Exhibit 10.5

 

IOS CAPITAL, LLC

 

TO

 

JPMORGAN CHASE BANK,

 

Trustee

 

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FOURTH SUPPLEMENTAL INDENTURE

 

Dated as of June 16, 2003

 

to the

 

INDENTURE

 

Dated as of June 30, 1995

 

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FOURTH SUPPLEMENTAL INDENTURE, dated as of June 16, 2003, between IOS Capital,
LLC (formerly known as “IOS Capital, Inc.”, “IKON Capital, Inc.” and “Alco
Capital Resource, Inc.”), a limited liability company duly organized and
existing under the laws of the State of Delaware (the “Company”), having its
principal office at 1738 Bass Road, Macon, Georgia, and JPMorgan Chase Bank
(formerly known as “The Chase Manhattan Bank” and “Chemical Bank”), a banking
corporation duly organized and existing under the laws of the State of New York,
as Trustee (the “Trustee”).

 

Recitals of the Company

 

WHEREAS the Company and the Trustee have heretofore executed and delivered an
Indenture dated as of June 30, 1995, as supplemented by the First Supplemental
Indenture dated as of June 4, 1997, the Second Supplemental Indenture dated as
of June 12, 2001 (the “Second Supplemental Indenture”) and the Third
Supplemental Indenture dated as of March 15, 2002 (the “Third Supplemental
Indenture” and collectively, the “Indenture”), providing for the issuance from
time to time of its unsecured debentures, notes or other evidences of
indebtedness to be issued in one or more series. All capitalized terms used in
this Fourth Supplemental Indenture and not defined herein shall have the
meanings assigned to them in the Indenture;

 

WHEREAS the Company intends to issue $350,000,000 aggregate principal amount of
its 7.25% Notes due 2008 (the “7.25%Notes”) under the Indenture. The Holders of
the 7.25% Notes will be entitled to the benefit of the additional Events of
Default described herein, solely for their benefit and not for the benefit of
any other Holders of Securities;

 

WHEREAS Section 901(3) of the Indenture provides that, without the consent of
any Holders, the Company, when authorized by a Board Resolution, and the
Trustee, at any time and from time to time, may enter into one or more
supplemental indentures, in form satisfactory to the Trustee, to add any
additional Events of Default solely for the benefit of the Holders of the 7.25%
Notes;

 

WHEREAS the Company desires to add provisions to the Indenture applicable to the
7.25% Notes as set forth below; and

 

WHEREAS all things necessary to make this Fourth Supplemental Indenture a valid
agreement of the Company, and a valid supplement to the Indenture, have been
done.

 

NOW, THEREFORE, this Fourth Supplemental Indenture Witnesseth:

 

For and in consideration of the premises, it is mutually agreed, solely for the
benefit of the Holders of the 7.25% Notes, as follows:

 

Section 1. Additional Definitions. The following Section 101A is hereby added to
the Indenture:

 

“Section 101A. Definitions for Section 501B and the 7.25% Notes.

 

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For purposes of Section 501B the terms defined in this Section 101A have the
meanings assigned to them in this Section 101A and include the plural as well as
the singular:

 

“7.25% Notes” means the Company’s 7.25% Notes due 2008 originally issued in an
aggregate principal amount of $ 350,000,000.

 

“9.75% Notes” means the Company’s 9.75% Notes due 2004 originally issued in an
aggregate principal amount of $250,000,000.

 

“Consolidated Net Worth” shall be determined in accordance with GAAP and shall
mean the sum (as reflected in the consolidated balance sheet of IKON and its
Consolidated Subsidiaries) of (i) the stated dollar amount of outstanding
capital stock, plus (ii) the stated dollar amount of additional paid in capital,
if any, plus (iii) the amount of surplus and retained earnings, minus (iv) the
cost of treasury shares and the excess of redemption value over the stated value
of preferred stock of IKON and its Consolidated Subsidiaries.

 

“Consolidated Subsidiary” means any corporation, limited liability company or
other business entity of which IKON directly or indirectly owns or controls at
least a majority of the outstanding stock or other equivalent interests having
general voting power, including without limitation the right, under ordinary
circumstances, to vote for the election of a majority of the Board of Directors
or similar governing body of such business entity.

 

“Credit Agreement” means the Credit Agreement among IKON Office Solutions, Inc.,
IOS Capital, LLC, IKON Capital, PLC, and IKON Capital, Inc., as Borrowers and
the Lenders party thereto, J.P. Morgan Bank Canada, as Canadian Administrative
Agent, and JPMorgan Chase Bank, as Administrative Agent, dated as of May 24,
2002, as amended from time to time.

 

“Credit Facility” means any debt of IKON or any Consolidated Subsidiary under
the facility established by the Credit Agreement and any other facility or
facilities (or successive facilities) refinancing or replacing such facility or
any other facility constituting the Credit Facility, in each case as amended
from time to time; provided that the aggregate principal amount of the Credit
Facility shall not exceed $600.0 million.

 

“Finance Leasing Subsidiary” means the Company, IKON Capital Inc., a Canadian
corporation, IKON Capital, PLC, a British company, IKON Office Solutions Dublin
Limited, an Irish company, IKON Leasing GmbH, a German company, any successors
to such corporations, and such additional subsidiaries

 

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whose primary business is the leasing of products distributed by IKON and its
subsidiaries.

 

“Fixed Charges Coverage Ratio” means the ratio of (x) consolidated operating
income, excluding non-recurring charges, plus one-third of rental expenses
relating to operating leases to (y) fixed charges. Fixed charges include (i)
interest costs, both expensed and capitalized, excluding interest costs of
Finance Leasing Subsidiaries, (ii) amortization of debt expense and discount or
premium relating to any indebtedness, whether expensed or capitalized, plus
(iii) one-third of rental expense relating to operating leases.

 

“Fourth Supplemental Indenture” means the Fourth Supplemental Indenture, dated
as of June 16, 2003, between the Company and the Trustee.

 

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time.

 

“IKON” means IKON Office Solutions, Inc., an Ohio corporation, the successor
corporation to Alco Standard Corporation, and its successors.

 

“Securitization” means with respect to IKON and its Consolidated Subsidiaries
the transfer or pledge of assets or interests in assets to a trust, partnership,
corporation or other entity, which transfer or pledge is funded by such entity
in whole or in part by the issuance of instruments or securities that are paid
principally from the cash flow derived from such assets or interests in assets.

 

“SFAS 133” means the Statement on Financial Accounting Standards No. 133 issued
by the American Institute of Certified Public Accountants.”

 

Section 2. Additional Defaults for 7.25% Notes. The following Section 501B is
hereby added to the Indenture:

 

“Section 501B. Additional Events of Default Solely for the Benefit of the
Holders of the 7.25% Notes due 2008.

 

“Event of Default,” wherever used herein with respect to the 7.25% Notes means,
in addition to the Events of Default listed in Section 501, any one of the
following events occurs and is continuing for a period of 60 days after written
notice thereof is given to the Company by the Trustee under the Indenture or to
the Company and the Trustee by the holders of an aggregate of at least 10% in
principal amount of the Notes (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):

 

(1) IKON or any Consolidated Subsidiary shall create or assume any debt (other
than the (i) Credit Facility and (ii) any other debt of IKON or any

 

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Consolidated Subsidiary existing as of the date of the Third Supplemental
Indenture that is required by its terms as in effect as of the date of the Third
Supplemental Indenture to be secured equally and ratably with the Credit
Facility or the net proceeds of which will be used to retire or refinance the
9.75% Notes or to defease the 9.75% Notes pursuant to Section 1302 or 1303,
provided that IKON shall have made effective provision to secure the 7.25% Notes
then outstanding equally and ratably with, or prior to, the Credit Facility and
any and all such other debt so secured for as long as the Credit Facility or
such other debt shall be so secured) secured by any mortgage, pledge, security
interest, encumbrance or other lien upon any property, now owned or acquired
after the date of the Second Supplemental Indenture, of IKON or any Consolidated
Subsidiary (the sale with recourse of receivables or any sale and lease-back of
any fixed assets being deemed to be the giving of a lien thereon for money
borrowed), other than debt secured by:

 

(A) liens existing on the date of the Second Supplemental Indenture on any
property, provided that the amount secured by any such lien is not greater than
the amount secured thereby on such date;

 

(B) liens on any property (including but not limited to margin stock (within the
meaning of Regulations T, U and X of the Board of Governors of the Federal
Reserve System)) acquired after the date of the Second Supplemental Indenture
existing at the time of such acquisition or created within a period of 120 days
following any such acquisition to secure or provide for the payment of any part
of the purchase price thereof or liens to secure debt incurred to fund or refund
any liens within the scope of this subsection (B), provided that the amount
secured by any such lien is not greater than the amount secured thereby on the
date of such acquisition or within the 120 day period, as the case may be;

 

(C) liens securing debt of a Consolidated Subsidiary outstanding on the date
that IKON acquires such Consolidated Subsidiary;

 

(D) liens for taxes, assessments or governmental charges or levies not yet due
and payable or being contested in good faith and by appropriate proceedings
promptly initiated and diligently conducted, provided that a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor and no foreclosure, distraint, sale, or other similar proceedings shall
have been commenced;

 

(E) statutory liens of landlords and liens of carriers, warehousemen, mechanics
and materialmen incurred in the ordinary course of business for sums not yet due
or being contested in good faith by appropriate proceedings promptly initiated
and diligently conducted, provided that a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;

 

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(F) liens incurred or deposits made in the ordinary course of business in
connection with workmen’s compensation, unemployment insurance and other types
of social security or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money);

 

(G) liens created after the date of the Second Supplemental Indenture in
connection with borrowing or pledges of receivables, which liens when added to
all sales and discounting transactions contemplated by Section 501B(2) do not in
the aggregate exceed 10% of Consolidated Net Worth;

 

(H) liens, security interests and any other encumbrances on any of IKON’s
treasury shares;

 

(I) liens arising in connection with a Securitization permitted by Section
501B(2) hereof, limited in each case to the accounts therein or in any trust or
similar entity utilized to effect such Securitizations and to any equipment
giving rise to such accounts; and

 

(J) any lien deemed to exist in connection with the escrow arrangement, as
described in the definition of “IOSC Notes Escrow Account” in the Credit
Agreement, securing the 9.75% Notes if IKON relies upon the escrow arrangement
to establish May 24, 2005 as the “Maturity Date” in the Credit Agreement.

 

(2) IKON or any Consolidated Subsidiary, with the exception of the Finance
Leasing Subsidiaries, enters into any securitizations or sells or discounts
receivables with recourse or sells and leases back fixed assets the aggregate
amount of which when added to all liens permitted by Section 501B(1)(G) exceeds
10% of Consolidated Net Worth.

 

(3) The total debt of IKON and its Consolidated Subsidiaries is equal to or
greater than 60% of the sum of (i) the total debt of IKON and its Consolidated
Subsidiaries, plus (ii) the consolidated minority interest obligations shown on
the consolidated balance sheet of IKON and its Consolidated Subsidiaries, plus
(iii) the Consolidated Net Worth of IKON and its Consolidated Subsidiaries. For
purposes of calculating such ratio (x) Finance Leasing Subsidiaries shall be
excluded from the definition of “Consolidated Subsidiaries,” (y) any adjustments
resulting from the application of SFAS 133 shall be excluded from shareholder’s
equity, and (z) in calculating the Consolidated Net Worth of IKON and its
Consolidated Subsidiaries, non-recurring charges subsequent to June 30, 2001,
shall be added back.

 

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(4) For any period of four consecutive fiscal quarters ending during the period
set forth below, the Fixed Charges Coverage Ratio of IKON is less than the ratio
set forth below opposite such period:

 

Period

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   Ratio

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June 30, 2002 to June 29, 2003

   1.75 to 1.00 

June 30, 2003 and thereafter

   2.00 to 1.00.

 

(5) Any Consolidated Subsidiary directly or indirectly creates, assumes,
guarantees or otherwise becomes liable with respect to any debt (other than
Excluded Debt, as defined below) in an aggregate amount outstanding (as to all
Consolidated Subsidiaries) at any time in excess of 12.5% of Consolidated Net
Worth plus the amount of debt outstanding on the date of the Second Supplemental
Indenture (other than Excluded Debt outstanding on such date).

 

For the purpose of this Section 501B(5), “Excluded Debt” shall mean: (i) debt
owing exclusively to IKON or a Consolidated Subsidiary, (ii) debt of a
Consolidated Subsidiary outstanding on the date that IKON acquires such
Consolidated Subsidiary, (iii) debt with respect to property to be used by IKON
or a Consolidated Subsidiary, the interest on which debt is exempt from Federal
income tax pursuant to Section 103 of the Internal Revenue Code of 1986, as
amended, (iv) debt of any foreign subsidiary that is not guaranteed by IKON or
any other Consolidated Subsidiary, (v) debt of Finance Leasing Subsidiaries
owing to IKON or any Consolidated Subsidiary, (vi) debt of Finance Leasing
Subsidiaries to a Person or Persons other than IKON or a Consolidated Subsidiary
provided that such debt is not guaranteed by IKON or a Consolidated Subsidiary,
or (vii) the notes or debt existing or incurred under a facility existing as of
the date of the Second Supplemental Indenture or any facility or facilities
replacing such existing facility, including without limitation, the Credit
Facility, provided that the aggregate principal amount of the Credit Facility
shall not exceed $600.0 million.

 

(6) IKON or a Consolidated Subsidiary sells, leases or transfers all or
substantially all of its assets unless (i) immediately after giving effect
thereto the Company is in compliance with the covenants and provisions of the
Indenture (including this Section 501B) and is not in default thereunder and
(ii) such sale, lease or transfer shall not have any materially adverse effect
upon the financial condition of IKON and its Consolidated Subsidiaries taken as
a whole (such determination to the contrary in (ii) to be evidenced by a letter
from a major investment banking firm of national reputation and by a direction
to the Trustee from the holders of a majority in principal amount of the
outstanding 7.25% Notes). Notwithstanding this provision, any Consolidated
Subsidiary may sell, lease or transfer all or substantially all its assets to
IKON or any other Consolidated Subsidiary.

 

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(7) IKON:

 

(i) declares or pays any dividends (other than dividends payable solely in
common stock);

 

(ii) makes other distributions on any class of capital stock; or

 

(iii) acquires or permits any Consolidated Subsidiary to acquire shares of
capital stock of IKON

 

if, after giving effect thereto, the sum of all payments would exceed: (a) 75%
of consolidated net income (or 100% of consolidated net loss) of IKON and its
Consolidated Subsidiaries since March 31, 2001, plus (b) net cash proceeds
derived from issues of stock since March 31, 2001, plus (c) the aggregate
principal amount of debt subsequently converted into stock since March 31, 2001,
plus (d) $50 million.

 

Notwithstanding the foregoing IKON may:

 

(x) pay dividends or make mandatory sinking funds payments on any preferred
stock; and

 

(y) pay any dividend on common stock within 90 days after declaration if such
payment would have been permitted at the date of declaration.

 

(8) IKON or any Consolidated Subsidiary enters into directly or indirectly any
transaction (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than IKON or a Consolidated Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of IKON’s or such Consolidated
Subsidiary’s business and upon fair and reasonable terms no less favorable to
IKON or such Consolidated Subsidiary than would be obtainable in a comparable
arm’s-length transaction with a Person not an Affiliate.”

 

Section 3. Negative Pledge Exception for 9.75% Notes. Section 1005 of the
Indenture shall not limit entering into or complying with escrow arrangements,
as described in the definition of “IOSC Notes Escrow Account” in the Credit
Agreement, securing the 9.75% Notes if IKON relies upon the escrow arrangement
to establish May 24, 2005 as the “Maturity Date in the Credit Agreement.

 

Section 4. Interpretation; Severability; Headings. Upon the execution and
delivery of this Fourth Supplemental Indenture, the Indenture shall be modified
and amended in accordance with this Fourth Supplemental Indenture, and all the
terms and conditions of both shall be read together as though they constitute
one instrument, except that, in case of conflict, the provisions of this

 

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Fourth Supplemental Indenture will control. The Indenture, as modified and
amended by this Fourth Supplemental Indenture, is hereby ratified and confirmed
in all respects and shall bind every Holder of 7.25% Notes. In case of conflict
between the terms and conditions contained in the 7.25% Notes and those
contained in the Indenture, as modified and amended by this Fourth Supplemental
Indenture, the provisions of the Indenture, as modified and amended by this
Fourth Supplemental Indenture, shall control. In case any provision in this
Fourth Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

 

Section 5. Conflict with Trust Indenture Act. If any provision of this Fourth
Supplemental Indenture limits, qualifies or conflicts with any provision of the
Trust Indenture Act that is required under the Trust Indenture Act to be part of
and govern any provision of this Fourth Supplemental Indenture, the provision of
the Trust Indenture Act shall control. If any provision of this Fourth
Supplemental Indenture modifies or excludes any provision of the Trust Indenture
Act that may be so modified or excluded, the provision of the Trust Indenture
Act shall be deemed to apply to the Indenture as so modified or to be excluded
by this Fourth Supplemental Indenture, as the case may be.

 

Section 6. Successors; Benefits of Fourth Supplemental Indenture, etc. All
agreements of the Company in this Fourth Supplemental Indenture shall bind its
successors. All agreements of the Trustee in this Fourth Supplemental Indenture
shall bind is successors. Nothing in this Fourth Supplemental Indenture or the
7.25% Notes, express or implied, shall give to any Person, other than the
parties hereto and thereto and their successors hereunder and thereunder and the
Holders of the 7.25% Notes, any benefit of any legal or equitable right, remedy
or claim under the Indenture, this Fourth Supplemental Indenture or the 7.25%
Notes.

 

Section 7. Certain Duties and Responsibilities of the Trustee; Trustee Not
Responsible for Recitals. In entering into this Fourth Supplemental Indenture,
the Trustee shall be entitled to the benefit of every provision of the Indenture
relating to the conduct or affecting the liability or affording protection to
the Trustee, whether or not elsewhere herein so provided. The Trustee shall not
be responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Fourth Supplemental Indenture or for or in respect of the
recitals contained herein, all of which recitals are made solely by the Company.

 

Section 8. Governing Law. This Fourth Supplemental Indenture shall be construed
in accordance with the laws of the State of New York without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.

 

Section 9. Counterpart Signatures. All parties may sign any number of copies or
counterparts of this Fourth Supplemental Indenture. Each signed copy or
counterpart shall be an original, but all of them together shall represent the
same agreement.

 

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This instrument may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.

 

In Witness Whereof, the parties hereto have caused this Fourth Supplemental
Indenture to be duly executed as of the day and year first above written.

 

IOS Capital, LLC

By:

     

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    Name:    

Title:

JPMorgan Chase Bank, as Trustee

By:

     

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    Name:    

Title:

           

 

 

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