EXHIBIT 10.3
INSURANCE AND INDEMNITY AGREEMENT
AMBAC ASSURANCE CORPORATION,
as Insurer,
IKON RECEIVABLES FUNDING, LLC,
as Issuer,
IKON RECEIVABLES-2, LLC,
as Seller,
IOS CAPITAL, LLC.,
as Originator and as Servicer,
and
BNY MIDWEST TRUST COMPANY
as Indenture Trustee
IKON RECEIVABLES FUNDING, LLC LEASE-BACKED NOTES, SERIES 2002
Dated as of May 30, 2002
TABLE OF CONTENTS
Page
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@@ARTICLE I DEFINITIONS ........................................................ 1
SECTION 1.01. Defined Terms ................................................... 1
SECTION 1.02. Other Definitional Provisions ................................... 4
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS ........................... 4
SECTION 2.01. Representations and Warranties of IOS Capital ................... 4
SECTION 2.02. Affirmative Covenants of IOS Capital ............................ 5
SECTION 2.03. Negative Covenants of IOS Capital ............................... 6
SECTION 2.04. Representations and Warranties of the Insurer ................... 7
SECTION 2.05. Representations and Warranties and Covenants of the Seller ...... 9
SECTION 2.06. Representations and Warranties of the Issuer .................... 9
SECTION 2.07. Affirmative Covenants of the Issuer ............................. 11
SECTION 2.08. Negative Covenants of the Issuer ................................ 13
ARTICLE III THE POLICIES; REIMBURSEMENT ........................................ 14
SECTION 3.01. Issuance of the Policies ........................................ 14
SECTION 3.02. Payment of Fees and Premium ..................................... 16
SECTION 3.03. Reimbursement Obligation ........................................ 17
SECTION 3.04. Indemnification ................................................. 17
SECTION 3.05. Payment Procedure ............................................... 20
ARTICLE IV FURTHER AGREEMENTS .................................................. 20
SECTION 4.01. Effective Date; Term of the Insurance Agreement ................. 20
SECTION 4.02. Further Assurances and Corrective Instruments ................... 20
SECTION 4.03. Obligations Absolute ............................................ 21
SECTION 4.04. Assignments; Reinsurance; Third-Party Rights .................... 23
SECTION 4.05. Liability of the Insurer ........................................ 23
SECTION 4.06. Annual Servicing Audit and Certification ........................ 24
ARTICLE V DEFAULTS AND REMEDIES ................................................ 24
SECTION 5.01. Defaults ........................................................ 24
SECTION 5.02. Remedies; No Remedy Exclusive ................................... 25
SECTION 5.03. Waivers ......................................................... 26
ARTICLE VI MISCELLANEOUS ....................................................... 26
SECTION 6.01. Amendments, Etc ................................................. 26
SECTION 6.02. Notices ......................................................... 26
SECTION 6.03. Severability .................................................... 28
SECTION 6.04. Governing Law ................................................... 29
SECTION 6.05. Consent to Jurisdiction ......................................... 29
SECTION 6.06. Consent of the Insurer .......................................... 30
SECTION 6.07. Counterparts .................................................... 30
SECTION 6.08. Headings ........................................................ 30
SECTION 6.09. Trial by Jury Waived ............................................ 30
SECTION 6.10. Limited Liability ............................................... 30
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TABLE OF CONTENTS
(continued)
Page
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SECTION 6.11. Entire Agreement ...................................... 30
SECTION 6.12. Indenture Trustee ..................................... 31
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INSURANCE AND INDEMNITY AGREEMENT (as it may be amended,
modified or supplemented from time to time, this "Insurance Agreement"), dated
as of May 30, 2002, by and among IOS Capital, LLC., as Originator and as
Servicer, Ambac Assurance Corporation, as Insurer, IKON Receivables Funding,
LLC, as Issuer, IKON Receivables-2, LLC, as Seller, and BNY Midwest Trust
Company, as Indenture Trustee.
PRELIMINARY STATEMENTS
A. The Indenture, dated as of May 1, 2002, relating to the
IKON Receivables Funding, LLC Lease-Backed Notes, Series 2002-1, by and among
the Issuer, the Servicer and the Indenture Trustee (as it may be amended,
modified or supplemented from time to time as set forth therein) provides for,
among other things, the issuance of the Notes.
B. The Insurer has issued the Policy, pursuant to which it
has agreed to pay to the Indenture Trustee for the benefit of the Holders
certain payments in respect of the Notes.
C. The Insurer shall be paid a Premium as set forth herein.
D. IOS Capital, the Issuer, the Seller and the Indenture
Trustee have undertaken certain obligations in consideration for the Insurer's
issuance of its Policy.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. Unless the context clearly requires otherwise,
all capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Indenture or, if not defined therein, in the
Policy described below. For purposes of this Insurance Agreement, the following
terms shall have the following meanings:
"Closing Date" means May 30, 2002.
"Commission" means the Securities and Exchange Commission.
"Company Documents" means the Indenture, this Insurance Agreement, the
Notes and the Assignment and Servicing Agreement.
"Default" means any event which results, or which with the giving of notice
or the lapse of time or both would result, in an Event of Servicing Termination.
"Documents" means the Company Documents and any other information relating
to the Asset Pool, IOS Capital, the Seller or the Issuer furnished to the
Insurer by IOS Capital, the Seller or the Issuer.
"Event of Servicing Termination" means any Event of Servicing
Termination specified in Section 5.01 of this Insurance Agreement.
"Holder" has the meaning given such term in the Policy.
"Indemnification Agreement" means the Indemnification
Agreement dated as of May 30, 2002 among the Insurer and the Underwriters.
"Indenture Trustee" means BNY Midwest Trust Company, as
trustee under the Indenture, and any successor thereto under the Indenture.
"Insurance Agreement" has the meaning given such term in the
initial paragraph hereof.
"Insurer" means Ambac Assurance Corporation, a Wisconsin
domiciled stock insurance corporation, or any successor thereto, as issuer of
the Policy.
"Insurer Information" has the meaning given such term in
Section 3.04(a)(v).
"Investment Company Act" means the Investment Company Act of
1940, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"IOS Capital" means IOS Capital, LLC, any successors thereto,
as the Originator and the Servicer.
"Issuer" means IKON Receivables Funding, LLC, a Delaware
limited liability company, or any successor thereto as provided for in the
Indenture.
"Late Payment Rate" means the lesser of (a) the greater of (i)
the per annum rate of interest publicly announced from time to time by Citibank,
N.A. as its prime or base lending rate (any change in such rate of interest to
be effective on the date such change is announced by Citibank, N.A.), plus 2%
per annum and (ii) the then applicable highest rate of interest on the Notes and
(b) the maximum rate permissible under applicable usury or similar laws limiting
interest rates. The Late Payment Rate shall be computed on the basis of the
actual number of days elapsed over a year of 360 days.
"Material Adverse Change" means, in respect of any Person, a
material adverse change in (i) the business, financial condition, results of
operations or properties of such Person on a consolidated basis with its
subsidiaries or (ii) the ability of such Person to perform its obligations under
any of the Company Documents.
"Moody's" means Moody's Investors Service, Inc., and any
successor thereto.
"Notes" has the meaning given such term in the Indenture.
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"Offering Document" means the Prospectus dated March 11, 2002,
the Preliminary Prospectus Supplement filed with the Commission on May 17, 2002,
and the Prospectus Supplement dated May 21, 2002, each in respect of the Notes,
and any amendment or supplement thereto, and any other offering document in
respect of the Notes prepared by IOS Capital that makes reference to the Policy.
"Person" means an individual, joint stock company, trust,
unincorporated association, joint venture, corporation, business or owner trust,
partnership or other organization or entity (whether governmental or private).
"Policy" means the certificate guaranty insurance policy,
#AB0559BE, together with all endorsements thereto, issued by the Insurer to the
Indenture Trustee, for the benefit of the Holders of the Notes.
"Premium" means the premium payable in accordance with the
Policy, with respect to any Payment Date, the amount calculated by multiplying
the Premium Percentage by the Outstanding Principal Amount of the Notes on such
Payment Date prior to the distribution of any principal with respect to the
Notes on such Payment Date. All calculations of the Premium shall be based upon
twelve 30-day months and a 360-day year.
"Premium Percentage" shall mean 0.30% per annum.
"Registration Statement" means the registration statement on
Form S-3 (No. 333-71362), including the prospectus, relating to the offering
from time to time of up to $2,500,000,000 aggregate principal amount of the
Issuer's lease-backed notes, including the Notes, at the time it became
effective.
"Securities Act" means the Securities Act of 1933, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Securities Exchange Act" means the Securities Exchange Act of
1934, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and any successor thereto.
"Transaction" means the transactions contemplated by the
Company Documents, including the transactions described in the Offering
Document.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Underwriters" means, collectively, Lehman Brothers Inc., Banc
of America Securities LLC and First Union Securities, Inc.
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"Underwriting Agreement" means the Underwriting Agreement dated
May 21, 2002 among the Underwriters, the Issuer and IOS Capital with respect to
the offer and sale of the Notes, as amended, modified or supplemented from time
to time.
"Underwriters' Information" has the meaning given such term in
the Indemnification Agreement.
SECTION 1.02. Other Definitional Provisions. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Insurance
Agreement shall refer to this Insurance Agreement as a whole and not to any
particular provision of this Insurance Agreement, and Section, subsection,
Schedule and Exhibit references are to this Insurance Agreement unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The words
"include" and "including" shall be deemed to be followed by the phrase "without
limitation."
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.01. Representations and Warranties of IOS Capital. IOS Capital
hereby makes to and for the benefit of the Insurer each of the representations
and warranties made by IOS Capital in the Indenture and the Assignment and
Servicing Agreement, including, but not limited to, Section 2 of the Assignment
and Servicing Agreement. Such representations and warranties are incorporated
herein by this reference as if fully set forth herein, and may not be amended
except by an amendment complying with the terms of Section 6.01. In addition,
IOS Capital represents and warrants as of the Closing Date as follows:
(a) Due Authorization. The execution, delivery and performance by IOS
Capital of the Company Documents to which it is a party, have been duly
authorized by all necessary corporate action and do not require any additional
approvals or consents, or other action by or any notice to or filing with any
Person, including any governmental entity or any of the stockholders of IOS
Capital, which have not previously been obtained or given.
(b) Noncontravention. The execution and delivery by IOS Capital of the
Company Documents to which it is a party, the consummation of the Transaction
and the satisfaction of the terms and conditions of the Company Documents do not
and will not:
(i) conflict with or result in any breach or violation of any
provision of the charter, bylaws, or operating agreement of IOS
Capital or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect
having applicability to IOS Capital or any of its respective
material properties, including regulations issued by any
administrative agency or other governmental authority having
supervisory powers over IOS Capital;
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(ii) constitute a default by IOS Capital under, result in the
acceleration of any obligation under, or breach any provision of any
loan agreement, mortgage, indenture or other agreement or instrument
to which IOS Capital is a party or by which any of its properties are
or may be bound or affected; or
(iii) result in or require the creation of any lien upon or in respect
of any assets of IOS Capital, except as expressly contemplated by the
Company Documents.
(c) Valid and Binding Obligations. When executed and delivered by IOS
Capital, the Company Documents to which IOS Capital is a party will constitute
the legal, valid and binding obligations of IOS Capital enforceable in
accordance with their respective terms, except as such enforceability may be
limited by insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles and
public policy considerations as to rights of indemnification for violations of
federal securities laws. The Notes, when executed, authenticated and delivered
in accordance with the Indenture, will be validly issued and outstanding and
entitled to the benefits of the Indenture. IOS Capital will not at any time in
the future deny that the Company Documents constitute the legal, valid and
binding obligations of IOS Capital.
(d) Compliance With Securities Laws. The offer and sale of the Notes comply
in all material respects with all requirements of law, including all
registration requirements of applicable securities laws. The Indenture is
required to be qualified and has been qualified under the Trust Indenture Act
and the Issuer is not required to be registered as an "investment company" under
the Investment Company Act. IOS Capital will satisfy any of the information
reporting requirements of the Securities Exchange Act arising out of the
Transaction to which it, the Issuer or the Seller are subject.
SECTION 2.02. Affirmative Covenants of IOS Capital. IOS Capital hereby
makes, to and for the benefit of the Insurer, all of the covenants made by IOS
Capital as Originator and Servicer in the Indenture and the Assignment and
Servicing Agreement, including, but not limited to, Sections 4, 5, 6, 7 and 8 of
the Assignment and Servicing Agreement (but with respect to such covenants made
by IOS Capital as Servicer, only for so long as IOS Capital is the Servicer).
Such covenants are hereby incorporated herein by this reference as if fully set
forth herein, and may not be amended except by an amendment complying with the
terms of Section 6.01. In addition, IOS Capital hereby agrees that during the
term of this Insurance Agreement, unless the Insurer shall otherwise expressly
consent in writing:
(a) Compliance With Agreements and Applicable Laws. IOS Capital shall
comply with the terms and conditions of and perform its obligations under the
Company Documents to which it is a party in all cases in which failure to so
comply or perform would result in a default thereunder and shall comply with all
material requirements of any law, rule or regulation applicable to it.
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(b) Access to Records; Discussions with Officers and Accountants. On an
annual basis, or upon the occurrence of a Material Adverse Change, IOS Capital
shall, upon the reasonable request of the Insurer, permit the Insurer or its
authorized agents:
(i) to inspect the books and records of IOS Capital as they may relate
to the Notes, the obligations of IOS Capital under the Company
Documents and the Transaction;
(ii) to discuss the affairs, finances and accounts of IOS Capital with
the Chief Operating Officer and the Chief Financial Officer of IOS
Capital; and
(iii) with IOS Capital's consent, which consent shall not be
unreasonably withheld or delayed, to discuss the affairs, finances and
accounts of IOS Capital with IOS Capital's independent accountants,
provided that an officer of IOS Capital shall have the right to be
present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours at the Insurer's expense and shall not unreasonably disrupt the
business of IOS Capital.
(c) Retirement of Notes. IOS Capital shall instruct the Indenture Trustee
in writing, upon a retirement or other payment of all of the Notes, to surrender
the Policy to the Insurer for cancellation.
(d) Disclosure Document. Each Offering Document delivered with respect to
the Notes shall clearly disclose that the Policy is not covered by the
property/casualty insurance security fund specified in Article 76 of the New
York Insurance Law.
(e) Third-Party Beneficiary. IOS Capital agrees that the Insurer shall
have all rights of a third-party beneficiary in respect of the Indenture, and
the Assignment and Servicing Agreement.
(f) Closing Documents. IOS Capital shall provide or cause to be provided
to the Insurer, within 30 Business Days after the date of closing, an executed
original copy of each document executed in connection with the Transaction.
SECTION 2.03. Negative Covenants of IOS Capital. IOS Capital hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Impairment of Rights. IOS Capital shall not take any action, or fail to
take any action, if such action or failure to take action may result in a
Material Adverse Change specified in clause (ii) of the definition of Material
Adverse Change with respect to IOS Capital, or may not interfere with the
enforcement of any rights of the Insurer under or with respect to any of the
Company Documents. IOS Capital shall give the Insurer written notice of any such
action or
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failure to act on the earlier of: (i) the date upon which any publicly available
filing or release is made with respect to such action or failure to act or (ii)
promptly prior to the date of consummation of such action or failure to act. IOS
Capital shall furnish to the Insurer all information requested by it that is
reasonably necessary to determine compliance with this paragraph.
(b) Amendments, Etc. IOS Capital shall not modify or amend, or consent to
any modification or amendment of, any of the terms, provisions or conditions of
the Company Documents to which it is a party without the prior written consent
of the Insurer thereto, but excluding any amendment to the Offering Document
required by law and excluding any modifications or amendments to which, pursuant
to the terms of the Company Documents, Insurer's consent is not required.
(c) Successors. Except as provided in Section 10.02 of the Assignment and
Servicing Agreement or Section 8.08 of the Indenture, as applicable, neither the
Indenture Trustee nor IOS Capital shall terminate or designate, or consent to
the termination or designation of, any successor Servicer or Indenture Trustee
without the prior written approval of the Insurer, which approval shall not be
unreasonably withheld, conditioned or delayed.
SECTION 2.04. Representations and Warranties of the Insurer. The Insurer
represents and warrants to the Indenture Trustee (on behalf of the Noteholders),
the Issuer and IOS Capital as follows:
(a) Organization and Licensing. The Insurer is a duly organized and validly
existing Wisconsin stock insurance company duly qualified to conduct an
insurance business in the State of Illinois.
(b) Corporate Power. The Insurer has the corporate power and authority to
issue the Policy and execute and deliver this Insurance Agreement and to perform
all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. All proceedings legally required for the
issuance of the Policy and the execution, delivery and performance of this
Insurance Agreement have been taken and all licenses, orders, consents or other
authorizations or approvals of the Insurer's Board of Directors or stockholders
or any governmental boards or bodies legally required for the enforceability of
the Policy have been obtained; any proceeding not taken and any license,
authorization or approvals not obtained are not material to the enforceability
of the Policy.
(d) Enforceability. The Policy, when issued, and this Insurance Agreement
will each constitute a legal, valid and binding obligation of the Insurer,
enforceable in accordance with its terms, subject to insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors' rights
generally and by general principles of equity and subject to principles of
public policy limiting the right to enforce the indemnification provisions
contained therein and herein, insofar as such provisions relate to
indemnification for liabilities arising under federal securities laws.
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(e) Financial Information. The consolidated financial statements of the
Insurer and its subsidiaries as of December 31, 2001 and 2000, and for the three
years ended December 31, 2001, included in the Annual Report on Form 10-K of
Ambac Financial Group, Inc. (which was filed with the Commission on March 26,
2002, Commission File Number 1-10777), and the unaudited consolidated financial
statements of the Insurer and its subsidiaries as of March 31, 2002 and for the
periods ending March 31, 2002 and March 31, 2001, included in the Quarterly
Report on Form 10-Q of Ambac Financial Group, Inc. for the period ended March
31, 2002 (which was filed with the Commission on May 13, 2002), are hereby
incorporated by reference into the Prospectus Supplement dated May 21, 2002
relating to the Notes and shall be deemed to be a part hereof. Since March 31,
2002, there has been no Material Adverse Change with respect to the financial
condition of the Insurer that would affect its ability to perform its
obligations under the Policy.
(f) Insurer Information. The Insurer Information is true and correct in all
material respects and does not contain any untrue statement of a material fact.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge, threatened
against it at law or in equity or before or by any court, governmental agency,
board or commission or any arbitrator which, if decided adversely, would result
in a Material Adverse Change or would materially and adversely affect its
ability to perform its obligations under the Policy or this Insurance Agreement.
(h) No Conflict. The execution by the Insurer of this Insurance Agreement
will not, and the satisfaction of the terms hereof will not, conflict with or
result in a breach of any of the terms, conditions or provisions of the
Certificate of Incorporation or By-Laws of the Insurer, or any restriction
contained in any contract, agreement or instrument to which the Insurer is a
party or by which it is bound or constitute a default under any of the
foregoing.
(i) Confidential Information. The Insurer agrees that it and its
shareholders, directors, agents, accountants and attorneys shall not use or
disclose any information provided to the Insurer pursuant to or in connection
with this Insurance Agreement or the issuance of the Policy or otherwise related
to the Transactions, including any matter of which it becomes aware during the
inspections conducted or discussions had pursuant to Section 2.02(b), unless
such information is readily available from public sources or except as may be
otherwise required by regulation, law or court order or requested by appropriate
governmental authorities or as necessary to preserve its rights or security
under or to enforce the Company Documents; provided, however, that the foregoing
shall not limit the right of the Insurer to make such information available to
its regulators, securities rating agencies, reinsurers, credit and liquidity
providers, counsel and accountants. If the Insurer is requested or required (by
oral questions, interrogatories, requests for information or documents subpoena,
civil investigative demand or similar process) to disclose any information
provided to the Insurer pursuant to or in connection with this Insurance
Agreement or the issuance of the Policy or otherwise related to the
Transactions, including any information of which it becomes aware through such
inspections or discussions, the Insurer will promptly notify IOS Capital of such
request(s) so that IOS Capital may seek an appropriate protective order and/or
waive the Insurer's compliance with the
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provisions of this Insurance Agreement. If, in the absence of a protective
order or the receipt of a waiver hereunder, the Insurer is, nonetheless, in the
opinion of its counsel (which shall be delivered to IOS Capital), compelled to
disclose such information to any tribunal or else stand liable for contempt or
suffer other censure of significant penalty, the Insurer may disclose such
information to such tribunal that the Insurer is compelled to disclose, provided
that the Insurer shall promptly notify IOS Capital that the Insurer has been
compelled to so disclose and that the Insurer shall use best efforts to provide
to IOS Capital prior to disclosure a copy of all information to be so disclosed.
(j) Rating. The Insurer is not aware of any facts that if disclosed to
Moody's or S&P would be reasonably expected to result in a downgrade of the
rating of the financial strength of the Insurer by either of such Rating
Agencies.
(k) 1933 Act Registration. Each Policy is exempt from registration under
the Act.
SECTION 2.05. Representations and Warranties and Covenants of the Seller.
The Seller hereby makes to and for the benefit of the Insurer each of the
representations and warranties and covenants made by the Seller in the
Assignment and Servicing Agreement, including, but not limited to, Section 3 and
Section 9 of the Assignment and Servicing Agreement. Such representations,
warranties and covenants are incorporated herein by this reference as if fully
set forth herein, and may not be amended except by an amendment complying with
the terms of Section 6.01.
SECTION 2.06. Representations and Warranties of the Issuer. The Issuer
hereby makes, to and for the benefit of the Insurer, each of the representations
and warranties made by the Issuer in the Indenture. Such representations and
warranties are incorporated herein by this reference as if fully set forth
herein, and may not be amended except by an amendment complying with the terms
of Section 6.01. In addition, the Issuer represents and warrants as of the
Closing Date as follows:
(a) Due Organization and Qualification. The Issuer is a limited liability
company, duly organized, validly existing and in good standing under the laws of
Delaware and the United States of America. The Issuer is duly qualified to do
business, is in good standing and has obtained all necessary licenses, permits,
charters, registrations and approvals (together, "approvals") necessary for the
conduct of its business as currently conducted and as described in the Offering
Document and the performance of its obligations under the Company Documents in
each jurisdiction in which the failure to be so qualified or to obtain such
approvals would render any Company Document unenforceable in any respect or
would have a material adverse effect upon the Transaction.
(b) Power and Authority. The Issuer has all necessary limited liability
company power and authority to conduct its business as currently conducted and
as described in the Offering Document, to execute, deliver and perform its
obligations under the Company Documents and to consummate the Transaction.
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(c) Due Authorization. The execution, delivery and performance of the
Company Documents by the Issuer has been duly authorized by all necessary
limited liability company action and does not require any additional approvals
or consents, or other action by or any notice to or filing with any Person,
including any governmental entity or any beneficial owner of the Trust, which
have not previously been obtained or given by the Trust.
(d) Noncontravention. The execution and delivery by the Issuer of the
Company Documents to which it is a party, the consummation of the Transaction
and the satisfaction of the terms and conditions of the Company Documents do not
and will not:
(i) conflict with or result in any breach or violation of any
provision of the Limited Liability Company Agreement of the Issuer
or any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award currently in effect having
applicability to the Issuer or any of its respective material
properties, including regulations issued by any administrative
agency or other governmental authority having supervisory powers
over the Issuer;
(ii) constitute a default by the Issuer under, result in the
acceleration of any obligation under, or breach any provision of
any loan agreement, mortgage, indenture or other agreement or
instrument to which the Issuer either is a party or by which any of
their properties are or may be bound or affected; or
(iii) result in or require the creation of any lien upon or in
respect of any assets of the Issuer, except as otherwise expressly
contemplated by the Company Documents.
(e) Legal Proceedings. There is no action, proceeding or investigation by
or before any court, governmental or administrative agency or arbitrator against
or affecting the Issuer, any properties or rights of the Issuer or any of the
Asset Pool pending or threatened, which, in any case, if decided adversely to
the Issuer could result in a Material Adverse Change with respect to the Issuer.
(f) Valid and Binding Obligations. The Company Documents, when executed and
delivered by the Issuer, will constitute the legal, valid and binding
obligations of the Issuer, enforceable in accordance with their respective
terms, except as such enforceability may be limited by insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general equitable principles and public policy considerations as
to rights of indemnification for violations of federal securities laws. The
Notes, when executed, authenticated and delivered in accordance with the
Indenture, will be validly issued and outstanding and entitled to the benefits
of the Indenture.
(g) Compliance with Law, Etc. No practice, procedure or policy employed, or
proposed to be employed, by the Issuer in the conduct of its business violates
any law, regulation,
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judgment, agreement, order or decree applicable to the Issuer that, if enforced,
could result in a Material Adverse Change with respect to the Issuer.
(h) Accuracy of Information. None of the Documents, as amended,
supplemented or superseded, furnished to the Insurer by the Issuer contains any
statement of a material fact which was untrue or misleading in any material
respect when made. Since the furnishing of the Documents, there has been no
change nor any development or event involving a prospective change known to the
Issuer that would render any of the Documents untrue or misleading in any
material respect.
(i) Compliance With Securities Laws. The offer and sale of the Notes comply
in all material respects with all requirements of law, including all
registration requirements of applicable securities laws. Without limiting the
foregoing, the Offering Document does not contain any untrue statement of a
material fact and does not omit to state a material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; provided, however, that no representation is made with
respect to the Insurer Information or with respect to the Underwriters'
Information. Neither the offer nor sale of the Notes by the Issuer has been or
will be in violation of the Securities Act or any other federal or state
securities laws. The Indenture is required to be qualified under the Trust
Indenture Act. The Issuer is not required to be registered as an "investment
company" under the Investment Company Act. The Issuer will satisfy any of the
information reporting requirements of the Securities Exchange Act arising out of
the Transaction to which it or the trust created under the Indenture are
subject.
(j) Solvency; Fraudulent Conveyance. The Issuer is solvent and will not be
rendered insolvent by the Transaction and, after giving effect to the
Transaction, the Issuer will not be left with an unreasonably small amount of
capital with which to engage in its business, and the Issuer does not intend to
incur, or believe that it has incurred, debts beyond its ability to pay as they
mature. The Issuer does not contemplate the commencement of insolvency,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the Issuer or
any of their assets. The Issuer is not pledging the Asset Pool under the
Indenture with any intent to hinder, delay or defraud any of the Issuer's
creditors.
(k) Principal Place of Business. The principal place of business of the
Issuer is 1738 Bass Road, Macon, Georgia 31210.
SECTION 2.07. Affirmative Covenants of the Issuer. The Issuer hereby makes,
to and for the benefit of the Insurer, all of the covenants of the Issuer set
forth in the Indenture, including, but not limited to, Section 9 of the
Indenture. Such covenants are incorporated herein by this reference, and may not
be amended except by an amendment complying with the terms of Section 6.01. In
addition, the Issuer hereby agrees that during the term of this Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:
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(a) Compliance With Agreements and Applicable Laws. The Issuer shall comply
with the terms and conditions of and perform its respective obligations under
the Company Documents to which it is a party in all cases in which failure to so
comply or perform would result in a default thereunder and shall comply with all
material requirements of any law, rule or regulation applicable to it.
(b) Existence. The Issuer and its successors and permitted assigns shall
maintain its existence as a limited liability company and shall at all times
continue to be duly organized under the laws of the State of Delaware and duly
qualified and duly authorized (as described in subsections 2.06(a), (b) and (c)
hereof) and shall conduct its business in accordance with the terms of its
Limited Liability Company Agreement.
(c) Access to Records; Discussions with Officers and Accountants. On an
annual basis, or upon the occurrence of a Material Adverse Change, the Issuer
shall, upon the reasonable request of the Insurer, permit the Insurer or its
authorized agents:
(i) to inspect the books and records of the Issuer as they may
relate to the Notes, the obligations of the Issuer under the
Company Documents and the Transaction, or any other indebtedness of
the Issuer;
(ii) to discuss the affairs, finances and accounts of the Issuer
with IOS Capital on behalf of the Issuer; and
(iii) with the Issuer's consent, which consent shall not be
unreasonably withheld or delayed, to discuss the affairs, finances
and accounts of the Issuer with the Issuer's independent
accountants, provided that an officer of the Issuer and IOS Capital
shall have the right to be present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the Issuer.
(d) Notice of Material Events. The Issuer shall be obligated promptly to
inform the Insurer in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation, or rule making or disciplinary proceeding by or
against the Issuer that (A) could reasonably be required to be
disclosed to the Commission or (B) would likely result in a
Material Adverse Change with respect to the Issuer, or the
promulgation of any proceeding or any proposed or final ruling in
connection with any such litigation, investigation or proceeding
which would likely result in a Material Adverse Change with respect
to the Issuer;
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(ii) any change in (A) the location of the principal office of the
Issuer, (B) the jurisdiction of the Issuer's organization, or (C)
the form of the Issuer's organization;
(iii) the occurrence of any Default or Event of Servicing
Termination, or any Material Adverse Change in respect of the
Issuer;
(iv) the commencement of any proceedings by or against the Issuer
under any applicable reorganization, liquidation, rehabilitation,
insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, conservator,
trustee or similar official shall have been, or may be, appointed
or requested for the Issuer or any of their assets; or
(v) the receipt of notice that (A) any license, permit, charter,
registration or approval necessary for the conduct of the Issuer's
business are to be, or may be suspended or revoked or (B) the
Issuer is to cease and desist any practice, procedure or policy
employed by the Issuer in the conduct of its business, and such
cessation may result in a Material Adverse Change with respect to
the Issuer.
(e) Financing Statements and Further Assurances. The Issuer shall, upon the
request of the Insurer, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, within ten days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Company Documents. In addition, the Issuer
agrees to cooperate with S&P and Moody's in connection with any review of the
Transaction, conducted during normal business hours and in a manner that does
not unreasonably disrupt the business of IOS Capital, that may be undertaken by
S&P and Moody's after the date hereof upon reasonable notice.
(f) Maintenance of Licenses. The Issuer shall maintain all licenses,
permits, charters and registrations which are material to the conduct of its
business.
(g) Third-Party Beneficiary. The Issuer agrees that the Insurer shall have
all rights of a third-party beneficiary in respect of the Indenture.
SECTION 2.08. Negative Covenants of the Issuer. The Issuer hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Impairment of Rights. The Issuer shall not take any action, or fail to
take any action, if such action or failure to take action may result in a
Material Adverse Change specified in clause (ii) of the definition of Material
Adverse Change with respect to the Issuer or may not interfere with the
enforcement of any rights of the Insurer under or with respect to any of the
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Company Documents. The Issuer shall give the Insurer written notice of any such
action or failure to act on the earlier of: (i) the date upon which any publicly
available filing or release is made with respect to such action or failure to
act or (ii) promptly prior to the date of consummation of such action or failure
to act. The Issuer shall furnish to the Insurer all information requested by it
that is reasonably necessary to determine compliance with this paragraph.
(b) Amendments, Etc. The Issuer shall not modify or amend, or consent to
any modification or amendment of, any of the terms, provisions or conditions of
the Company Documents to which it is a party without the prior written consent
of the Insurer thereto, but excluding any amendment to the Offering Document
required by law and excluding any modifications or amendments to which, pursuant
to the terms of the Company Documents, Insurer's consent is not required.
(c) Limitation on Mergers, Etc. The Issuer shall not consolidate with or
merge with or into any Person or transfer all or substantially all of its assets
to any Person or liquidate or dissolve except as provided in the Indenture or as
permitted hereby. The Issuer shall furnish to the Insurer all information
requested by it that is reasonably necessary to determine compliance with this
paragraph.
(d) Successors. Except as provided in Section 10.02 of the Assignment and
Servicing Agreement or Section 8.08 of the Indenture, as applicable, neither the
Trustee nor IOS Capital shall terminate or designate, or consent to the
termination or designation of, any successor Servicer or Trustee without the
prior written approval of the Insurer, which approval shall not be unreasonably
withheld, conditioned or delayed.
ARTICLE III
THE POLICY; REIMBURSEMENT
SECTION 3.01. Issuance of the Policies. The Insurer agrees to issue the
Policy on the Closing Date subject to satisfaction of the conditions precedent
set forth below:
(a) Payment of Initial Premium and Expenses. The applicable parties shall
have been paid by IOS Capital their related fees and expenses payable in
accordance with Section 3.02 within 5 Business Days of receipt of the related
invoice;
(b) Company Documents. The Insurer shall have received a copy of each of
the Company Documents, in form and substance reasonably satisfactory to the
Insurer, duly authorized, executed and delivered by each party thereto;
(c) Certified Documents and Resolutions. The Insurer shall have received a
copy of (i) the limited liability company agreement and certificate of IOS
Capital and the limited liability company agreement and certificate of each of
Seller and Issuer, and (ii) a certificate of the Secretary or Assistant
Secretary of IOS Capital stating that attached thereto is a true, complete and
correct copy of resolutions duly adopted by the Board of Managers or sole
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Manager, Managing Member or a duly authorized committee of IOS Capital, or the
Managing Member of the Seller and the Issuer, as the case may be, authorizing
the execution, delivery and performance by IOS Capital, the Seller or the
Issuer, as the case may be, of the Company Documents to which it is a party and
the consummation of the Transaction and that such limited liability company
agreements, certificates of formation and resolutions are in full force and
effect without amendment or modification on the Closing Date;
(d) Incumbency Certificate. The Insurer shall have received a certificate
of the Secretary or an Assistant Secretary of each of IOS Capital, the Seller
and the Issuer certifying the names and signatures of the officers of such
entity authorized to execute and deliver the Company Documents to which it is a
party;
(e) Representations and Warranties; Certificate. The representations and
warranties of IOS Capital, the Seller and the Issuer set forth or incorporated
by reference in this Insurance Agreement shall be true and correct on and as of
the Closing Date as if made on the Closing Date, and the Insurer shall have
received a certificate of appropriate officers of IOS Capital, the Seller and
the Issuer to that effect;
(f) Opinions of Counsel. The Insurer shall have received all opinions of
counsel addressed to any of Moody's, S&P, the Indenture Trustee, IOS Capital,
the Issuer, the Seller, or the Underwriters in respect of the Transaction, in
form and substance reasonably satisfactory to the Insurer, addressed to the
Insurer and addressing such matters as the Insurer may reasonably request, and
the counsel providing each such opinion shall have been instructed by its client
to deliver such opinion to the addressees thereof;
(g) Approvals, Etc. The Insurer shall have received true and correct copies
of all approvals, licenses and consents, if any, including any required approval
of the shareholders of IOS Capital, required in connection with the Transaction;
(h) No Litigation, Etc. No suit, action or other proceeding, investigation
or injunction, or final judgment relating thereto, shall be pending or
threatened before any court, governmental or administrative agency or arbitrator
in which it is sought to restrain or prohibit or to obtain damages or other
relief in connection with any of the Company Documents or the consummation of
the Transaction;
(i) Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court that would make the Transaction illegal or
otherwise prevent the consummation thereof;
(j) Satisfaction of Conditions of the Underwriting Agreement. All
conditions in the Underwriting Agreement relating to the Underwriters'
obligation to purchase the Notes shall have been satisfied, without taking into
account any waiver by any Underwriter of any condition unless such waiver has
been approved by the Insurer. The Insurer shall have received copies of each of
the documents, and shall be entitled to rely on each of the documents, required
to be delivered to any Underwriter pursuant to the Underwriting Agreement;
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(k) Issuance of Ratings. The Insurer shall have received confirmation that
the risk secured by the Policy constitutes a "BBB" risk by S&P and a "Baa2" risk
by Moody's and that the Notes, when issued, will be rated "AAA" by S&P and "Aaa"
by Moody's (or A-1+ by S&P and P-1 by Moody's in the case of the Class A-1
Notes);
(l) No Default. No Default or Event of Servicing Termination shall have
occurred;
(m) Additional Items. The Insurer shall have received such other documents,
instruments, approvals or opinions reasonably requested by the Insurer as may be
reasonably necessary to effect the Transaction, including evidence reasonably
satisfactory to the Insurer that the conditions precedent, if any, in the
Company Documents have been satisfied; and
(n) Satisfactory Documentation. The Insurer and its counsel shall have
determined that all documents, Notes and opinions to be delivered in connection
with the Notes conform to the terms of the Indenture, the Registration
Statement, the Offering Document and this Insurance Agreement.
SECTION 3.02. Payment of Fees and Premium.
(a) Legal and Accounting Fees. IOS Capital shall pay or cause to be paid,
within 5 Business Days of receipt of the related invoice, reasonable legal fees,
auditors' fees in connection with the provision of information or any consent in
connection with any Offering Document and disbursements incurred by the Insurer
in connection with the issuance of the Policy. Any reasonable additional fees of
the Insurer's counsel or auditors payable in respect of any amendment or
supplement to any Offering Document, or in respect of the issuance of any
additional indebtedness by the Issuer, incurred after the Closing Date shall be
paid by IOS Capital on demand.
(b) Rating Agency Fees. IOS Capital shall promptly pay the initial fees of
S&P and Moody's with respect to the Notes and the transactions contemplated
hereby following receipt of a statement with respect thereto. IOS Capital shall
pay any subsequent fees of S&P or Moody's with respect to, and directly
allocable to, the Notes to the extent that such fees and expenses result from
actions of S&P or Moody's that are requested by IOS Capital, including the
issuance of any additional indebtedness by the Issuer. The Insurer shall not be
responsible for any fees or expenses of S&P or Moody's. The fees for any other
rating agency shall be paid by the party requesting such other agency's rating.
(c) Premium.
(i) In consideration of the issuance by the Insurer of the Policy,
the Insurer shall be entitled to receive the Premium as and when due
in accordance with and from the funds specified by Section 3.03 of
the Indenture.
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(ii) The Premium paid under the Indenture shall be nonrefundable
without regard to whether any Notice for Payment is delivered to the
Insurer requiring the Insurer to make any payment under either
Policy or any other circumstances relating to the Notes or provision
being made for payment of the Notes prior to maturity.
SECTION 3.03. Reimbursement Obligation.
(a) As and when due, from, and only from, the funds specified in Section
3.03 or Article VII of the Indenture, the Insurer shall be entitled to
reimbursement for any payment made by the Insurer under the Policy, which
reimbursement shall be due and payable on the date that any amount is paid
thereunder, in an amount equal to the amount so paid and all amounts previously
paid that remain unreimbursed, together with interest on any and all amounts
remaining unreimbursed (to the extent permitted by law, if in respect of any
unreimbursed amounts representing interest) from the date such amounts became
due until paid in full (after as well as before judgment), at a rate of interest
equal to the Late Payment Rate.
(b) IOS Capital agrees to pay to the Insurer, within 5 Business Days of
receipt of an invoice, as follows: any and all charges, fees, costs and expenses
that the Insurer may reasonably pay or incur, including reasonable attorneys'
and accountants' fees and expenses, in connection with (i) the enforcement,
defense or preservation of any rights in respect of any of the Company
Documents, including defending, monitoring or participating in any litigation or
proceeding (including any insolvency proceeding in respect of any Transaction
participant or any affiliate thereof) relating to any of the Company Documents,
any party to any of the Company Documents (in its capacity as such a party) or
the Transaction, or (ii) any amendment, waiver or other action with respect to,
or related to, any Company Document (including, but not limited to, any action
in connection with the issuance of additional indebtedness by the Issuer),
whether or not executed or completed.
(c) IOS Capital agrees to pay to the Insurer, within 5 Business Days of
receipt of an invoice, as follows: interest on any and all amounts described in
subclause (b) of this Section 3.03 from the date payable or paid by such party
until payment thereof in full, and interest on any and all amounts described in
Section 3.02 (a) from the date due until payment thereof in full and interest on
any and all amounts described in Section 3.04 from the date due until payment
thereof in full, in each case, payable to the Insurer at the Late Payment Rate.
SECTION 3.04. Indemnification.
(a) In addition to any and all of the Insurer's rights of reimbursement,
indemnification, subrogation and to any other rights of the Insurer pursuant
hereto or under law or in equity, IOS Capital agrees to pay, and to protect,
indemnify and save harmless, the Insurer and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls the
Insurer within the meaning of either Section 15 of the Securities Act or Section
20 of the Securities Exchange Act from and against, any and all claims, losses,
liabilities (including penalties),
17
actions, suits, judgments, demands, damages, costs or expenses (including
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or relating to
the transactions contemplated by the Company Documents by reason of:
(i) any omission or action (other than of or by the Insurer
(including any Insurer Information, as defined below) or the
Underwriters) by IOS Capital in connection with the offering,
issuance, sale or delivery of any of the Notes prior to the
completion of the initial offering and distribution of the Notes;
(ii) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer, employee or
agent of IOS Capital in connection with any Transaction arising from
or relating to the Company Documents;
(iii) the violation by IOS Capital of any domestic or foreign law,
rule or regulation, or any judgment, order or decree applicable to
it;
(iv) the breach by IOS Capital of any representation, warranty or
covenant under any of the Company Documents or the occurrence, in
respect of IOS Capital, under any of the Company Documents of any
Event of Servicing Termination or any event which, with the giving
of notice or the lapse of time or both, would constitute any Event
of Servicing Termination (exclusive of clause (c) of Section 5.01
hereof); or
(v) any untrue statement or alleged untrue statement of a material
fact contained in any Offering Document or the Registration
Statement or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, except insofar as such claims, losses,
liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or expenses (including reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs
of investigations) arise out of or are based upon any untrue
statement or omission in the an Offering Document other than the
Underwriters' Information and information furnished by the Insurer
in writing expressly for use therein (all such information so
furnished being referred to herein as "Insurer Information"), it
being understood that, in respect of the initial Offering Document,
the Insurer Information is limited to the information with respect
to the Insurer included under the caption "THE INSURER AND THE
POLICY."
(b) The Insurer agrees to pay, and to protect, indemnify and save harmless,
IOS Capital and its respective officers, directors, shareholders, employees,
agents and each Person, if any,
18
who controls IOS Capital within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act from and against,
any and all claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or by reason of any untrue
statement or alleged untrue statement of a material fact contained in the
Insurer Information in any Offering Document or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading or a breach of any of the representations and warranties of
the Insurer contained in Section 2.04.
(c) If any action or proceeding (including any governmental investigation)
shall be brought or asserted against any Person (individually, an "Indemnified
Party" and, collectively, the "Indemnified Parties") in respect of which the
indemnity provided in Section 3.04(a) or (b) may be sought from IOS Capital, on
the one hand, or the Insurer, on the other (each, an "Indemnifying Party")
hereunder, each such Indemnified Party shall promptly notify the Indemnifying
Party in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel satisfactory to the Indemnified Party and
the payment of all expenses. The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof at the expense of the Indemnified Party; provided, however, that the
fees and expenses of such separate counsel shall be at the expense of the
Indemnifying Party if (i) the Indemnifying Party has agreed to pay such fees and
expenses, (ii) the Indemnifying Party shall have failed to assume the defense of
such action or proceeding and employ counsel reasonably satisfactory to the
Indemnified Party in any such action or proceeding or (iii) the named parties to
any such action or proceeding (including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party, and the Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Indemnifying Party (in which case, if the Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Party
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the Indemnified Parties, which firm shall be designated in writing by
the Indemnified Party). The Indemnifying Party shall not be liable for any
settlement of any such action or proceeding effected without its written consent
to the extent that any such settlement shall be prejudicial to the Indemnifying
Party, but, if settled with its written consent, or if there is a final judgment
for the plaintiff in any such action or proceeding with respect to which the
Indemnifying Party shall have received notice in accordance with this subsection
(c), the Indemnifying Party agrees to indemnify and hold the Indemnified Parties
harmless from and against any loss or liability by reason of such settlement or
judgment.
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(d) To provide for just and equitable contribution if the indemnification
provided by the Indemnifying Party is determined to be unavailable or
insufficient to hold harmless any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
losses incurred by the Indemnified Party on the basis of the relative fault of
the Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand. The relative fault of each Indemnifying Party, on the one hand, and each
Indemnified Party, on the other, shall be determined by reference to, among
other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth are within the control of, the
Indemnifying Party or the Indemnified Party, and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.
No Person guilty of fraudulent misrepresentation (within the meaning
of Section (11)(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
SECTION 3.05. Payment Procedure. In the event of any payment to the
Insurer, the Indenture Trustee and IOS Capital agree to accept the voucher or
other evidence of payment as prima facie evidence of the propriety thereof and
the liability, if any, described in Section 3.03 therefor to the Insurer. All
payments to be made to the Insurer under this Insurance Agreement shall be made
to the Insurer in lawful currency of the United States of America in immediately
available funds at the notice address for the Insurer as specified in the
Indenture on the date when due or as the Insurer shall otherwise direct by
written notice to the other parties hereto. In the event that the date of any
payment to the Insurer or the expiration of any time period hereunder occurs on
a day that is not a Business Day, then such payment or expiration of time period
shall be made or occur on the next succeeding Business Day with the same force
and effect as if such payment was made or time period expired on the scheduled
date of payment or expiration date.
ARTICLE IV
FURTHER AGREEMENTS
SECTION 4.01. Effective Date; Term of the Insurance Agreement. This
Insurance Agreement shall take effect on the Closing Date and shall remain in
effect until the later of (a) such time as the Insurer is no longer subject to a
claim under the Policy and the Policy shall have been surrendered to the Insurer
for cancellation and (b) all amounts payable to the Insurer by IOS Capital and
the Issuer hereunder or from any other source hereunder or under the Company
Documents and all amounts payable under the Notes have been paid in full;
provided, however, that the provisions of Sections 3.02, 3.03 and 3.04 hereof
shall survive any termination of this Insurance Agreement.
SECTION 4.02. Further Assurances and Corrective Instruments.
(a) Except at such times as an Insurer Default (as defined in the
Indenture) shall exist or shall have occurred, neither IOS Capital nor the
Indenture Trustee shall grant any waiver of
20
rights under any of the Company Documents to which any of them is a party
without the prior written consent of the Insurer, which shall not be
unreasonably withheld, conditioned or delayed and any such waiver without prior
written consent of the Insurer shall be null and void and of no force or effect.
(b) To the extent permitted by law, IOS Capital agrees that it will, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further instruments
as the Insurer may reasonably request and as may be required in the Insurer's
reasonable judgment to effectuate the intention of or facilitate the performance
of this Insurance Agreement.
(c) IOS Capital will not cause or permit (i) the Seller to assign or
transfer any of its assets to any party, other than the transfers to the Issuer
in connection with the Transaction, or in connection with the issuance of
additional indebtedness by the Issuer permitted by the Indenture, or to issue
any notes or other evidences of indebtedness, or to otherwise incur any
indebtedness, or (ii) the Issuer to issue any notes or other evidences of
indebtedness, or to otherwise incur any indebtedness, other than the
indebtedness represented by the Notes, and the Issuer agrees that it will not
issue any notes or other evidences of indebtedness, or otherwise incur any
indebtedness, other than the indebtedness represented by the Notes, in any such
case, unless (1) the issuance or incurrence of such indebtedness is expressly
permitted by the Indenture, (2) there shall be a true sale and substantive
consolidation opinion and Delaware law opinions issued with respect to the
transactions in connection with and including the issuance of such additional
indebtedness, which opinions shall be reasonably acceptable to the Insurer and
on which the Insurer shall be entitled to rely.
SECTION 4.03. Obligations Absolute.
(a) The obligations of IOS Capital, the Seller and the Issuer hereunder
shall be absolute and unconditional and shall be paid or performed strictly in
accordance with this Insurance Agreement under all circumstances irrespective
of:
(i) any lack of validity or enforceability of, or any amendment or
other modifications of, or waiver, with respect to any of the
Company Documents or the Notes;
(ii) any exchange or release of any other obligations hereunder;
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right that IOS Capital may have at any time
against the Insurer or any other Person;
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(iv) any document presented in connection with the Policy proving
to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(v) any payment by the Insurer under the Policy against
presentation of a certificate or other document that does not
strictly comply with the terms of the Policy;
(vi) any failure of IOS Capital to receive the proceeds from the
sale of the Notes; and
(vii) any other circumstances, other than payment in full, that
might otherwise constitute a defense available to, or discharge of,
IOS Capital in respect of any Company Document.
(b) IOS Capital, the Seller and the Issuer and any and all others who are
now or may become liable for all or any part of the obligations of IOS Capital,
the Seller and the Issuer under this Insurance Agreement (including any
successor to IOS Capital as Servicer) agree to be bound by this Insurance
Agreement and (i) to the extent permitted by law, waive and renounce any and all
redemption and exemption rights and the benefit of all valuation and
appraisement privileges against the indebtedness and obligations evidenced by
any Company Document or by any extension or renewal thereof; (ii) waive
presentment and demand for payment, notices of nonpayment and of dishonor,
protest of dishonor and notice of protest; (iii) waive all notices in connection
with the delivery and acceptance hereof and all other notices in connection with
the performance, default or enforcement of any payment hereunder, except as
required by the Company Documents; (iv) waive all rights of abatement,
diminution, postponement or deduction, or to any defense other than payment, or
to any right of setoff or recoupment arising out of any breach under any of the
Company Documents, by any party thereto or any beneficiary thereof, or out of
any obligation at any time owing to IOS Capital; (v) agree that its liabilities
hereunder shall, except as otherwise expressly provided in this Section 4.03, be
unconditional and without regard to any setoff, counterclaim or the liability of
any other Persons for the payment hereof; (vi) agree that any consent, waiver or
forbearance hereunder with respect to an event shall operate only for such event
and not for any subsequent event; (vii) consent to any and all extensions of
time that may be granted by the Insurer with respect to any payment hereunder or
other provisions hereof and to the release of any security at any time given for
any payment hereunder, or any part thereof, with or without substitution, and to
the release of any Person or entity liable for any such payment; and (viii)
consent to the addition of any and all other makers, endorsers, guarantors and
other obligors for any payment hereunder, and to the acceptance of any and all
other security for any payment hereunder, and agree that the addition of any
such obligors or security shall not affect the liability of the parties hereto
for any payment hereunder.
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(c) Nothing herein shall be construed as prohibiting IOS Capital or the
Indenture Trustee from pursuing any rights or remedies it may have against any
Person in a separate legal proceeding.
SECTION 4.04. Assignments; Reinsurance; Third-Party Rights.
(a) This Insurance Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. None of IOS
Capital, the Seller or the Issuer may assign its rights under this Insurance
Agreement, or delegate any of its duties hereunder, without the prior written
consent of the Insurer. Any assignments made in violation of this Insurance
Agreement shall be null and void.
(b) The Insurer shall have the right to give participations in its rights
under this Insurance Agreement and to enter into contracts of reinsurance with
respect to the Policy upon such terms and conditions as the Insurer may in its
discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve the Insurer of any of its
obligations hereunder or under the Policy and provided further that any
reinsurer or participant will not have any rights against IOS Capital, the
Noteholders or the Indenture Trustee and that IOS Capital, the Noteholders and
the Indenture Trustee shall have no obligation to have any communication or
relationship with any reinsurer or participant in order to enforce the
obligations of the Insurer hereunder and under the Policy.
(c) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any right, remedy
or claim, express or implied, upon any Person, including, particularly, any
Holder, other than the Insurer against IOS Capital or IOS Capital against the
Insurer and all the terms, covenants, conditions, promises and agreements
contained herein shall be for the sole and exclusive benefit of the parties
hereto and their successors and permitted assigns. Neither the Indenture Trustee
nor any Holder shall have any right to payment from any Premiums paid or payable
hereunder or under the Indenture or from any amounts paid by IOS Capital
pursuant to Sections 3.02 or 3.03 hereof.
SECTION 4.05. Liability of the Insurer. Unless the Insurer shall have
been grossly negligent or guilty of wrongful misconduct, neither the Insurer nor
any of its officers, directors or employees shall be liable or responsible for:
(a) the use that may be made of the Policy by the Indenture Trustee or for any
acts or omissions of the Indenture Trustee in connection therewith; or (b) the
validity, sufficiency, accuracy or genuineness of documents delivered to the
Insurer in connection with any claim under the Policy, or of any signatures
thereon, even if such documents or signatures should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged (unless the Insurer
shall have actual knowledge thereof). In furtherance and not in limitation of
the foregoing, the Insurer may accept documents that appear on their face to be
in order, without responsibility for further investigation.
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SECTION 4.06. Annual Servicing Audit and Certification. The annual
servicing audit required pursuant to Section 6.02 of the Servicing Agreement
shall be performed by an independent third party acceptable to the Insurer. Any
one of the five major nationally recognized firms of independent public
accountants is deemed to be acceptable.
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. Defaults. The occurrence of any of the following events
shall constitute an Event of Servicing Termination hereunder:
(a) Any representation or warranty made by IOS Capital, the Seller or the
Issuer hereunder or under the Company Documents, or in any certificate furnished
hereunder or under the Company Documents, shall prove to be untrue or incomplete
in any material respect; provided, however, that if IOS Capital, the Seller or
the Issuer effectively cures any such defects in any representation or warranty
under any Transaction Document or certificate or report furnished under any
Company Document, within the time period specified in the related document as
the cure period therefor, such defect shall not in and of itself constitute an
Event of Servicing Termination;
(b) (i) IOS Capital shall fail to pay when due any amount payable by IOS
Capital unless such amounts are paid in full within the cure period therefor,
respectively, hereunder or (ii) a legislative body has enacted any law that
declares or a court of competent jurisdiction shall find or rule that this
Insurance Agreement or the Indenture is not valid and binding on IOS Capital or
the Issuer;
(c) The occurrence and continuance of a Servicer Event of Default under
the Assignment and Servicing Agreement;
(d) Any failure on the part of IOS Capital, the Seller or the Issuer duly
to observe or perform in any material respect any other of the covenants or
agreements on the part of IOS Capital, the Seller or the Issuer contained in
this Insurance Agreement or in any other Company Document which continues
unremedied beyond any cure period provided therein, or, in the case of this
Insurance Agreement, for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to IOS Capital by the Insurer (with a copy to the Indenture Trustee) or by the
Indenture Trustee (with a copy to the Insurer); provided, further, that if such
failure shall be of a nature that it cannot be cured within 30 days, such
failure shall not constitute an Event of Servicing Termination hereunder, if
within such 30-day period IOS Capital, the Seller or the Issuer, as the case may
be, shall have given written notice to the Insurer and the Indenture Trustee of
corrective action it proposes to take, which corrective action is agreed in
writing by the Insurer to be satisfactory and IOS Capital, the Seller or the
Issuer shall thereafter pursue such corrective action diligently until such
default is cured;
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(e) A decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any present or
future federal or state insolvency or similar law or the appointment of a
conservator or receiver or liquidator or other similar official in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against IOS Capital, the Seller or the Issuer;
(f) IOS Capital, the Seller or the Issuer shall consent to the
appointment of a conservator or receiver or liquidator or other similar official
in any involuntary insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to IOS Capital, the Seller or
the Issuer or of or relating to all or substantially all of their respective
property, or any such involuntary proceeding shall have been commenced against
IOS Capital, the Seller or the Issuer and such proceeding shall not have been
withdrawn or dismissed within 30 Business Days; or
(g) IOS Capital, the Seller or the Issuer shall admit in writing its
inability to pay their debts generally as they become due, file a petition to
take advantage of or otherwise voluntarily commence a case or proceeding under
any applicable insolvency, reorganization or other similar statute, make an
assignment for the benefit of its creditors or voluntarily suspend payment of
its obligations.
SECTION 5.02. Remedies; No Remedy Exclusive.
(a) Upon the occurrence of an Event of Servicing Termination, the Insurer
may take whatever action at law or in equity as may appear necessary or
desirable in its judgment to collect the amounts, if any, then due under this
Insurance Agreement, the Assignment and Servicing Agreement or the Indenture or
to enforce performance and observance of any obligation, agreement or covenant
of IOS Capital, the Seller or the Issuer under this Insurance Agreement, the
Assignment and Servicing Agreement or the Indenture. In addition, so long as IOS
Capital is the Servicer, if the senior long-term debt-rating assigned by Moody's
or S&P to IOS Capital is Ba 2 or below or BB or below, respectively, then the
Insurer may take any action to replace IOS Capital as Servicer, as provided in
Section 10.02 of the Assignment and Servicing Agreement.
(b) Unless otherwise expressly provided, no remedy herein conferred or
reserved is intended to be exclusive of any other available remedy, but each
remedy shall be cumulative and shall be in addition to other remedies given
under this Insurance Agreement, the Assignment and Servicing Agreement the
Indenture or existing at law or in equity. No delay or omission to exercise any
right or power accruing under this Insurance Agreement, the Assignment and
Servicing Agreement or the Indenture upon the happening of any event set forth
in Section 5.01 shall impair any such right or power or shall be construed to be
a waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient. In order to entitle the Insurer to
exercise any remedy reserved to the Insurer in this Article, it shall not be
necessary to give any notice, other than such notice as may be required by this
Article.
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SECTION 5.03. Waivers.
(a) No failure by the Insurer to exercise, and no delay by the Insurer in
exercising, any right hereunder shall operate as a waiver thereof. The exercise
by the Insurer of any right hereunder shall not preclude the exercise of any
other right, and the remedies provided herein to the Insurer are declared in
every case to be cumulative and not exclusive of any remedies provided by law or
equity.
(b) The Insurer shall have the right, to be exercised in its complete
discretion, to waive any Event of Servicing Termination hereunder, by a writing
setting forth the terms, conditions and extent of such waiver signed by the
Insurer and delivered to IOS Capital and the Indenture Trustee. Unless such
writing expressly provides to the contrary, any waiver so granted shall extend
only to the specific event or occurrence which gave rise to the Event of
Servicing Termination so waived and not to any other similar event or occurrence
which occurs subsequent to the date of such waiver.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Amendments, Etc. This Insurance Agreement may be amended,
modified, supplemented or terminated only by written instrument or written
instruments signed by the parties hereto. No consent of any re-insurer or
participant contracted with by the Insurer pursuant to Section 4.04(b) hereof
shall be required for any amendment, modification, supplement or termination
hereof. IOS Capital agrees to provide a copy of any amendment to this Insurance
Agreement promptly to the Indenture Trustee and the rating agencies maintaining
a rating on any of the Notes at the request of IOS Capital. The Insurer agrees
to provide reasonable notice to the rating agencies maintaining a rating on any
of the Notes with respect to any proposed amendment. No act or course of dealing
shall be deemed to constitute an amendment, modification, supplement or
termination hereof.
SECTION 6.02. Notices. All demands, notices and other communications to
be given hereunder shall be in writing (except as otherwise specifically
provided herein) and shall be mailed by registered mail or personally delivered
and telecopied to the recipient as follows:
(a) To the Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department - ABS
Telecopy No.: 212-208-3547
Confirmation: 212-668-0340
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(in each case in which notice or other communication to
the Insurer refers to an Event of Servicing Termination,
a claim on the Policy or with respect to which failure
on the part of the Insurer to respond shall be deemed to
constitute consent or acceptance, then a copy of such
notice or other communication should also be sent to the
attention of the general counsel of each of the Insurer
and the Trustee and shall be marked to indicate "URGENT
MATERIAL ENCLOSED.")
(b) To IOS Capital:
IOS Capital, LLC
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31210
Attention: Harry G. Kozee
Vice President - Finance,
with a copy to the General Counsel
Facsimile: (912) 471-2375
with a copy to:
IOS Capital, LLC
70 Valley Stream Road
Malvern, PA 19355
Attention: Chief Counsel
Facsimile: (610) 408-7264
(c) To the Issuer:
IKON Receivables Funding, LLC
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31210
Attention: Harry G. Kozee
Facsimile: (912) 471-2375
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with a copy to:
IOS Capital, LLC
70 Valley Stream Road
Malvern, PA 19355
Attention: Chief Counsel
Facsimile: (610) 408-7264
(d) To the Seller:
IKON Receivables-2, LLC
1738 Bass Road
P.O. Box 9115
Macon, Georgia 31210
Attention: Harry G. Kozee
Facsimile: (912) 471-2375
with a copy to:
IOS Capital, LLC
70 Valley Stream Road
Malvern, PA 19355
Attention: Chief Counsel
Facsimile: (610) 408-7264
(e) To the Indenture Trustee:
BNY Midwest Trust Company
2 North LaSalle Street
Suite 1020
Chicago, IL 60602
Attention: Structured Financial Services
Facsimile: (312) 827-8562
A party may specify an additional or different address or
addresses by writing mailed or delivered to the other parties as aforesaid. All
such notices and other communications shall be effective upon receipt.
SECTION 6.03. Severability. In the event that any provision of this
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the
28
parties hereto agree that such holding shall not invalidate or render
unenforceable any other provision hereof. The parties hereto further agree that
the holding by any court of competent jurisdiction that any remedy pursued by
any party hereto is unavailable or unenforceable shall not affect in any way the
ability of such party to pursue any other remedy available to it.
SECTION 6.04. Governing Law. This Insurance Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 6.05. Consent to Jurisdiction.
(a) The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of the United States District Court for the Southern District of
New York and any court in the State of New York located in the City and County
of New York, and any appellate court from any thereof, in any action, suit or
proceeding brought against it and to or in connection with any of the Company
Documents or the Transaction or for recognition or enforcement of any judgment,
and the parties hereto hereby irrevocably and unconditionally agree that all
claims in respect of any such action or proceeding may be heard or determined in
such New York state court or, to the extent permitted by law, in such federal
court. The parties hereto agree that a final unappealable judgment in any such
action, suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. To
the extent permitted by applicable law, the parties hereto hereby waive and
agree not to assert by way of motion, as a defense or otherwise in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such courts, that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that the related documents or the subject matter thereof may not be
litigated in or by such courts.
(b) To the extent permitted by applicable law, the parties hereto shall
not seek and hereby waive the right to any review of the judgment of any such
court by any court of any other nation or jurisdiction which may be called upon
to grant an enforcement of such judgment.
(c) Service on IOS Capital may be made by mailing or delivering copies of
the summons and complaint and other process which may be served in any suit,
action or proceeding to the Servicer at the related addresses listed in Section
6.02(b) and (c) herein. Such address may be changed by the applicable party or
parties, with the prior written consent of the Insurer, by written notice to the
other parties hereto.
(d) Nothing contained in this Insurance Agreement shall limit or affect
any party's right to serve process in any other manner permitted by law or to
start legal proceedings relating to any of the Company Documents against any
other party or its properties in the courts of any jurisdiction.
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SECTION 6.06. Consent of the Insurer. In the event that the consent of
the Insurer is required under any of the Company Documents, the determination
whether to grant or withhold such consent shall be made by the Insurer in its
sole discretion without any implied duty towards any other Person, except as
otherwise expressly provided therein.
SECTION 6.07. Counterparts. This Insurance Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
SECTION 6.08. Headings. The headings of Articles and Sections and the
Table of Contents contained in this Insurance Agreement are provided for
convenience only. They form no part of this Insurance Agreement and shall not
affect its construction or interpretation.
SECTION 6.09. Trial by Jury Waived. Each party hereby waives, to the
fullest extent permitted by law, any right to a trial by jury in respect of any
litigation arising directly or indirectly out of, under or in connection with
any of the Company Documents or any of the transactions contemplated thereunder.
Each party hereto (A) certifies that no representative, agent or attorney of any
party hereto has represented, expressly or otherwise, that it would not, in the
event of litigation, seek to enforce the foregoing waiver and (B) acknowledges
that it has been induced to enter into the Company Documents to which it is a
party by, among other things, this waiver.
SECTION 6.10. Limited Liability. No recourse under any Company Document
or the Underwriting Agreement shall be had against, and no personal liability
shall attach to, any officer, employee, director, affiliate or shareholder of
any party hereto, as such, by the enforcement of any assessment or by any legal
or equitable proceeding, by virtue of any statute or otherwise in respect of any
of the Company Documents or the Underwriting Agreement, the Notes or the Policy,
it being expressly agreed and understood that each Company Document or the
Underwriting Agreement is solely a corporate obligation of each party hereto,
and that any and all personal liability, either at common law or in equity, or
by statute or constitution, of every such officer, employee, director, affiliate
or shareholder for breaches of any party hereto of any obligations under any
Company Document or the Underwriting Agreement is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Insurance Agreement.
SECTION 6.11. Entire Agreement. This Insurance Agreement and the Policy
set forth the entire agreement between the parties with respect to the subject
matter hereof and thereof, and this Insurance Agreement supersedes and replaces
any agreement or understanding that may have existed between the parties prior
to the date hereof in respect of such subject matter.
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SECTION 6.12. Indenture Trustee. The Indenture Trustee hereby
acknowledges and agrees to perform all its obligations and duties pursuant to
the Company Documents to which it is a party thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
all as of the day and year first above mentioned.
Ambac Assurance Corporation,
as Insurer
By: /s/ Barry Schofield
----------------------------
Name: Barry Schofield
Title: Vice President
S-1
IOS Capital, LLC,
as Originator and as Servicer
By: /s/ Russell Slack
-------------------------------
Name: Russell Slack
Title: President
S-2
IKON Receivables Funding, LLC,
as Issuer
By: IKON Receivables Funding, Inc.
By: /s/ Jack Quinn
----------------------------
Name: __________________________
Title: __________________________
IKON Receivables-2, LLC,
By: IKON Receivables Funding, Inc.
By: /s/ Jack Quinn
----------------------------
Name: __________________________
Title: __________________________
S-3
BNY Midwest Trust Company, not in its
individual capacity, but solely
as Indenture Trustee
By: /s/ Robert D. Foltz
------------------------------
Name: Robert D. Foltz
Title: Vice President
S-4