Exhibit 10.1
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IOS CAPITAL, INC.,
ORIGINATOR AND SERVICER
IKON RECEIVABLES-1, LLC
SELLER
AND
IKON RECEIVABLES, LLC,
ISSUER
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ASSIGNMENT AND SERVICING AGREEMENT
Dated as of June 1, 2001
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ALL RIGHT, TITLE AND INTEREST OF IKON RECEIVABLES, LLC IN AND TO THIS AGREEMENT
HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF SUNTRUST
BANK, AS TRUSTEE, UNDER THE INDENTURE DATED AS OF June 1, 2001, FOR THE BENEFIT
OF THE PERSONS REFERRED TO THEREIN.
TABLE OF CONTENTS
Page
R E C I T A L S ..............................................................1
SECTION 1. CAPITAL CONTRIBUTION .............................................2
1.01 Capital Contribution of Leases, Etc ..................................2
1.02 Capital Contribution of and Grant of Security Interest in Equipment ..2
1.03 Contribution of Leases; Grant of Security Interest ...................2
1.04 Servicer to Act as Custodian .........................................4
1.05 No Recourse to IKON Office Solutions, Inc. or Affiliates .............5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR .................5
2.01 Corporate Organization and Authority. ................................5
2.02 Business and Property. ...............................................6
2.03 Financial Statements. ................................................6
2.04 Equipment and Leases. ................................................6
2.05 Payments. ...........................................................10
2.06 Full Disclosure. ....................................................10
2.07 Pending Litigation. .................................................11
2.08 Title to Leases and Equipment. ......................................11
2.09 Transactions Legal and Authorized. ..................................11
2.10 Governmental Consent. ...............................................12
2.11 Taxes. ..............................................................12
2.12 Compliance with Law. ................................................12
2.13 ERISA. ..............................................................12
2.14 Ability to Perform. .................................................13
2.15 Ordinary Course; No Insolvency. .....................................13
2.16 Assets and Liabilities. .............................................13
2.17 Fair Consideration. .................................................13
2.18 Ability to Pay Debts. ...............................................14
2.19 Bulk Transfer Provisions. ...........................................14
2.20 Transfer Taxes. .....................................................14
2.21 Principal Executive Office. .........................................14
2.22 Servicing Provisions Customary. .....................................14
2.23 Nonconsolidation. ...................................................14
2.24 Capital Contribution Treatment. .....................................15
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER ....................15
3.01 Corporate Organization and Authority. ...............................15
3.02 Business and Property. ..............................................16
3.03 Ownership and Security Interest. ....................................16
3.04 Title to Leases and Equipment. ......................................16
3.05 Transactions Legal and Authorized. ..................................16
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3.06 Governmental Consent. ................................................17
3.07 Compliance with Law. .................................................17
3.08 Assets and Liabilities. ..............................................17
3.09 Fair Consideration. ..................................................18
3.10 Ability to Pay Debts. ................................................18
3.11 Bulk Transfer Provisions. ............................................18
3.12 Transfer Taxes. ......................................................18
3.13 Principal Executive Office. ..........................................18
3.14 Nonconsolidation. ....................................................19
3.15 Capital Contribution Treatment. ......................................19
SECTION 4. ADMINISTRATION OF LEASES .........................................19
4.01 Servicer to Act. .....................................................19
4.02 Lease Amendments and Modifications. ..................................22
4.03 Non-Performing Leases. ...............................................23
4.04 Costs of Servicing; Servicing Fee; Administrative Expenses. ..........24
4.05 Other Transactions. ..................................................24
SECTION 5. SERVICER ADVANCES AND ORIGINATOR'S AND SELLER'S SUPPORT...........24
5.01 Late Lease Payments. .................................................24
5.02 Early Termination Leases. ............................................25
5.03 Indemnification. .....................................................25
5.04 Purchases; Other Payments. ...........................................26
5.05 Seller's Obligation in Respect of Non-Performing Leases. .............27
5.06 Payment Advices. .....................................................27
SECTION 6. INFORMATION TO BE PROVIDED........................................27
6.01 Monthly Status Reports; Servicing Reports. ...........................27
6.02 Annual Independent Public Accountant's Report. .......................29
SECTION 7. THE SERVICER......................................................30
7.01 Merger or Consolidation of the Servicer. .............................30
7.02 Limitation on Liability of the Servicer and Others. ..................31
7.03 Servicer Not to Resign or Be Removed. ................................31
7.04 Financial and Business Information. ..................................31
7.05 Officers' Certificates. ..............................................33
7.06 Inspection. ..........................................................33
7.07 Servicer Records. ....................................................33
SECTION 8. THE ORIGINATOR ...................................................33
8.01 Merger or Consolidation of the Originator. ...........................33
8.02 Control of Seller. ...................................................34
8.03 Financial and Business Information. ..................................34
8.04 Officers' Certificates. ..............................................35
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8.05 Books and Records. ...................................................35
8.06 Communications. ......................................................36
SECTION 9. THE SELLER........................................................36
9.01 Merger or Consolidation of the Seller. ...............................36
9.02 Control of Issuer. ...................................................36
9.03 Information. .........................................................36
9.04 Inspection. ..........................................................37
9.05 Books and Records. ...................................................37
9.06 Communications. ......................................................37
SECTION 10. DEFAULT..........................................................37
10.01 Servicer Events of Default. .........................................37
10.02 Termination. ........................................................39
10.03 Trustee to Act; Appointment of Successor. ...........................40
10.04 Servicer to Cooperate. ..............................................41
10.05 Notification to Noteholders. ........................................41
10.06 Remedies Not Exclusive. .............................................41
SECTION 11. SUBSTITUTION AND ADDITION OF LEASES..............................41
11.01 Substitution and Addition. ..........................................41
11.02 Procedure. ..........................................................43
11.03 Objection and Purchase. .............................................44
11.04 Originator's, Seller's and Servicer's Subsequent Obligations. .......44
SECTION 12. ASSIGNMENT.......................................................44
12.01 Assignment to Trustee. ..............................................44
12.02 Assignment by Originator, Seller or Servicer. .......................45
SECTION 13. NATURE OF OBLIGATIONS AND SECURITY THEREFOR......................45
13.01 Obligations Absolute. ...............................................45
13.02 Security for Obligations. ...........................................46
13.03 Further Assurances; Financing Statements. ...........................46
SECTION 14. DEFINITIONS......................................................46
SECTION 15. MISCELLANEOUS....................................................53
15.01 Continuing Obligations. .............................................53
15.02 GOVERNING LAW. ......................................................53
15.03 Successors and Assigns. .............................................53
15.04 Modification. .......................................................53
15.05 No Proceedings. .....................................................53
15.06 Notices. ............................................................54
15.07 Counterparts. .......................................................54
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15.08 Nonpetition Covenant. .................................................54
15.09 Benefits of Agreement. ................................................54
Schedule 1 - Portfolio Detail
Exhibit A - Schedule of Leases and Equipment
Exhibit B - Form of Receivables Servicing Report
Exhibit C-1 - Form of Master Lease
Exhibit C-2 Short Forms of Lease Agreement
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ASSIGNMENT AND SERVICING AGREEMENT
This ASSIGNMENT AND SERVICING AGREEMENT (this "Agreement" or this
"Assignment and Servicing Agreement") is made and dated as of June 1, 2001,
among IKON RECEIVABLES, LLC, a Delaware limited liability company, as acquiror
hereunder (the "Issuer"), IOS CAPITAL, INC., a Delaware corporation, as
originator of the Leases (in such capacity, the "Originator"), contributor of
the Leases to IKON Receivables-1, LLC and servicer hereunder (in such capacity,
the "Servicer"), and IKON RECEIVABLES-1 LLC a Delaware limited liability
company, as contributor of the Leases to the Issuer (the "Seller").
R E C I T A L S
A. The Originator wishes to contribute, transfer, assign, set over and
convey to the Seller, and the Seller wishes to acquire from the Originator, all
right, title and interest of the Originator in, to and under the Leases and the
Equipment subject to the Leases (such terms and all other capitalized terms used
herein having the meanings ascribed thereto in Section 14 hereof unless
otherwise indicated).
B. The Seller wishes to contribute, transfer, assign, set over and convey
to the Issuer, and the Issuer wishes to acquire from the Seller, (i) all right,
title and interest of the Seller in, to and under the Leases, and (ii) all
right, title and interest of the Seller in, to and under the covenants,
representations, warranties and other obligations of the Originator (including
the Originator's Purchase Obligation) under this Assignment and Servicing
Agreement.
C. The Seller wishes to grant a security interest to the Issuer, and the
Issuer wishes to accept the Seller's grant of a security interest to the Issuer
of, all right, title and interest of the Seller in and to the Equipment subject
to the Leases as security for the performance by the Seller of certain of its
obligations hereunder.
D. Pursuant to the Indenture, the Issuer is issuing one class of 3.73375%
Class A-1 Lease-Backed Notes, Series 2001-1 in the aggregate principal amount of
$168,000,000 (the "Class A-1 Notes"), one class of 4.16% Class A-2 Lease-Backed
Notes, Series 2001-1 in the aggregate principal amount of $41,000,000 (the
"Class A-2 Notes"), one class of Class A-3 Lease-Backed Notes, Series 2001-1 in
the aggregate principal amount of $260,000,000 (the "Class A-3 Notes"), and one
class of Class A-4 Lease-Backed Notes, Series 2001-1 in the aggregate principal
amount of $126,200,000 (the "Class A-4 Notes" and, together with the Class A-1
Notes, the Class A-2 Notes and the Class A-3 Notes, the "Notes"), the net
proceeds of which are being used to fund the Reserve Account established
pursuant to the Indenture and to make distributions by the Issuer to the Seller
and by the Seller to the Originator. The Registration Statement filed in
connection with the Notes contemplates the issuance of subsequent series of the
Issuer's Lease-Backed Notes.
E. Pursuant to the Indenture, the Issuer is granting, inter alia, to the
Trustee, for the benefit of the holders from time to time of the Notes, a
security interest in all right, title and interest of the Issuer in, to and
under the Leases, the Equipment and this Assignment and Servicing Agreement.
SECTION 1. CAPITAL CONTRIBUTION
1.01 Capital Contribution of Leases, Etc.
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(a) By their execution and delivery of this Assignment and Servicing
Agreement, the Originator, in consideration for the membership interests in the
Seller, hereby contributes, transfers, assigns, sets over and conveys to the
Seller, and the Seller hereby acquires from the Originator, without recourse
(except to the extent of the Originator's Purchase Obligations as set forth
herein), all of the Originator's right, title and interest in and to each of the
Leases (including all Related Interests).
(b) By their execution and delivery of this Assignment and Servicing
Agreement, the Seller, in consideration for the membership interests in the
Issuer, hereby contributes, transfers, assigns, sets over and conveys to the
Issuer, and the Issuer hereby acquires from the Seller without recourse (except
to the extent of the Seller's Purchase Obligations as set forth herein), all of
the Seller's right, title and interest in and to each of (i) the Leases
(including all Related Interests), and (ii) the covenants, representations,
warranties and other obligations of the Originator (including the Originator's
Purchase Obligation) under this Assignment and Servicing Agreement.
1.02 Capital Contribution of and Grant of Security Interest in Equipment.
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(a) The Originator and the Seller each acknowledge and confirm that the
Originator, as additional consideration for the beneficial interests in the
Seller, is also contributing and transferring to the Seller, and in connection
with each transfer and assignment of Additional Leases and Substitute Leases,
the Originator will contribute and transfer to the Seller, without recourse, all
right, title and interest of the Originator in and to each item of Equipment
subject to each Lease, Additional Lease and Substitute Lease. After such
contribution and transfer by the Originator to the Seller, all right, title and
interest of the Originator in and to each item of Equipment subject to each
Lease shall be vested in the Seller.
(b) The Seller and the Issuer each acknowledge and confirm that the
Seller is granting a security interest to the Issuer, and in connection with
each transfer and assignment of Additional Leases and Substitute Leases the
Seller will grant a security interest to the Issuer, in all right, title and
interest of the Seller in and to each item of Equipment subject to each Lease,
Additional Lease and Substitute Lease, as security for the performance by the
Seller of its obligations under Section 5.05. After such grant by the Seller to
the Issuer, the Issuer shall have a security interest in all right, title and
interest of the Seller in and to each item of Equipment subject to each Lease,
Additional Lease and Substitute Lease.
1.03 Contribution of Leases; Grant of Security Interest.
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It is the intention of the parties hereto that each transfer of Leases,
Additional Leases, Substitute Leases and Equipment by the Originator to the
Seller pursuant to Sections 1.01(a) and 1.02(a), and each transfer of Leases,
Additional Leases and Substitute Leases by the Seller to the Issuer pursuant to
Section 1.01(b), shall constitute an absolute assignment thereof by way of
capital contribution and not a loan. Neither the Originator nor the Seller shall
take any action inconsistent with the treatment of such transfers as absolute
assignments by way of capital
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contributions or with the Issuer's ownership of the Leases (including all
Related Interests). Each of the Originator, the Seller and the Issuer shall
indicate in its records that, and shall respond to any inquiries from third
parties by indicating that, (i) ownership of the Leases, Additional Leases,
Substitute Leases, including all Related Interests, is held by the Issuer and
pledged to the Trustee, pursuant to the Indenture, and (ii) ownership of each
item of Equipment subject to each Lease is held by the Seller (subject to the
security interest therein granted by the Seller to the Issuer hereunder and by
the Issuer to the Trustee pursuant to the Indenture). In the event, however,
that contrary to the expressed intentions of the parties, the transactions
evidenced by Sections 1.01(a), 1.01(b) and 1.02(a) do not constitute an absolute
transfer and assignment of assets pursuant to the provisions of such Sections,
then it is the intention of the parties hereto that this Assignment and
Servicing Agreement shall constitute a security agreement under applicable law
and that, effective as of the date hereof, the Originator shall be deemed to
have granted to the Seller, and the Seller shall be deemed to have granted to
the Issuer, first priority security interests, as follows:
(a) Originator hereby grants to Seller a security interest in all of
the Originator's right, title and interest in, to and under the following
described property, whether such property (or Originator's right, title or
interest therein) is now existing or is hereafter created, acquired or
arising, and wherever located, as security for the payment and performance
of all liabilities, indebtedness and obligations now or at any time or
times hereafter owing by Originator to Seller, whether absolute or
conditional, due or to become due, liquidated or unliquidated and arising
under the terms of this Assignment and Servicing Agreement: (i) all Leases,
including, without limitation, all Additional Leases and Substitute Leases;
(ii) all amounts due or to become due at any time or times under or with
respect to any of the Leases since the Cut-Off Date (other than any
pre-payments of rent required pursuant to the terms of any Lease at or
before the commencement of the Lease), including, without limitation, all
Lease Payments, Renewal Payments, Casualty Payments, Retainable Deposits
and Termination Payments; (iii) all rights to payment or performance under
any Lease Guaranty; (iv) all rights and interests in any collateral with
respect to any Lease, including any security deposit and any security
interest in the Equipment securing the Lessee's obligations under any
Lease; (v) all of the Originator's right, title and interest in and to any
Equipment; (vi) all rights and benefits of Originator under this Assignment
and Servicing Agreement; and (vii) all proceeds of any of the foregoing
(collectively, the "Originator Collateral").
(b) Seller hereby grants to Issuer a security interest in all of
Seller's right, title and interest in, to and under the following described
property, whether such property (or Seller's right, title or interest
therein) is now existing or is hereafter created, acquired or arising, and
wherever located, as security for the payment and performance of all
liabilities, indebtedness and obligations now or at any time or times
hereafter owing by Seller to Issuer, whether absolute or conditional, due
or to become due, liquidated or unliquidated and arising under the terms of
this Assignment and Servicing Agreement: (i) all Leases, including, without
limitation, all Additional Leases and Substitute Leases; (ii) all amounts
due or to become due at any time or times under or with respect to any
Leases since the Cut-Off Date (other than any pre-payments of rent required
pursuant to the terms of any Lease at or before the commencement of the
Lease), including, without limitation, all Lease Payments, Renewal
Payments, Casualty Payments, Retainable
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Deposits and Termination Payments; (iii) all rights to payment or
performance under any Lease Guaranty; (iv) all rights and interests in any
collateral with respect to any Lease, including any security deposit and
any security interest in the Equipment securing the Lessee's obligations
under any Lease; (v) all of the Seller's right, title and interest in and
to any Equipment; (vi) all rights and benefits of Seller under this
Assignment and Security Agreement; (vii) all interest of the Seller in any
of the Originator Collateral, including, without limitation, the security
interest granted by Originator to Seller in the Originator Collateral; and
(viii) all proceeds of any of the foregoing (collectively, the "Seller
Collateral").
1.04 Servicer to Act as Custodian.
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(a) The Servicer shall hold and acknowledges that it is holding the
Leases and all other assets in the Asset Pool that it may from time to time
receive hereunder as custodian for the Trustee, excluding any amounts
distributed to the Servicer by the Trustee in accordance with Section 3.03(b) of
the Indenture.
(b) The Servicer shall perform its duties under this Section 1.04
in accordance with the standard set forth in Section 4.01 as such standard
applies to servicers acting as custodial agents. The Servicer shall promptly
report to the Trustee any failure by it to hold the Leases as herein provided
and shall promptly take appropriate action to remedy any such failure but only
to the extent (i) any such failure is caused by the acts or omissions of the
Servicer and (ii) such remedial action is otherwise within its capabilities or
control. As custodian, the Servicer shall have the following powers and perform
the following duties:
(A) hold the Leases on behalf of the Trustee for the benefit of the
Noteholders and the Insurer, maintain accurate records pertaining to each
Lease to enable it to comply with the terms and conditions of this
Assignment and Servicing Agreement, and maintain a current inventory
thereof;
(B) implement policies and procedures in accordance with the
Servicer's normal business practices with respect to the handling and
custody of the Leases so that the integrity and physical possession of the
Leases will be maintained; and
(C) attend to all details in connection with maintaining custody of
the Leases on behalf of the Issuer and for the Trustee on behalf of the
Noteholders and the Insurer.
(c) In acting as custodian of the Leases, the Servicer agrees
further that it does not and will not have or assert any beneficial ownership
interest in such Leases. The Servicer shall xxxx conspicuously its master data
processing records evidencing each Lease with a legend, acceptable to the
Trustee and the Insurer, evidencing that (i) all right, title and interest in
the Leases has been contributed and transferred to the Issuer and pledged by the
Issuer to the Trustee as provided in the Indenture, and (ii) a security interest
in all right, title and interest of the Seller in and to the related Equipment
has been granted by the Seller to the Issuer hereunder and pledged by the Issuer
to the Trustee as provided in the Indenture.
(d) Subject to the provisions of this Assignment and Servicing
Agreement, the Servicer agrees to maintain the Leases at its office at 0000 Xxxx
Xxxx, Xxxxx, Xxxxxxx or at such
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other offices of the Servicer as shall from time to time be identified by
prior written notice to the Trustee and the Insurer. The Servicer shall keep the
originals of the Leases and related Lease files segregated from other leases,
records and files of the Servicer in a place where it is indicated that they are
being held for the Trustee; provided, however, that the originals of the Leases
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and related Lease files in respect of obligors in the State of Florida need not
be so segregated provided that such Leases (and Lease files) are also retained
in imaged form and the Servicer is in compliance with the requirements of
Section 1.04(c). Notwithstanding the foregoing, the Servicer may temporarily
move individual Leases or any portion thereof and related Lease files without
notice as necessary to conduct collection and other servicing activities.
(e) Notwithstanding anything to the contrary contained herein, in the
event that the long-term debt rating assigned to the Servicer is downgraded
below BBB- by S&P or Baa3 by Xxxxx'x, the Servicer shall promptly notify the
Trustee and deliver the originals of all of the Leases (and related Lease
files), including the originals of any Leases (and related Lease files) in
imaged form, to the Trustee within three (3) Business Days of receipt of written
demand by the Insurer.
1.05 No Recourse to IKON Office Solutions, Inc. or Affiliates.
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Notwithstanding anything to the contrary contained here, the
contributions and transfers of the Leases and Equipment pursuant to Sections
1.01(a), 1.01(b) and 1.02(a) are without representation or warranty by, or
recourse to or against, IKON Office Solutions, Inc. or any subsidiary or
Affiliate of IKON Office Solutions, Inc. other than the Originator and the
Seller, including any right to require IKON Office Solutions, Inc. or any such
subsidiary or Affiliate other than the Originator or the Seller to purchase or
acquire any Lease or item of Equipment for any reason or to compensate the
Originator, the Seller, the Issuer or any other Person for or in respect of any
Lease or item of Equipment (whether on account of the non-payment of any lease
or rental payment or for any other reason).
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
The Originator, as Originator and Servicer, hereby represents and
warrants as follows:
2.01 Corporate Organization and Authority.
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The Originator:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation,
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to
carry on its business as now conducted (except where the
failure to have such licenses and permits would not have a
material adverse effect on the Asset Pool or the business or
condition (financial or otherwise) of the Originator or impair
the
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enforceability of any Lease) and to enter into and perform its
obligations under this Assignment and Servicing Agreement, and the
transactions contemplated hereby, including performance of the
duties of the Servicer and the Originator's support obligations
hereunder, and
(c) has duly qualified and is authorized to do business and is in good
standing as a foreign corporation in each jurisdiction where the
character of its properties or the nature of its activities makes
such qualification necessary (except where the failure to be so
qualified or in good standing would not have a material adverse
effect on the Asset Pool or the business or condition (financial or
otherwise) of the Originator or impair the enforceability of any
Lease).
2.02 Business and Property.
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The Prospectus accurately describes in all material respects the general
nature of the business of the Originator.
2.03 Financial Statements.
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(a) The consolidated balance sheet of the Originator and its
consolidated subsidiaries for the fiscal years ended September 30, 2000,
September 30, 1999 and September 30, 1998 and the related consolidated
statements of income, retained earnings and cash flow for the respective fiscal
years ended on such dates, all accompanied by reports thereon containing
opinions without qualification, except as therein noted, by the Originator's
independent certified public accountants (such independent certified public
accountants being Ernst & Young for the fiscal years ending September 30, 1998
and September 30, 1999 and PricewaterhouseCoopers for the fiscal year ending
September 30, 2000), and the unaudited interim consolidated balance sheets of
the Originator and its consolidated subsidiaries as of December 31, 2000 and as
of March 31, 2001 and the related consolidated statements of income, retained
earnings and cash flow for the three months (or other relevant period) ended
December 31, 2000 and March 31, 2001, respectively, have been prepared in
accordance with generally accepted accounting principles consistently applied,
and present fairly the financial position of the Originator and its subsidiaries
as of such dates and the results of their operations for such periods.
(b) Except as disclosed in the Prospectus and the financial statements
referred to in the preceding Section 2.03(a), since Mach 31, 2001 there has been
no change in the business, condition or prospects (financial or otherwise) of
the Originator except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse. Neither the
Originator nor any of its subsidiaries has any material liabilities or
obligations not incurred in the ordinary course of business other than those
disclosed in the financial statements referred to in Section 2.03(a) or for
which adequate reserves are reflected in such financial statements.
2.04 Equipment and Leases.
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(a) Prior to the date of each contribution and transfer of any Leases
and each contribution and transfer or grant of a security interest in the
related Equipment in accordance
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with Sections 1.01 and 1.02, the Originator purchased each item of Equipment
from the manufacturer or other supplier. The Originator has paid in full, to the
manufacturer or supplier, as the case may be, the purchase price and any related
charges in connection with the acquisition of the Equipment. The contribution to
the Seller and the concurrent contribution to the Issuer of the Leases, the
contribution of all of the Originator's right, title and interest in each item
of Equipment to the Seller and the grant of a security interest in the Seller's
interests in each item of Equipment to the Issuer, do not violate the terms or
provisions of any Lease or any other agreement to which the Originator is a
party or by which it is bound.
(b) Immediately prior to the completion of each contribution and transfer
described in Sections 1.01(a), 1.01(b) and 1.02(a), the Originator will (i) be
the legal owner of the Leases (including all Related Interests) and (ii) have
good title to each item of Equipment. Upon completion of each contribution and
transfer described in Sections 1.01(a), 1.01(b) and 1.02(a) and the grant of the
security interest described in Section 1.02(b), (i) the Issuer will be the legal
owner of the related Leases (including all Related Interests), (ii) the Seller
will have good title to each item of related Equipment, and (iii) the Issuer
will have a valid security interest in all of the Seller's right, title and
interest in and to each item of related Equipment.
(c) At the time of each transfer of a Lease hereunder, (A) each such Lease
(i) will be a triple-net lease (i.e., pursuant to which the Lessee is
unconditionally responsible for the payment of insurance, maintenance and taxes
with respect to the Equipment subject to the Lease); (ii) will be a legal, valid
and binding full recourse obligation of the Lessee thereunder, enforceable by
the Issuer (and by the Trustee as assignee of the Issuer) against such Lessee in
accordance with the terms thereof, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors' rights and by general equity principles;
(iii) provides that it is noncancellable by the Lessee (except for Leases which
contain early termination or prepayment clauses which require the Lessee to pay
the remainder of all remaining Lease Payments under such Lease upon such
cancellation or prepayment); (iv) will be in full force and effect; and (v) were
originated pursuant to a lease contract in a form substantially similar in all
material respects to the forms of master agreement and short forms of lease
agreement each as attached as Exhibit C-1 and C-2 hereto, (B) any and all
requirements of any federal, state or local law, including, without limitation,
usury, truth-in-lending and equal credit opportunity laws applicable to such
Lease will have been complied with; (C) the Originator has no knowledge (after
due inquiry) of any challenge, dispute or claim by or against the Lessee under
or affecting such Lease or of the bankruptcy or insolvency of the applicable
Lessee; and (D) at least 90% of such Leases (by Discounted Present Value of the
Performing Leases) are governed by Georgia law . As of the initial Determination
Date, or the effective date of the transfer of any Additional Lease or
Substitute Lease, each Lessee has paid the first scheduled installment of rent
under its respective Lease.
(d) At the time that any Lease is contributed and transferred hereunder,
the Originator will have no knowledge that any item of the Equipment subject
thereto has suffered any loss or damage which has not been repaired.
(e) Each Lease requires the Lessee thereunder to maintain insurance on the
Equipment subject thereto in an amount sufficient to fully insure such
Equipment.
7
(f) In addition to the insurance maintained by the Lessees with respect to
the Equipment, the Originator (or an Affiliate of the Originator) maintains (i)
one or more casualty insurance policies which, in the aggregate, are in an
amount not less than the aggregate Outstanding Principal Amount of the Notes,
(ii) a general liability insurance policy in the aggregate amount of $1,000,000
and (iii) an excess liability insurance policy in umbrella form in the aggregate
amount of $10,000,000. Each of such policies is in full force and effect and
covers all Equipment. All premiums in respect of such policies have been paid.
Each of the Trustee and the Issuer are named as loss payees and additional
insureds, as their interests may appear, on such casualty and liability policies
maintained by the Originator and will be provided with copies of all such
policies upon written request.
(g) No Lease has outstanding rent which is 61 or more days past due as of
the Cut-Off Date.
(h) Each Lease was entered into by the Originator in accordance with the
Originator's regular credit approval process described in the Prospectus, and no
selection procedures adverse to the credit quality of the Asset Pool were
employed in selecting the Leases for contribution under this Assignment and
Servicing Agreement.
(i) Each Lease provides that the obligation of the Lessee to pay rent
thereunder throughout the term thereof is and will be unconditional without
regard to any event affecting the Equipment, the obsolescence of any Equipment,
any claim of such Lessee against the Issuer, the Originator or the Servicer or
any change in circumstance of such Lessee or any other circumstance whatsoever
except to the extent that in the event of a casualty of any item of Equipment,
the Lessee, at a minimum, is obligated to pay, in lieu of the future Lease
Payments with respect to such item, the outstanding principal or net book value
of the Leases and any applicable make whole premium.
(j) Each of the Leases provides that payments thereunder are not subject to
setoff or reduction.
(k) In the case of each Lease which consists of a master lease and one or
more exhibits or schedules thereto, the Originator has neither assigned such
master lease in its entirety, nor delivered physical possession of such master
lease, to any Person other than the Seller, the Issuer or the Trustee (or the
trustee under another indenture in a transaction substantially similar to the
transaction contemplated hereby, which other indenture provides that the lien
thereof on such master lease extends only to such master lease insofar as it
relates to lease schedules which are not part of the Asset Pool).
(l) As of the time of each contribution and transfer of Leases hereunder,
there are no facts or circumstances which give rise, or would give rise at any
time in the future, to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, to obligations of any Lessee, including the
obligation of such Lessee to pay all amounts due with respect to any Lease to
which such Lessee is a party, and neither the operation of any of the terms of
any Lease or the exercise of any right thereunder will render such Lease
unenforceable in whole or in part or subject to any right of rescission, setoff,
counterclaim or defense, including the defense of
8
usury, and no such right of rescission, setoff, counterclaim or defense has
been asserted with respect thereto.
(m) As of the time of each contribution and transfer of Leases hereunder,
no Lease has been amended, altered or modified in any material respect except in
writing, and copies of all such writings are attached to the Lease.
(n) As of the time of each contribution and transfer of Leases hereunder,
no Lessee will have been released, in whole or in part, from any of its
obligations in respect of any Lease; no Lease will have been satisfied,
cancelled or subordinated, in whole, or in part, or rescinded, and no Equipment
covered by any Lease will have been released from such Lease, in whole or in
part, nor has any instrument been executed that would effect any such
satisfaction, release, cancellation, subordination or rescission.
(o) As of the time of each contribution and transfer of Leases hereunder,
each Lease was originated by the Originator in the ordinary course of its
business.
(p) The Leases do not violate any U.S. or state laws and no Lease was
originated in or is subject to the laws of any jurisdiction whose laws would
make any of the transfers and contributions under this Assignment and Servicing
Agreement unlawful.
(q) All parties to each Lease had authority and capacity to execute such
Lease.
(r) None of the Leases is a consumer lease.
(s) The final Lease Payment on each Lease is due and payable on or prior to
April 2007 and, as of the Cut-Off Date, the maximum remaining term of any Lease
did not exceed 70 months.
(t) Each Lease agreement is "chattel paper" within the meaning of the
Uniform Commercial Code in the states of New York and Georgia, and there is only
one original of each Lease.
(u) Each Lease provides that it is noncancellable by the Lessee and none of
the Leases contains early termination options (except for Leases which contain
early termination or prepayment clauses which require the Lessee to pay the
remainder of all remaining Lease Payments under such Lease upon such
cancellation or prepayment);
(v) None of the Leases is subject to any guaranty by the Originator.
(w) The Leases have been transferred by the Originator to the Seller and by
the Seller to the Issuer, in each case free and clear of any liens and are
assignable without prior written consent of the Lessee.
(x) The Leases are U.S. dollar-denominated and the Lessor and each Lessee
is located in the United States.
9
(y) As of the Cut-Off Date, no more than 3.00% of the Leases in the Asset
Pool will consist of Leases with government entities as the obligor.
(z) Each Lessee has represented to the Originator that it has accepted the
Equipment.
(aa) No Lessee is a subject of an insolvency or bankruptcy proceeding at
the time of the transfer.
(bb) No Lease is a Non-Performing Lease and each Lease is no more than 60
days past due at the time of transfer.
(cc) Each Lease provides for periodic payments.
(dd) All the Leases were originated in the United States.
2.05 Payments.
--------
(a) The aggregate amounts of Lease Payments payable by the Lessees under
the Leases during each Due Period, together with amounts on deposit in the
Reserve Account, are sufficient to cover the Servicing Fee, the premium due in
respect of the Policy and the principal and interest on the Notes, as such
payments become due and payable.
(b) The portfolio detail set forth in Schedule 1 hereto (i) accurately sets
forth, as of the Cut-Off Date, the amount of each Lease Payment due under each
of the Leases and the month in which such Lease Payment is to be paid in
accordance with the terms of the Lease under which the same is to be paid, (ii)
accurately sets forth, as of the Cut-Off Date, the information with respect to
the other characteristics of the Leases and the Equipment described in such
portfolio detail and (iii) is otherwise true and correct in all respects.
2.06 Full Disclosure.
---------------
The Prospectus (including, without limitation, the statistical and
descriptive information with respect to the initial Leases, Lessees and
Equipment), as of the date of the Prospectus Supplement, does not contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading; provided, however, that no representation or warranty
-------- -------
is made with respect to the information set forth in the Prospectus Supplement
under the heading "The Insurer and the Policy" (including information
incorporated by reference therein). There is no fact peculiar to the Originator
or any Affiliate of the Originator or, to the knowledge of the Originator, any
Lease, Lessee or item of Equipment, which the Originator has not or will not
disclose in the Prospectus which materially affects adversely or, so far as the
Originator can now reasonably foresee, will materially affect adversely the
ability of the Originator to perform the transactions contemplated by this
Assignment and Servicing Agreement.
10
2.07 Pending Litigation.
------------------
There are no proceedings or investigations pending, or to the knowledge
(after due inquiry) of the Originator threatened, against or affecting the
Originator or any subsidiary in or before any court, governmental authority or
agency or arbitration board or tribunal, including, but not limited to, any such
proceeding or investigation with respect to any environmental or other liability
resulting from the ownership or use of any of the Equipment, which, individually
or in the aggregate, would materially and adversely affect the properties,
business, profits or condition (financial or otherwise) of the Originator and
its subsidiaries, or the ability of the Originator or the Servicer to perform
its obligations under this Assignment and Servicing Agreement. The Originator is
not in default with respect to any order of any court, governmental authority or
agency or arbitration board or tribunal.
2.08 Title to Leases and Equipment.
-----------------------------
Immediately following the transfer and contribution by the Originator to
the Seller of the Leases and the Equipment, the transfer and contribution by the
Seller to the Issuer of the Leases and the security interest granted by the
Seller to the Issuer in all of the Seller's interest in the Equipment, in each
case as contemplated in Section 1, (a) the Leases and the Equipment will be free
and clear of all Liens, except the rights of each Lessee under the related
Lease, the rights of the Seller and the Issuer hereunder and the Lien in favor
of the Trustee granted pursuant to the Indenture, and (b) there will be no
delinquent taxes or other outstanding charges affecting the Equipment which is
or may give rise to any Lien prior to, or equal or coordinate with, the Lien of
the Trustee under the Indenture.
2.09 Transactions Legal and Authorized.
---------------------------------
The contribution and transfer by the Originator to the Seller of the Leases
and the Equipment and compliance by the Originator with all of the provisions of
this Assignment and Servicing Agreement:
(a) have been duly authorized by all necessary corporate action on the
part of the Originator, and do not require any stockholder approval, or approval
or consent of any trustee or holders of any indebtedness or obligations of the
Originator except such as have been duly obtained;
(b) are within the corporate powers of the Originator; and
(c) are legal and will not conflict with, result in any breach in any of
the provisions of, constitute a default under, or result in the creation of any
Lien upon any property of the Originator under the provisions of, any agreement,
charter instrument, by-law or other instrument to which the Originator is a
party or by which it or its property may be bound or result in the violation of
any law, regulation, rule, order or judgment applicable to the Originator or its
properties, or any order to which the Originator or its properties is subject,
of or by any government or governmental agency or authority.
11
2.10 Governmental Consent.
--------------------
Except for the filing of the Required Financing Statements, no consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority is necessary or required on the part of the Originator in
connection with the execution and delivery of this Assignment and Servicing
Agreement, the contribution and transfer of the Leases and Equipment to the
Seller contemplated hereby or the performance by the Originator of its
obligations hereunder.
2.11 Taxes.
-----
(a) All tax returns required to be filed by the Originator or any
subsidiary in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon the Originator or any
subsidiary, or upon any of their respective properties, income or franchises,
shown to be due and payable on such returns have been paid. To the best of the
Originator's knowledge all such tax returns were true and correct and neither
the Originator nor any subsidiary knows of any proposed additional tax
assessment against it in any material amount nor of any basis therefor.
(b) The provisions for taxes on the books of the Originator and each of its
subsidiaries are in accordance with generally accepted accounting principles.
2.12 Compliance with Law.
-------------------
The Originator:
(a) is not in violation of any laws, ordinances, governmental
rules or regulations to which it is subject;
(b) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership
of its property or to the conduct of its business; and
(c) is not in violation in any material respect of any term of
any agreement, charter instrument, by-law or other
instrument to which it is a party or by which it may be
bound,
which violation or failure to obtain might materially adversely
affect the Asset Pool or the business or condition (financial or
otherwise) of the Originator and its subsidiaries.
2.13 ERISA.
-----
(a) The present value of all benefits vested under all "employee pension
benefit plans," as such term is defined in Section 3 of ERISA, maintained by or
contributed to by the Originator and its Related Persons (other than
multi-employer plans as such term is defined in Section 3 of ERISA), as from
time to time in effect (herein called the "Pension Plans"), does not exceed the
value of the assets of the Pension Plans allocable to such vested benefits;
12
(b) No Prohibited Transactions, Accumulated Funding Deficiencies, or
Reportable Events have occurred with respect to any Pension Plans that, in the
aggregate, could subject the Originator to any material tax, penalty or other
liability; and
(c) No notice of intent to terminate a Pension Plan under a distress
termination has been filed, nor has the PBGC instituted proceedings to
terminate, or appoint a trustee to administer, a Pension Plan and no event has
occurred or condition exists which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan.
2.14 Ability to Perform.
------------------
At the date hereof, the Originator does not believe, nor does it have any
reasonable cause to believe, that it cannot (a) perform each and every covenant
contained in this Assignment and Servicing Agreement or (b) perform its
obligations hereunder as Servicer.
2.15 Ordinary Course; No Insolvency.
------------------------------
The transactions contemplated by the Notes, the Indenture and this
Assignment and Servicing Agreement are being consummated by the Originator in
furtherance of the Originator's ordinary business purposes and constitute a
practical and reasonable course of action by the Originator designed to improve
the financial position of the Originator, with no contemplation of insolvency
and with no intent to hinder, delay or defraud any of its present or future
creditors. The Originator will not, either as a result of the transaction
contemplated by this Assignment and Servicing Agreement, or immediately before
or after such transaction, be insolvent or have an unreasonably small capital
for the conduct of its business and the payment of existing and anticipated
obligations.
2.16 Assets and Liabilities.
----------------------
(a) Both immediately before and after any transfer and contribution by the
Originator to the Seller of Leases and Equipment contemplated by this Assignment
and Servicing Agreement, the present fair salable value of the Originator's
assets was or will be in excess of the amount that will be required to pay the
Originator's probable liabilities as they then exist and as they become absolute
and matured; and
(b) Both immediately before and after any transfer and contribution by the
Originator to the Seller of Leases and Equipment contemplated by this Assignment
and Servicing Agreement, the sum of the Originator's assets was or will be
greater than the sum of the Originator's debts, valuing the Originator's assets
at a fair salable value.
2.17 Fair Consideration.
------------------
The consideration received by the Originator, in exchange for the
contribution and transfer of the Leases and Equipment pursuant to this
Agreement, is fair consideration having value equivalent to or in excess of the
value of the assets being contributed by the Originator.
13
2.18 Ability to Pay Debts.
--------------------
The Originator does not believe that it will incur debts beyond its ability
to pay or which would be prohibited by its charter documents or by-laws as a
result of the transactions contemplated by this Assignment and Servicing
Agreement or otherwise. The Originator's assets and cash flow enable it to meet
its present obligations in the ordinary course of business as they become due.
2.19 Bulk Transfer Provisions.
------------------------
The contribution and transfer of the Leases and Equipment by the Originator
to the Seller, the contribution and transfer of the Leases by the Seller to the
Issuer and the grant of the security interest in the Seller's interest in the
Equipment by the Seller to the Issuer, in each case as contemplated in Section
1, are not subject to the bulk transfer or any similar statutory provisions in
effect in any applicable jurisdiction.
2.20 Transfer Taxes.
--------------
The contribution and transfer of the Leases and Equipment by the Originator
to the Seller, the contribution and transfer by the Seller to the Issuer of the
Leases and the grant by the Seller to the Issuer of a security interest in the
Seller's interest in the Equipment, in each case as contemplated in Section 1,
are not subject to and will not result in any tax, fee or governmental charge
payable by the Originator to any federal, state or local government ("Transfer
Taxes"). In the event that the Seller or the Issuer receives actual notice of
any Transfer Taxes arising out of any such contribution and transfer or grant,
on written demand by the Issuer, or upon the Originator otherwise being given
notice thereof, the Originator shall pay, and otherwise indemnify and hold the
Issuer, the Seller, the Trustee and the holders of the Notes harmless, on an
after-tax basis, from and against any and all such Transfer Taxes (it being
understood that the Seller, the Issuer, the holders of the Notes and the Trustee
shall have no obligation to pay such Transfer Taxes).
2.21 Principal Executive Office.
--------------------------
The principal executive office of each of the Originator and the Servicer
is located at 0000 Xxxx Xxxx, Xxxxx, Xxxxxxx 00000.
2.22 Servicing Provisions Customary.
------------------------------
The servicing arrangements hereunder, including without limitation the
terms and conditions pursuant to which the Originator will act as Servicer and
the Servicing Fee to be paid to the Originator, are consistent with the
arrangements and customary practices of the Originator when providing comparable
services to non-affiliated entities and of other servicers in the equipment
leasing industry.
2.23 Nonconsolidation.
----------------
The Originator is and at all times since its incorporation has been
operated in such a manner that it would not be substantively consolidated with
either the Seller or the Issuer and
14
such that the separate existence of any of the Originator, the Seller or the
Issuer would not be disregarded in the event of a bankruptcy or insolvency of
the Originator or the Seller or the Issuer, and in such regard:
(a) the Originator is not involved in the day-to-day management of the
Seller or the Issuer;
(b) the Originator maintains separate corporate records and books of
account from the Seller and the Issuer and otherwise observes corporate
formalities;
(c) the financial statements and books and records of the Originator
prepared after the Issuance Date will reflect the separate existence of the
Seller and the Issuer;
(d) the Originator maintains its assets separately from the assets of the
Seller and the Issuer (including through the maintenance of a separate bank
account), the Originator's funds and assets, and records relating thereto, have
not been and are not commingled with those of the Seller and the Issuer (except
temporarily as permitted by Section 4.01(a) hereof) and the separate creditors
of the Seller and the Issuer will be entitled to be satisfied out of the
Seller's and the Issuer's respective assets prior to any value in the Seller or
the Issuer becoming available to the Seller's or the Issuer's equityholders or
the Originator's creditors;
(e) all business correspondence of the Originator and other communications
are conducted in the Originator's own name and on its own stationery; and
(f) neither the Seller nor the Issuer acts as an agent of the Originator in
any capacity and the Originator does not act as agent for the Seller or the
Issuer, but instead presents itself to the public as a corporation separate from
the Seller and the Issuer; provided that the Originator is the Servicer
--------
hereunder and under agreements similar in nature to this Agreement.
2.24 Capital Contribution Treatment.
------------------------------
The Originator will treat the contribution and transfer to the Seller of
the Leases and the Equipment as a capital contribution for financial accounting
and reporting purposes.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants as follows:
3.01 Corporate Organization and Authority.
------------------------------------
The Seller:
(a) is a limited liability company duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization,
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to
carry on its business as now conducted and to enter into and
perform its
15
obligations under this Assignment and Servicing Agreement, and
the transactions contemplated hereby including its obligations
under Section 5.05, and
(c) has duly qualified and is authorized to do business and is in
good standing as a foreign limited liability company in each
jurisdiction where the character of its properties or the
nature of its activities makes such qualification necessary.
3.02 Business and Property.
---------------------
The Prospectus accurately describes, in all material respects, the general
nature of the business of the Seller.
3.03 Ownership and Security Interest.
-------------------------------
Upon completion of each contribution and transfer described in Sections
1.01(a), 1.01(b) and 1.02(a) and the grant of the security interest described in
Section 1.02(b), (i) the Issuer will be the legal owner of the related Leases
(including all Related Interests), (ii) the Seller will have good title to each
item of related Equipment, and (iii) the Issuer will have a valid security
interest in all of the Seller's right, title and interest in and to in each item
of related Equipment.
3.04 Title to Leases and Equipment.
-----------------------------
Immediately following the transfer and contribution by the Originator to
the Seller of the Leases and the Equipment, the transfer and contribution by the
Seller to the Issuer of the Leases and the grant by the Seller to the Issuer of
the security interest in the Seller's interests in the Equipment, in each case
as contemplated in Section 1, (a) the Leases and the Equipment will be free and
clear of all Liens, except the rights of each Lessee under the related Lease,
the rights of the Seller and the Issuer hereunder and the Lien in favor of the
Trustee granted pursuant to the Indenture, and (b) there will be no delinquent
taxes or other outstanding charges affecting the Equipment which have given or
may give rise to any Liens prior to, or equal or coordinate with, the Lien of
Trustee under the Indenture.
3.05 Transactions Legal and Authorized.
---------------------------------
The contribution and transfer by the Seller of all of its right, title and
interest in and to the Leases and of the covenants, representations, warranties
and obligations of the Originator (including the Originator's Purchase
Obligation) under this Assignment and Servicing Agreement, the grant of the
security interest by the Seller to the Issuer in and to each item of Equipment
and compliance by the Seller with all of the provisions of this Assignment and
Servicing Agreement:
(a) have been duly authorized by all necessary action on the part of the
Seller, as a limited liability company, and do not require any member approval,
or approval or consent of any trustee or holders of any indebtedness or
obligations of the Seller except such as have been duly obtained;
16
(b) are within the powers of the Seller, as a limited liability company;
and
(c) are legal and will not conflict with, result in any breach in any of
the provisions of, constitute a default under, or result in the creation of any
Lien upon any property of the Seller under the provisions of, any agreement,
charter instrument, by-law or other instrument to which the Seller is a party or
by which it or its property may be bound or result in the violation of any law,
regulation, rule, order or judgment applicable to the Seller or its properties,
or any order to which the Seller or its properties is subject, of or by any
government or governmental agency or authority.
3.06 Governmental Consent.
--------------------
Except for the filing of Financing Statements in accordance with the Filing
Requirements, no consent, approval or authorization of, or filing, registration
or qualification with, any governmental authority is necessary or required on
the part of the Seller in connection with the execution and delivery of this
Assignment and Servicing Agreement, the contribution and transfer by the Seller
to the Issuer of the Leases and the grant of the security interest by the Seller
to the Issuer in the Seller's interest in the Equipment contemplated hereby.
3.07 Compliance with Law.
-------------------
The Seller:
(a) is not in violation of any laws, ordinances, governmental rules
or regulations to which it is subject;
(b) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of
its property or to the conduct of its business; and
(c) is not in violation in any material respect of any term of any
agreement, charter instrument, by-law or other instrument to
which it is a party or by which it may be bound,
which violation or failure to obtain might materially adversely
affect the Asset Pool or the business or condition (financial or
otherwise) of the Seller and its subsidiaries.
3.08 Assets and Liabilities.
----------------------
(a) Both immediately before and after any contribution and transfer by the
Seller to the Issuer of the Leases and the grant of the security interest in the
interests of the Seller in the Equipment contemplated by this Assignment and
Servicing Agreement, the present fair salable value of the Seller's assets was
or will be in excess of the amount that will be required to pay the Seller's
probable liabilities as they then exist and as they become absolute and matured;
and
17
(b) Both immediately before and after any contribution and transfer by the
Seller to the Issuer of the Leases and the grant of the security interest in the
interests of the Seller in the Equipment contemplated by this Assignment and
Servicing Agreement, the sum of the Seller's assets was or will be greater than
the sum of the Seller's debts, valuing the Seller's assets at a fair salable
value.
3.09 Fair Consideration.
------------------
The consideration received by the Seller, in exchange for the contribution
and transfer of the Leases, the grant of the security interest in the interests
of the Seller in the Equipment and the assignment and contribution of the
covenants, representations, warranties and obligations of the Originator
(including the Originator's Purchase Obligation) under this Assignment and
Servicing Agreement, is fair consideration having value equivalent to or in
excess of the value of the assets being contributed by the Seller.
3.10 Ability to Pay Debts.
--------------------
The Seller does not believe that it will incur debts beyond its ability to
pay or which would be prohibited by its charter documents or limited liability
company agreement as a result of the transactions contemplated by this
Assignment and Servicing Agreement or otherwise. The Seller's assets and cash
flow enable it to meet its present obligations in the ordinary course of
business as they become due.
3.11 Bulk Transfer Provisions.
------------------------
The contribution and transfer by the Seller to the Issuer of the Leases and
the grant by the Seller to the Issuer of the security interest in the interests
of the Seller in the Equipment pursuant to this Assignment and Servicing
Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
3.12 Transfer Taxes.
--------------
The contribution and transfer by the Seller to the Issuer of the Leases and
the grant of the security interest by the Seller to the Issuer in the Seller's
interest in the Equipment pursuant to this Assignment and Servicing Agreement
are not subject to and will not result in any Transfer Taxes. In the event that
the Issuer receives actual notice of any Transfer Taxes arising out of any such
contribution and transfer or pledge, on written demand by the Issuer, or upon
the Seller otherwise being given notice thereof, the Seller shall pay, and
otherwise indemnify and hold the Issuer, the Trustee and the holders of the
Notes harmless, on an after-tax basis, from and against any and all such
Transfer Taxes (it being understood that the Issuer, the holders of the Notes
and the Trustee shall have no obligation to pay such Transfer Taxes).
3.13 Principal Executive Office.
--------------------------
The principal executive offices of the Seller are located at 0000 Xxxx
Xxxx, Xxxxx, Xxxxxxx 00000. The Seller has no place of business in any state
other than the State of Georgia.
18
3.14 Nonconsolidation.
----------------
The Seller is and at all times since its incorporation has been operated in
such a manner that it would not be substantively consolidated with the
Originator or the Issuer and such that the separate existence of any of the
Originator, the Seller or the Issuer would not be disregarded in the event of a
bankruptcy or insolvency of the Seller or the Issuer, and in such regard:
(a) the Seller is not involved in the day-to-day management of the
Originator or the Issuer;
(b) the Seller maintains separate corporate records and books of account
from the Originator and the Issuer and otherwise observes corporate formalities;
(c) the financial statements and books and records of the Seller
prepared after the Issuance Date will reflect the separate existence of the
Originator and the Issuer;
(d) the Seller maintains its assets separately from the assets of the
Originator and the Issuer (including through the maintenance of a separate bank
account), the Seller's funds and assets, and records relating thereto, have not
been and are not commingled with those of the Originator or the Issuer (except
temporarily as permitted by Section 4.01(a) hereof) and the separate creditors
of the Originator and the Issuer will be entitled to be satisfied out of the
Originator's and the Issuer's respective assets prior to any value in the
Originator or the Issuer becoming available to the Originator's or the Issuer's
equityholders or the Seller's creditors;
(e) all business correspondence of the Seller and other communications
are conducted in the Seller's own name and on its own stationery; and
(f) neither the Originator nor the Issuer acts as an agent of the Seller
in any capacity and the Seller does not act as agent for the Originator or the
Issuer, but instead presents itself to the public as a corporation separate from
the Originator and the Issuer.
3.15 Capital Contribution Treatment.
------------------------------
The Seller will treat the transfer to the Issuer of the Leases and amounts
owed by Lessees under the Leases and of its interests (other than its ownership
interest) in the Equipment as a capital contribution for financial accounting
and reporting purposes.
SECTION 4. ADMINISTRATION OF LEASES
4.01 Servicer to Act.
---------------
(a) Notwithstanding the contribution and transfer by the Originator of
the Leases and the Equipment contemplated hereby, the Servicer, for the benefit
of the Issuer, will service and administer each Lease in accordance with the
terms thereof and of this Assignment and Servicing Agreement. The Servicer shall
take, or cause to be taken, all such actions as may be necessary or advisable to
service, administer and collect each Lease from time to time, all in accordance
with (i) customary and prudent servicing procedures for leases of a similar
type, (ii)
19
all applicable laws, rules and regulations, and (iii) without limitation as
to its obligations under the preceding clauses (i) and (ii), no less a standard
of care than that which it applies to leases it services for its own account.
The Servicer shall provide the Lessees with appropriate invoices and such other
notices as may be required to ensure that all Lease Payments, Casualty Payments
and Termination Payments on or in respect of each Lease are remitted by the
Lessees to the address specified by the Servicer. The Servicer shall deposit
such payments to the Collection Account within two Business Days of the receipt
thereof, except as otherwise provided in Section 4.01(g) hereof. Any other
amount received by the Servicer from time to time from the Originator, the
Issuer or any Lessee which is subject to the Lien of the Indenture shall be held
in trust by the Servicer, as agent for the Trustee and promptly turned over to
the Trustee or deposited into the Collection Account for application in
accordance with the provisions of the Indenture.
(b) The Servicer shall do, and shall have full power and authority to do,
subject only to the specific requirements and prohibitions of this Assignment
and Servicing Agreement, any and all things in connection with the servicing and
administration of the Leases and the interests in the Equipment which are
consistent with the manner in which it services leases and equipment
constituting part of its own portfolio and consistent with the customary
practices of servicers in the equipment leasing industry, but in performing its
duties hereunder, the Servicer will act on behalf and for the benefit of the
Issuer, the Trustee and the holders of the Notes and the Insurer, subject at all
times to the provisions of the Indenture, without regard to any relationship
which the Servicer or any Affiliate of the Servicer may otherwise have with a
Lessee. The Servicer shall at all times act in accordance with the provisions of
each Lease, and shall observe and comply with all requirements of law applicable
to it. Except as permitted by the terms of any Lease following a default
thereunder, the Servicer shall not take any action which would result in the
interference with the Lessee's right to quiet enjoyment of the Equipment subject
to the Lease during the term thereof. The Servicer shall exercise with respect
to each item of Equipment all rights and remedies it, the Issuer or the Trustee
shall have against any vendor of the Equipment, subject to the provisions of any
Lease, and shall promptly pay all amounts realized from such actions to the
Trustee for deposit in the Collection Account, in accordance with the terms of
the Indenture.
(c) Without limiting the generality of the foregoing, the Servicer agrees
to (i) invoice each Lessee monthly (except quarterly, semi-annually or annually
in the case of Leases which provide for quarterly, semi-annual or annual Lease
Payments, respectively) for all Lease Payments required to be paid by such
Lessee in such manner and to the same extent as the Servicer does with respect
to leases held for its own account, (ii) maintain with respect to each Lease and
each item of Equipment, and with respect to each payment by each Lessee and
compliance by each Lessee with the provisions of each Lease, complete and
accurate records in the same form and to the same extent as the Servicer does
with respect to leases and equipment held for its own account (which records
shall be at least as complete and accurate as those maintained by the Servicer
as of the date of this Assignment and Servicing Agreement), and (iii) from time
to time execute, deliver and file (or cause the same to be done), and the
Servicer is hereby authorized and empowered to execute, deliver, and file on
behalf of the Originator, the Seller, the Issuer and the Trustee, any and all
tax returns with respect to sales, use, personal property and other taxes (other
than corporate income tax returns) and any and all reports or licensing
applications required to be filed in any jurisdiction with respect to any Lease
or any
20
item of Equipment and, except as provided in the last sentence of this Section
4.01(c), any Financing Statements and assignments of Financing Statements and
continuation statements as may from time to time be necessary because of Lease
substitutions, equipment replacements in accordance with the provisions of any
Lease or otherwise so that the transfer of the Leases and Equipment from the
Originator to the Seller, the transfer of the Leases from the Seller to the
Issuer, the security interest granted by the Seller to the Issuer in the
Equipment and the security interest granted by the Issuer pursuant to the
Indenture in favor of the Trustee in each of the Leases and the Issuer's
interest in the Equipment, at all times will be perfected by such filings with
the appropriate Uniform Commercial Code filing offices. The Originator, the
Seller, the Issuer and the Servicer agree to file Financing Statements on Form
UCC-1 to perfect the ownership interest of the Issuer and the security interest
of the Trustee in the Leases, the ownership interest of the Seller in the
Equipment, the security interest in favor of the Issuer in the Equipment and the
security interest of the Trustee in the Issuer's interest in the Equipment. The
parties acknowledge that the Originator has not filed, and it is not
contemplated that the Originator, the Servicer, the Seller, the Issuer or any
other party will file, Financing Statements in order to perfect or to continue
in effect any security interest in any item of Equipment securing the
obligations of the Lessee under the Lease relating to such Equipment.
(d) The Servicer will maintain, or cause to be maintained, with respect to
the Leases and the Equipment casualty and liability insurance in amounts at
least as great as those described in Section 2.04(f). Each such casualty and
liability policy (i) if maintained by the Servicer, shall name the Issuer and
Trustee as loss payees or additional insureds and (ii) if maintained by the
Lessee, shall name the Servicer or the Trustee as loss payee and additional
insured; provided that the Servicer shall cause all such policies to name the
--------
Trustee and the Issuer as loss payees and additional insureds upon the written
request of the Insurer if (A) the Originator is no longer the Servicer, (B) an
Event of Default shall have occurred and be continuing or (C) a Servicer Event
of Default shall have occurred and be continuing.
(e) On or prior to the Issuance Date, the Servicer will file the Required
Financing Statements and thereafter will file such additional Financing
Statements and continuation statements and assignments with respect to the
Leases and the Equipment as may be necessary because of equipment replacements
in accordance with the provisions of any Lease, purchases of Additional Leases
in accordance with Section 11 and Lease substitutions pursuant to Section 11
hereof, any revision to the Uniform Commercial Code, or otherwise so that (i)
the ownership interest and security interest contemplated by this Agreement in
favor of the Issuer, and the security interest contemplated by the Indenture in
favor of the Trustee, in the Leases will be perfected by such filings with the
appropriate Uniform Commercial Code filing offices and (ii) the ownership
interest contemplated by this Agreement in favor of the Seller, and the security
interest contemplated by this Agreement in favor of the Issuer and by the
Indenture in favor of the Trustee, in the Equipment, will be perfected by such
filings with the appropriate Uniform Commercial Code filing offices.
(f) The Servicer shall pay Excess Copy Charges and Maintenance Charges, if
any, owing to IKON Office Solutions, Inc. in a timely fashion.
(g) In the event of a downgrading of the long term debt rating assigned by
Xxxxx'x or S&P to IOS Capital below "Baa3" or below "BBB-", respectively, the
Insurer may,
21
at its option, require the Servicer to establish and maintain, within 30 days of
receipt of such notice, and to continue to establish and maintain in accordance
with the terms hereof, an Eligible Account, entitled "IKON Receivables, LLC
Series 2001-1 Lockbox Account" (the "Lockbox Account"), in the name of the
Trustee for the benefit of the Noteholders and the Insurer. The Servicer (i)
shall continue to be afforded adequate access to the Loxbox Account to perform
its duties hereunder and (ii) shall be authorized to direct the transfer of
funds to the Collection Account in accordance with the terms of Section 4.01(a)
hereof. Within 45 days of the receipt of notice required by the Section 4.01(g)
from the Insurer, the Servicer shall have instructed in writing each Lessee to
remit their respective Lease Payments to the address of the Loxbox Account. In
addition, the Servicer shall send such further notices and take such further
actions as reasonably requested by the Insurer or as reasonably necessary to
cause Lessees to comply with such instructions and remit their respective Lease
Payments to the Lockbox Account.
4.02 Lease Amendments and Modifications.
----------------------------------
In performing its obligations hereunder, the Servicer may, acting in the
name of the Issuer and without the necessity of obtaining the prior consent of
the Issuer, the Insurer or the Trustee, enter into and grant modifications,
waivers and amendments to the terms of any Lease except for modifications,
waivers or amendments that (a) are inconsistent with the servicing standards set
forth in Section 4.01 above, (b) would reduce the amount or extend the time for
payment of any Lease Payment, Casualty Payment or Termination Payment to be made
under a Lease (other than to permit termination of a Lease which does not
otherwise provide for termination by requiring the payment, in lieu of all
future Lease Payments with respect to the Lease or Equipment subject thereto, an
amount which equals or exceeds the Lease Purchase Amount for such Lease as of
such date) or the Lessee's absolute and unconditional obligation to make payment
of the same, (c) would reduce or adversely affect the Lessee's obligation to
maintain, service, insure and care for the Equipment or would permit the
alteration of any item of Equipment in any way which could adversely affect its
present or future value or (d) otherwise could adversely affect the interests of
any of the Seller, the Issuer, the Trustee, the Insurer or the holders of the
Notes.
In addition, following the transfer of any Lease to the Issuer in
accordance herewith, the Servicer may make adjustments to such Lease which
modify one or more terms of such Lease, such as payment amount or payment date.
Such administrative adjustments may result in a re-booking of such Lease and the
assignment of a new Lease number, but will not be considered to be a
substitution or prepayment of such Lease. Except to the extent the Originator
substitutes a Substitute Lease therefor in accordance with Section 11 hereof,
the Servicer may permit such adjustments so long as the following conditions
precedent have been satisfied:
(i) after giving effect to such adjustment and any additions and
substitutions pursuant to Section 11, the final payment on such Lease must be on
or prior to April 2007;
(ii) after giving effect to such adjustments and any additions and
substitutions pursuant to Section 11 the aggregate amount of Lease Payments
through the term of the Leases (including the Substitute Leases and the
Additional Leases) will not be materially less
22
than the aggregate scheduled Lease Payments of the Leases prior to such
adjustment, substitution or addition;
(iii) after giving effect to such adjustments, additions and
substitutions pursuant to Section 11, the Discounted Present Value of the
Performing Leases must not be less than the Discounted Present Value of the
Performing Leases prior to such adjustment, addition and substitution; and
(iv) after giving effect to such adjustments, additions, and
substitutions pursuant to Section 11, the weighted average remaining term of the
Performing Leases must not be greater than the weighted average remaining term
of the Performing Leases prior to such adjustment, addition, and substitution.
4.03 Non-Performing Leases.
---------------------
(a) Upon receipt of notice from the Issuer, the Trustee or any other
Person, or if the Servicer otherwise learns that any Lease is a Non-Performing
Lease, the Servicer will take such action as is appropriate, consistent with the
Servicer's administration of leases in its own portfolio and consistent with the
customary practices of servicers in the office equipment leasing industry,
including such action as may be necessary to cause, or attempt to cause, the
Lessee thereunder to cure such non-performance (if the same may be cured) or to
terminate or attempt to terminate such Lease and to recover, or attempt to
recover, all damages resulting from such default.
(b) The Servicer will use its best efforts to sell or lease any Equipment
that is subject to a Non-Performing Lease in a timely manner and upon the most
favorable terms and conditions available at the time. In the event of an Early
Lease Termination, any Substitute Leases in respect thereof must have a
Discounted Present Value equal to or greater than that of the Early Termination
Lease, monthly payments at least equal to those of the Early Termination Lease
through the remaining term of such Early Termination Lease and a remaining term
less than or equal to that of the Early Termination Lease.
(c) In the event that the Servicer is required to sell or lease any item of
Equipment pursuant to the provisions of this Section 4.03 at a time when the
Servicer has other similar items of equipment available to it, the Servicer will
not favor any such other item in its remarketing efforts.
(d) All amounts realized by the Servicer in the performance of its duties
under this Section 4.03 with respect to any Lease remaining subject to the Lien
of the Indenture and related Equipment (net of the Servicer's actual
out-of-pocket expenses reasonably incurred in such realization), including
amounts received by the Servicer pursuant to the provisions of Section 5.05,
shall be held in trust by the Servicer, as agent for the Trustee and deposited
into the Collection Account for application in accordance with the provisions of
the Indenture; provided that, to the extent that (i) the Servicer has made any
--------
advances pursuant to Section 5.01 hereof with respect to any Lease which
thereafter became a Non-Performing Lease, and (ii) the Servicer has not
otherwise been fully reimbursed for such advances or payments, the Servicer
shall reimburse itself for such advances or payments from any amounts recovered
with respect to such
23
Non-Performing Lease before depositing any such amounts pursuant to this
Section 4.03(d). Any amounts properly retained by the Servicer pursuant to this
Section are, without further action by the Trustee, released from the Lien of
the Indenture.
4.04 Costs of Servicing; Servicing Fee; Administrative Expenses.
----------------------------------------------------------
(a) All costs of servicing each Lease in the manner required by this
Section 4 shall be borne by the Servicer, but the Servicer shall be entitled to
retain, out of any amounts actually recovered by the Servicer in the performance
of its obligations under Section 4.03 hereof with respect to any Lease or the
interests in the Equipment subject thereto, the Servicer's actual out-of-pocket
expenses reasonably incurred in the course of such performance with respect to
such Lease or the interests in the Equipment. (For all purposes of this Section
4 the Servicer's "out-of-pocket expenses" means only those expenses incurred to
third parties (e.g., reasonable fees of outside counsel in a collection suit)
and not salaries, operating costs, overtime wages and other such "overhead"
costs or expenses of the Servicer.) In addition, the Servicer shall be entitled
to receive on each Payment Date following the Issuance Date a servicing fee with
respect to the Notes (the "Servicing Fee"). Any amounts properly retained by the
Servicer pursuant to this Section are, without further action by the Trustee,
released from the Lien of the Indenture.
(b) The amount of the Servicing Fee which the Servicer shall be entitled
to receive on each Payment Date following the original issuance of the Notes
shall be determined by multiplying one-twelfth of 0.75% by the lesser of (i) the
Discounted Present Value of the Performing Leases or (ii) the Outstanding
Principal Amount of the Notes, in each case at the Determination Date for such
Payment Date before application of payments with respect thereto.
(c) The Servicer agrees to pay, out of the Servicing Fee, all Trustee
Fees and expenses (including reasonable legal fees and expenses) of the Trustee
in connection with the Notes (including the expenses relating to the preparation
and delivery of reports to Noteholders) and all fees of accountants in
connection with the Notes.
4.05 Other Transactions.
------------------
Nothing in this Assignment and Servicing Agreement shall preclude the
Originator or the Servicer from entering into other leases or other financial
transactions with any Lessee or selling or discounting any such lease with any
Person.
SECTION 5. SERVICER ADVANCES AND ORIGINATOR'S AND SELLER'S SUPPORT
5.01 Late Lease Payments.
-------------------
On each Determination Date, the Servicer may, but will not be required to,
advance and remit to the Trustee for deposit in the Collection Account, in such
manner as will ensure that the Trustee will have immediately available funds on
account thereof by 11:00 A.M. New York City time on the second Business Day
prior to the next succeeding Payment Date, an amount (a "Servicer Advance")
equal to any Lease Payment due during the prior Due Period but unpaid prior to
such Determination Date with respect to any Lease. In consideration of each
24
Servicer Advance the Servicer will be entitled to retain any late payment fees
recovered from the Lessee with respect to any Lease Payment covered by a
Servicer Advance. In addition, the Servicer will be reimbursed for Servicer
Advances from Available Funds in the Collection Account in accordance with the
Indenture on the following Payment Date. Any amounts properly retained by the
Servicer pursuant to this Section are, without further action by the Trustee,
released from the Lien of the Indenture.
5.02 Early Termination Leases.
------------------------
Following the Determination Date as of which any Lease first becomes an
Early Termination Lease the Originator may, but shall have no obligation to,
either (a) substitute one or more Eligible Leases and the Equipment subject
thereto for such Lease and the Equipment subject thereto pursuant to Section 11
hereof (if the Originator is then entitled to substitute Leases and Equipment in
accordance with the provisions of Section 11.01 hereof) on or before the second
Business Day prior to the next succeeding Payment Date, (b) purchase from the
Issuer such Lease and the Issuer's interest in the related Equipment by
remitting to the Trustee an amount equal to the Lease Purchase Amount in such
manner as will ensure that the Trustee will have immediately available funds
therefor by 11:00 A.M. New York City time on the second Business Day prior to
the next succeeding Payment Date or (c) transfer to the Issuer one or more
Additional Leases in consideration of the proceeds thereof in accordance with
Section 11 hereof. Unless the Originator takes one of the actions set forth in
the prior sentence, the Servicer will not permit a voluntary termination of a
Lease prior to its stated maturity unless it receives a payment in connection
with such termination equal to at least the Lease Purchase Amount. Any Early
Termination Lease and the Issuer's interest in the Equipment subject thereto
which is purchased, or for which Additional Leases have been acquired or
Substitute Leases transferred, pursuant to this Section 5.02 shall nevertheless
remain subject to the Lien of the Indenture until such time as an Additional
Lease or Additional Leases have been acquired or Substitute Lease or Substitute
Leases have been transferred in accordance with the provisions of Section 11
hereof or the Lease Purchase Amount has been paid.
5.03 Indemnification.
---------------
Subject to the provisions of Section 7.02, the Originator, in its capacity
as Servicer, agrees to indemnify and hold harmless the Issuer, the Trustee (its
officers, directors, employees and agents) and each holder of the Notes (each an
"Indemnified Party") against any and all liabilities, losses, damages,
penalties, costs and expenses (including costs of defense and legal fees and
expenses) which may be incurred or suffered by such Indemnified Party (except to
the extent arising out of the gross negligence or willful misconduct on the part
of the Indemnified Party) as a result of claims, actions, suits or judgments
asserted or imposed against it and arising out of the transactions contemplated
hereby or by the Indenture, including, without limitation, any claims resulting
from any use, operation, maintenance, repair, storage or transportation of any
item of Equipment, whether or not in the Servicer's possession or under its
control pursuant to this Assignment and Servicing Agreement, and any tort claims
and any fines or penalties arising from any violation of the laws or regulations
of the United States or any state or local government or governmental authority;
provided that the foregoing indemnity shall in no way be deemed to impose on the
Originator any obligation, other than to the extent specifically set forth in
this Agreement or the Indenture, to make any payment with respect to any Lease
or
25
Equipment or principal or interest on the Notes, to pay or reimburse the Insurer
in respect of any amount paid by the Insurer on or in respect of the Notes or to
reimburse the Issuer for any payments on account of the Notes. This Section 5.03
shall bind any successor Servicer hereunder, except that no successor servicer
shall be liable for any such indemnification obligations which arose before it
became successor servicer. Nothing in this indemnification shall be construed as
a guaranty of any Lease or any Equipment by the Originator. The obligations of
the Servicer hereunder shall survive the satisfaction and discharge of the
Indenture or the earlier resignation or removal of the Trustee thereunder.
5.04 Purchases; Other Payments.
-------------------------
(a) In the event that (i) any of the representations or warranties made
by the Originator in Sections 2.04, 2.05(b) and 2.08 hereof with respect to any
of the Leases or the Equipment subject thereto proves at any time to have been
inaccurate in any material respect as of the Issuance Date or related transfer
date, as the case may be, or (ii) any Lease shall be terminated in whole or in
part by a Lessee, or any amounts due with respect to any Lease shall be reduced
or impaired, as a result of (x) any action or inaction by the Originator (other
than any such action or inaction of the Originator, when acting as Servicer, in
connection with the enforcement of any Lease in a manner consistent with the
provisions of this Assignment and Servicing Agreement) or (y) any claim by any
Lessee against the Originator and, in any such case, the event or condition
causing such inaccuracy, termination, reduction, impairment or claim shall not
have been cured or corrected within 30 days after the earlier of the date on
which the Originator is given notice thereof by the Issuer or the Trustee or the
date on which the Originator otherwise first has notice thereof, and the
Originator shall not have substituted one or more Substitute Leases therefor in
accordance with Section 11.01(a) hereof, the Originator will purchase such Lease
and related Equipment interests by paying to the Servicer for deposit into the
Collection Account, not later than the second Business Day after the
Determination Date next following the expiration of such 30-day period with
respect to the events referenced in Section 5.04(a)(i) and (ii), an amount equal
to the Lease Purchase Amount, and simultaneously with such purchase, the
Originator shall reimburse the Servicer for all amounts, if any, theretofore
advanced by the Servicer pursuant to Section 5.01 with respect to such Lease.
Without limiting the generality of the foregoing, it is agreed and understood
that for purposes of this Section 5.04, any inaccuracy in any representation or
warranty with respect to (i) the priority of the Lien of the Indenture with
respect to any Lease or (ii) the amount (if less than represented) of the Lease
Payments, Casualty Payments or Termination Payments under any Lease shall be
deemed to be material.
(b) By the Issuance Date, the Originator and the Seller agree to obtain
and provide to the Trustee UCC searches against each of them from the
appropriate filing offices in Georgia confirming the absence of any UCC filings
(other than those in the process of being released pursuant to releases
delivered on the Issuance Date) against either of them with respect to the
Leases (including the right to receive all payments due or to become due
thereunder) and the Equipment, other than those naming the Seller or the Issuer
as the owner of the Leases or the Trustee as secured party. In the event the
Originator and Seller fail to provide any such searches required by the
preceding sentence of this Section 5.04(b) within the required time period or
any search reveals the existence of any conflicting Liens (which are not removed
within 30 days of receipt of such search), the Originator shall be required to
purchase not later than the third
26
Business Day after the Determination Date following the expiration of the time
period during which such search was to be obtained or such Lien released, as the
case may be, any Lease as to which such searches are not provided or with
respect to which conflicting Liens with respect thereto or any related Equipment
are found to exist at the Lease Purchase Amount for such Lease.
(c) The Originator's obligations under this Section 5.04 are the full
recourse obligations of the Originator and shall in no way be limited or
discharged by the application of any funds constituting part of the Asset Pool.
(d) In connection with any purchase of Leases and Equipment interests
pursuant to this Section 5.04, the Originator may reacquire from the Seller the
ownership interest of the Seller in such Equipment and such Leases and Equipment
shall be released from the Lien of the Indenture.
5.05 Seller's Obligation in Respect of Non-Performing Leases.
-------------------------------------------------------
In the event that any Lease shall become a Non-Performing Lease, and the
Originator shall not have substituted one or more Substitute Leases therefor in
accordance with the provisions of Section 11, the Seller shall pay to the Issuer
in the manner provided in the next sentence an amount equal to the lesser of (i)
the amount of all recoveries by the Seller in respect of the sale, re-lease or
other disposition of any item of Equipment subject to such Non-Performing Lease
and (ii) the Discounted Present Value of such Non-Performing Lease (the
"Recourse Amount"). The amount of any such recoveries, up to the Recourse
Amount, shall be deposited into the Collection Account within two Business Days
of the receipt thereof by the Seller or the Servicer. The Seller's obligations
under this Section 5.05 are secured by a security interest from the Seller to
the Issuer in all right, title and interest of the Seller in and to the
Equipment subject to the Leases (whether or not constituting Non-Performing
Leases).
5.06 Payment Advices.
---------------
Each payment to the Servicer pursuant to any of the provisions of this
Assignment and Servicing Agreement shall be accompanied by written advice
containing sufficient information to identify the Lease and/or Equipment to
which such payment relates, the Section of this Assignment and Servicing
Agreement pursuant to which such payment is made, and the proper application
pursuant to the provisions of this Assignment and Servicing Agreement or the
Indenture of the amounts being paid.
SECTION 6. INFORMATION TO BE PROVIDED
6.01 Monthly Status Reports; Servicing Reports.
-----------------------------------------
(a) Within five Business Days following each Payment Date, the Servicer
will send to the Issuer, the Trustee and the Insurer a written report, signed by
one of the Servicer's financial officers, (i) identifying each Lease with
respect to which any Lease Payment was 90 or more days overdue as of the end of
the immediately preceding Due Period, the Discounted Present Value of such Lease
as of such Payment Date, the amount advanced by the Servicer with respect to
such Lease pursuant to Section 5.01 hereof since the Servicer's previous monthly
27
report (or, in the case of the first such report, since the Cut-Off Date), (ii)
identifying each Lease with respect to which any Lease Payment was 60 or more
days overdue as of the end of the immediately preceding Due Period, the
Discounted Present Value of such Lease as of such Payment Date, and the amount
advanced by the Servicer with respect to such Lease pursuant to Section 5.01
hereof since the Servicer's previous monthly report (or, in the case of the
first such report, since the Issuance Date), (iii) identifying each Lease which
became a Non-Performing Lease as of the preceding Determination Date and
specifying the Discounted Present Value of such Lease as of such Determination
Date (or, in the case of the first such report, subsequent to the Cut-Off Date)
and the aggregate Discounted Present Value of all such Non-Performing Leases,
and (iv) indicating the aggregate amount recovered by the Servicer subsequent to
the preceding Payment Date (or, in the case of the first Payment Date,
subsequent to the Cut-Off Date) and on or prior to such Payment Date with
respect to Lease Delinquency Payments and Lease Payments in respect of
Non-Performing Leases previously made by the Servicer (and the specific amounts
so recovered with respect to any Non-Performing Lease) as of the related
Determination Date. Each such report shall also describe generally what action
or actions the Servicer is then taking or proposes to take to recover from the
appropriate Lessees any amounts previously paid by the Servicer to the Trustee
pursuant to Section 5.01 hereof.
(b) On the Determination Date, the Servicer shall deliver to the Trustee,
each Rating Agency, the Counterparty and the Insurer a servicing report signed
by an Authorized Officer of the Servicer (the "Servicing Report") duly completed
and dated, in substantially the form of Exhibit B hereto.
(c) The Servicing Report shall include, among other items, the total amount
of all Lease Payments, Casualty Payments, Retainable Deposits, Termination
Payments, Lease Purchase Amounts, recoveries related to Non-Performing Leases
and other payments received by the Servicer and deposited in the Collection
Account prior to the related Determination Date and on or subsequent to the
Determination Date preceding such Determination Date (or, in the case of the
first Determination Date, on or subsequent to the Cut-Off Date). Such report
shall indicate the amount of all Lease Payments received by the Servicer and
deposited in the Collection Account which are for any Due Period other than the
Due Period for such Determination Date and shall identify each Lease with
respect to which a Casualty Payment, Retainable Deposit, Termination Payment or
Lease Purchase Amount was made during such time period. Such report shall also
indicate (i) the aggregate amount paid by the Servicer on or subsequent to the
most recent Determination Date pursuant to Section 5.01 hereof, and (ii) the
aggregate amount reimbursed to the Servicer prior to the most recent
Determination Date and on or subsequent to the Determination Date preceding such
Determination Date (or, in the case of the first Determination Date, on or
subsequent to the Cut-Off Date) for any Servicer Advances made by the Servicer
pursuant to Section 5.01 hereof. Such report shall also include the amount of
the distribution with respect to each class of Notes to be made on the related
Payment Date, the amount of such distribution allocable to principal, the amount
of such distribution allocable to interest, the Asset Pool balance as of the
close of business on the last day of the related Due Period, the aggregate
outstanding principal balance and the Pool Factor for each class of Notes after
giving effect to all distributions allocable to principal on such Payment Date,
the amounts paid to or retained by the Servicer, if any, with respect to the
related Due Period, and the amount of the aggregate Purchase Amounts in respect
of Leases that have been reacquired, if any, for such Due Period. The Servicer
hereby represents and warrants that such calculations will be
28
correct and accurate, and the Servicer shall be fully responsible for, and shall
reimburse and indemnify each Indemnified Party for, any loss resulting from such
Indemnified Party's reliance on any such calculations which are not correct.
(d) The Servicer shall deliver to the Issuer and the Trustee, with a copy
to each Rating Agency and the Insurer, within 135 days following the end of each
fiscal year of the Servicer, beginning with the Servicer's fiscal year ending
September 30, 2001, an Officers' Certificate stating that the Servicer has
fulfilled its obligations under the Assignment and Servicing Agreement in all
material respects throughout the preceding twelve (12) months (or, in the case
of the first such certificate, the period from the Issuance Date) or if there
has been any material default under the Assignment and Servicing Agreement or
the Indenture, describing such default.
(e) The Servicer shall deliver to the Issuer and the Trustee, with a copy
to each Rating Agency and the Insurer, within 120 days following the end of each
fiscal year of the Servicer, beginning with the Servicer's fiscal year ending
September 30, 2001, a report (the "Supplementary Report") signed by an
Authorized Officer on behalf of the Servicer and dated as of the last day of
such fiscal year, stating that (a) a review of the activities of the Servicer
and the Servicer's performance under the Assignment and Servicing Agreement and
the Indenture for the previous 12-month period (or, in the case of the first
such report, the period from the Issuance Date) has been made under such
officer's supervision and (b) nothing has come to such officer's attention to
indicate that a Servicer Event of Default has occurred, or, if any Servicer
Event of Default has occurred and is continuing, specifying each such event
known to the officer, the nature and status thereof and the steps necessary to
remedy such event.
(f) If any funds are to be withdrawn from the Collection Account other than
as provided in Section 3.03(b) of the Indenture, the Servicer shall submit with
the related Servicing Report the certificate required by Section 3.03(d) of the
Indenture.
(g) Within the prescribed period of time for tax reporting purposes after
the end of each calendar year, the Servicer on behalf of the Issuer, will
provide to the Noteholders a statement containing the distribution amount with
respect to each class of Notes and the distribution amount allocable to interest
for that calendar year and any other information required by applicable tax
laws, for the purpose of the Noteholders' preparation of federal income tax
returns.
(h) The Servicer shall deliver to the Trustee and the Insurer and each of
the Rating Agencies, within three days after obtaining knowledge of the
occurrence thereof, written notice of any event which with the giving of notice
or the lapse of time would become an Event of Default under any of clauses (c),
(d), (e) or (f) of Section 7.01 of the Indenture, its status and what action the
Issuer or the Servicer is taking or proposes to take with respect thereto.
6.02 Annual Independent Public Accountant's Report.
---------------------------------------------
The Servicer shall cause a firm of independent public accountants (who may
also render other services to the Servicer, the Seller or the Originator) to
deliver to the Trustee, with a copy to the Insurer and each Rating Agency,
within 135 days following the end of each fiscal
29
year of the Servicer, beginning with the Servicer's fiscal year ending September
30, 2001, a written statement to the effect that such firm has (a) obtained from
the Servicer a copy of the monthly status report pursuant to Section 6.01 for
each of three months during the previous calendar year, such three months to be
selected at random by such firm of independent public accountants; (b) compared
the information contained in such monthly status report and in the monthly
summaries prepared by the Servicer in support of such monthly status report to
the computer printouts and accounts prepared by the Servicer and supporting such
reports; and (c) selected, at random, 100 Leases included in the Asset Pool and
compared the activity in the files maintained by the Servicer for such Leases to
the activity as reported for those Leases to the monthly summaries prepared by
the Servicer and supporting the monthly status report, and that, on the basis of
such examination and comparison, such firm is of the opinion that the Servicer
has prepared such monthly status report and summaries in agreement with the
computer printouts, accounts and individual Lease files, except in each case for
(x) such exceptions as such firm shall believe to be immaterial and (y) such
other exceptions as shall be set forth in such statement. In the event such firm
of independent public accountants requires the Trustee to agree to the
procedures performed by such firm, the Servicer shall direct the Trustee in
writing to so agree; it being understood and agreed that the Trustee shall
deliver such letter of agreement in conclusive reliance upon the direction of
the Servicer, and the Trustee makes no independent inquiry or investigation as
to, and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
SECTION 7. THE SERVICER
7.01 Merger or Consolidation of the Servicer.
---------------------------------------
Except in the event of merger or consolidation as permitted by this Section
7.01, so long as the Notes remain outstanding, the Servicer will keep in full
force and effect its existence, rights and franchise as a corporation under the
laws of its jurisdiction of incorporation and will preserve its qualification to
do business as a foreign corporation in each jurisdiction in which such
qualification is necessary to protect the validity and enforceability of any of
the Leases or to permit performance of the Servicer's duties under this
Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Servicer shall not merge or
consolidate with any other Person unless (i) the entity surviving such merger or
consolidation is a corporation organized under the laws of the United States or
any jurisdiction thereof and (ii) the surviving entity, if not the Servicer,
shall execute and deliver to the Issuer, the Servicer and the Trustee, in form
and substance satisfactory to each of them, (a) an instrument expressly assuming
all of the obligations of the Servicer hereunder and (b) an opinion of counsel
to the effect that (i) such Person is a corporation of the type described in the
preceding clause (i); (ii) such Person has effectively assumed the obligations
of the Servicer hereunder, (iii) all conditions precedent to such action have
been satisfied and (iv) all required Financing Statements have been filed. Upon
the occurrence of any such merger or consolidation, the Servicer shall give
notice promptly to the Rating Agencies.
30
7.02 Limitation on Liability of the Servicer and Others.
--------------------------------------------------
Neither the Servicer nor any of the directors, officers, employees or
agents of the Servicer shall incur any liability to the Issuer, the Trustee, the
Insurer or the holders of the Notes for any action taken or not taken in good
faith pursuant to the terms of this Assignment and Servicing Agreement with
respect to any Lease (including any Non-Performing Lease) or the Equipment
subject thereto; provided, however, that this provision shall not protect the
-------- -------
Servicer or any such person against any breach of warranties, representations or
covenants made by it herein or in any certificate delivered in conjunction with
the purchase of the Notes or for any liability which would otherwise be imposed
for any action or inaction resulting from willful misconduct or bad faith or for
negligence in the performance or nonperformance of its duties hereunder.
7.03 Servicer Not to Resign or Be Removed.
------------------------------------
The Servicer shall not resign from the servicing obligations and duties
hereby imposed on it except upon determination that such duties hereunder are no
longer permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced by an opinion of independent
counsel to the Servicer, in form and substance satisfactory to the Insurer (so
long as the Policy is outstanding) or the Trustee (if the Policy is not
outstanding), to such effect delivered to the Trustee and the Insurer with a
copy to each Rating Agency.
Except as provided in Section 10.02 hereof, the Servicer shall not be
removed or be replaced as Servicer with respect to any Lease or any of the
Equipment.
No resignation or removal of the Servicer shall in any event (i) become
effective until the Trustee or a successor servicer shall have assumed the
Servicer's servicing responsibilities and obligations in accordance with Section
10.02 hereof, or (ii) affect the Originator's obligations pursuant to Section 5
hereof.
7.04 Financial and Business Information.
----------------------------------
The Servicer will deliver to the Issuer, the Trustee, the Insurer and each
Rating Agency and upon written request, to any holder of outstanding Notes
evidencing not less than 25% of the Outstanding Principal Amount of the Notes
(and, upon the request of any holder of Outstanding Notes evidencing not less
than 25% of the Outstanding Principal Amount of the Notes, to any prospective
transferee of any Notes):
(a) Quarterly Statements - within 45 days after the end of each of the
--------------------
first three quarterly fiscal periods in each fiscal year of the Servicer, a copy
of:
(1) a consolidated balance sheet of the Servicer (or its parent) and its
consolidated subsidiaries at the end of such quarter, and
(2) consolidated statements of income, retained earnings and cash flow of
the Servicer (or its parent) and its consolidated subsidiaries for that
quarter and for the portion of the fiscal year ending with such quarter,
31
accompanied by a certificate signed by a principal financial officer of the
Servicer stating that such financial statements present fairly the financial
condition of the Servicer (or its parent) and its consolidated subsidiaries and
have been prepared in accordance with generally accepted accounting principles
consistently applied;
(b) Annual Statements - within 135 days after the end of each fiscal year
-----------------
of the Servicer, a copy of:
(1) a consolidated balance sheet of the Servicer (or its parent) and its
consolidated subsidiaries, at the end of that year, and
(2) consolidated statements of income, retained earnings and cash flow of
the Servicer (or its parent) and its consolidated subsidiaries for that year,
setting forth in each case in comparative form the figures for the previous
fiscal year,
all in reasonable detail and accompanied by an opinion of a firm of independent
certified public accountants of recognized national standing stating that such
financial statements present fairly the financial condition of the Servicer (or
its parent) and its consolidated subsidiaries and have been prepared in
accordance with generally accepted accounting principles consistently applied
(except for changes in application in which such accountants concur and
footnote), and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances;
(c) Notice of Servicer Event of Default - immediately upon the Servicer's
-----------------------------------
becoming aware of the existence of any condition or event which constitutes a
Servicer Event of Default, a written notice, by certified mail return receipt
requested, hand delivery or overnight courier, describing its nature and period
of existence and what action the Servicer is taking or proposes to take with
respect thereto;
(d) SEC and Other Reports - promptly upon their becoming available, one
---------------------
copy of each report (including the Servicer's annual report to shareholders and
reports on Form 8-K, 10-K, and 10-Q), proxy statement, registration statement,
prospectus and notice filed with or delivered to any securities exchange, the
Securities and Exchange Commission or any successor agencies; and
(e) Report on Proceedings - promptly upon the Servicer becoming aware of
---------------------
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or conditions (financial
or otherwise) of the Servicer, a written notice specifying the nature of such
investigation or proceeding and what action the Servicer is taking or proposes
to take with respect thereto and evaluating its merits.
32
7.05 Officers' Certificates.
----------------------
With each set of financial statements delivered pursuant to Section 7.04,
the Servicer will deliver an Officers' Certificate stating (i) that the officers
signing such Officers' Certificate have reviewed the relevant terms of this
Assignment and Servicing Agreement and have made, or caused to be made under
such officers' supervision, a review of the activities of the Servicer during
the period covered by the statements then being furnished, (ii) that the review
has not disclosed the existence of any Servicer Event of Default or, if a
Servicer Event of Default exists, describing its nature and what action the
Servicer has taken and is taking with respect thereto, and (iii) that on the
basis of such review the officers signing such certificate are of the opinion
that during such period the Servicer has serviced the Leases in compliance with
the procedures hereof except as described in such certificate.
7.06 Inspection.
----------
The Servicer will permit, on reasonable prior notice, the representatives
of the Issuer, the Trustee, the Insurer (so long as the Policy is outstanding)
and, if the Policy is no longer outstanding, the holder of any Notes evidencing
not less than 25% of the Outstanding Principal Amount of the Notes to inspect
the servicing operations and discuss the servicing operations of the Servicer
with any of its officers or employees all at such reasonable times and as often
as may be reasonably requested for the purpose of reviewing the Servicer or the
Servicer's performance of its duties and obligations hereunder. Any expense
incident to the exercise by the Issuer, the Trustee, the Insurer, or any holder
of the Notes during the continuance of any Servicer Event of Default, or any
event or condition which with the giving of notice or the lapse of time or both
would become a Servicer Event of Default, of any right under this Section 7.06
shall be borne by the Servicer.
7.07 Servicer Records.
----------------
The Servicer will indicate in its records that it is servicing and
administering each Lease in its capacity as Servicer hereunder, and to the
extent it is in possession of any original Lease agreement, will hold such
Lease, subject to the provisions of the Indenture as custodian for the Trustee.
SECTION 8. THE ORIGINATOR
8.01 Merger or Consolidation of the Originator.
-----------------------------------------
Except in the event of merger or consolidation as permitted by this Section
8.01, so long as the Notes remain outstanding, the Originator will keep in full
force and effect its existence, rights and franchise as a corporation under the
laws of its jurisdiction of incorporation and will preserve its qualification to
do business as a foreign corporation in each jurisdiction in which such
qualification is necessary to protect the validity and enforceability of any of
the Leases or to permit performance of the Originator's duties under this
Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Originator shall not merge or
consolidate with any other Person unless (i) the entity surviving such merger or
consolidation is
33
a corporation organized under the laws of the United States or any jurisdiction
thereof and (ii) the surviving entity, if not the Originator, shall execute and
deliver to the Seller, the Issuer, the Servicer, the Trustee and the Insurer (so
long as the Policy is outstanding), in form and substance satisfactory to each
of them, (a) an instrument expressly assuming all of the obligations of the
Originator hereunder and (b) an Opinion of Counsel to the effect that such
Person is a corporation of the type described in the preceding clause (i) and
has effectively assumed the obligations of the Originator hereunder.
8.02 Control of Seller.
-----------------
So long as the Notes remain outstanding, the Originator will not (i) sell,
pledge or otherwise transfer any membership interest in the Seller held by the
Originator or any capital stock of IKON Receivables Funding Inc. (the manager of
the Seller and the Issuer) held by the Originator or (ii) vote such membership
interests in the Seller in favor of any amendment to or alteration of the
certificate of formation or limited liability company agreement of the Seller or
any such capital stock of IKON Receivables Funding Inc. in favor of any
amendment to or alteration of the certificate of incorporation or by-laws of the
Manager.
8.03 Financial and Business Information.
----------------------------------
The Originator will deliver to the Issuer, the Trustee and the Insurer (so
long as the Policy is outstanding):
(a) Notice of Servicer Event of Default - immediately upon the Originator
-----------------------------------
becoming aware of the existence of any condition or event which constitutes a
Servicer Event of Default, a written notice (with a copy to each Rating Agency)
describing its nature and period of existence and what action the Originator is
taking or proposes to take with respect thereto;
(b) SEC and Other Reports - promptly upon their becoming available, one
---------------------
copy of each report (including the Originator's annual report to shareholders
and reports on Form 8-K, 10-K, and 10-Q), proxy statement, registration
statement, prospectus, prospectus supplement and notice filed with or delivered
to any securities exchange, the Securities and Exchange Commission or any
successor agencies;
(c) Report on Proceedings - promptly upon the Originator becoming aware of
---------------------
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding,
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Originator, a written notice specifying the nature of such
investigation or proceeding and what action the Originator is taking or proposes
to take with respect thereto and evaluating its merits;
(d) ERISA - (i) promptly and in any event within ten days after the
-----
Originator knows or has reason to know of the occurrence of a Reportable Event
with respect to a Pension
34
Plan with regard to which notice must be provided to the PBGC, a copy of such
materials required to be filed with the PBGC with respect to such Reportable
Event and in each such case a statement of the chief financial officer of the
Originator setting forth details as to such Reportable Event and the action
which the Originator proposes to take with respect thereto; (ii) at least ten
days prior to the filing by any plan administrator of a Pension Plan of a notice
of intent to terminate such Pension Plan, a copy of such notice; (iii) upon
request of the Issuer and the Trustee, and in no event more than ten days after
such request, copies of each annual report which is filed on Form 5500, together
with certified financial statements for the Pension Plan (if any) as of the end
of such year and actuarial statements on Schedule B to such Form 5500; (iv)
promptly and in any event within ten days after it knows or has reason to know
of any event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Plan, a statement of the chief financial officer of the Originator
describing such event or condition; (v) promptly and in no event more than ten
days after receipt thereof by the Originator or any Related Person, each notice
received by the Originator or any Related Person concerning the imposition of
any withdrawal liability under Section 4202 of ERISA; and (vi) promptly after
receipt thereof a copy of any notice the Originator or any Related Person may
receive from the PBGC or the Internal Revenue Service with respect to any
Pension Plan; provided, however, that this subsection (vi) shall not apply to
-------- -------
notices of general application promulgated by the PBGC or the Internal Revenue
Service or notices which would not require any material payment by the
Originator or any Related Person; and
(e) Requested Information - with reasonable promptness, any other data and
---------------------
information which may be reasonably requested by such parties from time to time.
Compliance by the Servicer with the requirements of Sections 7.04(c),
7.04(d) or 7.04(e) shall be deemed to be compliance by the Originator with the
corresponding requirements of Section 8.03(a), 8.03(b) or 8.03(c), as the case
may be, and vice versa, so long as IOS Capital is the Servicer hereunder.
---- -----
8.04 Officers' Certificates.
----------------------
With each set of financial statements delivered pursuant to Section 8.03,
the Originator will deliver an Officers' Certificate stating that the officers
signing such Certificate have reviewed the relevant terms of this Assignment and
Servicing Agreement and have made, or caused to be made under such officers'
supervision, a review of the activities of the Originator during the period
covered by the income statements then being furnished and, so long as the
Originator is Servicer hereunder, that the review has not disclosed the
existence of any Servicer Event of Default or, if a Servicer Event of Default
exists, describing its nature and what action the Originator has taken and is
taking with respect thereto.
8.05 Books and Records.
-----------------
The Originator will clearly xxxx its books and records to reflect the
contributions of Leases and Equipment pursuant to this Agreement.
35
8.06 Communications.
--------------
The Originator will reply to all inquiries by third parties with respect to
the transactions contemplated by this Agreement by indicating that it has
transferred the Leases and its right, title and interest in the related
Equipment and that the Issuer now holds title to the Leases and such interests
(other than ownership interests) in the Equipment.
SECTION 9. THE SELLER
9.01 Merger or Consolidation of the Seller.
-------------------------------------
So long as the Notes remain outstanding, the Seller will keep in full force
and effect its existence, rights and franchise as a limited liability company
under the laws of its jurisdiction of organization and will preserve its
qualification to do business as a foreign limited liability company in each
jurisdiction in which such qualification is necessary to protect the validity
and enforceability of any of the Leases or to permit performance of the Seller's
duties under this Assignment and Servicing Agreement.
So long as the Notes remain outstanding, the Seller shall not merge or
consolidate with any other Person.
9.02 Control of Issuer.
-----------------
So long as any of the Notes remain outstanding, the Seller will not (i)
sell, pledge or otherwise transfer any of its membership interests in the Issuer
or (ii) vote such beneficial interests in favor of any amendment to or
alteration of the certificate of formation or limited liability company
agreement of the Issuer.
9.03 Information.
-----------
The Seller will deliver to the Issuer, the Trustee and the Insurer (so long
as the Policy is outstanding):
(a) Notice of Servicer Event of Default - immediately upon becoming aware
-----------------------------------
of the existence of any condition or event which constitutes a Servicer Event of
Default, a written notice (with a copy to each Rating Agency) describing its
nature and period of existence and what action the Seller is taking or proposes
to take with respect thereto;
(b) Report on Proceedings - promptly upon the Seller's becoming aware of
---------------------
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding,
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Seller, a
36
written notice specifying the nature of such investigation or proceeding and
what action the Seller is taking or proposes to take with respect thereto and
evaluating its merits;
(c) Requested Information - with reasonable promptness, any other data and
---------------------
information which may be reasonably requested by such parties from time to time.
9.04 Inspection.
----------
The Seller will permit, on reasonable prior notice, the representatives of
the Issuer, the Servicer, the Trustee, the Insurer (so long as no Insurer
Default has occurred and is continuing), or, if an Insurer Default has occurred
and is continuing, any holder of the Notes evidencing not less than 25% of the
Outstanding Principal Amount of any class of Notes to examine and discuss the
operations of the Seller with any of its officers or employees all at such
reasonable times and as often as may be reasonably requested for the purpose of
reviewing Seller's performance of its duties and obligations hereunder. Any
expense incident to the exercise by the Issuer, the Trustee or any holder of the
Notes during the continuance of any default by the Seller in any of its
obligations hereunder of any right under this Section 9.04 shall be borne by the
Seller.
9.05 Books and Records.
-----------------
The Seller will clearly xxxx its books and records to reflect each
contribution of a Lease and of its right, title, and interest (other than its
ownership interest) in the Equipment subject thereto to the Issuer.
9.06 Communications.
--------------
The Seller will reply to all inquiries by third parties with respect to the
transactions contemplated by this Agreement by indicating that it has
contributed to the Issuer the Leases and its right, title and interest (other
than its ownership interest) in the related Equipment.
SECTION 10. DEFAULT
10.01 Servicer Events of Default.
--------------------------
The following events and conditions shall constitute Servicer Events of
Default hereunder:
(i) failure on the part of the Servicer to deposit to the Collection
Account, or other applicable account in accordance with the terms of the
Indenture within three Business Days following the receipt thereof any
monies received by the Servicer (including, without limitation, any Lease
Payments on Performing Leases or Non-Performing Leases) and required to be
deposited thereunder and hereunder;
37
(ii) failure on the part of the Servicer to pay to the Trustee on the
date when due in accordance with the terms hereof, any payment required to
be made by the Servicer pursuant to Section 5 hereof;
(iii) failure on the part of either the Servicer or (so long as the
Originator is the Servicer) the Originator to observe or perform in any
material respect any other of their respective covenants or agreements in
this Assignment and Servicing Agreement which failure continues unremedied
for a period of 30 days after the earlier of (A) the date it first becomes
known to any officer of the Originator or the Servicer, as the case may be,
and (B) the date on which written notice thereof requiring the same to be
remedied shall have been given to the Originator or the Servicer, as the
case may be, by the Trustee, or to the Originator or the Servicer, as the
case may be, and the Trustee by the Seller, the Issuer, the Insurer or any
holder of the Notes;
(iv) if any representation or warranty made by the Originator in this
Assignment and Servicing Agreement or in any certificate or other writing
delivered pursuant hereto or made by any successor Servicer in connection
with such successor Servicer's assumption of the duties of the Servicer
shall prove to be incorrect in any material respect as of the time when the
same shall have been made; provided, however, that the breach of any
-------- -------
representation or warranty made by the Originator or Servicer in this
Assignment and Servicing Agreement will be deemed to be "material" only if
it affects the Noteholders, the Insurer or the enforceability of the
Indenture or of the Notes; and provided, further, that a material breach of
-------- -------
any representation or warranty made by the Originator in this Assignment
and Servicing Agreement with respect to any of the Leases or the Equipment
subject thereto will not constitute a Servicer Event of Default if the
Originator purchases such Lease and the Issuer's interest in the Equipment
or substitutes a Substitute Lease therefor in accordance with this
Assignment and Servicing Agreement;
(v) an involuntary petition or proceeding shall be filed (A) in
respect of the Servicer under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law or (B) seeking a decree or
order adjudging the Servicer bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, or composition of or in respect of
the Servicer under any applicable federal or state law, or the appointment
of a custodian, receiver, liquidator, assignee, trustee, sequestrator, or
other similar official of the Servicer or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and
either (1) such petition shall not have been dismissed within a period of
60 consecutive days or (2) any such order for relief or decree shall be
entered in any such proceeding, or any such receiver, liquidator, assignee,
trustee, sequestrator or other similar official shall be appointed;
(vi) the commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to
be
38
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Servicer in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or
similar official of the Servicer or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the failure by the Servicer to pay its debts generally as
they become due, or the taking of corporate action by the Servicer in
furtherance of any such action;
(vii) the failure of the Servicer to make one or more payments due
with respect to aggregate recourse debt or other recourse obligations of
the Servicer exceeding $5,000,000, or the occurrence of any event or the
existence of any condition, the effect of which event or condition is to
cause (or permit one or more Persons to cause) more than $5,000,000 of
aggregate recourse debt or other recourse obligations of the Servicer to
become due before its (or their) stated maturity or before its (or their)
regularly scheduled dates of payment so long as such failure, event or
condition shall be continuing and shall not have been waived by the Person
or Persons entitled to performance;
(viii) a final judgment or judgments (or decrees or orders) against
the Servicer for the payment of money aggregating in excess of $5,000,000
and any one of such judgments (or decrees or orders) has remained
unsatisfied and in effect for any period of 60 consecutive days without a
stay of execution;
(ix) so long as IOS Capital is the Servicer, a downgrading of the
long-term debt rating assigned by Xxxxx'x or S&P to IOS Capital to Ba2 or
below or BB or below, respectively;
(x) for any three consecutive Due Periods, the average of the
Annualized Default Rates for such Due Periods shall be greater than 8.00%;
or
(xi) for any three consecutive Due Periods, the average of the
Delinquency Rates for such Due Periods shall be greater than 10.00%.
10.02 Termination.
-----------
So long as a Servicer Event of Default shall be continuing, the Trustee
(with the written consent of the Insurer, if no Insurer Default has occurred and
is continuing) may, and, upon the written instructions of the Insurer (if no
Insurer Default has occurred and is continuing) or the holders of 66-2/3% in
Outstanding Principal Amount of the Notes (if an Insurer Default has occurred
and is continuing), shall, by notice in writing to the Servicer terminate all of
the rights and obligations of the Servicer (but not the Originator's obligations
which shall survive any such termination) under this Assignment and Servicing
Agreement. On the receipt by the
39
Servicer of such written notice, all authority and power of the Servicer under
this Assignment and Servicing Agreement to take any action with respect to any
Lease or Equipment shall cease and the same shall pass to and be vested in the
Trustee or other successor Servicer appointed pursuant to and under this Section
and the Indenture; and, without limitation, the Trustee or such successor
Servicer is hereby authorized and empowered to execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, any and all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and assignment of any Lease and the related
Equipment, or otherwise.
10.03 Trustee to Act; Appointment of Successor.
----------------------------------------
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 10.02 hereof, the Trustee or other successor Servicer,
subject to the terms of Section 6.01 of the Indenture, shall be the successor in
all respects to the Servicer in its capacity as servicer of the Leases under
this Assignment and Servicing Agreement and, to such extent, shall be subject to
all the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof (but not the obligations of the
Originator contained in Section 5 hereof which shall survive any such
termination as above provided) and shall be entitled to receive from the Issuer
the Servicing Fee provided for in Section 4.04 hereof; provided that the Trustee
--------
shall in no way be responsible or liable for any action or actions of the
Servicer before the time the Servicer receives such a notice of termination.
(b) Notwithstanding the above, the Trustee (with the written consent of
the Insurer, if no Insurer Default has occurred and is continuing) may, if it
shall be unwilling to so act, or shall, if it is unable to so act, give notice
of such fact to the Insurer (if no Insurer Default has occurred and is
continuing) or to each holder of the Notes (if an Insurer Default has occurred
and is continuing) and (i) appoint an established institution satisfactory to
the Insurer (if no Insurer Default has occurred and is continuing) or to the
holders of 66-2/3% of the then Outstanding Principal Amount of the Notes (if an
Insurer Default has occurred and is continuing) as the successor to the Servicer
hereunder to assume all of the rights and obligations of the Servicer hereunder,
including, without limitation, the Servicer's right hereunder to receive the
Servicing Fee (but not the obligations of the Originator contained in Section 5
hereof), or (ii) if no such Person satisfactory to the Insurer (if no Insurer
Default has occurred and is continuing) or to the holders of 66-2/3% of the then
Outstanding Principal Amount of the Notes (if an Insurer Default has occurred
and is continuing) is so appointed within 60 days following the giving of such
notice, appoint a bank or other established Person, which has experience in
servicing lease contracts and equipment similar to the Leases and Equipment and
as to which each of S&P and Xxxxx'x has indicated in writing that the
appointment of such Person, as the successor to the Servicer hereunder will not
result in the reduction or withdrawal of such Rating Agency's then-current
rating of the Notes, or (iii) if no such institution is so appointed, petition a
court of competent jurisdiction to appoint an institution meeting such criteria
as the Servicer hereunder. Pending appointment of a successor to the Servicer
hereunder, the Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trustee shall cause such
successor to the Servicer to enter into a servicing agreement substantially in
the form of this Assignment and Servicing Agreement except that such agreement
shall not include any of the Originator's representations, warranties or
obligations and the Trustee may make arrangements for the compensation of such
successor out of payments on
40
Leases as it and such successor shall agree. In no event shall the Trustee be
liable for any servicing fee or for any difference in the amount of the
servicing fee payable hereunder and the amount necessary to induce any successor
Servicer to act as successor Servicer under this Agreement and the transactions
set forth or provided for herein. The Trustee shall provide the Rating Agencies
with prior written notice of the appointment of any successor to the Servicer.
10.04 Servicer to Cooperate.
---------------------
The Servicer hereby agrees to cooperate with the Trustee and any successor
to the Servicer appointed in accordance with Section 10.03 hereof, as
applicable, in effecting the termination and transfer of the responsibilities
and rights of the Servicer hereunder to the Trustee or any successor to the
Servicer, including, without limitation, the execution and delivery of
assignments of Financing Statements, and the transfer to the Trustee or the
successor to the Servicer for administration by it of all amounts which shall at
the time be held by the Servicer or thereafter received with respect to the
Leases. The Servicer hereby agrees to transfer to any successor to the Servicer
its electronic records and all other records, correspondence and documents
relating to the Leases and Equipment in the manner and at such times as the
successor to the Servicer shall reasonably request. The Servicer hereby
designates the Trustee and any successor to the Servicer its agent and
attorney-in-fact to execute transfers of Financing Statements and any other
filings or instruments which may be necessary or advisable to effect such
transfer of the Servicer's responsibilities and rights hereunder. All costs and
expenses incurred in connection with the transfer of servicing shall be borne by
the Servicer.
10.05 Notification to Noteholders.
---------------------------
Upon any such termination or appointment of a successor to the Servicer,
the Issuer shall cause the Trustee to give prompt written notice thereof to each
Rating Agency and to each holder of the Notes in the manner provided in the
Indenture.
10.06 Remedies Not Exclusive.
----------------------
Nothing in the preceding provisions of this Section 10 shall be interpreted
as limiting or restricting any rights or remedies which the Issuer, the Trustee
or any other Person would otherwise have at law or in equity on account of the
breach or violation of any provision of this Assignment and Servicing Agreement
by the Servicer, including, without limitation, the right to recover full and
complete damages on account thereof to the extent not inconsistent with Section
7.02 hereof.
SECTION 11. SUBSTITUTION AND ADDITION OF LEASES
11.01 Substitution and Addition.
-------------------------
(a) Subject to the satisfaction of the requirements set forth in Section
11.01(b) hereof, the Originator will have the right (but not the obligation) at
any time to substitute one or more Eligible Leases and the Equipment subject
thereto (each, a "Substitute Lease") for a Lease (for purposes of this Section
11 referred to as a "Predecessor Lease") and the Equipment subject thereto if:
41
(i) the Predecessor Lease became (A) a Non-Performing Lease, (B) a
Warranty Lease or (C) an Adjusted Lease during the immediately preceding
Due Period;
(ii) the aggregate Discounted Present Value of the Non-Performing
Leases that have become Predecessor Leases during the term of this
Agreement shall not in the aggregate exceed 10% of the Discounted Present
Value of the Leases on the Cut-Off Date; and
(iii) the aggregate Discounted Present Value of the Adjusted Leases
and Warranty Leases that have become Predecessor Leases during the term of
this Agreement shall not exceed 10% of the Discounted Present Value of the
Leases on the Cut-off Date.
Subject to the satisfaction of the requirements set forth in Section 5 and
Section 11.01(b) hereof, in the event of an Early Lease Termination resulting in
the prepayment in full of the related Early Termination Lease, the Seller will
have the option to transfer to the Issuer an additional Eligible Lease (each, an
"Additional Lease"), together with all right, title and interest in and to the
Equipment (other than the Seller's ownership interests therein); provided,
however, that the aggregate Discounted Present Value of the Early Termination
Leases for which the Seller will have the option of transferring Additional
Leases shall be limited to an amount not in excess of 20% of the aggregate
Discounted Present Value of the Leases as of the Cut-off Date.
(b) Each transfer of Substitute Leases and addition of Additional Leases
will be subject to the satisfaction of the following conditions precedent:
(i) the final payment on such Substitute Lease or Additional Lease
must be on or prior to April 2007;
(ii) after giving effect to such additions and substitutions and any
adjustments pursuant to Section 5.02 hereof the aggregate amount of Lease
Payments through the term of the Leases (including the Substitute Leases
and the Additional Leases) will not be materially less than the aggregate
Lease Payments of the Leases prior to such substitution or addition or
adjustment;
(iii) after giving effect to such adjustments, additions and
substitutions, the Discounted Present Value of the Performing Leases must
not be less than the Discounted Present Value of the Performing Leases
prior to such adjustment, substitution or addition; and
(iv) after giving effect to such adjustments, additions, and
substitutions pursuant to Section 11, the weighted average remaining term
of the Performing Leases must not be greater than the weighted average
remaining term of the Performing Leases prior to such adjustment, addition,
and substitution.
(c) Each addition and substitution pursuant to this Section 11.01 shall
include the right to all Related Interests in respect of each Substitute Lease
being substituted or Additional Leases being transferred. At the time of each
such addition or substitution, all Lease
42
Payments with respect to the related Substitute Leases and/or Additional Leases
actually received by the Originator or the Seller which became due during the
then current Due Period shall be transferred to the Collection Account and all
security deposits with respect thereto shall be transferred to the Security
Deposit Account.
(d) To the extent the Originator does not substitute a Substitute Lease
for Leases for which any of the representations and warranties made by the
Originator in Sections 2.04, 2.05(b) and 2.08 are breached, the Originator shall
purchase such Leases pursuant to the provisions of Section 5.04.
11.02 Procedure.
---------
(a) By 11:00 A.M. on the third Business Day following each
Determination Date, the Originator or the Seller, as the case may be, shall give
written notice to the Servicer of any substitution pursuant to Section 11.01 of
Substitute Leases for Predecessor Leases or addition of Additional Leases for
Early Termination Leases which have been prepaid in full during the preceding
Due Period. By 11:00 A.M. on the fourth Business Day following each Payment
Date, the Originator or the Seller, as the case may be, shall deliver to the
Servicer and the Trustee and, to the extent not included in the Servicer Report,
the Servicer shall promptly deliver to the Insurer and each Rating Agency (i) a
supplement to Exhibit A hereto setting forth the information shown thereon for
each such Substitute Lease and Additional Lease, (ii) an Officers' Certificate
(A) certifying that each such Substitute Lease and Additional Lease is an
"Eligible Lease", (B) specifying each Predecessor Lease for which a substitution
has been made and each Early Termination Lease which is being replaced by an
Additional Lease and the amount of each periodic Lease Payment under each such
Predecessor Lease and Early Termination Lease and the amount of each periodic
Lease Payment under each Additional Lease and Substitute Lease being transferred
thereby and (C) that all conditions precedent to such addition or substitution
have been satisfied and (iii) such additional information concerning such
Additional Leases, Substitute Leases, Early Termination Leases or Predecessor
Leases as may be needed for the Servicer to prepare its monthly reports pursuant
to Section 6.01 hereof and to otherwise carry out its duties as Servicer
hereunder.
(b) Subject to the provisions of Section 11.03, the delivery of any
Officers' Certificate and supplement to Exhibit A pursuant to Section 11.02(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Due Period (i) the Originator contributed as a
contribution to capital to the Seller pursuant to Section 11.01 hereof all of
the Originator's right, title and interest in and to the Substitute Leases and
Additional Leases identified in such supplement, and the related rights
described in Section 11.01 hereof, and contemporaneously the Seller contributed
as a contribution to capital to the Issuer pursuant to Section 11.01 hereof all
of the Seller's right, title and interest in and to the Substitute Leases and
Additional Leases identified in such supplement, and the related rights
described in Section 11.01 hereof, (ii) the Originator transferred to the
Seller, as a contribution of capital, all of the Originator's right, title and
interest in and to the Equipment subject to such Substitute Leases and
Additional Leases and contemporaneously the Seller pledged to the Issuer all of
the Seller's right, title and interest in and to the Equipment subject to such
Substitute Leases and Additional Leases, and (iii) the Issuer assigned and
transferred to the Seller, without representation or warranty, all of the
Issuer's right, title and interest in and to the Predecessor Leases and Early
43
Termination Leases identified in such Officers' Certificate and released its
security interest in the Equipment relating thereto and contemporaneously the
Seller assigned to the Originator, without representation or warranty, all of
the Seller's right, title and interest in and to the Predecessor Leases and
Early Termination Leases identified in such Officers' Certificate and all the
Seller's right, title and interest in and to the related Equipment. The
Originator shall promptly deliver to the Servicer (or, if the Originator is the
Servicer, retain in accordance with this Assignment and Servicing Agreement in
its capacity as Servicer) the original executed copy of each Substitute Lease
and Early Termination Lease assigned to the Issuer pursuant to Section 11.01
hereof and the Issuer shall promptly request the Trustee (or, if the Servicer is
acting as the custodian, the Servicer) in writing to deliver to or upon the
order of the Seller the original executed counterpart of each Predecessor Lease
for which substitution has been made pursuant to Section 11.01 hereof and
contemporaneously the Seller shall promptly deliver to the Originator the
original executed counterpart of each Predecessor Lease for which substitution
has been made pursuant to Section 11.01 hereof.
11.03 Objection and Purchase.
----------------------
If the Insurer (if no Insurer Default has occurred and is continuing) or
any holder of the Notes (if an Insurer Default has occurred and is continuing)
objects to any substitution of Leases within ten days of receipt of the
Servicer's monthly report providing notice thereof pursuant to Section 6.01
above, on the grounds either that any Substitute Lease or Additional Lease is
not an Eligible Lease within the meaning of the definition thereof or that such
substitution or addition is otherwise not permitted under the provisions of
Section 11.01 hereof, the Originator shall be entitled to present such
additional information as it deems appropriate in an effort to demonstrate that
such Lease is an Eligible Lease and that such substitution is permitted under
the provisions of Section 11.01 hereof. Following such presentation, the
substitution shall remain effective if each person originally objecting to the
substitution withdraws the objection. If the conditions specified in the
preceding sentence are not satisfied, or if at any time it is established that
any lease was not, at the time of substitution, an Eligible Lease, then the
Originator shall be required to purchase such Lease in accordance with the
provisions of Section 5.04 hereof.
11.04 Originator's, Seller's and Servicer's Subsequent Obligations.
------------------------------------------------------------
Upon any substitution or addition of Leases in accordance with the
provisions of this Section 11, the Originator's, Seller's and the Servicer's
obligations hereunder with respect to the Predecessor Lease or the applicable
Early Termination Lease shall cease but the Originator, Seller and the Servicer
shall each thereafter have the same obligations with respect to the Substitute
Lease or Additional Lease substituted or added as it has with respect to all
other Leases subject to the terms hereof.
SECTION 12. ASSIGNMENT
12.01 Assignment to Trustee.
---------------------
It is understood that this Assignment and Servicing Agreement and all
rights of the Issuer hereunder, but none of its duties or obligations, will be
assigned by the Issuer to the
44
Trustee pursuant to the Indenture, for the benefit of the holders from time to
time of the Notes and the Insurer as provided in the Indenture, and may be
subsequently assigned by the Trustee to any successor Trustee or as otherwise
provided in the Indenture. Each of the Originator, the Seller and the Servicer
hereby expressly agrees to each such assignment and agrees that all of its
duties, obligations, representations and warranties hereunder shall be for the
benefit of, and may be enforced by, the Trustee, the Insurer, the holders from
time to time of the Notes, and any successor to or assignee of any thereof.
12.02 Assignment by Originator, Seller or Servicer.
--------------------------------------------
None of the respective rights or obligations of the Originator, the Seller
or the Servicer hereunder may be assigned (other than the assignment by the
Seller to the Issuer of the covenants, representations, warranties and
obligations of the Originator pursuant to Section 12.01 and the assignment by
the Issuer to the Trustee of the rights of the Issuer hereunder pursuant to the
Indenture as contemplated in Section 12.01) without the prior written consent of
the Issuer and the Trustee (acting upon the written instructions of the Insurer
(if no Insurer Default has occurred and is continuing) or the holders of 66-2/3%
of the then aggregate unpaid Outstanding Principal Amount of the Notes (if an
Insurer Default has occurred and is continuing); provided, that nothing herein
--------
shall preclude the Servicer from performing its duties hereunder through the use
of agents to the extent that such use is consistent with the Servicer's business
practices in dealing with leases and equipment for its own account.
SECTION 13. NATURE OF OBLIGATIONS AND SECURITY THEREFOR
13.01 Obligations Absolute.
--------------------
The obligations of the Originator and Seller hereunder, and the rights of
the Trustee, as assignee of the Issuer, in and to all amounts payable by the
Originator or the Seller hereunder, shall be absolute and unconditional and
shall not be subject to any abatement, reduction, setoff, defense, counterclaim
or recoupment whatsoever, including, without limitation, abatements, reductions,
setoffs, defenses, counterclaims or recoupments due or alleged to be due to, or
by reason of, any past, present or future claims which the Originator or the
Seller may have against the Servicer, the Issuer, the Insurer, the Trustee, and
any holder of the Notes or any other Person for any reason whatsoever; nor,
except as otherwise expressly provided herein, shall this Assignment and
Servicing Agreement terminate, or the respective obligations of the Issuer, the
Originator, the Seller or the Servicer be otherwise affected, by reason of any
defect in any Lease or in any unit of Equipment or in the respective rights and
interests of the Issuer, the Originator, the Seller, the Insurer and the Trustee
therein, or by reason of any Liens with respect to any Lease or any unit of
Equipment, or any failure by the Issuer or the Servicer to perform any of its
obligations herein contained, or by reason of any other indebtedness or
liability, howsoever and whenever arising, of the Issuer, the Servicer, the
Trustee, the Insurer, or any holder of the Notes to the Originator, the Seller
or any other Person or by reason of any insolvency, bankruptcy, or similar
proceedings by or against the Originator, the Seller, the Servicer, the Issuer,
the Insurer, the Trustee or any other Person or for any other cause whether
similar or dissimilar to the foregoing, any present or future law to the
contrary notwithstanding, it being the intention of the parties hereto that all
obligations of the Originator or the Seller hereunder and all amounts payable by
the Originator or the Seller hereunder shall continue to be due and payable in
all
45
events and in the manner and at the times herein provided unless and until the
obligation to perform or pay the same shall be terminated or limited pursuant to
the express provisions of this Assignment and Servicing Agreement.
13.02 Security for Obligations.
------------------------
As security for the full and timely performance by the Originator, the
Seller and the Servicer of each of their respective obligations hereunder, and
by the Issuer of each of its obligations hereunder and under the Notes and the
Indenture, each of the Originator and the Seller hereby pledges and grants to
the Trustee (as a precaution in the event that, contrary to the intent of the
parties to the transactions contemplated hereby, it is contended that either has
any continuing interest in any Lease, that the Originator has any continuing
interest in any Equipment or that the security interest granted to the Issuer by
the Seller in the Seller's interest in the Equipment is invalid or ineffective
in whole or in part) a first priority Lien on and security interest in all
right, title and interest of the Originator or the Seller now or hereafter
acquired in and to each Lease (including all Related Interests) and the
Originator's and the Seller's interests in each item of Equipment at any time
subject to the Indenture. The foregoing security interest is granted upon and is
subject to the same terms and provisions as are set forth in the Indenture and
shall continue in full force and effect until the Indenture is discharged in
accordance with the terms thereof, notwithstanding any waiver or modification of
any of the terms hereof or thereof or of any of the Notes, whether with or
without the consent of the Originator or the Seller.
13.03 Further Assurances; Financing Statements.
----------------------------------------
Each of the Originator, the Seller and the Servicer severally agrees that
at any time and from time to time, at its expense, it shall promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable or that the Issuer, the Trustee or the Insurer may
request to perfect and protect the assignments and security interests granted or
purported to be granted herein with respect to the Leases and the Lease Payments
or to enable the Issuer, the Trustee or the Insurer to exercise and enforce its
rights and remedies under this Agreement with respect to any Leases and the
Lease Payments and, subject to the penultimate sentence of Section 1.04(d), the
Equipment. Without limiting the generality of the foregoing, each of the
Originator and the Seller shall execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices as may
be necessary or desirable or that the Issuer, the Trustee or the Insurer may
request to protect and preserve the assignments and security interests granted
by this Agreement with respect to the Leases and, subject to the penultimate
sentence of Section 1.04(d), the Equipment.
SECTION 14. DEFINITIONS
As used in this Assignment and Servicing Agreement, the following terms
have the respective meanings set forth below or set forth in the Section hereof
or in any other agreement indicated:
Accumulated Funding Deficiency - a funding deficiency described in Section
------------------------------
302 of ERISA.
Additional Lease - Section 11.01(a) hereof.
----------------
46
Adjusted Lease - a Lease which has had one or more non-credit related terms
--------------
adjusted or modified by the Servicer.
Affiliate - Section 1.01 of the Indenture.
---------
Annualized Default Rate - for any Due Period, the sum of the Discounted
-----------------------
Present Value as of the related Determination Date of all Leases that became
Non-Performing Leases during such Due Period minus the sum of the recoveries on
Non-Performing Leases received during such Due Period, divided by the Discounted
Present Value of the Leases on the Determination Date immediately preceding such
Determination Date, multiplied by twelve.
Asset Pool - Granting Clause of the Indenture.
----------
Authorized Officer - in respect of the Servicer, any officer of or other
------------------
Person representing the Servicer who is authorized to act for the Servicer.
Available Funds - Granting Clause of the Indenture.
---------------
Base Prospectus - the prospectus, dated April 28, 2000, included in the
---------------
Registration Statement.
Business Day - any day that is not a Saturday, Sunday or other day on which
------------
commercial banking institutions in the city in which the Corporate Trust Office
or the Servicer is located are authorized or obligated by law or executive order
to remain closed.
Casualty Payment - any payment pursuant to a Lease on account of the loss,
----------------
theft, condemnation, governmental taking, destruction, or damage beyond repair
of any item of Equipment subject thereto which results, in accordance with the
terms of the Lease, in a reduction in the number or amount of any future Lease
Payments due thereunder or in the termination of the Lessee's obligation to make
future Lease Payments thereunder.
Class A-1 Notes - the Issuer's 3.73375% Class A-1 Lease-Backed Notes,
---------------
Series 2001-1.
Class A-2 Notes - the Issuer's 4.16% Class A-2 Lease-Backed Notes, Series
---------------
2001-1.
Class A-3 Notes - the Issuer's Class A-3 Lease-Backed Notes, Series 2001-1.
---------------
Class A-4 Notes - the Issuer's Class A-4 Lease-Backed Notes, Series 2001-1.
---------------
Code - the Internal Revenue Code of 1986, as amended.
----
Collection Account - Section 1.01 of the Indenture.
------------------
Counterparty - Section 1.01 of the Indenture.
------------
Corporate Trust Office - Section 1.01 of the Indenture.
----------------------
47
Cut-Off Date - the close of business on May 31, 2001.
------------
Delinquency Rate - for any Due Period, the sum of the Discounted Present
----------------
Value as of the related Determination Date of all Leases that are 61 or more
days delinquent, as of such Determination Date, divided by the Discounted
Present Value of the Leases on such Determination Date.
Determination Date - Section 1.01 of the Indenture.
------------------
Discounted Present Value of the Delinquent Leases - Section 1.01 of the
-------------------------------------------------
Indenture.
Discounted Present Value of the Performing Leases - Section 1.01 of the
-------------------------------------------------
Indenture.
Due Period - with respect to any Payment Date and the related Determination
----------
Date with respect thereto, the calendar month prior to the month in which such
Payment Date and Determination Date occur.
Early Lease Termination - the termination of a Lease by reason of the
-----------------------
prepayment in full thereof prior to its original stated maturity.
Early Termination Lease - a Lease as to which there has been an Early Lease
-----------------------
Termination.
Eligible Lease - a Lease that satisfies the representations and warranties
--------------
set forth in Section 2.04, 2.05(b) and 2.08 and, in the case of a Substitute
Lease or Additional Lease, the applicable requirements of Section 11.
Equipment - all units or items of equipment and related property from time
---------
to time subject to any Lease.
ERISA - the Employee Retirement Income Security Act of 1974, as amended.
-----
Event of Default - Section 1.01 of the Indenture.
----------------
Excess Copy Charges - Section 1.01 of the Indenture.
-------------------
Filing States - (a) in the case of the Financing Statements referred to in
-------------
clauses (i) and (ii) of the definition of Required Financing Statements, each of
the fifty states of the United States, and (b) in the case of the Financing
Statements referred to in clause (iii) of the definition of Required Financing
Statements, the State of Georgia.
Financing Statement - a statement filed pursuant to the UCC which evidences
-------------------
a perfected security interest in an asset.
Governmental Authority: - any court or federal or state regulatory body,
----------------------
administrative agency or other tribunal or other governmental instrumentality.
48
Indemnified Party - Section 5.03 hereof.
-----------------
Indenture - the Indenture dated as of June 1, 2001, between the Issuer and
---------
the Trustee, as the same may be supplemented, modified or amended from time to
time in accordance with the terms thereof.
Insurer - Ambac Assurance Corporation, a Wisconsin stock insurance
-------
corporation, and any successor.
Issuance Date - June 28, 2001.
-------------
Issuer - IKON Receivables, LLC, a Delaware special purpose limited
------
liability company, and any successor.
Leases - collectively, (i) each lease agreement, conditional sale contract
------
and other agreement creating a contractual obligation to which the Originator is
a party, to the extent that such lease agreement, conditional sale contract or
other agreement is described in Exhibit A hereto (as such Exhibit A may be
--------- ---------
amended from time to time in accordance with this Assignment and Servicing
Agreement), including, without limitation, each Additional Lease and Substitute
Lease; (ii) each schedule or supplement to each such lease agreement,
conditional sale contract or other agreement (and each master lease agreement
insofar as it relates to any such schedule or supplement); and (iii) any and all
amendments or modifications from time to time to each such lease agreement,
conditional sale contract or other agreement, or to any schedule or supplement,
in accordance with this Assignment and Servicing Agreement.
Lease Delinquency Payment - Section 1.01 of the Indenture.
-------------------------
Lease Guaranty - with respect to any Lease, any guaranty of payment or
--------------
performance of the whole or any part of the liabilities or obligations of the
Lessee under such Lease.
Lease Payment - Section 1.01 of the Indenture.
-------------
Lease Purchase Amount - Section 1.01 of the Indenture.
---------------------
Lessee - each lessee under a Lease.
------
Lien - means a security interest, lien, charge, pledge, equity (except the
----
Seller's equity in any Equipment), or encumbrance of any kind other than tax
liens, mechanics liens, and any liens that attach to a Lease or any item of
Equipment by operation of law.
"Lockbox Account" - Section 4.01(g) hereof.
---------------
Maintenance Charges - Section 1.01 of the Indenture.
-------------------
Non-Performing Lease - Section 1.01 of the Indenture.
--------------------
49
Noteholder - at any time, any Person in whose name a note is registered in
----------
the Note Register (as defined in the Indenture).
Notes - the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and
-----
the Class A-4 Notes issued pursuant to the Indenture and all notes issued in
exchange therefor pursuant to the Indenture.
Officers' Certificate - with respect to the Seller, Servicer or Originator,
---------------------
a certificate signed by the Chairman, the President or a Vice President, and by
at least one other Person who is a Vice President, the Treasurer, an Assistant
Treasurer, the Secretary, or an Assistant Secretary, of the Seller, Servicer or
Originator, as the case may be.
Originator - IOS Capital, Inc. and any successor thereto in accordance with
----------
the provisions hereof.
Originator Collateral - Section 1.03 hereof.
---------------------
Originator's Purchase Obligation - the obligation of the Originator to
--------------------------------
purchase Leases and Equipment interests pursuant to Section 5.04.
Other Lease Payments - Section 1.01 of the Indenture.
--------------------
Outstanding - Section 1.01 of the Indenture.
-----------
Outstanding Principal Amount - Section 1.01 of the Indenture.
----------------------------
Payment Date - the 15th day of each calendar month (or the next Business
------------
Day thereafter if such day is not a Business Day).
PBGC - the Pension Benefit Guaranty Corporation established pursuant to
----
Subtitle A of Title IV of ERISA.
Pension Plan - Section 2.13 hereof.
------------
Person - an individual, partnership, corporation, joint venture,
------
association, limited liability company, trust (including any beneficiary
thereof) or unincorporated organization, or a government or agency or political
subdivision thereof.
Policy - Section 1.01 of the Indenture.
------
Pool Factor - a seven-digit decimal, which the Servicer will compute on
-----------
each Determination Date, for each class of Notes, indicating the remaining
outstanding principal balance of such class of Notes as of the applicable
Payment Date, as a fraction of the initial outstanding principal balance of such
class of Notes. Each Pool Factor will be initially 1.0000000, and thereafter
will decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes
Predecessor Lease - Section 11.01 hereof.
-----------------
50
Prohibited Transaction - any transaction described in Section 406 of ERISA
----------------------
which is not exempt by reason of Section 408 of ERISA or the transitional rules
set forth in Section 414(c) of ERISA and any transaction described in Section
4975(c) of the Code which is not exempt by reason of Section 4975(c)(2) or
Section 4975(d) of the Code, or the transitional rules of Section 2003(c) of
ERISA.
Prospectus - the form of final prospectus (including the Base Prospectus
----------
and Prospectus Supplement) to be used in connection with the public offering of
the Notes as filed with the Securities and Exchange Commission pursuant to Rule
424(b).
Prospectus Supplement - the prospectus supplement relating to the offering
---------------------
of the Notes, dated June 20, 2001, accompanying the Base Prospectus.
Purchase Obligation - the Originator's obligation to purchase any Lease
-------------------
pursuant to the provisions of Section 5.04 hereof.
Rating Agency - Standard & Poor's Ratings Services, a division of the
-------------
XxXxxx-Xxxx Companies or Xxxxx'x Investors Service Inc. and their respective
successors.
Recourse Amount - Section 5.05 hereof.
---------------
Registration Statement - the Registration Statement (File No. 333-91599),
----------------------
as amended and supplemented from time to time, relating to the offering from
time to time of up to $2,000,000,000 aggregate principal amount of the Issuer's
Lease-Backed Notes, the first such issuance having been the Issuer's
Lease-Backed Notes, Series 2000-1, the second such issuance having been the
Issuer's Lease-Backed Notes Series 2000-2, and which contemplates that the
Issuer's Lease-Backed Notes, Series 1999-1 and Series 1999-2 will remain
outstanding and that subsequent series of the Issuer's Lease-Backed Notes will
be issued, subject to Section 9.13 of the Indenture.
Related Interests - with respect to any Lease, (i) all Lease Payments,
-----------------
Renewal Payments, Casualty Payments, Retainable Deposits and Termination
Payments in respect of such Lease, (ii) all rights under any Lease Guarantees
with respect to such Lease, (iii) all rights and interests in any collateral
with respect to such Lease, including any security deposit (whether or not such
security deposit shall have become a Retainable Deposit) and any security
interest in the Equipment securing the obligations of the related Lessee under
such Lease, and (iv) all other amounts due or becoming due with respect to such
Lease or any of the foregoing, except Maintenance Charges, Excess Copy Charges
and insurance and taxes paid by the Lessee.
Related Person - any Person (whether or not incorporated) which is under
--------------
common control with the Originator or the Seller within the meaning of Section
414(c) of the Internal Revenue Code of 1986, as amended, or of Section 4001(b)
of ERISA.
Renewal Payment - Section 1.01 of the Indenture.
---------------
Reportable Event - any of the events set forth in Section 4043(c) of ERISA
----------------
or the regulations thereunder, a withdrawal from a Pension Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4062(e)
of ERISA.
51
Required Financing Statements - Financing Statements filed in the
-----------------------------
appropriate UCC filing offices in the Filing States (i) naming the Originator as
debtor and the Seller as secured party and the Originator Collateral as the
collateral, (ii) naming the Seller as debtor, the Issuer as secured party, the
Trustee as assignee and the Seller Collateral as the collateral, and (iii)
naming the Issuer as debtor and the Trustee as secured party and the assets
comprising the Asset Pool as the collateral.
Reserve Account - Section 1.01 of the Indenture.
---------------
Seller - IKON Receivables-1 LLC, a Delaware limited liability company, and
------
any successor.
Seller Collateral - Section 1.03 hereof.
-----------------
Servicer - the corporation so identified in the first paragraph of this
--------
Assignment and Servicing Agreement and any successor thereto in accordance with
the provisions hereof.
Servicer Event of Default - Section 10.01 hereof.
-------------------------
Servicing Fee - Section 4.04(a) hereof.
-------------
Servicing Report - Section 6.01(b) hereof.
----------------
Substitute Lease - Section 11.01(a) hereof.
----------------
Supplementary Report - Section 6.01(e) hereof.
--------------------
Terminated Lease - a lease that is terminated prior to its original stated
----------------
maturity (but not on account of casualty or a Lease default).
Termination Payment - a payment payable by a Lessee under a Lease upon the
-------------------
early termination of such Lease (but not on account of a casualty or a Lease
default) which may be agreed upon by the Servicer, acting in the name of the
Issuer, and the Lessee in accordance with the provisions of Section 5.02 of this
Assignment and Servicing Agreement.
Transaction Payment Amount - Section 1.01 of the Indenture.
--------------------------
Transfer Taxes - Section 2.20 hereof.
--------------
Trustee - SunTrust Bank and any successor thereto, as Trustee under the
-------
Indenture.
Trustee Fee - the fees and expenses from time to time payable to the
-----------
Trustee pursuant to the fee agreement between the Issuer and the Trustee.
Underwriting Agreement - the Underwriting Agreement dated June 20, 2001
----------------------
among the Issuer, IOS Capital and the several Underwriters named therein for the
purchase and sale of the Notes.
52
Uniform Commercial Code or UCC - with respect to a particular jurisdiction,
------------------------------
the Uniform Commercial Code, as in effect from time to time in such
jurisdiction, or any successor statute thereto.
Warranty Lease - Section 1.01 of the Indenture.
--------------
SECTION 15. MISCELLANEOUS
15.01 Continuing Obligations.
----------------------
This Assignment and Servicing Agreement shall continue in full force and
effect until, and shall terminate when, each of the Notes and any other amounts
due to any holder of the Notes and the Insurer have been paid in full and all
other obligations, if any, secured by the Lien of the Indenture have been fully
satisfied.
15.02 GOVERNING LAW.
-------------
THIS ASSIGNMENT AND SERVICING AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK. IF ANY PROVISION OF THIS ASSIGNMENT AND SERVICING
AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE BALANCE OF THIS ASSIGNMENT
AND SERVICING AGREEMENT.
15.03 Successors and Assigns.
----------------------
This Assignment and Servicing Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the Originator, the
Issuer, the Seller, and the Servicer and shall inure to the benefit of the
successors and assigns of the holders, from time to time, of the Notes.
15.04 Modification.
------------
The terms of this Assignment and Servicing Agreement shall not be waived,
modified or amended without the written consent of the party against whom such
waiver, modification or amendment is claimed and, in any case, the Trustee
(acting upon the written instructions of the Insurer (so long as no Insurer
Default has occurred and is continuing) or the holders of 66-2/3% of the then
aggregate unpaid Outstanding Principal Amount of the Notes (if an Insurer
Default has occurred and is continuing)).
15.05 No Proceedings.
--------------
The Originator and the Seller each hereby agrees that it will not, directly
or indirectly, or direct or cause its officers, directors, or employees to, aid,
institute, or cause to be instituted, against the Issuer, and the Originator
hereby agrees that it will not, directly or indirectly, or direct or cause its
officers, directors or employees to, aid, institute, or cause to be instituted,
against the Seller, any proceeding of the type referred to in Section 7.01(d) or
(e) of
53
the Indenture so long as there shall not have elapsed one year plus one day
since the latest maturing Notes have been paid in full in cash.
15.06 Notices.
-------
All notices and other communications given in connection with this
Assignment and Servicing Agreement shall be sufficient for every Person
hereunder (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid or certified mail return receipt requested, or sent
by private courier or confirmed telecopy, in case of the Originator, to 0000
Xxxx Xxxx, X.X. Xxx 0000, Xxxxx, Xxxxxxx 00000, Attention: Xxxxx X. Xxxxx, Vice
President - Finance, with a copy to the General Counsel (telecopy: (912)
471-2375), in the case of the Seller, to 0000 Xxxx Xxxx, X.X. Xxx 0000, Xxxxx,
Xxxxxxx 00000, Attention: Xxxxx X. Xxxxx (telecopy: (000) 000-0000, and in the
case of the Issuer, the Servicer and the Trustee and the holders of the Notes,
to such addresses as are provided pursuant to Sections 1.05 and 1.06 of the
Indenture or to such other address as either party may specify to the other from
time to time in accordance with this Section 15.06.
15.07 Counterparts.
------------
This Assignment and Servicing Agreement may be executed in any number of
counterparts, each counterpart constituting an original, but all together
constituting only one Agreement.
15.08 Nonpetition Covenant.
--------------------
Neither the Originator nor the Seller shall petition or otherwise invoke
the process of any Governmental Authority for the purpose of commencing or
sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its respective property, or ordering the winding up or
liquidation of the affairs of the Issuer during the period ending one year and
one day after satisfaction and discharge of the Indenture. Neither the
Originator nor the Seller shall petition or otherwise invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its respective property, or ordering the winding up or liquidation of the
affairs of the Issuer.
15.09 Benefits of Agreement.
---------------------
The Trustee and the Insurer and their respective successors and assigns
shall be third-party beneficiaries to the provisions of this Agreement, and
shall be entitled to rely upon and directly to enforce such provisions so long,
in the case of the Insurer, that no Insurer Default has occurred and is
continuing. Nothing in this Agreement, express or implied, shall give to any
other Person any benefit or any legal or equitable right, remedy or claim under
this Agreement. The Insurer may disclaim any of its rights and powers under this
Agreement (in which case the Trustee may exercise such rights and powers
hereunder), but not its duties and obligations under the Policy, upon delivery
of a written notice to the Trustee and the parties hereto.
54
[Balance of Page Intentionally Left Blank]
55
IN WITNESS WHEREOF, the parties hereto have executed this Assignment and
Servicing Agreement as of the date and year first written above.
IOS CAPITAL, INC., as
Originator and Servicer
By: /s/ X.X. Xxxxx
-----------------------------------------
Name: X.X. Xxxxx
Title: Treasurer
IKON RECEIVABLES-1, LLC
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By: /s/ Xxxxxxx Xxxxx
---------------------------------------
Name: Xxxxxxx Xxxxx
Title: President
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING, INC.,
its Manager
By: /s/ Xxxxxxx Xxxxx
---------------------------------------
Name: Xxxxxxx Xxxxx
Title: President
The undersigned hereby acknowledges receipt of a copy of the foregoing
Assignment and Servicing Agreement and agrees to, and to be bound by, each of
the provisions thereof applicable to the undersigned.
SUNTRUST BANK,
not in its individual capacity, but
solely as Trustee
By: /s/ Xxxxxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxxxxx Xxxxxxx
Title: Trust Officer
EXHIBIT A
---------
SCHEDULE OF LEASES AND EQUIPMENT
A-1
EXHIBIT B
---------
Form of Servicing Report
[To be updated and conformed]
Line
1 Transaction Cash Flow - see computer detail
1/1 Beginning Net Present Value
1/2 Less: - current month
1/3 Add: Actual Interest Payment (Weighted Avg. A notes)
1/4 Add: 0.75% Servicing Component
1/5 Less: Current month Non-Performing
1/5a Less: Warranty Leases
1/6 Less: Amounts on Early Terminations
1/7 Add: Amounts due to Substitutions
1/8 Add: Amounts due to Additional leases (Prepaid leases)
1/9 Ending Net Present Value
2 Overdue Lease Payments - see computer detail
2/1 Beginning Balance
2/2 (Memo) Overdue Payments Received
2/3 Less: Reimbursed Per This Report
2/4 Less: Past Dues on Disqualified Leases - Early Terminations
2/5 Less: Past Dues on Disqualified Leases - Non-Performing and Warranty
2/6 Add: Last Month's Current Payments that became Past due
2/7 Add: Received on Replacements Leases
2/8 (MEMO) Net New Advances
2/9 Ending Balance
3 Collection account-Advance Lease Payments
3/1 Beginning Balance
3/2 Less: Applied to Current from Prepaid
3/3 Less: Advance on Disqualified Leases
3/4 Add: Received This Month
3/5 Add: Received on Replacement Leases
3/6 Ending Balance
4 Renewal Account
4/1 Beginning Balance
4/2 Less: New Obligations
4/3 Plus: Interest earned on amounts on deposit in Renewal Account
4/4 Ending Balance
4/5 Lesser of 2% of Discounted Present Value of Leases as of the Cut-Off
Date and the Outstanding Principal Amount
5 Cash Reserve Account
5/1 Beginning Balance
5/2 Less: New Obligations: Total Shortfall (B9)
5/3 Plus: Interest earned on Cash Reserve Acct.
5/4 Ending Balance
B-1
5/5 1% of Outstanding Note Value
5/6 Lesser of 1% of Discounted Present Value of Leases as of the Cut-Off
Date and the Outstanding Principal Amount
5/7 Target Cash Reserve (Greater of 6/5 & 6/6)
5/8 Cash Reserve Release (6/4-6/7)
5/9 Ending Balance Cash Reserve Account
6 Non-Performing Leases
6/1 Beginning Balance of Non-Performing Leases
6/2 Plus Current Month Additions
6/3 Plus Past Due Payments on Non-Performing Leases
6/4 Less Current Month Recoveries
6/5 Ending Balance
Cash Receipts
Line
A/1 Regular monthly payments
A/2 Overdue payments
A/3 Overdue Payments due on Early Termination and Termed Out Leases (From
Originator)
A/4 Advance Payments of monthly rentals
A/5 Residual Values
A/6 Recoveries on Non-Performing Leases
A/7 Proceeds from investment of Collection Accounts funds
A/8 Casualty and Termination Payments
A/9 Servicer Advances
A/10 Total Receipts
Disbursement Requirements
Line
B/1 Past Due Payments Collected, Due Servicer (COLLECTION ACCT)
B/2 Overdue Payments Advanced, on Disqualified Leases (COLLECTION ACCT)
B/3 Servicing Fee (COLLECTION ACCT)
B/4 Advanced Payments on Disqualified Leases (COLLECTION ACCT)
B/5 Total to Servicer
B/6 Collection Account - Advanced Rents (Monthly-Increase/(Decrease))
B/7 Net cash receipts
B/8 Shortfall
B/9 Draw on Cash Reserve
B/10 Total Available Funds
C Noteholders
C/1 Class A-1 Interest Paid
C/2 Class A-2 Interest Paid
C/3 Class A-3 Interest Paid
C/4 Class A-4 Interest Paid
C/9 Beginning Class A-1 Note Balance
C/10 Class A-1 Note Value Target
C/11 Class A-1 Principal Paid
C/12 Beginning Class A-2 Note Balance
C/13 Class A-2 Note Value
C/14 Ending Class A-2 Note Balance
C/15 Class A-2 Principal Paid
B-2
C/16 Beginning Class A-3 Note Balance
C/17 Class A-3 Note Value
C/18 Ending Class A-3 Note Balance
C/19 Class A-3 Principal Paid
C/20 Beginning Class A-4 Note Balance
C/21 Class A-4 Note Value
C/22 Class A-4 Principal Paid
C/23 Ending Class A-4 Note Balance
C/24 Balance Available for Distribution to IOS Capital
C/25 Combined Class A-3 Note Balance and Class A-4 Balance (for so long as
Class A-3 Notes are outstanding)
E Miscellaneous Tracking Items
E/1 % of Total Non-Performing and Warranty substituted as per Initial Outs,
Note Value
E/2 (MEMO) Cumulative amounts on Early Lease Terminations due to
modification of leases
E/3 (MEMO) Cumulative amounts of additional leases purchased
B-3
