer may not be able to recover the
entire amount due on a Non-Performing Lease in the event that the Servicer
elects to repossess and sell the Equipment at any time.
Under the UCC and laws applicable in most states, a creditor is
entitled to obtain a deficiency judgment from a Lessee for any deficiency on
repossession and resale of the asset securing the unpaid balance of the Lessee's
contract. However, some states impose prohibitions or limitations on deficiency
judgments. In most jurisdictions, the courts, in interpreting the UCC, would
impose upon a creditor an obligation to repossess the equipment in a
commercially reasonable manner and to "mitigate damages" in the event of a
Lessee's failure to cure a default. The creditor would be required to exercise
reasonable judgment and follow acceptable commercial practice in seizing and
disposing of the equipment and to offset the net proceeds of such disposition
against its claim. In addition, a Lessee may successfully invoke an election of
remedies defense to a deficiency claim in the event that the Servicer's
repossession and sale of the Equipment is found to be a retention discharging
the Lessee from all further obligations under UCC Section 9-505(2). If a
deficiency judgment were granted, the judgment would be a personal judgment
against the Lessee for the shortfall, but a defaulting Lessee may have very
little capital or sources of income available following repossession.
Therefore, it may not be useful to seek a deficiency judgment or, if one is
obtained, it may be settled at a significant discount or be uncollectible.
Certain statutory provisions, including federal and state bankruptcy
and insolvency laws, may also limit the ability of the Servicer to repossess and
resell collateral or obtain a deficiency judgment. In the event of the
bankruptcy or reorganization of a Lessee, various provisions of the Bankruptcy
Code and related laws may interfere with or eliminate the ability of the
Servicer, the Issuer or the Trustee to enforce its rights under the Lease
Receivables. If bankruptcy proceedings were instituted in respect of a Lessee,
the Issuer and/or Trustee could be prevented from continuing to collect payments
due from or on behalf of the Lessee or exercising any remedies
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without the approval of the bankruptcy court, and the bankruptcy court could
permit the Lessee to use or dispose of the Equipment and provide the Issuer
and/or Trustee with a lien on substitute collateral, so long as such substitute
collateral constituted "adequate protection" as defined under the Bankruptcy
Code.
In the case of operating leases, the Bankruptcy Code grants to the
bankruptcy trustee or the debtor-in-possession a right to elect to assume or
reject any executory contract or unexpired lease. Any rejection of this type of
lease or contract constitutes a breach of the lease or contract, entitling the
nonbreaching party to a claim for damages for breach of contract. The net
proceeds from any resulting judgment would be deposited by the Servicer into the
Collection Account and allocated to the Noteholders as more fully described
herein and in the related Prospectus Supplement. Upon the bankruptcy of a
Lessee, if the bankruptcy trustee or debtor-in-possession elected to reject a
Lease, the flow of scheduled payments to Noteholders would cease. In the event
that, as a result of the bankruptcy of a Lessee, the Leases become Non-
Performing Leases, no recourse would be available against the Originator (except
for misrepresentation or breach of warranty) and the Noteholders could suffer a
loss. Similarly, upon the bankruptcy of the Issuer, if the bankruptcy trustee
or debtor-in-possession elected to reject a Lease, the flow of Lease Payments to
the Issuer and the Noteholders would cease. As noted above, however, the Issuer
has been structured so that the filing of a bankruptcy petition with respect to
it is unlikely. See "The Issuer."
In addition, certain of the Leases (but not in excess of 3% of the
related Asset Pool) may be with governmental entities. Payment by governmental
authorities of amounts due under these Leases may be contingent upon legislative
approval. Further, the assignment of their payment obligations may be void or
voidable if not done in compliance with applicable government rules and
regulations. Accordingly, payment delays and collection difficulties may limit
collections with respect to certain governmental Leases.
These UCC and bankruptcy provisions, in addition to the possible
decrease in value of a repossessed item of Equipment, may limit the amount
realized on the sale of the Equipment to less than the amount due on the related
Lease.
Material Federal Income Tax Consequences
General
The following discussion sets forth the material federal income tax
consequences to the original purchasers of the Notes of the purchase, ownership
and disposition of the Notes. The opinion of Dewey Ballantine LLP, special tax
counsel to the Issuer ("Tax Counsel"), does not purport to deal with all federal
tax considerations applicable to all categories of investors. Certain holders,
including insurance companies, tax-exempt organizations, financial institutions
or broker dealers, taxpayers subject to the alternative minimum tax, and holders
that will hold the Notes as other than capital assets, may be subject to special
rules that are not discussed below. In particular, this discussion applies only
to institutional investors that purchase the Notes directly from the Issuer and
hold the Notes as capital assets.
The discussion that follows, and the opinion of Tax Counsel set forth
below are based upon provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), treasury regulations promulgated thereunder as in effect on the
date hereof, and existing judicial and administrative interpretations thereof.
These authorities are subject to change and to differing interpretations, which
could apply retroactively. The opinion of Tax Counsel is not binding on the
courts or the Internal Revenue Service (the "IRS"). Potential investors should
consult their own tax advisors in determining the federal, state, local and any
other tax consequences to them of the purchase, ownership and disposition of the
Notes.
The following discussion addresses lease-backed notes such as the
Notes that are intended to be treated for federal income tax purposes as
indebtedness secured by the underlying Lease Receivables. Tax Counsel has
prepared the following discussion and is of the opinion that such discussion is
correct in all material respects.
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Tax Characterization of the Issuer
Tax counsel is of the opinion that the Issuer will not be treated as
an association (or a publicly traded partnership) taxable as a corporation for
federal income tax purposes.
Tax Characterization of the Notes
Although no transaction closely comparable to that contemplated herein
has been the subject of any treasury regulation, revenue ruling or judicial
decision, based on the application of existing law to the facts as set forth in
the applicable agreements, Tax Counsel is of the opinion that the Notes will be
treated as indebtedness for federal income tax purposes. If characterized as
indebtedness, interest on the Notes will be taxable as ordinary income for
federal income tax purposes when received by Noteholders using the cash method
of accounting ,and when accrued by Noteholders using the accrual method of
accounting. Noteholders using the accrual method of accounting may be required
to report income for tax purposes in advance of receiving a corresponding cash
distribution with which to pay the related tax. Interest received on the Notes
also may constitute "investment income" for purposes of certain limitations of
the Code concerning the deductibility of investment interest expense.
Although it is the opinion of Tax Counsel that the Notes are properly
characterized as indebtedness for federal income tax purposes, no assurance can
be given that such characterization of the Notes will prevail. If the Notes
were treated as an ownership interest in the Leases, all income on the Leases
would be income to the holders of the Notes, and related fees and expenses would
generally be deductible (subject to certain limitations on the deductibility of
miscellaneous itemized deductions by individuals) and certain market discount
and premium provisions of the Code might apply to a purchase of the Notes.
If, alternatively, the Notes were treated as an equity interest in the
Issuer, the Issuer might be classified as a partnership, or as an association
(or a publicly traded partnership) taxable as a corporation. If the Notes were
treated as interests in a partnership, each item of income, gain, loss,
deduction and credit generated through the ownership of the Equipment and the
Lease Receivables by the partnership would be passed through to the Noteholders,
as partners in a partnership according to their respective interests therein.
The timing, amount and character of the income or expenses reportable by the
Noteholders as partners in such a partnership could differ from the income or
expenses reportable by the Noteholders as holders of debt. If the Noteholders
were treated as partners, a cash basis Noteholder might be required to report
income when it accrues to the partnership rather than when it is received by the
Noteholder. Moreover, if Notes were treated as interests in a partnership, an
individual Noteholder's share of expenses of the partnership (such as Servicing
Fees) would be miscellaneous itemized deductions that in the aggregate are
allowed only to the extent they exceed two percent of the individual
Noteholder's adjusted gross income, meaning that the individual Noteholder might
be taxed on a greater amount of income than the stated interest on his or her
Notes. Finally, if a Note were treated as a partnership interest, any taxable
income allocated to a Holder that is a pension, profit sharing or employee
benefit plan or otherwise tax-exempt, could constitute "unrelated business
taxable income."
If the Notes were treated as interests in an association (or a
publicly traded partnership) taxable as a corporation, the resulting entity
would be subject to federal income tax at corporate tax rates on its taxable
income generated by ownership of the Lease Receivables. Moreover, distributions
by the entity on the Notes probably would not be deductible in computing the
entity's taxable income and all or part of any distributions to Noteholders
would probably be treated as dividend income to such Noteholders. Such an
entity-level tax could result in a reduced amount of cash available for
distributions to Noteholders.
Since the Issuer will treat the Notes as indebtedness for federal
income tax purposes, the Trustee (and Participants and Indirect Participants)
will not attempt to satisfy the tax reporting requirements that would apply
under these alternative characterizations of the Notes. Further, if the IRS
were to contend successfully that the Notes are interests in a publicly traded
partnership taxable as a corporation, additional tax consequences would apply to
foreign Noteholders. Investors are urged to consult their own tax advisors with
regard to the potential application of those provisions.
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Discount and Premium
A Note purchased for an amount other than its outstanding principal
amount will be subject to the rules governing original issue discount, market
discount or premium. In very general terms, (i) original issue discount is
treated as a form of interest and must be included in a beneficial owner's
income as it accrues (regardless of the beneficial owner's regular method of
accounting) using a constant yield method; (ii) market discount is treated as
ordinary income and must be included in a beneficial owner's income as principal
payments are made on the Note (or upon a sale of a Note); and (iii) if a
beneficial owner so elects, premium may be amortized over the life of the Note
and offset against inclusions of interest income. These tax consequences are
discussed in greater detail below. Beneficial owners who are required to
include the interest income as it accrues may be required to report income for
tax purposes in advance of receiving a corresponding cash contribution with
which to pay the related tax.
Original Issue Discount. In general, a Note will be considered to be
issued with original issue discount equal to the excess, if any, of its "stated
redemption price at maturity" over its "issue price." The issue price of a Note
is the initial offering price to the public (excluding bond houses and brokers)
at which a substantial amount of the Notes is sold. The issue price also
includes any accrued interest attributable to the period between the beginning
of the Due Period and the closing date relating to such series of Notes (the
"Issuance Date"). The stated redemption price at maturity of a Note that has a
notional principal amount or receives principal only or that is or may provide
for accruals of interest is equal to the sum of all distributions to be made
under that Note. The stated redemption price at maturity of any other Note is
its stated principal amount, plus an amount equal to the excess (if any) of the
interest payable on the first Payment Date over the interest that accrues for
the period from the Issuance Date to the first Payment Date. The Trustee will
supply, at the time and in the manner required by the IRS, to beneficial owners,
brokers and middlemen information with respect to the original issue discount
accruing on the Notes.
Notwithstanding the general definition, original issue discount will
be treated as zero if the discount is less than 0.25 percent of the stated
redemption price at maturity of the Note multiplied by its weighted average
life. The weighted average life of a Note is apparently computed for this
purpose as the sum, for all distributions included in the stated redemption
price at maturity, of the amounts determined by multiplying (i) the number of
complete years (rounding down for partial years) from the Issuance Date until
the date on which each of those distributions is expected to be made by (ii) a
fraction, the numerator of which is the amount of the distribution and the
denominator of which is the Note's stated redemption price at maturity. Even if
original issue discount is treated as zero under this rule, the actual amount of
original issue discount must be allocated to the principal distributions on the
Note and, when each such distribution is received, gain equal to the discount
allocated to the distribution will be recognized.
The adjusted issue price of a Note at any time will equal the issue
price of such Note, increased by the aggregate amount of previously accrued
original issue discount with respect to that Note, and reduced by the amount of
any distributions made on that Note as of that time of amounts included in the
stated redemption price at maturity. The original issue discount accruing
during any accrual period will then be allocated ratably to each day during the
period to determine the daily portion of original issue discount.
A subsequent purchaser of a Note that purchases it at a cost less than
its remaining stated redemption price at maturity also will be required to
include in gross income for each day on which it holds the Note, the daily
portion of original issue discount with respect to the Note (but reduced, if the
cost of the Note to the purchaser exceeds its adjusted issue price, by an amount
equal to the product of (i) that daily portion and (ii) a constant fraction, the
numerator of which is that excess and the denominator of which is the sum of the
daily portions of original issue discount on the Note for all days on or after
the day of purchase).
Market Discount. A beneficial owner that purchases a Note at a market
discount, that is, at a purchase price less than the remaining stated redemption
price at maturity of such Note (or, in the case of a Note with original issue
discount, its adjusted issue price), will be required to allocate each principal
distribution first to accrued market discount on the Note, and recognize
ordinary income to the extent such distribution does not exceed the aggregate
amount of accrued market discount on such Note not previously included in
income. With respect to Notes that have unaccrued original issue discount, such
market discount must be included in income in addition to any original issue
discount. A beneficial owner that incurs or continues indebtedness to acquire a
Note at a market
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discount may also be required to defer the deduction of all or a portion of the
interest on such indebtedness until the corresponding amount of market discount
is included in income. In general terms, market discount on a Note may be
treated as accruing either (i) under a constant yield method or (ii) in
proportion to remaining accruals of original issue discount, if any, or if none,
in proportion to remaining distributions of interest on the Note. The Trustee
will make available, as required by the IRS, to beneficial owners of Notes
information necessary to compute the accrual of market discount.
Notwithstanding the above rules, market discount on a Note will be
considered to be zero if such discount is less than 0.25 percent of the
remaining stated redemption price at maturity of such Note multiplied by its
weighted average remaining life. Weighted average remaining life presumably
would be calculated in a manner similar to weighted average life, taking into
account payments (including prepayments) prior to the date of acquisition of the
Note by the subsequent purchaser. If market discount on a Note is treated as
zero under this rule, the actual amount of market discount must be allocated to
the remaining principal distributions on the Note and, when each such
distribution is received, gain equal to the discount allocated to such
distribution will be recognized.
Premium. A purchaser of a Note that purchases such Note at a cost
greater than its remaining stated redemption price at maturity will be
considered to have purchased such Note (a "Premium Note") at a premium. Such a
purchaser need not include in income any remaining original issue discount and
may elect, under section 171(c)(2) of the Code, to treat such premium as
"amortizable bond premium." If a beneficial owner makes such an election, the
amount of any interest payment that must be included in such beneficial owner's
income for each period ending on a Payment Date will be reduced by the portion
of the premium allocable to such period based on the Premium Note's yield to
maturity. Such premium amortization should be made using constant yield
principles. If such election is made by the beneficial owner, the election will
also apply to all bonds the interest on which is not excludible from gross
income ("fully taxable bonds") held by the beneficial owner at the beginning of
the first taxable year to which the election applies and to all such fully
taxable bonds thereafter acquired by it, and is irrevocable without the consent
of the IRS. If such an election is not made, (i) such a beneficial owner must
include the full amount of each interest payment in income as it accrues, and
(ii) the premium must be allocated to the principal distributions on the Premium
Note and when each such distribution is received, a loss equal to the premium
allocated to such distribution will be recognized. Any tax benefit from the
premium not previously recognized will be taken into account in computing gain
or loss upon the sale or disposition of the Premium Note.
Special Election. A beneficial owner may elect to include in gross
income all "interest" that accrues on a Note by using a constant yield method.
For purposes of the election, the term "interest" includes stated interest,
acquisition discount, original issue discount, de minimis original issue
discount, market discount, de minimis market discount and unstated interest as
adjusted by any amortizable bond premium or acquisition premium. A beneficial
owner should consult its own tax advisor regarding the time and manner of making
and the scope of the election and the implementation of the constant yield
method.
Sale or Exchange of Notes
If a Note is sold or exchanged, the seller of the Note will recognize
gain or loss equal to the difference between the amount realized on the sale or
exchange and the adjusted basis of the Note. The adjusted basis of a Note will
generally equal its cost, increased by any OID or market discount includible in
income with respect to the Note through the date of sale and reduced by any
principal payments previously received with respect to the Note, any payments
allocable to previously accrued OID or market discount and any amortized market
premium. Subject to the market discount rules, gain or loss will generally be
capital gain or loss if the Note was held as a capital asset. Capital losses
generally may be used only to offset capital gains.
Backup Withholding
Distributions of interest and principal, as well as distributions of
proceeds from the sale of Notes, may be subject to the "backup withholding tax"
under section 3406 of the Code at a rate of 31 percent if recipients of those
distributions fail to furnish to the payor certain information, including their
taxpayer identification numbers, or otherwise fail to establish an exemption
from that tax. Any amounts deducted and withheld from a distribution to
38
<PAGE>
a recipient would be allowed as a credit against such recipient's federal income
tax. Furthermore, certain penalties may be imposed by the IRS on a recipient of
distributions that is required to supply information but that does not do so in
the proper manner.
The IRS has issued withholding regulations (the "Withholding
Regulations"), which make certain modifications to withholding, backup
withholding and information reporting rules. The Withholding Regulations
attempt to unify certification requirements and modify certain reliance
standards. The Withholding Regulations will generally be effective for payments
made after December 31, 2000, although taxpayers may begin compliance with the
Withholding Regulations immediately. Prospective investors are urged to consult
their own tax advisors regarding the Withholding Regulations.
Foreign Investors
Distributions made on a Note to, or on behalf of, a beneficial owner
that is not a U.S. Person generally will be exempt from U.S. federal income and
withholding taxes. The term "U.S. Person " means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision thereof,
an estate that is subject to U.S. federal income tax regardless of the source of
its income, or a trust if a court within the United States can exercise primary
supervision over its administration and at least one United States person has
the authority to control all substantial decisions of the trust. This exemption
is applicable provided (a) the beneficial owner is not subject to U.S. tax as a
result of a connection to the United States other than ownership of the Note,
(b) the beneficial owner signs a statement under penalties of perjury that
certifies that such beneficial owner is not a U.S. Person, and provides the name
and address of such beneficial owner, and (c) the last U.S. Person in the chain
of payment to the beneficial owner receives such statement from such beneficial
owner or a financial institution holding on its behalf and does not have actual
knowledge that such statement is false. Beneficial owners should be aware that
the IRS might take the position that this exemption does not apply to a
beneficial owner that is a "controlled foreign corporation" described in Section
881(c)(3)(C) of the Code.
If income or gain with respect to a Note is effectively connected with
a U.S. trade or business carried on by a Noteholder who or which is not a U.S.
person, the 30 percent withholding tax will not apply but such Noteholder will
be subject to U.S. federal income tax at graduated rates applicable to U.S.
persons.
The Withholding Regulations would require, in the case of Notes held
by a foreign partnership, that (x) the certification described above be provided
by the partners rather than by the foreign partnership and (y) the partnership
provide certain information, including a United States taxpayer identification
number. See "Backup Withholding" above. A look-through rule would apply in the
case of tiered partnerships. Non-U.S. Persons should consult their own tax
advisors regarding the application to them of the Withholding Regulations.
State and Local Tax Consequences
Investors should consult their own tax advisors regarding whether the
purchase of the Notes, either alone or in conjunction with an investor's other
activities, may subject an investor to any state or local taxes based on an
assertion that the investor is either "doing business" in, or deriving income
from a source located in, any state or local jurisdiction. Additionally,
potential investors should consider the state, local and other tax consequences
of purchasing, owning or disposing of a Note. State and local tax laws may
differ substantially from the corresponding federal tax law, and the foregoing
discussion does not purport to describe any aspect of the tax laws of any state
or other jurisdiction. Accordingly, potential investors should consult their
own tax advisors with regard to such matters.
The federal and state income tax discussions set forth above are
included for general information only and may not be applicable depending upon a
Noteholder's particular tax situation. Prospective purchasers should consult
their tax advisors with respect to the tax consequences to them of the purchase,
ownership and disposition of the notes, including the tax consequences under
state, local, foreign and other tax laws and the possible effects of changes in
federal or other tax laws or in the interpretations thereof.
39
<PAGE>
Ratings
Each Class of Notes offered by this Prospectus and the related
Prospectus Supplement will be rated in one of the four highest rating categories
by one or more Rating Agencies. These ratings will address, in the opinion of
such Rating Agencies, the likelihood that the Issuer will be able to make timely
payment of all amounts due on the related Notes in accordance with the terms
thereof. These ratings will neither address any prepayment or yield
considerations applicable to any Notes nor constitute a recommendation to buy,
sell or hold any Notes.
ERISA Considerations
The Prospectus Supplement for each series of Notes will summarize
considerations under ERISA relevant to the purchase of Notes of that series by
employee benefit plans and individual retirement accounts.
Plan of Distribution
The Notes will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices to
be determined at the time of sale or at the time of commitment therefor.
In connection with the sale of the Notes, underwriters may receive
compensation from the Issuer or from purchasers of the Notes in the form of
discounts, concessions or commissions. The underwriters and dealers
participating in the distribution of the Notes may be deemed to be underwriters
in connection with the Notes, and any discounts or commissions received by them
from the Issuer and any profit on the resale of Notes by them may be deemed to
be underwriting discounts and commissions under the Securities Act.
In connection with this offering, the underwriters may over-allot or
effect transactions which stabilize or maintain the market prices of the offered
notes at levels above those which might otherwise prevail in the open market.
Any stabilizing, if commenced, may be discontinued at any time.
The underwriting agreement pertaining to the sale of the Notes will
provide that the obligations of the underwriters will be subject to certain
conditions precedent, that the underwriters will be obligated to purchase all
the Notes subject to that agreement if any are purchased and that, in limited
circumstances, the Issuer will indemnify the underwriters and the underwriters
will indemnify the Issuer against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments required to
be made in respect thereof.
Purchasers of Notes, including dealers, may, depending on the facts
and circumstances of their purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
Notes. Noteholders should consult with their legal advisors in this regard
prior to any such reoffer or sale.
Legal Opinions
Certain legal matters will be passed upon for the Issuer by Don H.
Liu, Esq., General Counsel of the Originator and IKON Office Solutions, the
parent company of the Originator, and for the Underwriters by Dewey Ballantine
LLP, New York, New York. As of the date of this Prospectus, Mr. Liu is a full-
time employee and an officer of IKON Office Solutions and a beneficial owner of
shares of common stock of IKON Office Solutions and options to purchase shares
of common stock of IKON Office Solutions.
Experts
The financial statements of IKON Receivables, LLC appearing in IKON
Receivables, LLC's Annual Report (Form 10-K) for the period ended September 30,
1999 have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such
40
<PAGE>
financial statements are incorporated herein in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
41
<PAGE>
Index Of Terms
Set forth below is a list of the defined terms used in this Prospectus
and the pages on which the definitions of such terms may be found herein.
1934 Act.................................................................... 17
Additional Account.......................................................... 31
Additional Lease............................................................ 23
Adjusted Lease.............................................................. 23
Asset Pool.................................................................. 12
Assignment and Servicing Agreement.......................................... 12
Available Funds............................................................. 22
Bankruptcy Code............................................................. 34
Business Day................................................................ 22
Casualty.................................................................... 23
Casualty Payment............................................................ 23
Cede........................................................................ 24
CLAS........................................................................ 19
Clearstream Participants.................................................... 25
Code........................................................................ 35
Collection Account.......................................................... 31
Commission.................................................................. 17
Cooperative................................................................. 25
Cut-off Date................................................................ 12
Definitive Notes............................................................ 26
Depositories................................................................ 24
Discount Rate............................................................... 16
Discounted Present Value of the Leases...................................... 16
Discounted Present Value of the Performing Leases........................... 16
Distribution Account........................................................ 31
DTC......................................................................... 24
Due Period.................................................................. 22
Early Termination Lease..................................................... 23
Eligible Account............................................................ 31
Eligible Investments........................................................ 31
Eligible Leases............................................................. 14
Equipment................................................................... 12
Euroclear Operator.......................................................... 26
Euroclear Participants...................................................... 25
Events of Default........................................................... 32
High Risk Review List....................................................... 19
IKON marketplaces........................................................... 18
IKON Office Solutions....................................................... 17
Indirect Participants....................................................... 24
Industry.................................................................... 26
IOS Capital................................................................. 12
IRS......................................................................... 35
Issuer...................................................................... 12
Lease....................................................................... 12
Lease Payment............................................................... 22
Lease Receivables........................................................... 12
Lessee...................................................................... 12
Lessees..................................................................... 12
Manager..................................................................... 13
Non-Performing Leases....................................................... 23
Originator.................................................................. 12
42
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Originator's Leasing Business............................................... 13
Participants................................................................ 24
Payment Date................................................................ 17
Pool Factor................................................................. 17
Pre-Funding Account......................................................... 31
Premium Note................................................................ 38
Rating Agencies............................................................. 21
Rating Agency............................................................... 21
Reserve Account............................................................. 31
Retainable Deposit.......................................................... 23
Rules....................................................................... 25
Seller...................................................................... 12
Servicer.................................................................... 12
Servicer Advance............................................................ 28
Servicer Events of Default.................................................. 30
Servicing Fee............................................................... 28
Substitute Lease............................................................ 23
Systems..................................................................... 26
Tax Counsel................................................................. 35
Termination Payment......................................................... 23
Terms and Conditions........................................................ 26
Transaction Accounts........................................................ 31
Transaction Documents....................................................... 27
Trust Depository............................................................ 25
U.S. Person................................................................. 39
Warranty Lease.............................................................. 23
43
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the amount of fees and expenses (other
than underwriting discounts and commissions) to be incurred in connection with
the issuance and distribution of the Offered Notes.
SEC Filing Fee................................................ $ 430,000
Indenture Trustee's Fees and Expenses......................... 30,000
Legal Fees and Expenses....................................... 300,000
Accounting Fees and Expenses.................................. 155,000
Printing and Engraving Expenses............................... 45,000
Blue Sky Qualification and Legal Investment Fees
and Expenses................................................. 35,000
Rating Agency Fees............................................ 30,000
Miscellaneous................................................. 230,000
- --------------------------------------------------------------------------------
TOTAL $1,255,000
==========
____________________________
Item 15. Indemnification of Managers and Officers.
Indemnification. Under the Delaware Limited Liability Company Act, the
Registrant has the power and in some instances may be required to provide an
agent, including an officer or manager, who was or is a party or is threatened
to be made a party to certain proceedings, with indemnification against certain
expenses, judgments, fines, settlements and other amounts under certain
circumstances.
Section 7.1 of the Limited Liability Company Agreement of IKON Receivables,
LLC provides that all officers and managers of the company shall be indemnified
by the company from and against all expenses, liabilities or other matters
arising out of their status as an officer or manager for their acts, omissions
or services rendered in such capacities. IOS Capital, Inc., the ultimate
corporate parent of IKON Receivables, LLC., maintains certain policies of
liability insurance coverage for the officers and managers of IOS Capital, Inc.
and certain of its subsidiaries, including IKON Receivables, LLC.
The form of the Underwriting Agreement, filed as Exhibit 1.1 to this
Registration Statement, provides that IKON Receivables, LLC will indemnify and
reimburse the underwriter(s) and each controlling person of the underwriter(s)
with respect to certain expenses and liabilities, including liabilities under
the 1933 Act or other federal or state regulations or under the common law,
which arise out of or are based on certain material misstatements or omissions
in the Registration Statement. In addition, the Underwriting Agreement provides
that the underwriter(s) will similarly indemnify and reimburse IKON Receivables,
LLC with respect to certain material misstatements or omissions in the
Registration Statement which are based on certain written information furnished
by the underwriter(s) for use in connection with the preparation of the
Registration Statement.
Insurance. As permitted under the Delaware Limited Liability Company Act,
the Registrant's Limited Liability Company Agreement permit the managers to
purchase and maintain insurance on behalf of the Registrant's agents, including
its officers and managers, against any liability asserted against them in such
capacity or arising out
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<PAGE>
of such agents' status as such, whether or not such Registrant would have the
power to indemnify them against such liability under applicable law.
Item 16. Exhibits.
1.1 Form of Underwriting Agreement.
3.1 Certificate of Formation of IKON Receivables, LLC.
3.2 Limited Liability Company Agreement of IKON Receivables, LLC.*
4.1 Form of Indenture between the Issuer and the Indenture Trustee.
5.1 Opinion of Dewey Ballantine LLP with respect to validity.
8.1 Opinion of Dewey Ballantine LLP with respect to tax matters.
10.1 Form of Assignment and Servicing Agreement.
23.1 Consents of Dewey Ballantine (included in Exhibit 8.1 hereto).
23.2 Consents of Dewey Ballantine LLP (included in Exhibit 5.1 hereto).
23.3 Consent of Independent Auditor
25.1 Form of Statement of Eligibility of Indenture Trustee**
__________________________
* Previously filed on May 7, 1999 in connection with Registration Statement
on Form S-3 (Registration No. 333- 71073) and incorporated herein by reference.
** To be filed subsequently.
Item 17. Undertakings.
A. Undertaking in respect of indemnification
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to managers, officers and controlling persons of the Registrant
pursuant to the provisions described above in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a manager, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such manager, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of their counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by them is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
B. Undertaking pursuant to Rule 415.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which is registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the
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<PAGE>
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the Registration Statement
or any material change of such information in the Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply if the information
required to be included in the post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
C. Undertaking pursuant to Rule 430A.
The Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
D. Undertaking pursuant to the Trust Indenture Act of 1939.
The Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act ("Act") in accordance with the
rules and regulations prescribed by the Commission under section 305(b)(2) of
the Act.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on the 28th day of April,
2000. As of the date hereof, the Registrant reasonably believes that the
Security rating requirement for asset-backed offerings on Form S-3 will be met
at the time of each sale.
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING INC.,
as Sole Member and Initial Manager
By: /s/ Russell Slack
------------------
Name: Russell Slack
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Russell Slack President & Director April 28, 2000
- -----------------------
Russell Slack
/s/ Harry Kozee C.F.O., Vice President & Director April 28, 2000
- -----------------------
Harry Kozee
/s/ Jack Quinn Vice President, Treasurer & Director April 28, 2000
- -----------------------
Jack Quinn
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<PAGE>
EXHIBIT INDEX
1.1 Form of Underwriting Agreement.
3.1 Certificate of Formation of IKON Receivables, LLC.
3.2 Limited Liability Company Agreement of IKON Receivables, LLC.*
4.1 Form of Indenture between the Issuer and the Indenture Trustee.
5.1 Opinion of Dewey Ballantine LLP with respect to validity.
8.1 Opinion of Dewey Ballantine LLP with respect to tax matters.
10.1 Form of Assignment and Servicing Agreement.
23.1 Consents of Dewey Ballantine LLP (included in Exhibit 8.1 hereto).
23.2 Consents of Dewey Ballantine LLP (included in Exhibit 5.1 hereto).
23.3 Consent of Independent Auditor
25.1 Form of Statement of Eligibility of Indenture Trustee**
____________________________
* Previously filed on May 7, 1999 in connection with Registration Statement
on Form S-3 (Registration No. 333- 71073) and incorporated herein by reference.
** To be filed subsequently.
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<PAGE>
EXHIBIT 1.1
IKON RECEIVABLES LLC
$______ -- ______% Class [A-1] Lease-Backed Notes, Series 2000-1
$______ -- ______% Class [A-2] Lease-Backed Notes, Series 2000-1
$______ -- ______% Class [A-3a] Lease-Backed Notes, Series 2000-1
$______ -- ______% Class [A-3b] Lease-Backed Notes, Series 2000-1
$______ -- ______% Class [A-4] Lease-Backed Notes, Series 2000-1
UNDERWRITING AGREEMENT
----------------------
___________, 2000
[CHASE SECURITIES, INC.],
as Representative for the Underwriters
- ---------------
- ---------------
New York, New York [ ]
Ladies and Gentlemen:
IKON Receivables LLC, a limited liability company organized and
existing under the laws of Delaware (the "Issuer"), IKON Receivables-1 LLC, a
limited liability company organized and existing under the laws of Delaware (the
"Seller"), and IOS Capital, Inc., a corporation organized and existing under the
laws of Delaware ("IOS Capital"), hereby agree with you as follows:
Section 1. Issuance and Sale of Notes. The Issuer has authorized the
--------------------------
issuance of $__________ of ______% Class [A-1] Lease-Backed Notes, Series 2000-1
(the "Class [A-1] Notes"); $__________ of ______% Class [A-2] Lease-Backed
Notes, Series 2000-1 (the "Class [A-2] Notes"); $__________ of ______% Class [A-
3a] Lease-Backed Notes, Series 2000-1 (the "Class [A-3a] Notes"); $__________ of
Class [A-3b] Lease-Backed Notes Series 2000-1 (the "Class [A-3b] Notes") and
$__________ of ___% Class [A-4] Lease-Backed Notes, Series 2000-1 (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 __________, 2000 (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
<PAGE>
guaranty insurance policy issued 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. 333-91599) 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 [Chase Securities, Inc., Lehman Brothers
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.
--------------------------
(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
2
<PAGE>
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.
--------------------
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
__________, 2000 (the "Issuance Date"). The Notes shall be delivered against
payment by the Underwriters of the Purchase Price therefor, to or upon the order
of the Issuer by one or more wire transfers in immediately available funds.
Following the Effective Date, at the request of the Underwriters, delivery of
one or more global notes (the "Global Notes") representing the Notes shall be
made to the respective accounts of the Underwriters. The Global Notes to be so
delivered shall be registered in the name of Cede & Co., as nominee for The
Depository Trust Company ("DTC"). The interests of beneficial owners of the
Notes will be represented by book entries on the records of DTC and
participating members thereof. Definitive Notes representing the Notes will be
available under the circumstances described in the Indenture.
Section 4. Representations and Warranties.
------------------------------
(a) The Issuer hereby represents and warrants to, and agrees with, the
Underwriters as follows:
(i) The Issuer meets the requirements for use of Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act"), and has
filed with the Securities and Exchange Commission (the "Commission") the
Registration Statement, including the Base Prospectus and form of
Prospectus Supplement, on such Form S-3 for the registration under the
Securities Act of the Notes. Such Registration Statement has been declared
effective. The Issuer may have filed one or more amendments thereto, each
of which has previously been furnished to you. The Issuer will file with
the Commission either, (A) prior to the effectiveness of such Registration
Statement, a further amendment thereto (including the form of Final
Prospectus) or, (B) after effectiveness of such Registration Statement, a
Final Prospectus in accordance with Rule 424(b). In the case of clause (B),
the Issuer will include in such Registration Statement, as amended at the
Effective Date, all information required by the Securities Act and
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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 __________, 2000 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, 1999. 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, 1999.
(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) As of December 28, 1999 and during the period covered by
the financial statements on which Ernst & Young LLP reported, Ernst & Young
LLP were independent auditors with respect to IKON Office Solutions, Inc.,
IOS Capital, Inc., and IKON Receivables, LLC within the meaning of the
Securities Act and the applicable rules and regulations thereunder adopted
by the Commission.
(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.
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(iii) The performance of this Agreement and the Assignment and
Servicing Agreement by the Seller will not (A) conflict with or result in a
breach of, and will not constitute a default under any of the provisions
of, its certificate of formation or any law, governmental rule or
regulation, or any judgment, decree or order binding on the Seller or its
properties, or any of the provisions of any indenture, mortgage, deed of
trust, contract or other agreement 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
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Registration Statement has become or becomes effective, or filing of the Final
Prospectus is otherwise required under Rule 424(b), to file the Final
Prospectus, properly completed, pursuant to Rule 424(b) within the time period
prescribed and to provide evidence satisfactory to the Underwriters of such
timely filing; to promptly advise the Underwriters (i) when the Registration
Statement shall have become effective, (ii) when any amendment thereof shall
have become effective, (iii) of any request by the 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
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jurisdiction where it is not so subject, other than in suits arising out of the
offering of the Notes or the transactions contemplated by the Notes, the
Indenture or the Assignment and Servicing Agreement;
(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 with respect to the statements contained in
the sections entitled "The Issuer", "The Servicer and the Originator" and "The
Asset Pool" in the Prospectus Supplement and "The Issuer", "The Asset Pools",
"Management's Discussion and Analysis of Financial Condition", "Directors and
Executive Officers of the Manager of the Issuer", "The Leases" and "The
Originator's Leasing Business" in the Base Prospectus nothing came to such
counsel's attention that leads such counsel to believe that any of such sections
(as of the Effective Date or the date of the Final Prospectus) contained an
untrue statement of a material fact or omitted to state a material
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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 _____________,
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
_________________, special counsel to the Issuer, the Seller and IKON
Receivables Funding Inc. (the "Manager") (subject to customary and usual
qualifications) with respect to or to the effect that: (i) the due formation,
existence and good standing of the Issuer, the Seller and the Manager, (ii) the
legal, valid and binding effect and enforceability of the limited liability
company agreement of the Seller and the Issuer, (iii) a Delaware court applying
Delaware law would conclude that the consent of the Manager and of IOS
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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,
PricewaterhouseCoopers, 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.
(i) All proceedings in connection with the transactions contemplated
by this Agreement and all documents incident hereto shall be reasonably
satisfactory in
13
<PAGE>
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;
(xi) the cost or expenses of any transfer agent or registrar;
and
14
<PAGE>
(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 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
15
<PAGE>
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 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
16
<PAGE>
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 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.
17
<PAGE>
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 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
18
<PAGE>
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 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
19
<PAGE>
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, 1999], 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. Notices. All communications provided for or permitted
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by certified or registered mail, postage
prepaid, or transmitted by telex or telegraph and confirmed by a similar mailed
writing, if to you, addressed to you,
20
<PAGE>
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
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY
21
<PAGE>
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:
-----------------------------------
Name:
Title:
IKON RECEIVABLES, LLC
By: IKON Receivables Funding, Inc., its Manager
By:
-----------------------------------
Name:
Title:
IKON RECEIVABLES-1 LLC
By: IKON Receivables Funding, Inc., its Manager
By:
-----------------------------------
Name:
Title:
The foregoing Agreement is
hereby accepted and entered
into as of the date hereof.
[CHASE SECURITIES, INC.],
as Representative of the Underwriters
By:
----------------------------------------
Name:
Title:
[Signature Page to the Underwriting Agreement]
23
<PAGE>
SCHEDULE A
The Notes will be purchased by Chase Securities, Inc., Lehman Brothers
Inc., Deutsche Bank.Alex Brown and PNC Capital Markets, Inc. as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Chase [Lehman Brothers [Deutsche Bank. [PNC Capital
Securities Inc. 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 $ _________ $ _________ $ _________ $ _________ _________%
- ------------------------------------------------------------------------------------------------------------------------------
Class [A-
2]Notes $ _________ $ _________ $ _________ $ _________ _________%
- ------------------------------------------------------------------------------------------------------------------------------
Class [A-
3a] Notes $ _________ $ _________ $ _________ $ _________ _________%
- ------------------------------------------------------------------------------------------------------------------------------
Class [A-
3b] Notes $ _________ $ _________ $ _________ $ _________ _________%
- ------------------------------------------------------------------------------------------------------------------------------
Class [A-
4] Notes $ _________ $ _________ $ _________ $ _________ _________%
- ------------------------------------------------------------------------------------------------------------------------------
Totals $ _________ $ _________ $ _________ $ _________
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF FORMATION
OF
IKON RECEIVABLES, LLC
This Certificate of Formation of IKON Receivables, LLC (the "Company")
dated as of January 20, 1999, is being duly executed and filed by IKON
Receivables Funding, Inc., as an authorized person, to form a limited liability
company under the Delaware Limited Liability Company Act (6 Del.C. ss.18-101, et
seq.).
FIRST. The name of the Company formed hereby is IKON Receivables, LLC.
SECOND. The address of the registered office of the Company in the State of
Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801. The Company's registered agent for service
of process at that address is the The Corporation Trust Company.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation as of the date first above written.
IKON Receivables Funding, Inc., Manager
By: /s/ Robert K. Mclain
---------------------------------------
Name: Robert Mclain, President
Title: Authorized Person
<PAGE>
EXHIBIT 4.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IKON RECEIVABLES, LLC,
Issuer
[HARRIS TRUST AND SAVINGS BANK],
Trustee
and
IOS CAPITAL, INC.,
Servicer
______________________
INDENTURE
Dated as of ______, 2000
______________________
$__________ in aggregate principal amount
of Lease-Backed Notes, consisting of:
$__________ of ______% Class [A-1] Lease-Backed
Notes
$__________ of ______% Class [A-2] Lease-Backed
Notes
$__________ of ______% Class [A-3a] Lease-Backed
Notes
$__________ of Class [A-3b] Lease-Backed Notes
$__________ of ______ Class [A-4] Lease-Backed Notes
<PAGE>
IKON RECEIVABLES LLC
Reconciliation and Tie between the Indenture
dated as of ________, 2000 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
310 (a)(1)............ 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
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION........................ 3
SECTION 1.01. General Definitions...................................................... 3
SECTION 1.02. Compliance Certificates and Opinions..................................... 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. 23
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......................................................... 33
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
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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
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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
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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
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SCHEDULES
SCHEDULE 1 Leases
EXHIBITS
EXHIBIT A Forms of Notes and Trustee's Certificate of Authentication
iv
<PAGE>
INDENTURE
This INDENTURE dated as of ________, 2000, 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 $_____________ in
aggregate principal amount of its Lease-Backed Notes, consisting of $__________
aggregate principal amount of ______% Class [A-1] Lease-Backed Notes (the "Class
[A-1] Notes"), $__________ aggregate principal amount of ______% Class [A-2]
Lease-Backed Notes (the "Class [A-2] Notes"), $__________ aggregate principal
amount of ______% Class [A-3a] Lease-Backed Notes (the "Class [A-3a] Notes"),
$__________ aggregate principal amount of Class [A-3b] Lease-Backed Notes (the
"Class [A-3b] Notes") and $__________ aggregate principal amount of ______%
Class [A-4] Lease-Backed Notes (the "Class [A-4] Notes", together with the Class
[A-1] Notes, Class [A-2] Notes, and Class [A-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 ______, 2000 (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
_____%,; or (iv) for any three consecutive Due Periods, the average of the
Delinquency Rates for those Due Periods is greater than ______%.
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
3
<PAGE>
specified Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
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 ________, 2000 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).
4
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Benefit Plan: as defined in Section 2.03(a).
------------
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.
Class A Notes: as defined in the Recitals hereto.
-------------
Class A Percentage: ______%.
------------------
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: $__________.
------------------------------------
Class [A-1] Note Interest Rate: the rate at which interest accrues on
------------------------------
the Class [A-1] Notes, which rate shall be equal to ______% per annum.
Class [A-1] Note Owner: with respect to a Book-Entry Class [A-1]
----------------------
Note, the Person who is the beneficial owner of such Book-Entry Class [A-1]
Note, as reflected on the books of 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: $__________.
------------------------------------
Class [A-2] Note Interest Rate: the rate at which interest accrues on
------------------------------
the Class [A-2] Notes, which rate shall be equal to ______% per annum.
Class [A-2] Note Owner: with respect to a Book-Entry Class [A-2]
----------------------
Note, the Person who is the beneficial owner of such Book-Entry Class [A-2]
Note, as reflected on the books of 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: $__________.
-------------------------------------
Class [A-3b] Initial Principal Amount: $__________.
-------------------------------------
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Class [A-3a] Note Interest Rate: the rate at which interest accrues
-------------------------------
on the Class [A-3a] Notes, which rate shall be equal to ______% 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 ______%.
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: $__________.
------------------------------------
Class [A-4] Note Interest Rate: the rate at which interest accrues on
------------------------------
the Class [A-4] Notes, which rate shall be equal to ______% per annum.
Class [A-4] Note Owner: with respect to a Book-Entry Class [A-4]
----------------------
Note, the Person who is the beneficial owner of such Book-Entry Class [A-4]
Note, as reflected on the books of 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.
-----------------
Clearstream: Clearstream Banking, societe anonyme.
-----------
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.
7
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Clearing Agency Participant: a broker, dealer, bank, other financial
---------------------------
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
Code: as defined in Section 2.03(a).
----
Collection Account: the account or accounts by that name established
------------------
and maintained by the Trustee pursuant to Section 3.01(a).
Commission: the Securities and Exchange Commission.
----------
Corporate Trust Office: the principal corporate trust office of the
----------------------
Trustee located at ____________________, 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]: [_______________, 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 ________, 2000.
------------
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 ____, 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
8
<PAGE>
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
______, 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, 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, ______%.
-------------
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".
9
<PAGE>
DTC: the Depository Trust Company.
---
Due Period: with respect to any Payment Date and the Determination
----------
Date with respect thereto, the period beginning on the first day and ending on
the last day of the calendar month prior to the month in which such Payment Date
and such Determination Date occur.
Eligible Account: either (a) an account maintained with a depository
----------------
institution or trust company acceptable to each of the Rating Agencies and (so
long as no Insurer Default has occurred and is continuing) the Insurer or (b) a
trust account or similar account 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 $__________, 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: ________, 2000.
--------------------
[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, ________, 2000 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: ________, 2000.
-------------
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)
---------------------------
___% 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. ________ with
-------
respect to the Notes, dated ________, 2000, 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) ______% 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
<PAGE>
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 _____ ______ (the "Class [A-1] Stated
Maturity Date"), the stated maturity date with respect to the Class [A-2] Notes
is the Payment Date in ______ ______ (the "Class [A-2] Stated Maturity Date"),
the stated maturity date with respect to the Class [A-3a] Notes is the Payment
Date in _______ ______ (the "Class [A-3a] Stated Maturity Date"), the stated
maturity date with respect to the Class [A-3b] Notes is the Payment Date in
_____ _______ (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 _______ _____
(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
<PAGE>
[Swap]: [that certain interest rate swap transaction governed by the
------
Swap Documents].
[Swap Documents]: [The ISDA Master Agreement dated as of ________,
----------------
2000 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.
-----------------------
________ dated ________, 2000 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.
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Trustee Secured Obligations: all amounts and obligations which the
---------------------------
Issuer or the Servicer, as the case may be, may at any time owe to or on behalf
of itself or of the Trustee for the benefit of the Noteholders under this
Indenture or the Notes.
Trust Indenture Act: the Trust Indenture Act of 1939 as in effect on
-------------------
the date on which this Indenture is qualified under the Trust Indenture Act,
except as provided in Section 10.06 or 12.01 hereof.
Underwriting Agreement: the Underwriting Agreement, among the Issuer,
----------------------
IOS Capital and the several underwriters named therein relating to the issuance
of the Notes.
Uniform Commercial Code: with respect to a particular jurisdiction,
-----------------------
the Uniform Commercial Code, as in effect from time to time in such
jurisdiction, or any successor statute thereto.
Warranty Lease: a Lease subject to purchase by IOS Capital as a
--------------
result of a breach of a representation or warranty in accordance with the
provisions of Section 5.04 of the Assignment and Servicing Agreement.
SECTION 1.02. Compliance Certificates and Opinions.
------------------------------------
Upon any written application or request (or oral application with
prompt written or telecopied confirmation) by the Issuer to the Trustee to take
any action under any provision of this Indenture, other than any request that
(a) the Trustee authenticate the Notes specified in such request, (b) the
Trustee invest moneys in any of the Transaction Accounts pursuant to the written
directions specified in such request, or (c) the Trustee pay moneys due and
payable to the Issuer hereunder to the Issuer's assignee specified in such
request, the Trustee shall require the Issuer to furnish to the Trustee and, so
long as no Insurer Default has occurred and is continuing, the Insurer, an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and that the request otherwise is in accordance with the terms of the Indenture,
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such requested action as to which other evidence of satisfaction of the
conditions precedent thereto is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
SECTION 1.03. Form of Documents Delivered to Trustee and Insurer.
--------------------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
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Any certificate or opinion of an officer of the Issuer delivered to
the Trustee or the Insurer may be based, insofar as it relates to legal matters,
upon a certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous. Any such Officer's
Certificate or opinion and any Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or representations
by, an officer or officers of the Issuer as to such factual matters unless such
officer or counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any Opinion of Counsel may be based on the written opinion of
other counsel, in which event such Opinion of Counsel shall be accompanied by a
copy of such other counsel's opinion and shall include a statement to the effect
that such counsel believes that such counsel and the Trustee and the Insurer may
reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee or the Insurer, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's or the Insurer's right to rely upon the truth
and accuracy of any statement or opinion contained in any such document as
provided in Section 8.01(a)(ii).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default or Servicer Event
of Default is a condition precedent to the taking of any action by the Trustee
or the Insurer at the request or direction of the Issuer, then, notwithstanding
that the satisfaction of such condition is a condition precedent to the Issuer's
right to make such request or direction, the Trustee and the Insurer shall be
protected in acting in accordance with such request or direction if it does not
have knowledge of the occurrence and continuation of such Default or Event of
Default or Servicer Event of Default. For all purposes of this Indenture,
neither the Trustee nor the Insurer shall be deemed to have knowledge of any
Insurer Default, Servicer Event of Default, Default or Event of Default nor
shall the Trustee or the Insurer have any duty to monitor or investigate to
determine whether such default has occurred (other than an Event of Default of
the kind described in Section 7.01(a) or 7.01(b)) unless, in the case of the
Trustee, a Responsible Officer of the Trustee shall have actual knowledge
thereof or shall have been notified in writing thereof by the Issuer, the
Servicer, the Insurer or any Noteholder.
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SECTION 1.04. Acts of Noteholders, etc.
------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to the
Issuer and/or the Insurer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 8.01)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section 1.04.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the holder of any Note shall bind every future holder of
the same Note and the holder of every Note issued upon the registration of
transfer thereof or in exchange therefore or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Issuer in
reliance thereon, whether or not notation of such action is made upon such Note.
(d) By accepting the Notes issued pursuant to this Indenture, each
Noteholder irrevocably appoints the Trustee hereunder as the special
attorney-in-fact for such Noteholder vested with full power on behalf of such
Noteholder to effect and enforce the rights of such Noteholder and the revisions
pursuant hereto for the benefit of such Noteholder; provided that nothing
--------
contained in this Section 1.04(d) shall be deemed to confer upon the Trustee any
duty or power to vote on behalf of the Noteholders with respect to any matter on
which the Noteholders have a right to vote pursuant to the terms of this
Indenture.
SECTION 1.05. Notices, etc., to Trustee, Servicer, Issuer, Insurer
----------------------------------------------------
and Rating Agencies.
- -------------------
Any request, demand, authorization, direction, notice, consent,
waiver, Act of Noteholders, or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with, the Trustee,
the Issuer, the Insurer or the Servicer shall be sufficient for every purpose
hereunder (unless otherwise herein
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 (___) ___-____), 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
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<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
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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.
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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 $__________ principal amount of Class
[A-1] Notes, $__________ principal amount of Class [A-2] Notes, $__________
principal amount of Class [A-3a] Notes, $__________ principal amount of Class
[A-3b] Notes, $__________ 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 $__________ 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.
26
<PAGE>
(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.
27
<PAGE>
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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<PAGE>
(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.
<PAGE>
(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-
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2] 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
maybe 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 Clearstream.
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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
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receiving the Class A Principal Payment, in the order established in clause
(vii) above, 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
$___________ 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
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Required Reserve Amount, the Trustee shall transfer, not later than the end
of business on such Payment Date, an amount equal to such excess to the Issuer.
(d) Upon the satisfaction and discharge of this Indenture, any
balance remaining in the Reserve Account, after all obligations to the
Noteholders hereunder have been fully satisfied, shall be paid to reimburse the
Trustee for any amounts owing to it arising from the performance of its
obligations under this Indenture and, then, to the Issuer.
SECTION 3.05. Reports by Trustee; Notices of Certain Payments.
-----------------------------------------------
(a) The Trustee shall within two Business Days after the request of
the Issuer, the Servicer, the Insurer or any Noteholder, deliver to the
requesting Person a written report setting forth the amounts on deposit in the
Collection Account, the Reserve 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.
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(c) With each report of the Trustee furnished pursuant to this
Section 3.05 following any Payment Date, the Trustee shall enclose a copy of the
relevant Servicing Report.
(d) Upon request of a Noteholder, the Trustee will provide
information as to the Outstanding Principal Amount of each Class of Notes to
such Noteholder.
SECTION 3.06. Trustee May Rely on Certain Information from Servicer.
-----------------------------------------------------
Pursuant to Sections 5.01, 6.01 and 6.02 of the Assignment and
Servicing Agreement and Sections 3.02 through 3.05 hereof, the Servicer is
required to furnish to the Trustee and/or the Insurer from time to time certain
information and make various calculations which are relevant to the performance
of the Trustee's duties in this Article III and in Article IV of this Indenture.
The Trustee and the Insurer shall be entitled to 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 $___________ 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.
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(c) The Servicer shall be responsible for the payment of all amounts
held from time to time in the Security Deposit Account not required to be
transferred to the Collection Account in accordance with Section 3.08(b) to the
Lessees or other Persons entitled thereto in accordance with the related Lease
documentation. From time to time, upon written request of the Servicer, the
Trustee shall release from the Security Deposit Account and from the Lien of
this Indenture such amounts as the Servicer shall determine to be necessary for
application as provided in the immediately preceding sentence.
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
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the Notes by or on behalf of the Insurer, the Trustee and the Noteholders shall
assign to the Insurer all rights to the payment of interest or principal with
respect to the Notes which are then due for payment to the extent of all
payments made by the Insurer, and the Insurer may exercise any option, vote,
right, power or the like with respect to the Notes to the extent that it has
made payment pursuant to the Policy. To evidence such subrogation, the Note
Registrar (as defined in this Indenture) shall note the Insurer's rights as
subrogee upon the register of Noteholders upon receipt from the Insurer of proof
of payment by the Insurer of any Insured Payment (as defined in the Policy). The
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
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agrees that so long as an Insurer Default shall not have occurred and be
continuing, the Insurer may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference Claim, including, without limitation, (i) the direction of any appeal
of any order relating to any Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal. In addition,
and without limitation of the foregoing, as set forth in Section 4.01(d), the
Insurer shall be subrogated to, and each Noteholder and the Trustee hereby
delegate and assign, to the fullest extent permitted by law, the rights of the
Trustee and 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
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fully effectuate the release from this Indenture of any Lease and interests in
the related Equipment required to be so released pursuant to Sections 5.01 or
5.02.
SECTION 5.04. Further Release of Collateral.
-----------------------------
Notwithstanding any provision of this Indenture to the contrary, any
amounts properly retained by the Servicer pursuant to Section 4.03, 4.04 and
4.05 of the Assignment and Servicing Agreement are, without further action by
the Trustee released 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
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fifth, to the payment of the Outstanding Class [A-4] Principal Amount;
provided, that the Noteholders may allocate such payments for interest,
--------
principal and premium at their own discretion, except that no such
allocation shall affect the allocation of such amounts or future payments
received by any other Noteholder;
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
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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 or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, note,
debenture, other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties (and the Trustee need not investigate any fact or matter stated in the
document);
(ii) any request or direction or action of the Issuer mentioned herein
shall be sufficiently evidenced by an Issuer Order;
(iii) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate;
(iv) the Trustee may consult with counsel as to legal matters and the
advice of any such counsel selected by the Trustee shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(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
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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.
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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
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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.
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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:
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(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.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
IKON RECEIVABLES, LLC,
as Issuer
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By:
----------------------------------------------
Name:
Title:
[HARRIS TRUST AND SAVINGS BANK],
as Trustee
By:
----------------------------------------------
Name:
Title:
IOS CAPITAL, INC., as Servicer
By:
----------------------------------------------
Name:
Title:
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<PAGE>
CLASS [A-1] NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
IKON RECEIVABLES, LLC
______% CLASS [A-1] LEASE-BACKED NOTE, SERIES 2000-1
CUSIP NO. _______________
No. R-1 $____________
IKON Receivables, LLC, a limited liability company duly organized and
existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________________________
($_____________), payable in monthly installments beginning ________, 2000, in
accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of ______% per annum, until the
full amount of principal hereof is otherwise paid or made available for payment
and shall be computed on the basis of a year of 360 days and the actual number
of days in the period since the last Payment Date or with respect to the
________, 2000, Payment Date, since ________, 2000.
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 ________, 2000, 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
<PAGE>
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.
This Class [A-1] Note is one of a duly authorized issue of Class A Notes of
the Issuer designated as its ______% Class [A-1] Lease-Backed Notes, Series
2000-1" (herein called the "Class [A-1] Notes") limited in aggregate principal
amount to $_________, issued under the Indenture, dated as of ________, 2000
(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
A-1-2
<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-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
A-1-3
<PAGE>
the owner hereof for all purposes, whether or not this Class [A-1] Note may be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
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: _____, 2000
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
______% CLASS [A-2] LEASE-BACKED NOTE, SERIES 2000-1
CUSIP NO. _______________
No. R-1 $____________
IKON Receivables, LLC, a limited liability company duly organized and
existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________________________
($_____________), payable in monthly installments beginning on ________, 2000,
in accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of ______% per annum, until the
full amount of principal hereof is otherwise paid or made available for payment
and shall be computed on the basis of a year of 360 days 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 ________, 2000, 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 "______% Class [A-2] Lease-Backed Notes, Series
2000-1" (herein called the "Class [A-2] Notes") limited in aggregate principal
amount to $__________ issued under the Indenture, dated as of ________, 2000
(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,
A-2-3
<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-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: _____, 2000
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)
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
______% Class [A-3a] LEASE-BACKED NOTE, SERIES 2000-1
CUSIP NO. _______________
No. R-1 $____________
IKON Receivables, LLC, a limited liability company duly organized and
existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________________________
($_____________), payable in monthly installments beginning on ________, 2000,
in accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of ______% per annum, until the
full amount of principal hereof is otherwise paid or made available for payment
and shall be computed on the basis of a year of 360 days 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 ________, 2000, 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.
This Class [A-3a] Note is one of a duly authorized issue of Class A Notes
of the Issuer designated as its "______% Class [A-3a] Lease-Backed Notes, Series
2000-1" (herein called the "Class [A-3a] Notes") limited in aggregate principal
amount to $__________, issued under the Indenture, dated as of ________, 2000
(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.
<PAGE>
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:__________, 2000
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 2000-1
CUSIP NO. _______________
No. R-1 $____________
IKON Receivables, LLC, a limited liability company duly organized and
existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________________________
($_____________), payable in monthly installments 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 .__% 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 ________, 2000, 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 2000-1"
(herein called the "Class [A-3b] Notes") limited in aggregate principal amount
to $__________, issued under the Indenture, dated as of ________, 2000 (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
A-3b-2
<PAGE>
mail to Holders, as their names and addresses appear in the Note Register, as
provided in the Indenture. Upon payment of such principal amount together with
all accrued interest, the obligations of the Issuer with respect to the payment
of principal and interest on this Class [A-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.
A-3b-3
<PAGE>
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 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: _____, 2000
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
______% CLASS [A-4] LEASE-BACKED NOTE, SERIES 2000-1
CUSIP NO. _______________
No. R-1 $____________
IKON Receivables, LLC, a limited liability company duly organized and
existing under the laws of Delaware (herein called the "Issuer", which term
includes any successor Person under the Indenture referred to herein), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________________________
($_____________), payable in monthly installments beginning on ________, 2000,
in accordance with the Indenture. Interest will accrue on the unpaid principal
hereof from the date of issuance, at the rate of ______% per annum, until the
full amount of principal hereof is otherwise paid or made available for payment
and shall be computed on the basis of a year of 360 days 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 ________, 2000, 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 "______% Class [A-4] Lease-Backed Notes, Series
2000-1" (herein called the "Class [A-4] Notes") limited in aggregate principal
amount to $__________, issued under the Indenture, dated as of ________, 2000
(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,
A-4-3
<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-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: _____, 2000
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING, INC., its Manager
By:
----------------------------------------------
Authorized Officer
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Class [A-4] Notes referred to in the within mentioned
Indenture.
[HARRIS TRUST AND SAVINGS BANK], as Trustee
By:
----------------------------------------------
Authorized Officer
A-4-5
<PAGE>
ASSIGNMENT FORM
---------------
If you the holder want to assign this Class [A-4] Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Class [A-4] Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________, agent to transfer this Class [A-4] Note
on the books of the Issuer. The agent may substitute another to act for him.
Dated: Signed:
----------------- -------------------------------------
-------------------------------------
(sign exactly as the name
appears on the other side of
this Class [A-4] Note)
Signature Guarantee
--------------------------------------------------------
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class [A-4] Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class [A-4] Note and the signed "power of attorney" in separate
envelopes. For added protection, use certified or registered mail for a Class
[A-4] Note.
A-4-6
<PAGE>
Exhibit 5.1
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK 10019-6092
TELEPHONE 212 259-8000 FACSIMILE 212 259-6333
_______, 2000
IKON Receivables, LLC
1738 Bass Road
P.O Box 9115
Macon, GA 31208
Re: Lease-Backed Notes
-----------------------
Ladies and Gentlemen:
We have acted as counsel to ____________ (the "Underwriter") in connection
with the preparation and filing of the registration statement on Form S-3
(Registration 333-91599) (such registration statement, the "Registration
Statement") being filed today with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Act"), in respect of
Lease-Backed Notes (the "Notes") which IKON Receivables, LLC (the "Issuer" or
the "Registrant") plans to offer in series, each series to be issued under a
separate assignment and servicing agreement or indenture (an "Indenture"), in
substantially one of the forms incorporated by reference as Exhibits to the
Registration Statement, among Issuer, a servicer to be identified in the
prospectus supplement for such series of Notes (the "Servicer" for such series),
and a trustee to be identified in the prospectus supplement for such series of
Notes (the "Trustee" for such series).
We have examined and relied on the originals or copies certified or
otherwise identified to our satisfaction of all such documents and records of
Issuer and such other instruments and other certificates of public officials,
officers and representatives of Issuer and such other persons, and we have made
such investigations of law, as we have deemed appropriate as a basis for the
opinions expressed below.
We are admitted to the Bar of the State of New York and we express no
opinion as to the laws of any other jurisdiction except as to matters that are
governed by Federal law or the laws of the State of New York. All opinions
expressed herein are based on laws, regulations and policy guidelines currently
in force and may be affected by future regulations.
<PAGE>
Based upon the foregoing, we are of the opinion that:
1. When, in respect of a series of Notes, an Indenture has been
duly executed and delivered by Issuer, the Servicer and the Trustee
for such series, such Indenture will be a valid and legally binding
obligation of the Issuer; and
2. When an Indenture for a series of Notes has been duly executed
and delivered by the Issuer, the Servicer and the Trustee for such
series, and when the Notes of such series have been duly executed and
authenticated in accordance with the provisions of the Indenture, and
issued and sold as contemplated in the Registration Statement and the
Prospectus, as amended or supplemented and delivered pursuant to
Section 5 of the Act in connection therewith, such Notes will be
legally and validly issued, fully paid and nonassessable, and the
holders of such Notes will be entitled to the benefits of such
Indenture.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to Dewey Ballantine LLP in the
Registration Statement and in future related prospectus supplements under the
heading "Legal Matters." In giving this opinion, we do not concede that we are
experts within the meaning of the Act or the rules and regulations therewith, or
that this consent is required by Section 7 of the Act.
Very truly yours,
DEWEY BALLANTINE LLP
2
<PAGE>
Exhibit 8.1
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK 10019-6092
TELEPHONE 212 259-8000 FACSIMILE 212 259-6333
__________, 2000
IKON Receivables, LLC
1738 Bass Road
P.O. Box 9115
Macon, GA 31208
Re: Lease-Backed Notes
-----------------------
Ladies and Gentlemen:
We have acted as special counsel to _______________ (the "Underwriter") in
connection with the preparation and filing of a registration statement on Form
S-3 (Registration No. 333-91599) (the "Registration Statement") being filed
today with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Act"), in respect of Lease-Backed Notes (the "Notes")
which IKON Receivables, LLC (the "Issuer") plans to offer in series.
In addition, assuming (i) the Indenture among IKON Receivables, LLC,
______________ (the "Indenture Trustee") and IOS Capital, Inc. is fully
executed, delivered and enforceable against the parties thereto in accordance
with its terms (ii) the transaction described in the Registration Statement is
completed on substantially the terms and conditions set forth therein, and (iii)
no election on IRS Form 8832 is made to the contrary, it is our opinion that:
. the Issuer will not be treated as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes;
. the Notes will be characterized as indebtedness for federal income tax
purposes; and
. subject to the assumptions and limitations described therein, the
discussion under the heading "Material Federal Income Tax
Consequences" in the prospectus contained in the Registration
Statement sets forth all the material federal income tax consequences
to the original purchasers of the Notes of any series and is accurate
in all material respects.
<PAGE>
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to the reference to Dewey Ballantine LLP in the
Registration Statement and in future related prospectus supplements under the
heading "Material Federal Income Tax Consequences." In giving this opinion, we
do not concede that we are experts within the meaning of the Act or the rules
and regulations therewith, or that this consent is required by Section 7 of the
Act.
Very truly yours,
Dewey Ballantine LLP
2
<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 ___________, 2000
-------------------------
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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
___________, 2000, FOR THE BENEFIT OF THE PERSONS REFERRED TO THEREIN.
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TABLE OF CONTENTS
Page
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
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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
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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
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Schedule 1 - Portfolio Detail
Exhibit A - Schedule of Leases and Equipment
Exhibit B - Form of Receivables Servicing Report
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ASSIGNMENT AND SERVICING AGREEMENT
This ASSIGNMENT AND SERVICING AGREEMENT (this "Agreement" or this
"Assignment and Servicing Agreement") is made and dated as of ___________, 2000,
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
______% Class [A-1] Lease-Backed Notes, Series 2000-1 in the aggregate principal
amount of $__________ (the "Class [A-1] Notes"), one class of ______% Class
[A-2] Lease-Backed Notes, Series 2000-1 in the aggregate principal amount of
$__________ (the "Class [A-2] Notes"), one class of ______% Class [A-3a]
Lease-Backed Notes, Series 2000-1 in the aggregate principal amount of
$__________ (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
$__________, and one class of ______% Class [A-4] Lease-Backed Notes, Series
2000-1 in the aggregate principal amount of $__________(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.
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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
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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 prepayments 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
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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
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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, 1999,
September 30, 1998 and September 31, 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, 1999] and as of [March 31, 2000] and the related consolidated
statements of income, retained earnings and cash flow for the three months ended
December 31, 1999 and March 31, 2000, 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,
1999 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
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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 __ __ and, as of the Cut-Off Date, the maximum remaining term of
any Lease did not exceed __ 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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(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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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 equityholders or the Seller's creditors;
(e) all business correspondence of the Seller and other
communications are conducted in the Seller's own name and on its own stationery;
and
(f) neither the Originator nor the Issuer acts as an agent of the
Seller in any capacity and the Seller does not act as agent for the Originator
or the Issuer, but instead presents itself to the public as a corporation
separate from the Originator and the Issuer.
3.15 Capital Contribution Treatment.
The Seller will treat the transfer to the Issuer of the Leases and
amounts owed by Lessees under the Leases and of its interests (other than its
ownership interest) in the Equipment as a capital contribution for financial
accounting and reporting purposes.
SECTION 4. ADMINISTRATION OF LEASES
4.01 Servicer to Act.
(a) Notwithstanding the contribution and transfer by the Originator
of the Leases and the Equipment contemplated hereby, the Servicer, for the
benefit of the Issuer, will service and administer each Lease in accordance with
the terms thereof and of this Assignment and Servicing Agreement. The Servicer
shall take, or cause to be taken, all such actions as may be necessary or
advisable to service, administer and collect each Lease from time to time, all
in accordance with (i) customary and prudent servicing procedures for leases of
a similar type, (ii) all applicable laws, rules and regulations, and (iii)
without limitation as to its obligations under the preceding clauses (i) and
(ii), no less a standard of care than that which it applies to leases it
services for its own account. The Servicer shall provide the Lessees with
appropriate invoices and such other notices as may be required to ensure that
all Lease Payments, Casualty Payments
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and Termination Payments on or in respect of each Lease are remitted by the
Lessees to the address specified by the Servicer. The Servicer shall deposit
such payments to the Collection Account within two Business Days of the receipt
thereof. Any other amount received by the Servicer from time to time from the
Originator, the Issuer or any Lessee which is subject to the Lien of the
Indenture shall be held in trust by the Servicer, as agent for the Trustee and
promptly turned over to the Trustee or deposited into the Collection Account for
application in accordance with the provisions of the Indenture.
(b) The Servicer shall do, and shall have full power and authority
to do, subject only to the specific requirements and prohibitions of this
Assignment and Servicing Agreement, any and all things in connection with the
servicing and administration of the Leases and the interests in the Equipment
which are consistent with the manner in which it services leases and equipment
constituting part of its own portfolio and consistent with the customary
practices of servicers in the equipment leasing industry, but in performing its
duties hereunder, the Servicer will act on behalf and for the benefit of the
Issuer, the Trustee and the holders of the Notes and the Insurer, subject at all
times to the provisions of the Indenture, without regard to any relationship
which the Servicer or any Affiliate of the Servicer may otherwise have with a
Lessee. The Servicer shall at all times act in accordance with the provisions of
each Lease, and shall observe and comply with all requirements of law applicable
to it. Except as permitted by the terms of any Lease following a default
thereunder, the Servicer shall not take any action which would result in the
interference with the Lessee's right to quiet enjoyment of the Equipment subject
to the Lease during the term thereof. The Servicer shall exercise with respect
to each item of Equipment all rights and remedies it, the Issuer or the Trustee
shall have against any vendor of the Equipment, subject to the provisions of any
Lease, and shall promptly pay all amounts realized from such actions to the
Trustee for deposit in the Collection Account, in accordance with the terms of
the Indenture.
(c) Without limiting the generality of the foregoing, the Servicer
agrees to (i) invoice each Lessee monthly (except quarterly, semi-annually or
annually in the case of Leases which provide for quarterly, semi-annual or
annual Lease Payments, respectively) for all Lease Payments required to be paid
by such Lessee in such manner and to the same extent as the Servicer does with
respect to leases held for its own account, (ii) maintain with respect to each
Lease and each item of Equipment, and with respect to each payment by each
Lessee and compliance by each Lessee with the provisions of each Lease, complete
and accurate records in the same form and to the same extent as the Servicer
does with respect to leases and equipment held for its own account (which
records shall be at least as complete and accurate as those maintained by the
Servicer as of the date of this Assignment and Servicing Agreement), and (iii)
from time to time execute, deliver and file (or cause the same to be done), and
the Servicer is hereby authorized and empowered to execute, deliver, and file on
behalf of the Originator, the Seller, the Issuer and the Trustee, any and all
tax returns with respect to sales, use, personal property and other taxes (other
than corporate income tax returns) and any and all reports or licensing
applications required to be filed in any jurisdiction with respect to any Lease
or any item of Equipment and, except as provided in the last sentence of this
Section 4.01(c), any Financing Statements and assignments of Financing
Statements and continuation statements as may from time to time be necessary
because of Lease substitutions, equipment replacements in accordance with the
provisions of any Lease or otherwise so that the transfer of the Leases and
Equipment from the Originator to the Seller, the transfer of the Leases from the
Seller to the
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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
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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
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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.
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(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, 2000, 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, 2000, 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
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Default has occurred, or, if any Servicer Event of 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, 2000, 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.
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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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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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(c) Notice of Servicer Event of Default - immediately upon the
Servicer's becoming aware of the existence of any condition or event which
constitutes a Servicer Event of Default, a written notice, by certified mail
return receipt requested, hand delivery or overnight courier, describing its
nature and period of existence and what action the Servicer is taking or
proposes to take with respect thereto;
(d) SEC and Other Reports - promptly upon their becoming available,
one copy of each report (including the Servicer's annual report to shareholders
and reports on Form 8-K, 10-K, and 10-Q), proxy statement, registration
statement, prospectus and notice filed with or delivered to any securities
exchange, the Securities and Exchange Commission or any successor agencies; and
(e) Report on Proceedings - promptly upon the Servicer becoming
aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or conditions (financial
or otherwise) of the Servicer, a written notice specifying the nature of such
investigation or proceeding and what action the Servicer is taking or proposes
to take with respect thereto and evaluating its merits.
7.05 Officers' Certificates.
With each set of financial statements delivered pursuant to Section
7.04, the Servicer will deliver an Officers' Certificate stating (i) that the
officers signing such Officers' Certificate have reviewed the relevant terms of
this Assignment and Servicing Agreement and have made, or caused to be made
under such officers' supervision, a review of the activities of the Servicer
during the period covered by the statements then being furnished, (ii) that the
review has not disclosed the existence of any Servicer Event of Default or, if a
Servicer Event of Default exists, describing its nature and what action the
Servicer has taken and is taking with respect thereto, and (iii) that on the
basis of such review the officers signing such certificate are of the opinion
that during such period the Servicer has serviced the Leases in compliance with
the procedures hereof except as described in such certificate.
7.06 Inspection.
The Servicer will permit, on reasonable prior notice, the
representatives of the Issuer, the Trustee, the Insurer (so long as the Policy
is outstanding) and, if the Policy is no longer outstanding, the holder of any
Notes evidencing not less than 25% of the Outstanding Principal Amount of the
Notes to inspect the servicing operations and discuss the servicing operations
of the Servicer with any of its officers or employees all at such reasonable
times and as often as may be reasonably requested for the purpose of reviewing
the Servicer or the Servicer's performance of its duties and obligations
hereunder. Any expense incident to the exercise by the Issuer, the Trustee, the
Insurer, or any holder of the Notes during the continuance of any Servicer Event
of Default, or any event or condition which with the giving of notice or the
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lapse of time or both would become a Servicer Event of Default, of any right
under this Section 7.06 shall be borne by the Servicer.
7.07 Servicer Records.
The Servicer will indicate in its records that it is servicing and
administering each Lease in its capacity as Servicer hereunder, and to the
extent it is in possession of any original Lease agreement, will hold such
Lease, subject to the provisions of the Indenture as custodian for the Trustee.
SECTION 8. THE ORIGINATOR
8.01 Merger or Consolidation of the Originator.
So long as the Notes remain outstanding, the Originator will keep in
full force and effect its existence, rights and franchise as a corporation under
the laws of its jurisdiction of incorporation and will preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is necessary to protect the validity and enforceability
of any of the Leases or to permit performance of the Originator's duties under
this Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Originator shall not
merge or consolidate with any other Person unless (i) the entity surviving such
merger or consolidation is a corporation organized under the laws of the United
States or any jurisdiction thereof and (ii) the surviving entity, if not the
Originator, shall execute and deliver to the Seller, the Issuer, the Servicer,
the Trustee and the Insurer (so long as the Policy is outstanding), in form and
substance satisfactory to each of them, (a) an instrument expressly assuming all
of the obligations of the Originator hereunder and (b) an Opinion of Counsel to
the effect that such Person is a corporation of the type described in the
preceding clause (i) and has effectively assumed the obligations of the
Originator hereunder.
8.02 Control of Seller.
So long as the Notes remain outstanding, the Originator will not (i)
sell, pledge or otherwise transfer any membership interest in the Seller held by
the Originator or any capital stock of IKON Receivables Funding Inc. (the
manager of the Seller and the Issuer) held by the Originator or (ii) vote such
membership interests in the Seller in favor of any amendment to or alteration of
the certificate of formation or limited liability company agreement of the
Seller or any such capital stock of IKON Receivables Funding Inc. in favor of
any amendment to or alteration of the certificate of incorporation or by-laws of
the Manager.
8.03 Financial and Business Information.
The Originator will deliver to the Issuer, the Trustee and the
Insurer (so long as the Policy is outstanding):
(a) Notice of Servicer Event of Default - immediately upon the
Originator becoming aware of the existence of any condition or event which
constitutes a Servicer Event of
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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.
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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.
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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
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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;
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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;
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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
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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.
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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 __________.
(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
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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
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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
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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 _______, 2000, 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 ______% Class [A-1] Lease-Backed
Notes, Series 2000-1.
Class [A-2] Notes - the Issuer's ______% Class [A-2] Lease-Backed
Notes, Series 2000-1.
Class [A-3a] Notes - the Issuer's ______% Class [A-3a] Lease-Backed
Notes, Series 2000-1.
Class [A-3b] Notes - the Issuer's Class [A-3b] Lease-Backed Notes,
Series 2000-1.
Class [A-4] Notes - the Issuer's ______% Class [A-4] Lease-Backed
Notes, Series 2000-1.
Code - the Internal Revenue Code of 1986, as amended.
Collection Account - Section 1.01 of the Indenture.
Corporate Trust Office - Section 1.01 of the Indenture.
Cut-Off Date - the opening of business on ________, 2000.
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.
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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 ___________, 2000, 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 - _______, 2000.
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.
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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.
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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 __________, 2000, 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.
333-91599), as amended and supplemented from time to time, relating to the
offering from time to time of up to $2,000,000,000 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.
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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.
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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
___________, 2000 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)).
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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
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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]
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IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Servicing Agreement as of the date and year first written above.
IOS CAPITAL, INC., as
Originator and Servicer
By:
----------------------------------------
Name:
Title:
IKON RECEIVABLES-1 LLC
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By:
----------------------------------
Name:
Title:
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By:
----------------------------------
Name:
Title:
The undersigned hereby acknowledges
receipt of a copy of the foregoing
Assignment and Servicing Agreement and
agrees to, and to be bound by, each of
the provisions thereof applicable to the
undersigned.
[Harris Trust and Savings Bank],
not in its individual capacity, but
solely as Trustee
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
SCHEDULE OF LEASES AND EQUIPMENT
ON FILE WITH INDENTURE TRUSTEE
A-1
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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
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- --------------------------------------------------------------------------------
5 Non-Performing Leases
- --------------------------------------------------------------------------------
8/1 Beginning Balance of Non-Performing Leases
8/2 Plus Current Month Additions
8/3 Plus Past Due Payments on Non-Performing Leases
8/4 Less Current Month Recoveries
8/5 Ending Balance
- --------------------------------------------------------------------------------
Cash Receipts
- --------------------------------------------------------------------------------
Line
A/1 Regular monthly payments
A/2 Overdue payments
A/3 Overdue Payments due on Early Termination and Termed Out Leases (From
Originator)
A/4 Advance Payments of monthly rentals
A/5 Residual Values
A/6 Recoveries on Non-Performing Leases
A/7 Proceeds from investment of Collection Accounts funds
A/8 Casualty and Termination Payments
A/9 Servicer Advances
A/10 Total Receipts
- --------------------------------------------------------------------------------
Disbursement Requirements
- --------------------------------------------------------------------------------
Line
B/1 Past Due Payments Collected, Due Servicer (COLLECTION ACCT)
B/2 Overdue Payments Advanced, on Disqualified Leases (COLLECTION ACCT)
B/3 Servicing Fee (COLLECTION ACCT)
B/4 Advanced Payments on Disqualified Leases (COLLECTION ACCT)
B/5 Total to Servicer
B/6 Collection Account - Advanced Rents (Monthly-Increase/(Decrease))
- --------------------------------------------------------------------------------
B/7 Net cash receipts
- --------------------------------------------------------------------------------
B/8 Shortfall
B/9 Draw on Cash Reserve
B/10 Total Available Funds
- --------------------------------------------------------------------------------
C Noteholders
- --------------------------------------------------------------------------------
C/1 Class [A-1] Interest Paid ______%
C/2 Class [A-2] Interest Paid ______%
C/3 Class [A-3a] Interest Paid ______%
C/3 Class [A-3b] Interest Paid
C/4 Class [A-4] Interest Paid ______%
C/9 Beginning Class [A-1] Note Balance
C/10 Class [A-1] Note Value Target
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
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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
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Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-91599) and related
Prospectus of IKON Receivables, LLC and to the incorporation by reference
therein of our report dated October 25, 1999, with respect to the financial
statements of IKON Receivables, LLC included in its Annual Report (Form 10-K)
for the period ended September 30, 1999, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 25, 2000
