EXHIBIT 10.3
EXECUTION COPY
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 Trustee
IKON RECEIVABLES FUNDING, LLC LEASE-BACKED NOTES, SERIES 2003-1
Dated as of April 23, 2003
TABLE OF CONTENTS
PAGE
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........................ 8
Section 2.04. Representations and Warranties of the Insurer............ 9
Section 2.05. Representations and Warranties of the Seller............. 10
Section 2.06. Affirmative Covenants of the Seller...................... 12
Section 2.07. Representations and Warranties of the Issuer............. 12
Section 2.08. Affirmative Covenants of the Issuer...................... 14
Section 2.09. Negative Covenants of the Issuer......................... 16
ARTICLE III THE POLICIES; REIMBURSEMENT.................................. 17
Section 3.01. Issuance of the Policies................................. 17
Section 3.02. Payment of Fees and Premium.............................. 18
Section 3.03. Reimbursement Obligation................................. 19
Section 3.04. Indemnification.......................................... 20
Section 3.05. Payment Procedure........................................ 22
Section 3.06. Subrogation.............................................. 23
ARTICLE IV FURTHER AGREEMENTS........................................... 23
Section 4.01. Effective Date; Term of the Insurance Agreement.......... 23
Section 4.02. Further Assurances and Corrective Instruments............ 23
Section 4.03. Obligations Absolute..................................... 24
Section 4.04. Assignments; Reinsurance; Third-Party Rights............. 25
Section 4.05. Liability of the Insurer................................. 26
Section 4.06. Annual Servicing Audit and Certification................. 26
ARTICLE V DEFAULTS AND REMEDIES........................................ 26
Section 5.01. Defaults................................................. 26
Section 5.02. Remedies; No Remedy Exclusive............................ 27
Section 5.03. Waivers.................................................. 28
ARTICLE VI MISCELLANEOUS................................................ 28
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TABLE OF CONTENTS
(continued)
PAGE
Section 6.01. Amendments, Etc.......................................... 28
Section 6.02. Notices.................................................. 28
Section 6.03. Severability............................................. 30
Section 6.04. Governing Law............................................ 30
Section 6.05. Consent to Jurisdiction.................................. 30
Section 6.06. Consent of the Insurer................................... 31
Section 6.07. Counterparts............................................. 31
Section 6.08. Headings................................................. 31
Section 6.09. Trial by Jury Waived..................................... 31
Section 6.10. Limited Liability........................................ 31
Section 6.11. Entire Agreement......................................... 31
Section 6.12. Trustee.................................................. 32
Section 6.13. Third-Party Beneficiary.................................. 32
Section 6.14. No Proceedings........................................... 32
Section 6.15. Limited Recourse......................................... 32
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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 April
23, 2003, 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 Trustee.
PRELIMINARY STATEMENTS
A. The Indenture, dated as of April 1, 2003, relating to the IKON
Receivables Funding, LLC Lease-Backed Notes, Series 2003-1, by and among the
Issuer, the Servicer and the 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 Note Policy, pursuant to which it has
agreed to pay to the Trustee for the benefit of the Holders certain payments in
respect of the Notes, and the Swap Policy, pursuant to which it has agreed to
pay to the Counterparty certain payments in respect of the Swap Documents.
C. The Insurer shall be paid a Premium as set forth herein.
D. IOS Capital, the Issuer, the Seller and the Trustee have
undertaken certain obligations in consideration for the Insurer's issuance of
the Policies.
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 Policies described below. All references herein to any agreement
that constitutes a Company Document shall refer to such agreement as of the date
hereof without giving effect to any amendment, supplement or other modification
thereto made without the Insurer's consent. For purposes of this Insurance
Agreement, the following terms shall have the following meanings:
"Closing Date" means April 23, 2003.
"Commission" means the Securities and Exchange Commission.
"Company Documents" means the Indenture, this Insurance Agreement, the
Notes, the Swap Documents and the Assignment and Servicing Agreement.
"Counterparty" means Lehman Brothers Special Financing Inc., a Delaware
corporation, or its permitted successors or assigns under the Swap Documents.
"Default" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Servicing
Termination.
"Documents" means the Company Documents and any other information
relating to the Asset Pool, IOS Capital, the Seller or the Issuer furnished to
the Insurer by IOS Capital, the Seller or the Issuer.
"Event of Servicing Termination" means any Event of Servicing
Termination specified in Section 5.01 of this Insurance Agreement.
"Holder" has the meaning given such term in the Note Policy.
"Indemnification Agreement" means the Indemnification Agreement dated as
of April 23, 2003 among the Insurer and the Underwriters.
"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 Policies.
"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.
"Offering Document" means the Prospectus dated March 11, 2002, the
Preliminary Prospectus Supplement filed with the Commission on April 14, 2003,
and the Prospectus Supplement dated April 16, 2003, 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
Policies.
"Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, limited liability company, business or
owner trust, partnership or other organization or entity (whether governmental
or private).
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"Policy" means each of the following: (a) the certificate guaranty
insurance policy, No. AB0661BE, together with all endorsements thereto, issued
by the Insurer to the Trustee, for the benefit of the Holders of the Notes (the
"Note Policy") and (b) the financial guaranty insurance policy, No. SF0610BE,
issued by the Insurer to the Counterparty (the "Swap Policy"). "Policies" means
both of the Note Policy and the Swap Policy.
"Premium" means the premium payable in accordance with the Policies, and
being, 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 0.28% 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.
"Responsible Officer" means any officer, including any managing
director, first vice president, vice president, assistant vice president,
assistant treasurer, assistant secretary or any other officer of the Insurer
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
this Insurance Agreement, 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.
"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.
"Trustee" means BNY Midwest Trust Company, as trustee under the
Indenture, and any successor thereto under the Indenture.
"Underwriters" means Lehman Brothers Inc., J.P. Morgan Securities Inc.,
Banc of America Securities LLC, Deutsche Bank Securities Inc. and PNC Capital
Markets, Inc.
"Underwriting Agreement" means the Underwriting Agreement dated April
16, 2003 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.
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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, whether in its capacity as
Originator, Servicer or otherwise, in each of the Company Documents to which it
is a party, including, but not limited to, Section 2 of the Assignment and
Servicing Agreement, as of each date on which such representations and
warranties are made thereunder. 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 and as of
each date of addition or substitution of a Lease under the Company Documents 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;
(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 material 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
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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 is subject.
(e) Accuracy of Information. None of the Documents, as amended,
supplemented or superseded, furnished to the Insurer by IOS Capital contains any
statement of a material fact which was untrue or misleading in any material
respect when made or omit to state a material fact necessary to make such
information or statements not misleading in any material respect.
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, whether in its capacity as Originator or Servicer in the Company
Documents to which it is a party, including, but not limited to, Sections 4, 5,
6, 7 and 8 of the Assignment and Servicing Agreement (but with respect to such
covenants made by IOS Capital as Servicer, only for so long as IOS Capital is
the Servicer). Such covenants are hereby incorporated herein by this reference
as if fully set forth herein, and may not be amended except by an amendment
complying with the terms of Section 6.01. In addition, IOS Capital hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. IOS Capital shall
comply with the terms and conditions of and perform its obligations under the
Company Documents to which it is a party in all cases in which failure to so
comply or perform would result in a default thereunder and shall comply with all
material requirements of any law, rule or regulation applicable to it.
(b) Access to Records; Discussions with Officers and Accountants. Upon
reasonable prior written notice of the Insurer, at any time and in any event at
least annually in each case unless otherwise indicated below, it shall 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 (and which consent shall not be
required after the occurrence of a Default or an event which, with
or without notice or lapse of time or both would constitute an Event
of Default), 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 IOS Capital's reasonable cost and expense prior to a Default
or Event of Default, and at its cost and expense from and after the occurrence
of a Default or Event of Default and shall not unreasonably disrupt the
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business of IOS Capital. Absent a Default, or an event which, with or without
notice or lapse of time or both would constitute an Event of Default, it is the
Insurer's intent to conduct such inspections or discussions not more often than
annually. If, however, a Default or an event which, with or without notice or
lapse of time or both would constitute an Event of Default, has occurred or if
the Insurer, in its sole discretion, determines that there has occurred or is
reasonably likely to occur a deterioration in the assets or financial condition
of IOS Capital or the Issuer, or it determines that it is appropriate to verify
information being provided by the Servicer pursuant to the Company Documents, it
may increase the frequency of such audits to semi-annual, quarterly, or
otherwise as it deems appropriate and IOS Capital shall make its premises and
books and records available on two (2) Business Day's notice for such purposes.
Without limiting the foregoing, upon the occurrence of a Default or an event
which, with or without notice or lapse of time or both would constitute an Event
of Default, IOS Capital shall make its principal officers available to discuss
the Transaction with representatives of the Insurer within two (2) days of
receipt by IOS Capital of such a request from the Insurer.
(c) Retirement of Notes. IOS Capital shall instruct the Trustee in
writing, upon a retirement or other payment of all of the Notes, to surrender
the Note Policy to the Insurer for cancellation and shall instruct the
Counterparty, upon the termination or cancellation of the Swap Documents, to
surrender the Swap Policy to the Insurer.
(d) Disclosure Document. Each Offering Document delivered with respect
to the Notes shall clearly disclose that the Policies are 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.
(g) Notice of Material Events. IOS Capital shall be obligated promptly
to inform the Insurer in writing (with a copy for informational purposes only to
the Trustee (the failure to provide such copy to the Trustee shall not be a
Default hereunder)) 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 IOS Capital 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 IOS Capital, 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 IOS Capital;
(ii) any change in (A) the location of the principal office of
IOS Capital, (B) the jurisdiction of IOS Capital's organization, or
(C) the form of IOS Capital's organization;
(iii) the occurrence of any Default, or an event which, with or
without notice or lapse of time or both would constitute an Event of
Default), or any Material Adverse Change in respect of IOS Capital;
(iv) the commencement of any proceedings by or against IOS
Capital under any applicable reorganization, liquidation,
rehabilitation, insolvency or other similar law now
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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 IOS Capital or any of
its assets; or
(v) the receipt of notice that (A) any license, permit, charter,
registration or approval used in the conduct of IOS Capital's
business is to be, or may be, suspended or revoked or (B) IOS
Capital is to cease and desist any practice, procedure or policy
employed in the conduct of its business, and such suspension,
cessation or revocation is reasonably likely to result in a Material
Adverse Change with respect to IOS Capital.
(h) Field Examination by Independent Public Accountants. Upon reasonable
prior written notice of the Insurer at any time and in any event at least
annually, in each case except at otherwise noted below, it shall permit
independent public accountants or other financial consultants designated by the
Insurer to conduct a field examination(s) from time to time with such procedures
as the Insurer shall determine in its discretion, and in connection therewith
shall permit such independent public accountants or other financial consultants
without limitation:
(i) to inspect its books and records and those of the Issuer and
the Seller as they may relate to the Transaction, the Asset Pool,
the Notes or its obligations under the Company Documents;
(ii) to discuss its affairs, finances and accounts and those of
the Issuer and the Seller with its principal executive officer and
its principal financial officer; and
(iii) to discuss its affairs, finances and accounts with its
independent accountants, provided that one of its officers shall
have the right to be present during such discussions.
Such inspections and discussions shall be conducted during normal business hours
at IOS Capital's reasonable cost and expense prior to a Default or Event of
Default, and at its cost and expense from and after the occurrence of a Default
or Event of Default and shall not unreasonably disrupt the business of IOS
Capital. Absent a Default or an event which, with or without notice or lapse of
time or both would constitute an Event of Default), it is the Insurer's intent
to conduct such inspections or discussions not more often than annually. If,
however, a Default or an event which, with or without notice or lapse of time or
both would constitute an Event of Default, has occurred or if the Insurer, in
its sole discretion, determines that there has occurred or is reasonably likely
to occur a deterioration in the assets or financial condition of IOS Capital or
the Issuer, or it determines that it is appropriate to verify information being
provided by the Servicer pursuant to the Company Documents, it may increase the
frequency of such audits to semi-annual, quarterly, or otherwise as it deems
appropriate and IOS Capital shall make its premises and books and records
available on two (2) Business Day's notice for such purposes. Without limiting
the foregoing, upon the occurrence of a Default or an event which, with or
without notice or lapse of time or both would constitute an Event of Default),
IOS Capital shall make its principal officers available to discuss the
Transaction with representatives of the Insurer within two (2) days of receipt
by IOS Capital of such a request from the Insurer.
(i) Random Sampling. The Servicer agrees to produce and maintain as part
of its books and records in the ordinary course of business a separate binder
for each calendar month which shall contain copies of all of its internal
reports and bank statements supporting each of the line items contained in the
status and servicing reports for such month provided pursuant to Section 6.01(a)
and (b) of the Assignment and Servicing Agreement. Upon reasonable prior notice
from time to time of the Insurer, but, prior to the occurrence of a Default, or
an event which, with or without notice or lapse of time or both would constitute
an Event of Default), not more often than four times annually, the Servicer
agrees to provide a copy of such binder to a financial consultant designated by
the Insurer.
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(j) Credit and Collections Policy. Within 90 days after the end of each
fiscal year of IOS Capital, IOS Capital shall deliver to the Insurer a complete
copy of the Credit and Collections Policy then in effect. IOS Capital will
provide the Insurer with a copy of any material changes to the Credit and
Collections Policy within 10 days of the adoption of such changes.
(k) Public Debt Ratings. Promptly, but in any event within fifteen (15)
days after the date of any upgrade in IOS Capital's public debt ratings and two
(2) Business Days of any downgrade in such ratings, IOS Capital shall deliver to
the Insurer a written certification of IOS Capital's public debt ratings after
giving effect to such change.
(l) Operation of the Issuer. IOS Capital agrees that (i) it shall not
take any steps or actions that are inconsistent with the obligations of the
Seller and the Issuer under Section 3.14 of the Assignment and Servicing
Agreement and Section 9.19 of the Indenture, respectively, (ii) at all times
during the effectiveness of this Insurance Agreement, it shall be the sole
record and beneficial owner of all of the outstanding equity interests of the
Seller, free and clear of all liens and other encumbrances, and (iii) the Seller
shall be the sole record and beneficial owner of all of the outstanding equity
interests of the Issuer, free and clear of all liens and other encumbrances.
(m) Other Information. IOS Capital shall provide to the Insurer such
other information (including non-financial information) in respect of the
Leases, the Transaction and the Company Documents and such other financial or
operating information in respect of IOS Capital, the Seller, the Issuer or any
of their Affiliates, in each case, which the Insurer may from time to time
reasonably request.
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 interfere with the
enforcement of any rights of the Insurer under or with respect to any of the
Company Documents. IOS Capital shall give the Insurer written notice of any such
action or failure to act on the earlier of: (i) the date upon which any publicly
available filing or release is made with respect to such action or failure to
act or (ii) promptly prior to the date of consummation of such action or failure
to act. IOS Capital shall furnish to the Insurer all information requested by it
that is reasonably necessary to determine compliance with this paragraph.
(b) Amendments, Etc. IOS Capital shall not modify or amend, or consent
to any modification or amendment of, any of the terms, provisions or conditions
of the Company Documents to which it is a party without the prior written
consent of the Insurer thereto, but excluding any amendment to the Offering
Document required by law.
(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 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.
(d) Limitation on Mergers, Etc. Except as expressly permitted by the
Assignment and Servicing Agreement, IOS Capital shall not consolidate with or
merge with or into any Person or transfer all or substantially all of its assets
to any Person (each, a "Combination Transaction") or liquidate or dissolve.
Without limiting the foregoing, no Combination Transaction shall be consummated
unless IOS Capital shall have delivered to the Insurer (a) an Officer's
Certificate reasonably satisfactory to it, stating that such consolidation,
conversion, merger, or succession and such agreement of assumption comply with
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this Section and the other Company Documents and that all conditions precedent,
if any, provided for in the Company Documents relating to such Combination
Transaction have been complied with, and (b) an opinion of counsel, reasonably
satisfactory to it, stating that, in the opinion of such counsel, (1) the
agreement of assumption of the obligations of IOS Capital under the Company
Documents is the valid and binding obligations of the parties thereto and
effective to accomplish the assumption of liabilities contemplated therein, (2)
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interests of the Issuer, the Trustee, the Insurer and the
Noteholders in the Leases and reciting the details of such filings, or (B) no
such action shall be necessary to preserve and protect such interest, and (3)
after giving effect to such merger or consolidation, IOS Capital (or its
successor) would not be substantively consolidated with the Seller or the Issuer
in the event of a bankruptcy of IOS Capital or its successor. IOS Capital shall
also deliver to the Trustee for informational purposes only a copy of the
Officer's Certificate described above in subparagraph (a) (the failure to
provide such Officer's Certificate to the Trustee shall not be a Default
hereunder).
Section 2.04. Representations and Warranties of the Insurer. The
Insurer represents and warrants to the Trustee (on behalf of the Noteholders),
the Issuer and IOS Capital as follows:
(a) Organization and Licensing. The Insurer is a duly organized and
validly existing Wisconsin stock insurance company duly qualified to conduct an
insurance business in the State of Illinois.
(b) Corporate Power. The Insurer has the corporate power and authority
to issue each Policy and execute and deliver this Insurance Agreement and to
perform all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. All proceedings legally required for the
issuance of the Policies and the execution, delivery and performance of this
Insurance Agreement have been taken and all licenses, orders, consents or other
authorizations or approvals of the Insurer's Board of Directors or stockholders
or any governmental boards or bodies legally required for the enforceability of
the Policies have been obtained; any proceeding not taken and any license,
authorization or approvals not obtained are not material to the enforceability
of the Policies.
(d) Enforceability. Each Policy, when issued, and this Insurance
Agreement will each constitute a legal, valid and binding obligation of the
Insurer, enforceable in accordance with its terms, subject to insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and subject to
principles of public policy limiting the right to enforce the indemnification
provisions contained therein and herein, insofar as such provisions relate to
indemnification for liabilities arising under federal securities laws.
(e) Financial Information. The consolidated financial statements of the
Insurer and its subsidiaries as of December 31, 2002 and 2001, and for the three
years ended December 31, 2002, included in the Annual Report on Form 10-K of
Ambac Financial Group, Inc. (which was filed with the Securities and Exchange
Commission ("SEC") on March 28, 2003, Commission File Number 1-10777), and the
Current Reports on Form 8-K filed with the SEC on January 24, 2003, February 28,
2003, March 4, 2003, March 20, 2003, March 26, 2003 and March 31, 2003, as each
related to the Insurer fairly present in all material respects the financial
condition of the Insurer as of such dates and for the periods covered by such
statements in accordance with accounting principles generally accepted in the
United States of America. Any future financial statements of the Insurer
incorporated by reference into the Offering Document relating to the Notes will
fairly present in all material respects the financial condition of the Insurer
as of their dated dates in accordance with accounting principles generally
accepted in the United States of America. Since December 31, 2002, there has
been no Material Adverse Change with respect to
9
the financial condition of the Insurer that would affect its ability to perform
its obligations under the Policies.
(f) Insurer Information. The Insurer Information is true and correct in
all material respects and does not contain any untrue statement of a material
fact.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge, threatened
against it at law or in equity or before or by any court, governmental agency,
board or commission or any arbitrator which, if decided adversely, would result
in a Material Adverse Change or would materially and adversely affect its
ability to perform its obligations under the Policies or this Insurance
Agreement.
(h) No Conflict. The execution by the Insurer of this Insurance
Agreement will not, and the satisfaction of the terms hereof will not, conflict
with or result in a breach of any of the terms, conditions or provisions of the
Certificate of Incorporation or By-Laws of the Insurer, or any restriction
contained in any contract, agreement or instrument to which the Insurer is a
party or by which it is bound or constitute a default under any of the foregoing
which would materially and adversely affect its ability to perform its
obligations under the Policy or this Insurance Agreement.
(i) Confidential Information. The Insurer agrees that it and its
shareholders, directors, agents, accountants and attorneys shall not use or
disclose any information provided to the Insurer pursuant to or in connection
with this Insurance Agreement or the issuance of the Policies or otherwise
related to the Transactions, including any matter of which it becomes aware
during the inspections conducted or discussions had pursuant to Section 2.02(b),
unless such information is readily available from public sources or except as
may be otherwise required by regulation, law or court order or requested by
appropriate governmental authorities or as necessary to preserve its rights or
security under or to enforce the Company Documents; provided, however, that the
foregoing shall not limit the right of the Insurer to make such information
available to its regulators, securities rating agencies, reinsurers, credit and
liquidity providers, counsel and accountants. If the Insurer is requested or
required (by oral questions, interrogatories, requests for information or
documents subpoena, civil investigative demand or similar process) to disclose
any information provided to the Insurer pursuant to or in connection with this
Insurance Agreement or the issuance of the Policies or otherwise related to the
Transactions which it is otherwise required to keep confidential, including any
information of which it becomes aware through such inspections or discussions,
the Insurer will promptly notify IOS Capital of such request(s) so that IOS
Capital may seek an appropriate protective order and/or waive the Insurer's
compliance with the provisions of this Insurance Agreement. If, in the absence
of a protective order or the receipt of a waiver hereunder, the Insurer is,
nonetheless, in the opinion of its counsel (which shall be delivered to IOS
Capital), compelled to disclose such information to any tribunal or else stand
liable for contempt or suffer other censure of significant penalty, the Insurer
may disclose such information to such tribunal that the Insurer is compelled to
disclose, provided that the Insurer shall promptly notify IOS Capital that the
Insurer has been compelled to so disclose and that the Insurer shall use best
efforts to provide to IOS Capital prior to disclosure a copy of all information
to be so disclosed.
(j) Rating. No Responsible Officer of the Insurer has actual knowledge
of any facts that if disclosed to S&P would be reasonably expected to result in
a downgrade of the rating of the financial strength of the Insurer by such
rating agency.
(k) 1933 Act Registration. Each Policy is exempt from registration under
the Act.
Section 2.05. Representations and Warranties of the Seller. The Seller
hereby makes to and for the benefit of the Insurer each of the representations
and warranties made by the Seller in the
10
Company Documents to which it is a party, including, but not limited to, Section
3 of the Assignment and Servicing Agreement, as of each date on which such
representations and warranties are made thereunder. 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. In addition, the Seller represents and warrants as of
the Closing Date and as of each date of addition and substitution of a Lease
under the Company Documents as follows:
(a) Due Organization and Qualification. The Seller 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 Seller 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 Seller has all necessary limited liability
company power and authority to conduct its business as currently conducted and
as described in the Offering Document, to execute, deliver and perform its
obligations under the Company Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and performance of the
Company Documents by the Seller 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 Seller, which
have not previously been obtained or given by the Seller.
(d) Noncontravention. The execution and delivery by the Seller 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 Seller
or any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award currently in effect having
applicability to the Seller or any of its respective material
properties, including regulations issued by any administrative
agency or other governmental authority having supervisory powers
over the Seller;
(ii) constitute a default by the Seller 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 Seller either 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 the Seller, 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 Seller, any properties or rights of the Seller or any
of the Asset Pool pending or threatened, which, in any case, if decided
adversely to the Seller could result in a Material Adverse Change with respect
to the Seller.
11
(f) Valid and Binding Obligations. The Company Documents, when executed
and delivered by the Seller, will constitute the legal, valid and binding
obligations of the Seller, 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.
(g) Compliance with Law, Etc. No practice, procedure or policy employed,
or proposed to be employed, by the Seller in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable to
the Seller that, if enforced, could result in a Material Adverse Change with
respect to the Seller.
(h) Accuracy of Information. None of the Documents, as amended,
supplemented or superseded, furnished to the Insurer by the Seller contains any
statement of a material fact which was untrue or misleading in any material
respect when made or omit to state a material fact necessary to make such
information or statements not misleading in any material respect. Since the
furnishing of the Documents, there has been no change nor any development or
event involving a prospective change known to the Seller that would render any
of the Documents untrue or misleading in any material respect.
(i) Solvency; Fraudulent Conveyance. The Seller is solvent and will not
be rendered insolvent by the Transaction and, after giving effect to the
Transaction, the Seller will not be left with an unreasonably small amount of
capital with which to engage in its business, and the Seller does not intend to
incur, nor believes that it has incurred, debts beyond its ability to pay as
they mature. The Seller 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 Seller or
any of its assets.
(j) Principal Place of Business. The principal place of business of the
Seller is 1738 Bass Road, Macon, Georgia 31210.
Section 2.06. Affirmative Covenants of the Seller. The Seller hereby
makes, to and for the benefit of the Insurer, all of the covenants of the Seller
set forth in the Company Documents to which it is a party, including, but not
limited to, Section 9 of the Assignment and Servicing Agreement. 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 Seller
hereby agrees that during the term of this Insurance Agreement, unless the
Insurer shall otherwise expressly consent in writing:
(a) Third-Party Beneficiary. The Seller agrees that the Insurer shall
have all rights of a third-party beneficiary in respect of the Indenture.
(b) Other Information. The Seller shall provide to the Insurer such
other information (including non-financial information) in respect of the Loans,
the Transaction and the Basic Documents and such other financial or operating
information in respect of the Seller, in each case, which the Insurer may from
time to time reasonably request.
Section 2.07. 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 Company Documents to which it is a
party, as of each date on which such representations and warranties are made
thereunder. 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 and as of each date of addition
or substitution of a Lease under the Company Documents as follows:
12
(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.
(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 Issuer, which
have not previously been obtained or given by the Issuer.
(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 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 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.
13
(g) Compliance with Law, Etc. No practice, procedure or policy employed,
or proposed to be employed, by the Issuer in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable to
the Issuer that, if enforced, could result in a Material Adverse Change with
respect to the Issuer.
(h) Accuracy of Information. None of the Documents, as amended,
supplemented or superseded, furnished to the Insurer by the Issuer contains any
statement of a material fact which was untrue or misleading in any material
respect when made or omits to state a material fact necessary to make such
information or statements not misleading in any material respect. 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, nor believes 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 its 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 2.08. 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 Company Documents to which it is a party, including, but not
limited to, Section 9 of the Indenture. Such covenants are incorporated herein
by this reference, and may not be amended except by an amendment complying with
the terms of Section 6.01. In addition, the Issuer hereby agrees that during the
term of this Insurance Agreement, unless the Insurer shall otherwise expressly
consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Issuer shall
comply with the terms and conditions of and perform its respective obligations
under the Company Documents to which it is a party in all cases in which failure
to so comply or perform would result in a default thereunder and shall comply
with all material requirements of any law, rule or regulation applicable to it.
(b) Existence. The Issuer and its successors and permitted assigns shall
maintain its existence as a limited liability company and shall at all times
continue to be duly organized under the laws of the State
14
of Delaware and duly qualified and duly authorized (as described in subsections
2.08(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. Upon
reasonable prior written notice of the Insurer, at any time and in any event at
least annually in each case unless otherwise indicated below, it shall 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 (and which consent shall not be
required after the occurrence of a Default or an event which, with
or without notice or lapse of time or both would constitute an Event
of Default), 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 at the Issuer's reasonable cost and expense prior to a Default or
Event of Default, and at its cost and expense from and after the occurrence of a
Default or Event of Default and shall not unreasonably disrupt the business of
the Issuer. Absent a Default, or an event which, with or without notice or lapse
of time or both would constitute an Event of Default, it is the Insurer's intent
to conduct such inspections or discussions not more often than annually. If,
however, a Default or an event which, with or without notice or lapse of time or
both would constitute an Event of Default, has occurred or if the Insurer, in
its sole discretion, determines that there has occurred or is reasonably likely
to occur a deterioration in the assets or financial condition of IOS Capital or
the Issuer, or it determines that it is appropriate to verify information being
provided by the Issuer pursuant to the Company Documents, it may increase the
frequency of such audits to semi-annual, quarterly, or otherwise as it deems
appropriate and the Issuer shall make its premises and books and records
available on two (2) Business Day's notice for such purposes. Without limiting
the foregoing, upon the occurrence of a Default, or an event which, with or
without notice or lapse of time or both would constitute an Event of Default,
the Issuer shall make its principal officers available to discuss the
Transaction with representatives of the Insurer within two (2) days of receipt
by the Issuer of such a request from the Insurer.
(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;
15
(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 an event which, with or
without notice or lapse of time or both would constitute an Event of
Default, 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 its assets; or
(v) the receipt of notice that (A) any license, permit, charter,
registration or approval used in 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 suspension,
revocation or cessation is reasonably likely to 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.
(h) Other Information. The Issuer shall provide to the Insurer such
other information (including non-financial information) in respect of the Loans,
the Transaction and the Basic Documents and such other financial or operating
information in respect of the Issuer, in each case, which the Insurer may from
time to time reasonably request.
Section 2.09. 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 interfere with the enforcement
of any rights of the Insurer under or with respect to any of the Company
Documents. The Issuer shall give the Insurer written notice of any such action
or failure to act on the earlier of: (i) the date upon which any publicly
available filing or release is made with respect to such action or failure to
act or (ii) promptly prior to the date of consummation of such action or failure
to act. The Issuer shall furnish to the Insurer all information requested by it
that is reasonably necessary to determine compliance with this paragraph.
16
(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 or its organizational documents
without the prior written consent of the Insurer thereto, but excluding any
amendment to the Offering Document.
(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.
(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 the Issuer 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.
ARTICLE III
THE POLICIES; REIMBURSEMENT
Section 3.01. Issuance of the Policies. The Insurer agrees to issue
each Policy on the Closing Date subject to satisfaction of the conditions
precedent set forth below:
(a) Payment of Initial Premium and Expenses. The applicable parties
shall have been paid by IOS Capital their related fees and expenses payable in
accordance with Section 3.02 within 5 Business Days of receipt of the related
invoice;
(b) Company Documents. The Insurer shall have received a copy of each of
the Company Documents, in form and substance reasonably satisfactory to the
Insurer, duly authorized, executed and delivered by each party thereto;
(c) Certified Documents and Resolutions. The Insurer shall have received
a copy of (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
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) Credit and Collection Policy. The Insurer shall have received a
complete copy of the Credit and Collections Policy then in effect certified by
the president or principal financial officer of IOS Capital;
17
(g) Opinions of Counsel. The Insurer shall have received all opinions of
counsel addressed to any of Moody's, S&P, the 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;
(h) 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;
(i) 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;
(j) 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;
(k) 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;
(l) Issuance of Ratings. The Insurer shall have received confirmation
that the risk secured by the Policies 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);
(m) No Default. No Default or an event which, with or without notice or
lapse of time or both would constitute an Event of Default shall have occurred;
(n) Additional Items. The Insurer shall have received such other
documents, instruments, approvals or opinions in form and substance reasonably
satisfactory to the Insurer as shall be 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
(o) Satisfactory Documentation. The Insurer and its counsel shall have
determined that all documents, Notes and opinions to be delivered in connection
with the Notes and the Swap Documents conform to the terms of the Indenture, the
Registration Statement, the Offering Document, the Swap Documents and this
Insurance Agreement.
Section 3.02. Payment of Fees and Premium.
(a) Legal and Accounting Fees. IOS Capital shall pay or cause to be
paid, within 5 Business Days of receipt of the related invoice, reasonable legal
fees, auditors' fees and other reasonable expenses 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
Policies. Any
18
reasonable additional fees of the Insurer's counsel or auditors or other
reasonable expenses 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
Policies, the Insurer shall be entitled to receive the Premium as
and when due in accordance with and from the funds specified by
Section 3.03 of the Indenture.
(ii) The Premium paid under the Indenture shall be nonrefundable
without regard to whether any Notice for Payment is delivered to the
Insurer requiring the Insurer to make any payment under either
Policy or any other circumstances relating to the Notes or the Swap
Documents 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 either Policy, plus the
amount of any other due and payable and unpaid Reimbursement Amount, 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 five (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
administration, 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, including without limitation the reasonable
costs and fees and, after the occurrence of a Default or Event of Default, all
costs and expenses, of inspections by the Insurer or audits or field
examinations by accountants, 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) Each of IOS Capital, the Issuer and the Seller agrees to pay to the
Insurer, within five (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
19
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), 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;
(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 (without giving effect
to any materiality qualifier or limitation therein) 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 Underwriters' Information or
information furnished by the Insurer in writing expressly for use
therein (all such information so furnished by the Insurer being
referred to herein as "Insurer Information"), it being understood
that, in respect of the Offering Document, the Insurer Information
is limited to the information with respect to the Insurer included
under the subheading "THE INSURER" under the heading "THE INSURER
AND THE POLICY."
(b) The Insurer agrees to pay, and to protect, indemnify and save
harmless, IOS Capital and its respective officers, directors, shareholders,
employees, agents and each Person, if any, who controls IOS Capital within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities
20
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) In addition to any and all of the Insurer's rights of reimbursement,
indemnification or subrogation, and to any other rights of the Insurer pursuant
hereto or under law or in equity, each of the Seller and the Issuer, jointly and
severally, agree to pay, and to protect, indemnify and save harmless, the
Insurer and its officers, directors, shareholders, employees, agents and each
Person, if any, who controls the Insurer within the meaning of either Section 15
of the Securities Act or Section 20 of the Securities Exchange Act from and
against, any and all claims, losses, liabilities (including penalties), actions,
suits, judgments, demands, damages, costs or expenses (including reasonable fees
and expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or relating to the transactions
contemplated by the Company Documents, including, without limitation, 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 the Seller or the Issuer in connection with the
offering, issuance, sale or delivery of any of the Notes;
(ii) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer, employee or
agent of the Seller or the Issuer in connection with any Transaction
arising from or relating to the Company Documents;
(iii) the violation by the Seller or the Issuer of any domestic or
foreign law, rule or regulation, or any judgment, order or decree
applicable to it;
(iv) the breach by the Seller or the Issuer of any
representation, warranty or covenant under any of the Company
Documents (without giving effect to any materiality qualifier or
limitation therein) or the occurrence, in respect of the Seller or
the Issuer, 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 Underwriters' Information or Insurer
Information, it being understood that, in respect of the Offering
Document, the Insurer Information is limited to the information with
respect to the Insurer included under the subheading "THE INSURER"
under the heading "THE INSURER AND THE POLICY."
21
(d) 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), (b) or (c) may be sought from
another Person (the "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; provided
that failure to notify the Indemnifying Party shall not relieve it from any
liability it may have to such Indemnified Party except to the extent that it
shall be actually prejudiced thereby. 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 within a reasonable time
after the commencement of such action 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, which consent shall not be unreasonably withheld or delayed, 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
(d), 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.
(e) 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 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
22
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.
Section 3.06. Subrogation. The parties hereto acknowledge that, to the
extent of any payment made by the Insurer pursuant to the Note Policy or
otherwise, the Insurer shall be fully subrogated to the extent of such payment
and any interest due thereon, to the rights of the Noteholders to any moneys
paid or payable in respect of the Notes under the Company Documents or otherwise
subject to applicable law and to the extent of any payment made by the Insurer
on the Swap Documents, the Insurer shall be fully subrogated to the extent of
such payment and any interest due thereon, to the rights of the Issuer to any
moneys paid or payable in respect of the Swap Documents or otherwise subject to
applicable law. The parties hereto agree to such subrogation and further agree
to execute such instruments and to take such actions as, in the reasonable
judgment of the Insurer, are necessary to evidence such subrogation and to
perfect the rights of the Insurer to receive any such moneys paid or payable in
respect of the Notes or Swap Documents under the Company Documents or otherwise.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of the Insurance Agreement. This
Insurance Agreement shall take effect on the Closing Date and shall remain in
effect until the later of (a) such time as the Insurer is no longer subject to a
claim under either Policy and the Policies 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
Trustee shall grant any waiver of rights under any of the Company Documents to
which any of them is a party without the prior written consent of the Insurer,
which shall not be unreasonably withheld, conditioned or delayed and any such
waiver without prior written consent of the Insurer shall be null and void and
of no force or effect.
(b) To the extent permitted by law, IOS Capital agrees that it will,
from time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further instruments
as the Insurer may reasonably request and as may be required in the Insurer's
reasonable judgment to effectuate the intention of or facilitate the performance
of this Insurance Agreement. Without limiting the foregoing, each of the Company
Parties which is a party to any of the Company Documents hereby authorizes the
Trustee and the Insurer (in the case of the Trustee, subject to the provisions
of the Indenture), at the expense of the Issuer, to execute and file financing
statements covering the assets covered by any assignment pursuant to the Company
Documents or owned by the Issuer in such jurisdictions as may be required to
confirm title thereto and perfect and maintain the lien thereon, including,
without limitation, filings required to maintain perfection pursuant to Article
9 of the Uniform Commercial Code. In addition, each of the parties hereto agrees
to cooperate with the applicable rating agencies in connection with any review
of the Transaction conducted during normal business hours
23
and in a manner that does not unreasonably disrupt the business of IOS Capital,
the Seller or the Issuer, that may be undertaken by such rating agencies after
the date hereof upon prior written notice.
(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 Seller or 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 (each, a
"Company Party") 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 a Company Party which is a party to
any of the Company Documents may have at any time against the
Insurer or any other Person;
(iv) any document presented in connection with either 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 either Policy against
presentation of a certificate or other document that does not
strictly comply with the terms of such Policy;
(vi) any failure of a Company Party which is a party to any of
the Company Documents 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,
a Company Party which is a party to any of the Company Documents 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
24
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 their
liabilities hereunder shall, except as otherwise expressly provided in this
Section 4.03, be unconditional and without regard to any setoff, counterclaim or
the liability of any other Persons for the payment hereof; (vi) agree that any
consent, waiver or forbearance hereunder with respect to an event shall operate
only for such event and not for any subsequent event; (vii) consent to any and
all extensions of time that may be granted by the Insurer with respect to any
payment hereunder or other provisions hereof and to the release of any security
at any time given for any payment hereunder, or any part thereof, with or
without substitution, and to the release of any Person or entity liable for any
such payment; and (viii) consent to the addition of any and all other makers,
endorsers, guarantors and other obligors for any payment hereunder, and to the
acceptance of any and all other security for any payment hereunder, and agree
that the addition of any such obligors or security shall not affect the
liability of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting IOS Capital or the
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 Policies upon such terms and conditions as the Insurer may
in its discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve the Insurer of any of its
obligations hereunder or under either Policy and provided further that any
reinsurer or participant will not have any rights against IOS Capital, the
Noteholders or the Trustee and that IOS Capital, the Noteholders and the 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 Policies.
(c) In addition, the Insurer shall be entitled to assign or pledge to
any bank, other lender or reinsurer providing liquidity or credit with respect
to Transaction or the obligations of the Insurer in connection therewith, any
rights of the Insurer under the Company Documents or with respect to any real or
personal property or other interests pledged to the Insurer or in which the
Insurer has a security interest, in connection with the Transaction, subject in
each case to the liens granted pursuant to the Company Documents, provided, that
no such bank or other lender shall thereby obtain any direct right against
Company Parties, the Noteholders or the Trustee, and further provided, that no
such assignment or pledge shall give any assignee the right to exercise any
discretionary authority that the Company Documents provide shall be exercisable
by the Insurer or relieve the Insurer of any of its obligations hereunder or
under the Policy.
(d) 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,
25
including, particularly, any Holder, other than the Insurer against the Company
Parties or the Company Parties 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 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. 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 Policies by the Trustee or for any acts or omissions
of the Trustee in connection therewith; or (b) the validity, sufficiency,
accuracy or genuineness of documents delivered to the Insurer in connection with
any claim under either Policy, or of any signatures thereon, even if such
documents or signatures should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged (unless the Insurer shall have
actual knowledge thereof). In furtherance and not in limitation of the
foregoing, the Insurer may accept documents that appear on their face to be in
order, without responsibility for further investigation.
Section 4.06. Annual Servicing Audit and Certification. The annual
servicing audit required pursuant to Section 6.02 of the Servicing Agreement
shall be performed by an independent third party acceptable to the Insurer. Any
one of the four 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 Company 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 or deposit when due any amount
required to be paid or deposited by it under any Company Document 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, the Seller 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 Trustee) or by the Trustee
(with a copy to the Insurer); provided, that if such failure shall be of a
nature that it cannot be
26
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 Trustee of corrective action it proposes to take and the date by which
such corrective action shall be completed and such default cured, which
corrective action and time period are agreed in writing by the Insurer to be
satisfactory, and IOS Capital, the Seller or the Issuer shall thereafter pursue
such corrective action diligently until such default is cured;
(e) A decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any present or
future federal or state insolvency or similar law or the appointment of a
conservator or receiver or liquidator or other similar official in any
bankruptcy, 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 bankruptcy, 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 Ba2 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 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 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. The other Company Documents may be amended only with the prior written
consent of the Insurer, and without such consent any such amendment is null and
void.
Section 6.02. Notices. All demands, notices and other communications
to be given hereunder shall be in writing (except as otherwise specifically
provided herein) and shall be mailed by registered mail or personally delivered
and telecopied to the recipient as follows:
(a) To the Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: Structured Finance Department - ABS
Telecopy No.: 212-208-3547
Confirmation: 212-668-0340
(in each case in which notice or other communication to the
Insurer refers to an Event of Servicing Termination, a claim on
either Policy or with respect to which failure on the part of
the Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication
should also be sent to the attention of the general counsel of
each of the Insurer and the Trustee and shall be marked to
indicate "URGENT MATERIAL ENCLOSED.")
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(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 of Leasing
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
with a copy to:
IOS Capital, LLC
70 Valley Stream Road
Malvern, PA 19355
Attention: Chief Counsel of Leasing
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
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with a copy to:
IOS Capital, LLC
70 Valley Stream Road
Malvern, PA 19355
Attention: Chief Counsel of Leasing
Facsimile: (610) 408-7264
(e) To the 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 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
without regard to conflicts of laws provisions.
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.
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(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, the Seller or the Issuer may be made by
mailing or delivering copies of the summons and complaint and other process
which may be served in any suit, action or proceeding to the Servicer at the
related addresses listed in Section 6.02(b) and (c) herein. Such address may be
changed by the applicable party or parties, with the prior written consent of
the Insurer, by written notice to the other parties hereto.
(d) Nothing contained in this Insurance Agreement shall limit or affect
any party's right to serve process in any other manner permitted by law or to
start legal proceedings relating to any of the Company Documents against any
other party or its properties in the courts of any jurisdiction.
Section 6.06. Consent of the Insurer. In the event that the consent
of the Insurer is required under any of the Company Documents, the determination
whether to grant or withhold such consent shall be made by the Insurer in its
sole discretion without any implied duty towards any other Person, except as
otherwise expressly provided therein.
Section 6.07. Counterparts. This Insurance Agreement may be executed
in counterparts by the parties hereto, and all such counterparts shall
constitute one and the same instrument.
Section 6.08. Headings. The headings of Articles and Sections and the
Table of Contents contained in this Insurance Agreement are provided for
convenience only. They form no part of this Insurance Agreement and shall not
affect its construction or interpretation.
Section 6.09. Trial by Jury Waived. Each party hereby waives, to the
fullest extent permitted by law, any right to a trial by jury in respect of any
litigation arising directly or indirectly out of, under or in connection with
any of the Company Documents or any of the transactions contemplated thereunder.
Each party hereto (A) certifies that no representative, agent or attorney of any
party hereto has represented, expressly or otherwise, that it would not, in the
event of litigation, seek to enforce the foregoing waiver and (B) acknowledges
that it has been induced to enter into the Company Documents to which it is a
party by, among other things, this waiver.
Section 6.10. Limited Liability. No recourse under any Company
Document or the Underwriting Agreement shall be had against, and no personal
liability shall attach to, any officer, employee, director, affiliate or
shareholder of any party hereto, as such, by the enforcement of any assessment
or by any legal or equitable proceeding, by virtue of any statute or otherwise
in respect of any of the Company Documents or the Underwriting Agreement, the
Notes or the Policies, it being expressly agreed and understood that each
Company Document or the Underwriting Agreement is solely a corporate obligation
of each party hereto, and that any and all personal liability, either at common
law or in equity, or by statute or constitution, of every such officer,
employee, director, affiliate or shareholder for breaches of any party hereto
of any obligations under any Company Document or the Underwriting Agreement is
hereby expressly waived as a condition of and in consideration for the execution
and delivery of this Insurance Agreement.
Section 6.11. Entire Agreement. This Insurance Agreement and the
Policies set forth the entire agreement between the parties with respect to the
subject matter hereof and thereof, and this Insurance Agreement supersedes and
replaces any agreement or understanding that may have existed between the
parties prior to the date hereof in respect of such subject matter. Execution
and delivery of this Insurance Agreement by facsimile signature shall constitute
execution and delivery of this Insurance
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Agreement for all purposes hereof with the same force and effect as
execution and delivery of a manually signed copy hereof.
Section 6.12. Trustee. The Trustee hereby acknowledges and agrees to
perform all its obligations and duties pursuant to the Company Documents to
which it is a party thereto.
Section 6.13. Third-Party Beneficiary.
Each of the parties hereto agrees that the Insurer shall have all rights
of an intended third-party beneficiary in respect of each of the Company
Documents, including but not limited to enforcing the respective obligations of
the parties thereunder.
Section 6.14. No Proceedings.
Each of the parties hereto (other than, after the Notes are paid in
full, the Insurer) agrees that it will not institute against the Issuer or the
Seller any involuntary proceeding or otherwise institute any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding or other
proceeding under any federal or state bankruptcy or similar law until the date
which is one year and one day since the last day on which any Notes shall have
been outstanding and all amounts payable to the Insurer hereunder shall have
been paid in full.
Section 6.15. Limited Recourse.
Each of the parties hereto agrees that any obligation of the Issuer
hereunder or under any of the other Company Documents will be payable by the
Issuer solely from funds when, if and to the extent available for such purpose
pursuant to the Indenture and that, except in the event of a claim for
reimbursement for payment of principal or other amounts paid under the Policies
or otherwise by the Insurer in respect of principal or interest under the Notes,
or in the event of acceleration of the principal amount of the Notes, any amount
in excess of the amount so available shall not constitute a current claim
against the Issuer therefor.
[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/ Gretchen E. Brigden
------------------------------
Name: Gretchen E.Brigden
Title: First Vice President
S-1
IOS Capital, LLC,
as Originator and as Servicer
By: /s/ Kathleen M. Burns
------------------------------
Name:
Title:
S-2
IKON Receivables Funding, LLC,
as Issuer
By: IKON Receivables Funding, Inc.
By: /s/ Kathleen M. Burns
--------------------------
Name:
Title:
IKON Receivables-2, LLC,
By: IKON Receivables Funding, Inc.
By: /s/ Kathleen M. Burns
--------------------------
Name:
Title:
S-3
BNY Midwest Trust Company, not
in its individual capacity,
but solely as Trustee
By: /s/ Eric A. Lindahl
------------------------------
Name: Eric A. Lindahl
Title: Vice President
S-4