<PAGE>


                                                                  Execution Copy

                       INSURANCE AND INDEMNITY AGREEMENT

                          AMBAC ASSURANCE CORPORATION,

                                  as Insurer

                             IKON RECEIVABLES, LLC

                                  as Insurer

                           IKON RECEIVABLES-I, LLC,

                                   as Seller

                              IOS CAPITAL, INC.,

                        as Originator and as Servicer,

                                      and

                           THE CHASE MANHATTAN BANK,

                             as Indenture Trustee

            IKON RECEIVABLES, LLC LEASE-BACKED NOTES, SERIES 2000-2

                         Dated as of December 7, 2000


<PAGE>

                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----



ARTICLE I  DEFINITIONS.........................................................1
     SECTION 1.01.  Defined Terms..............................................1
     SECTION 1.02.  Other Definitional Provisions..............................4

ARTICLE II  REPRESENTATIONS, WARRANTIES AND COVENANTS..........................4
     SECTION 2.01.  Representations and Warranties of IOS Capital..............4
     SECTION 2.02.  Affirmative Covenants of IOS Capital.......................5
     SECTION 2.03.  Negative Covenants of IOS Capital..........................7
     SECTION 2.04.  Representations and Warranties of the Insurer..............7
     SECTION 2.05.  Representations and Warranties and Covenants of the
                    Seller.....................................................9
     SECTION 2.06.  Representations and Warranties of the Issuer...............9
     SECTION 2.07.  Affirmative Covenants of the Issuer.......................12
     SECTION 2.08.  Negative Covenants of the Issuer..........................14

ARTICLE III  THE POLICIES; REIMBURSEMENT......................................14
     SECTION 3.01.  Issuance of the Policies..................................14
     SECTION 3.02.  Payment of Fees and Premium...............................16
     SECTION 3.03.  Reimbursement Obligation..................................17
     SECTION 3.04.  Indemnification...........................................18
     SECTION 3.05.  Payment Procedure.........................................20

ARTICLE IV  FURTHER AGREEMENTS................................................20
     SECTION 4.01.  Effective Date; Term of the Insurance Agreement...........20
     SECTION 4.02.  Further Assurances and Corrective Instruments.............21
     SECTION 4.03.  Obligations Absolute......................................21
     SECTION 4.04.  Assignments; Reinsurance; Third-Party Rights..............23
     SECTION 4.05.  Liability of the Insurer..................................23
     SECTION 4.06.  Annual Servicing Audit and Certification..................24

ARTICLE V  DEFAULTS AND REMEDIES..............................................24
     SECTION 5.01.  Defaults..................................................24
     SECTION 5.02.  Remedies; No Remedy Exclusive.............................25
     SECTION 5.03.  Waivers...................................................26

ARTICLE VI  MISCELLANEOUS.....................................................26
     SECTION 6.01.  Amendments, Etc...........................................26
     SECTION 6.02.  Notices...................................................26
     SECTION 6.03.  Severability..............................................28
     SECTION 6.04.  Governing Law.............................................29
     SECTION 6.05.  Consent to Jurisdiction...................................29
     SECTION 6.06.  Consent of the Insurer....................................30
     SECTION 6.07.  Counterparts..............................................30
     SECTION 6.08.  Headings..................................................30
     SECTION 6.09.  Trial by Jury Waived......................................30
     SECTION 6.10.  Limited Liability.........................................30

                                       i
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                               TABLE OF CONTENTS
                                  (continued)

                                                                            Page
                                                                            ----
     SECTION 6.11.  Entire Agreement..........................................30
     SECTION 6.12.  Indenture Trustee.........................................31



                                      ii
<PAGE>

      INSURANCE AND INDEMNITY AGREEMENT (as it may be amended, modified or
supplemented from time to time, this "Insurance Agreement"), dated as of
December 7, 2000, by and among IOS Capital, Inc., as Originator and as Servicer,
Ambac Assurance Corporation, as Insurer, IKON Receivables, LLC, as Issuer, IKON
Receivables-I, LLC, as Seller, and The Chase Manhattan Bank, as Indenture
Trustee.

                            PRELIMINARY STATEMENTS

      A.    The Indenture, dated as of December 1, 2000, relating to the IKON
Receivables, LLC Lease-Backed Notes, Series 2000-2, by and among the Issuer, the
Servicer and the Indenture Trustee (as it may be amended, modified or
supplemented from time to time as set forth therein) provides for, among other
things, the issuance of the Notes.

      B.    The Insurer has issued the Policy, pursuant to which it has agreed
to pay to the Indenture Trustee for the benefit of the Holders certain payments
in respect of the Notes.

      C.    The Insurer shall be paid a Premium as set forth herein.

      D.    IOS Capital, Inc., the Issuer, the Seller and the Indenture Trustee
have undertaken certain obligations in consideration for the Insurer's issuance
of its Policy.

      NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:

                                   ARTICLE I
                                  DEFINITIONS

      SECTION 1.01. Defined Terms. Unless the context clearly requires
                    -------------
otherwise, all capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Indenture or, if not defined
therein, in the Policy described below. For purposes of this Insurance
Agreement, the following terms shall have the following meanings:

            "Closing Date" means December 7, 2000.

            "Commission" means the Securities and Exchange Commission.

            "Company Documents" means the Indenture, this Insurance Agreement,
the Notes, the Swap Documents and the Assignment and Servicing Agreement.

            "Counterparty" means Lehman Brothers Special Financing Inc., a
Delaware corporation, or its permitted successors or assigns under the Swap
Documents.

            "Default" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Servicing
Termination.
<PAGE>

      "Documents" means the Company Documents and any other information relating
to the Asset Pool, IOS Capital, the Seller or the Issuer furnished to the
Insurer by IOS Capital, the Seller or the Issuer.

      "Event of Servicing Termination" means any Event of Servicing Termination
specified in Section 5.01 of this Insurance Agreement.

      "Financial Statements" means, with respect to IOS Capital, the
consolidated statements of financial condition as of September 30, 2000 and the
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended September 30, 2000 and the notes thereto.

      "Holder" has the meaning given such term in the Policy.

      "Indemnification Agreement" means the Indemnification Agreement dated as
of December 7, 2000 among the Insurer and the Underwriters.

      "Indenture Trustee" means The Chase Manhattan Bank, as indenture trustee
under the Indenture, and any successor thereto under the Indenture.

      "Insurance Agreement" has the meaning given such term in the initial
paragraph hereof.

      "Insurer" means Ambac Assurance Corporation, a Wisconsin domiciled stock
insurance corporation, or any successor thereto, as issuer of the Policy.

      "Insurer Information" has the meaning given such term in Section
3.04(a)(v).

      "Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

      "IOS Capital" means IOS Capital, Inc., and any successors thereto, as the
Originator and the Servicer.

      "Issuer" means IKON Receivables, LLC, a Delaware limited liability
company, or any successor thereto as provided for in the Indenture.

      "Late Payment Rate" means the lesser of (a) the greater of (i) the per
annum rate of interest publicly announced from time to time by Citibank, N.A. as
its prime or base lending rate (any change in such rate of interest to be
effective on the date such change is announced by Citibank, N.A.), plus 2% per
annum and (ii) the then applicable highest rate of interest on the Notes and (b)
the maximum rate permissible under applicable usury or similar laws limiting
interest rates. The Late Payment Rate shall be computed on the basis of the
actual number of days elapsed over a year of 360 days.

                                       2
<PAGE>

      "Material Adverse Change" means, in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person on a consolidated basis with its subsidiaries or
(ii) the ability of such Person to perform its obligations under any of the
Company Documents.

      "Moody's" means Moody's Investors Service, Inc., and any successor
thereto.

      "Notes" has the meaning given such term in the Indenture.

      "Offering Document" means the Prospectus dated April 28, 2000, the
Preliminary Prospectus Supplement dated November 21, 2000, and the Prospectus
Supplement dated November 29, 2000, each in respect of the Notes, and any
amendment or supplement thereto, and any other offering document in respect of
the Notes prepared by IOS Capital that makes reference to the Policy.

      "Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, partnership or
other organization or entity (whether governmental or private).

      "Policy" means each of the following: (a) the certificate guaranty
insurance policy, #AB0409BE, together with all endorsements thereto, issued by
the Insurer to the Indenture Trustee, for the benefit of the Holders of the
Notes (the "Note Policy") and (b) the financial guaranty insurance policy,
SF0394BE, issued by the Insurer to the Counterparty (the "Swap Policy").
"Policies" means both of the Note Policy and the Swap Policy.

      "Premium" means the premium payable in accordance with the Policy, with
respect to any Payment Date, the amount calculated by multiplying the Premium
Percentage by the Outstanding Principal Amount of the Notes on such Payment Date
prior to the distribution of any principal with respect to the Notes on such
Payment Date. All calculations of the Premium shall be based upon twelve 30-day
months and a 360-day year.

      "Premium Percentage" shall mean 0.18% per annum.

      "Registration Statement" means the registration statement on Form S-3 (No.
333-91599), including the prospectus, 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, including the Notes, at the time it became effective.

      "Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.

      "Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

                                       3
<PAGE>

      "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and any successor thereto.

      "Transaction" means the transactions contemplated by the Company
Documents, including the transactions described in the Offering Document.

      "Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.

      "Underwriters" means, collectively, Lehman Brothers Inc., Chase Securities
Inc., Deutsche Banc Alex. Brown, Banc of America Securities LLC and PNC Capital
Markets, Inc.

      "Underwriting Agreement" means the Underwriting Agreement dated November
29, 2000 among the Underwriters, the Issuer and IOS Capital with respect to the
offer and sale of the Notes, as amended, modified or supplemented from time to
time.

      "Underwriters' Information" has the meaning given such term in the
Indemnification Agreement.


      SECTION 1.02. Other Definitional Provisions. The words "hereof," "herein"
                    -----------------------------
and "hereunder" and words of similar import when used in this Insurance
Agreement shall refer to this Insurance Agreement as a whole and not to any
particular provision of this Insurance Agreement, and Section, subsection,
Schedule and Exhibit references are to this Insurance Agreement unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The words
"include" and "including" shall be deemed to be followed by the phrase "without
limitation."

                                  ARTICLE II
                   REPRESENTATIONS, WARRANTIES AND COVENANTS

      SECTION 2.01. Representations and Warranties of IOS Capital. IOS Capital
                    ---------------------------------------------
hereby makes to and for the benefit of the Insurer each of the representations
and warranties made by IOS Capital in the Indenture and the Assignment and
Servicing Agreement, including, but not limited to, Section 2 of the Assignment
and Servicing Agreement. Such representations and warranties are incorporated
herein by this reference as if fully set forth herein, and may not be amended
except by an amendment complying with the terms of Section 6.01. In addition,
IOS Capital represents and warrants as of the Closing Date as follows:

      (a) Due Authorization. The execution, delivery and performance by IOS
Capital of the Company Documents to which it is a party, have been duly
authorized by all necessary corporate action and do not require any additional
approvals or consents, or other action by or any notice to or filing with any
Person, including any governmental entity or any of the stockholders of IOS
Capital, which have not previously been obtained or given.

                                       4
<PAGE>

      (b) Noncontravention. The execution and delivery by IOS Capital of the
Company Documents to which it is a party, the consummation of the Transaction
and the satisfaction of the terms and conditions of the Company Documents do not
and will not:

            (i) conflict with or result in any breach or violation of any
            provision of the charter or bylaws of IOS Capital or any law, rule,
            regulation, order, writ, judgment, injunction, decree, determination
            or award currently in effect having applicability to IOS Capital or
            any of its respective material properties, including regulations
            issued by any administrative agency or other governmental authority
            having supervisory powers over IOS Capital;

            (ii) constitute a default by IOS Capital under, result in the
            acceleration of any obligation under, or breach any provision of any
            loan agreement, mortgage, indenture or other agreement or instrument
            to which IOS Capital is a party or by which any of its properties
            are or may be bound or affected; or

            (iii) result in or require the creation of any lien upon or in
            respect of any assets of IOS Capital, except as expressly
            contemplated by the Company Documents.

      (c) Valid and Binding Obligations. When executed and delivered by IOS
Capital, the Company Documents to which IOS Capital is a party will constitute
the legal, valid and binding obligations of IOS Capital enforceable in
accordance with their respective terms, except as such enforceability may be
limited by insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles and
public policy considerations as to rights of indemnification for violations of
federal securities laws. The Notes, when executed, authenticated and delivered
in accordance with the Indenture, will be validly issued and outstanding and
entitled to the benefits of the Indenture. IOS Capital will not at any time in
the future deny that the Company Documents constitute the legal, valid and
binding obligations of IOS Capital.

      (d) Compliance With Securities Laws. The offer and sale of the Notes
comply in all material respects with all requirements of law, including all
registration requirements of applicable securities laws. The Indenture is
required to be qualified and has been qualified under the Trust Indenture Act
and the Issuer is not required to be registered as an "investment company" under
the Investment Company Act. IOS Capital will satisfy any of the information
reporting requirements of the Securities Exchange Act arising out of the
Transaction to which it, the Issuer or the Seller are subject.

      SECTION 2.02. Affirmative Covenants of IOS Capital. IOS Capital hereby
                    ------------------------------------
makes, to and for the benefit of the Insurer, all of the covenants made by IOS
Capital as Originator and Servicer in the Indenture and the Assignment and
Servicing Agreement, including, but not limited to, Sections 4, 5, 6, 7 and 8 of
the Assignment and Servicing Agreement (but with respect to such covenants made
by IOS Capital as Servicer, only for so long as IOS Capital is the Servicer).
Such covenants are hereby incorporated herein by this reference as if fully set

                                       5
<PAGE>

forth herein, and may not be amended except by an amendment complying with the
terms of Section 6.01. In addition, IOS Capital hereby agrees that during the
term of this Insurance Agreement, unless the Insurer shall otherwise expressly
consent in writing:

      (a) Compliance With Agreements and Applicable Laws. IOS Capital shall
comply with the terms and conditions of and perform its obligations under the
Company Documents to which it is a party in all cases in which failure to so
comply or perform would result in a default thereunder and shall comply with all
material requirements of any law, rule or regulation applicable to it.

      (b) Access to Records; Discussions with Officers and Accountants. On an
annual basis, or upon the occurrence of a Material Adverse Change, IOS Capital
shall, upon the reasonable request of the Insurer, permit the Insurer or its
authorized agents:

            (i) to inspect the books and records of IOS Capital as they may
            relate to the Notes, the obligations of IOS Capital under the
            Company Documents and the Transaction;

            (ii) to discuss the affairs, finances and accounts of IOS Capital
            with the Chief Operating Officer and the Chief Financial Officer of
            IOS Capital; and

            (iii) with IOS Capital's consent, which consent shall not be
            unreasonably withheld or delayed, to discuss the affairs, finances
            and accounts of IOS Capital with IOS Capital's independent
            accountants, provided that an officer of IOS Capital shall have the
            right to be present during such discussions.

            Such inspections and discussions shall be conducted during normal
business hours at the Insurer's expense and shall not unreasonably disrupt the
business of IOS Capital.

      (c) Retirement of Notes. IOS Capital shall instruct the Indenture Trustee
in writing, upon a retirement or other payment of all of the Notes, to surrender
the Policy to the Insurer for cancellation.

      (d) Disclosure Document. Each Offering Document delivered with respect to
the Notes shall clearly disclose that the Policy is not covered by the
property/casualty insurance security fund specified in Article 76 of the New
York Insurance Law.

      (e) Third-Party Beneficiary. IOS Capital agrees that the Insurer shall
have all rights of a third-party beneficiary in respect of the Indenture, and
the Assignment and Servicing Agreement.

      (f) Closing Documents. IOS Capital shall provide or cause to be provided
to the Insurer an executed original copy of each document executed in connection
with the Transaction within 30 Business Days after the date of closing.

                                       6
<PAGE>

      SECTION 2.03. Negative Covenants of IOS Capital. IOS Capital hereby agrees
                    ---------------------------------
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:

      (a) Impairment of Rights. IOS Capital shall not take any action, or fail
to take any action, if such action or failure to take action may result in a
Material Adverse Change specified in clause (ii) of the definition of Material
Adverse Change with respect to IOS Capital, or may not interfere with the
enforcement of any rights of the Insurer under or with respect to any of the
Company Documents. IOS Capital shall give the Insurer written notice of any such
action or failure to act on the earlier of: (i) the date upon which any publicly
available filing or release is made with respect to such action or failure to
act or (ii) promptly prior to the date of consummation of such action or failure
to act. IOS Capital shall furnish to the Insurer all information requested by it
that is reasonably necessary to determine compliance with this paragraph.

      (b) Amendments, Etc. IOS Capital shall not modify or amend, or consent to
any modification or amendment of, any of the terms, provisions or conditions of
the Company Documents to which it is a party without the prior written consent
of the Insurer thereto, but excluding any amendment to the Offering Document
required by law and excluding any modifications or amendments to which, pursuant
to the terms of the Company Documents, Insurer's consent is not required.

      (c) Successors. Except as provided in Section 10.02 of the Assignment and
Servicing Agreement or Section 8.08 of the Indenture, as applicable, neither the
Indenture Trustee nor IOS Capital shall terminate or designate, or consent to
the termination or designation of, any successor Servicer or Indenture Trustee
without the prior written approval of the Insurer, which approval shall not be
unreasonably withheld, conditioned or delayed.


      SECTION 2.04. Representations and Warranties of the Insurer. The Insurer
                    ---------------------------------------------
represents and warrants to the Indenture Trustee (on behalf of the Noteholders),
the Issuer and IOS Capital as follows:

      (a) Organization and Licensing. The Insurer is a duly organized and
validly existing Wisconsin stock insurance company duly qualified to conduct an
insurance business in the State of Illinois.

      (b) Corporate Power. The Insurer has the corporate power and authority to
issue each Policy and execute and deliver this Insurance Agreement and to
perform all of its obligations hereunder and thereunder.

      (c) Authorization; Approvals. All proceedings legally required for the
issuance of the Policies and the execution, delivery and performance of this
Insurance Agreement have been taken and all licenses, orders, consents or other
authorizations or approvals of the Insurer's Board of Directors or stockholders
or any governmental boards or bodies legally required for

                                       7
<PAGE>

the enforceability of the Policies have been obtained; any proceeding not taken
and any license, authorization or approvals not obtained are not material to the
enforceability of the Policies.

      (d) Enforceability. Each Policy, when issued, and this Insurance Agreement
will each constitute a legal, valid and binding obligation of the Insurer,
enforceable in accordance with its terms, subject to insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors' rights
generally and by general principles of equity and subject to principles of
public policy limiting the right to enforce the indemnification provisions
contained therein and herein, insofar as such provisions relate to
indemnification for liabilities arising under federal securities laws.

      (e) Financial Information. The consolidated financial statements of the
Insurer and its subsidiaries as of December 31, 1999 and 1998, and for the three
years ended December 31, 1999, included in the Annual Report on Form 10-K of
Ambac Financial Group, Inc. (which was filed with the Commission on March 30,
2000, Commission File Number 1-10777), and the unaudited consolidated financial
statements of the Insurer and its subsidiaries as of September 30, 2000 and for
the periods ending September 30, 2000 and September 30, 1999, included in the
Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. for the period
ended September 30, 2000 (which was filed with the Commission on November 13,
2000), are hereby incorporated by reference into the Prospectus Supplement dated
November 29, 2000 relating to the Notes and shall be deemed to be a part hereof.
Since September 30, 2000, there has been no Material Adverse Change with respect
to the financial condition of the Insurer that would affect its ability to
perform its obligations under the Policy.

      (f) Insurer Information. The Insurer Information is true and correct in
all material respects and does not contain any untrue statement of a material
fact.

      (g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge, threatened
against it at law or in equity or before or by any court, governmental agency,
board or commission or any arbitrator which, if decided adversely, would result
in a Material Adverse Change or would materially and adversely affect its
ability to perform its obligations under the Policies or this Insurance
Agreement.

      (h) No Conflict. The execution by the Insurer of this Insurance Agreement
will not, and the satisfaction of the terms hereof will not, conflict with or
result in a breach of any of the terms, conditions or provisions of the
Certificate of Incorporation or By-Laws of the Insurer, or any restriction
contained in any contract, agreement or instrument to which the Insurer is a
party or by which it is bound or constitute a default under any of the
foregoing.

      (i) Confidential Information. The Insurer agrees that it and its
shareholders, directors, agents, accountants and attorneys shall not use or
disclose any information provided to the Insurer pursuant to or in connection
with this Insurance Agreement or the issuance of the Policies or otherwise
related to the Transactions, including any matter of which it becomes aware
during the inspections conducted or discussions had pursuant to Section 2.02(b),
unless such information is readily available from public sources or except as
may be otherwise

                                       8
<PAGE>

required by regulation, law or court order or requested by appropriate
governmental authorities or as necessary to preserve its rights or security
under or to enforce the Company Documents; provided, however, that the foregoing
                                           --------  -------
shall not limit the right of the Insurer to make such information available to
its regulators, securities rating agencies, reinsurers, credit and liquidity
providers, counsel and accountants. If the Insurer is requested or required (by
oral questions, interrogatories, requests for information or documents subpoena,
civil investigative demand or similar process) to disclose any information
provided to the Insurer pursuant to or in connection with this Insurance
Agreement or the issuance of the Policies or otherwise related to the
Transactions, including any information of which it becomes aware through such
inspections or discussions, the Insurer will promptly notify IOS Capital of such
request(s) so that IOS Capital may seek an appropriate protective order and/or
waive the Insurer's compliance with the provisions of this Insurance Agreement.
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Insurer is, nonetheless, in the opinion of its counsel (which shall be
delivered to IOS Capital), compelled to disclose such information to any
tribunal or else stand liable for contempt or suffer other censure of
significant penalty, the Insurer may disclose such information to such tribunal
that the Insurer is compelled to disclose, provided that the Insurer shall
promptly notify IOS Capital that the Insurer has been compelled to so disclose
and that the Insurer shall use best efforts to provide to IOS Capital prior to
disclosure a copy of all information to be so disclosed.

      (j) Rating. The Insurer is not aware of any facts that if disclosed to
Moody's or S&P would be reasonably expected to result in a downgrade of the
rating of the financial strength of the Insurer by either of such Rating
Agencies.

      (k) 1933 Act Registration. Each Policy is exempt from registration under
the Act.


      SECTION 2.05. Representations and Warranties and Covenants of the Seller.
                    ----------------------------------------------------------
The Seller hereby makes to and for the benefit of the Insurer each of the
representations and warranties and covenants made by the Seller in the
Assignment and Servicing Agreement, including, but not limited to, Section 3 and
Section 9 of the Assignment and Servicing Agreement. Such representations,
warranties and covenants are incorporated herein by this reference as if fully
set forth herein, and may not be amended except by an amendment complying with
the terms of Section 6.01.


      SECTION 2.06. Representations and Warranties of the Issuer. The Issuer
                    --------------------------------------------
hereby makes, to and for the benefit of the Insurer, each of the representations
and warranties made by the Issuer in the Indenture. Such representations and
warranties are incorporated herein by this reference as if fully set forth
herein, and may not be amended except by an amendment complying with the terms
of Section 6.01. In addition, the Issuer represents and warrants as of the
Closing Date as follows:

      (a) Due Organization and Qualification. The Issuer is a limited liability
company, duly organized, validly existing and in good standing under the laws of
Delaware and the United States of America. The Issuer is duly qualified to do
business, is in good standing and has

                                       9
<PAGE>

obtained all necessary licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as currently
conducted and as described in the Offering Document and the performance of its
obligations under the Company Documents in each jurisdiction in which the
failure to be so qualified or to obtain such approvals would render any Company
Document unenforceable in any respect or would have a material adverse effect
upon the Transaction.

      (b) Power and Authority. The Issuer has all necessary limited liability
company power and authority to conduct its business as currently conducted and
as described in the Offering Document, to execute, deliver and perform its
obligations under the Company Documents and to consummate the Transaction.

      (c) Due Authorization. The execution, delivery and performance of the
Company Documents by the Issuer has been duly authorized by all necessary
limited liability company action and does not require any additional approvals
or consents, or other action by or any notice to or filing with any Person,
including any governmental entity or any beneficial owner of the Trust, which
have not previously been obtained or given by the Trust.

      (d) Noncontravention. The execution and delivery by the Issuer of the
Company Documents to which it is a party, the consummation of the Transaction
and the satisfaction of the terms and conditions of the Company Documents do not
and will not:

            (i) conflict with or result in any breach or violation of any
            provision of the Amended and Restated Limited Liability Company
            Agreement of the Issuer or any law, rule, regulation, order, writ,
            judgment, injunction, decree, determination or award currently in
            effect having applicability to the Issuer or any of its respective
            material properties, including regulations issued by any
            administrative agency or other governmental authority having
            supervisory powers over the Issuer;

            (ii) constitute a default by the Issuer under, result in the
            acceleration of any obligation under, or breach any provision of any
            loan agreement, mortgage, indenture or other agreement or instrument
            to which the Issuer either is a party or by which any of their
            properties are or may be bound or affected; or

            (iii) result in or require the creation of any lien upon or in
            respect of any assets of the Issuer, except as otherwise expressly
            contemplated by the Company Documents.

      (e) Legal Proceedings. There is no action, proceeding or investigation by
or before any court, governmental or administrative agency or arbitrator against
or affecting the Issuer, any properties or rights of the Issuer or any of the
Asset Pool pending or threatened, which, in any case, if decided adversely to
the Issuer could result in a Material Adverse Change with respect to the Issuer.

                                      10
<PAGE>

      (f) Valid and Binding Obligations. The Company Documents, when executed
and delivered by the Issuer, will constitute the legal, valid and binding
obligations of the Issuer, enforceable in accordance with their respective
terms, except as such enforceability may be limited by insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general equitable principles and public policy considerations as
to rights of indemnification for violations of federal securities laws. The
Notes, when executed, authenticated and delivered in accordance with the
Indenture, will be validly issued and outstanding and entitled to the benefits
of the Indenture.

      (g) Compliance with Law, Etc. No practice, procedure or policy employed,
or proposed to be employed, by the Issuer in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable to
the Issuer that, if enforced, could result in a Material Adverse Change with
respect to the Issuer.

      (h) Accuracy of Information. None of the Documents, as amended,
supplemented or superseded, furnished to the Insurer by the Issuer contains any
statement of a material fact which was untrue or misleading in any material
respect when made. Since the furnishing of the Documents, there has been no
change nor any development or event involving a prospective change known to the
Issuer that would render any of the Documents untrue or misleading in any
material respect.

      (i) Compliance With Securities Laws. The offer and sale of the Notes
comply in all material respects with all requirements of law, including all
registration requirements of applicable securities laws. Without limiting the
foregoing, the Offering Document does not contain any untrue statement of a
material fact and does not omit to state a material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; provided, however, that no representation is made with
                      --------  -------
respect to the Insurer Information or with respect to the Underwriters'
Information. Neither the offer nor sale of the Notes by the Issuer has been or
will be in violation of the Securities Act or any other federal or state
securities laws. The Indenture is required to be qualified under the Trust
Indenture Act. The Issuer is not required to be registered as an "investment
company" under the Investment Company Act. The Issuer will satisfy any of the
information reporting requirements of the Securities Exchange Act arising out of
the Transaction to which it or the Trust are subject.

      (j) Solvency; Fraudulent Conveyance. The Issuer is solvent and will not
be rendered insolvent by the Transaction and, after giving effect to the
Transaction, the Issuer will not be left with an unreasonably small amount of
capital with which to engage in its business, and the Issuer does not intend to
incur, or believe that it has incurred, debts beyond its ability to pay as they
mature. The Issuer does not contemplate the commencement of insolvency,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the Issuer or
any of their assets. The Issuer is not pledging the Asset Pool under the
Indenture with any intent to hinder, delay or defraud any of the Issuer's
creditors.


                                      11
<PAGE>

      (k) Principal Place of Business. The principal place of business of the
Issuer is 1738 Bass Road, Macon, Georgia 31210.


      SECTION 2.07. Affirmative Covenants of the Issuer. The Issuer hereby
                    -----------------------------------
makes, to and for the benefit of the Insurer, all of the covenants of the Issuer
set forth in the Indenture, including, but not limited to, Section 9 of the
Indenture. Such covenants are incorporated herein by this reference, and may not
be amended except by an amendment complying with the terms of Section 6.01. In
addition, the Issuer hereby agrees that during the term of this Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:

      (a) Compliance With Agreements and Applicable Laws. The Issuer shall
comply with the terms and conditions of and perform its respective obligations
under the Company Documents to which it is a party in all cases in which failure
to so comply or perform would result in a default thereunder and shall comply
with all material requirements of any law, rule or regulation applicable to it.

      (b) Existence. The Issuer and its successors and permitted assigns shall
maintain its existence as a limited liability company and shall at all times
continue to be duly organized under the laws of the State of Delaware and duly
qualified and duly authorized (as described in subsections 2.06(a), (b) and (c)
hereof) and shall conduct its business in accordance with the terms of its
Amended and Restated Limited Liability Company Agreement.

      (c) Access to Records; Discussions with Officers and Accountants. On an
annual basis, or upon the occurrence of a Material Adverse Change, the Issuer
shall, upon the reasonable request of the Insurer, permit the Insurer or its
authorized agents:

            (i)   to inspect the books and records of the Issuer as they may
            relate to the Notes, the obligations of the Issuer under the Company
            Documents and the Transaction, or any other indebtedness of the
            Issuer;

            (ii)  to discuss the affairs, finances and accounts of the Issuer
            with IOS Capital on behalf of the Issuer; and

            (iii) with the Issuer's consent, which consent shall not be
            unreasonably withheld or delayed, to discuss the affairs, finances
            and accounts of the Issuer with the Issuer's independent
            accountants, provided that an officer of the Issuer and IOS Capital
            shall have the right to be present during such discussions.

            Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of the Issuer.

      (d) Notice of Material Events. The Issuer shall be obligated promptly to
inform the Insurer in writing of the occurrence of any of the following:


                                      12
<PAGE>

            (i)   the submission of any claim or the initiation or threat of any
            legal process, litigation or administrative or judicial
            investigation, or rule making or disciplinary proceeding by or
            against the Issuer that (A) could reasonably be required to be
            disclosed to the Commission or (B) would likely result in a Material
            Adverse Change with respect to the Issuer, or the promulgation of
            any proceeding or any proposed or final ruling in connection with
            any such litigation, investigation or proceeding which would likely
            result in a Material Adverse Change with respect to the Issuer;

            (ii)  any change in the location of the principal office of the
            Issuer;

            (iii) the occurrence of any Default or Event of Servicing
            Termination, or any Material Adverse Change in respect of the
            Issuer;

            (iv)  the commencement of any proceedings by or against the Issuer
            under any applicable reorganization, liquidation, rehabilitation,
            insolvency or other similar law now or hereafter in effect or of any
            proceeding in which a receiver, liquidator, conservator, trustee or
            similar official shall have been, or may be, appointed or requested
            for the Issuer or any of their assets; or

            (v)   the receipt of notice that (A) any license, permit, charter,
            registration or approval necessary for the conduct of the Issuer's
            business are to be, or may be suspended or revoked or (B) the Issuer
            is to cease and desist any practice, procedure or policy employed by
            the Issuer in the conduct of its business, and such cessation may
            result in a Material Adverse Change with respect to the Issuer.

      (e) Financing Statements and Further Assurances. The Issuer shall, upon
the request of the Insurer, from time to time, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, within ten days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Company Documents. In addition, the Issuer
agrees to cooperate with S&P and Moody's in connection with any review of the
Transaction, conducted during normal business hours and in a manner that does
not unreasonably disrupt the business of IOS Capital, that may be undertaken by
S&P and Moody's after the date hereof upon reasonable notice.

      (f) Maintenance of Licenses. The Issuer shall maintain all licenses,
permits, charters and registrations which are material to the conduct of its
business.

      (g) Third-Party Beneficiary. The Issuer agrees that the Insurer shall
have all rights of a third-party beneficiary in respect of the Indenture.


                                      13
<PAGE>

      SECTION 2.08. Negative Covenants of the Issuer. The Issuer hereby agrees
                    --------------------------------
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:

      (a) Impairment of Rights. The Issuer shall not take any action, or fail
to take any action, if such action or failure to take action may result in a
Material Adverse Change specified in clause (ii) of the definition of Material
Adverse Change with respect to the Issuer or may not interfere with the
enforcement of any rights of the Insurer under or with respect to any of the
Company Documents. The Issuer shall give the Insurer written notice of any such
action or failure to act on the earlier of: (i) the date upon which any publicly
available filing or release is made with respect to such action or failure to
act or (ii) promptly prior to the date of consummation of such action or failure
to act. The Issuer shall furnish to the Insurer all information requested by it
that is reasonably necessary to determine compliance with this paragraph.


      (b) Amendments, Etc. The Issuer shall not modify or amend, or consent to
any modification or amendment of, any of the terms, provisions or conditions of
the Company Documents to which it is a party without the prior written consent
of the Insurer thereto, but excluding any amendment to the Offering Document
required by law and excluding any modifications or amendments to which, pursuant
to the terms of the Company Documents, Insurer's consent is not required.

      (c) Limitation on Mergers, Etc. The Issuer shall not consolidate with or
merge with or into any Person or transfer all or substantially all of its assets
to any Person or liquidate or dissolve except as provided in the Indenture or as
permitted hereby. The Issuer shall furnish to the Insurer all information
requested by it that is reasonably necessary to determine compliance with this
paragraph.

      (d) Successors. Except as provided in Section 10.02 of the Assignment and
Servicing Agreement or Section 8.08 of the Indenture, as applicable, neither the
Trustee nor IOS Capital shall terminate or designate, or consent to the
termination or designation of, any successor Servicer or Trustee without the
prior written approval of the Insurer, which approval shall not be unreasonably
withheld, conditioned or delayed.

                                  ARTICLE III
                          THE POLICIES; REIMBURSEMENT

      SECTION 3.01. Issuance of the Policies. The Insurer agrees to issue each
                    ------------------------
Policy on the Closing Date subject to satisfaction of the conditions precedent
set forth below:

      (a) Payment of Initial Premium and Expenses. The applicable parties shall
have been paid by IOS Capital their related fees and expenses payable in
accordance with Section 3.02 within 5 Business Days of receipt of the related
invoice;


                                      14
<PAGE>

      (b) Company Documents. The Insurer shall have received a copy of each of
the Company Documents, in form and substance reasonably satisfactory to the
Insurer, duly authorized, executed and delivered by each party thereto;

      (c) Certified Documents and Resolutions. The Insurer shall have received a
copy of the charter and bylaws of IOS Capital and the limited liability company
agreement and certificate of each of Seller and Issuer, and (ii) a certificate
of the Secretary or Assistant Secretary of IOS Capital stating that attached
thereto is a true, complete and correct copy of resolutions duly adopted by the
Board of Directors or a duly authorized committee of IOS Capital, or the
Managing Member of the Seller and the Issuer, as the case may be, authorizing
the execution, delivery and performance by IOS Capital, the Seller or the
Issuer, as the case may be, of the Company Documents to which it is a party and
the consummation of the Transaction and that such charter, bylaws, limited
liability company agreements, certificates of formation and resolutions are in
full force and effect without amendment or modification on the Closing Date;

      (d) Incumbency Certificate. The Insurer shall have received a certificate
of the Secretary or an Assistant Secretary of each of IOS Capital, the Seller
and the Issuer certifying the names and signatures of the officers of such
entity authorized to execute and deliver the Company Documents to which it is a
party;

      (e) Representations and Warranties; Certificate. The representations and
warranties of IOS Capital, the Seller and the Issuer set forth or incorporated
by reference in this Insurance Agreement shall be true and correct on and as of
the Closing Date as if made on the Closing Date, and the Insurer shall have
received a certificate of appropriate officers of IOS Capital, the Seller and
the Issuer to that effect;

      (f) Opinions of Counsel. The Insurer shall have received all opinions of
counsel addressed to any of Moody's, S&P, the Indenture Trustee, IOS Capital,
the Issuer, the Seller, or the Underwriters in respect of the Transaction, in
form and substance reasonably satisfactory to the Insurer, addressed to the
Insurer and addressing such matters as the Insurer may reasonably request, and
the counsel providing each such opinion shall have been instructed by its client
to deliver such opinion to the addressees thereof;

      (g) Approvals, Etc. The Insurer shall have received true and correct
copies of all approvals, licenses and consents, if any, including any required
approval of the shareholders of IOS Capital, required in connection with the
Transaction;

      (h) No Litigation, Etc. No suit, action or other proceeding, investigation
or injunction, or final judgment relating thereto, shall be pending or
threatened before any court, governmental or administrative agency or arbitrator
in which it is sought to restrain or prohibit or to obtain damages or other
relief in connection with any of the Company Documents or the consummation of
the Transaction;


                                      15
<PAGE>

      (i) Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court that would make the Transaction illegal or
otherwise prevent the consummation thereof;

      (j) Satisfaction of Conditions of the Underwriting Agreement. All
conditions in the Underwriting Agreement relating to the Underwriters'
obligation to purchase the Notes shall have been satisfied, without taking into
account any waiver by any Underwriter of any condition unless such waiver has
been approved by the Insurer. The Insurer shall have received copies of each of
the documents, and shall be entitled to rely on each of the documents, required
to be delivered to any Underwriter pursuant to the Underwriting Agreement;

      (k) Issuance of Ratings. The Insurer shall have received confirmation that
the risk secured by the Note Policy constitutes a "BBB" risk by S&P and a "Baa2"
risk by Moody's and that the Notes, when issued, will be rated "AAA" by S&P and
"Aaa" by Moody's (or A-1+ by S&P and P-1 by Moody's in the case of the Class A-1
Notes);

      (l) No Default. No Default or Event of Servicing Termination shall have
occurred;

      (m) Additional Items. The Insurer shall have received such other
documents, instruments, approvals or opinions reasonably requested by the
Insurer as may be reasonably necessary to effect the Transaction, including
evidence reasonably satisfactory to the Insurer that the conditions precedent,
if any, in the Company Documents have been satisfied; and

      (n) Satisfactory Documentation. The Insurer and its counsel shall have
determined that all documents, Notes and opinions to be delivered in connection
with the Notes and the Swap Documents conform to the terms of the Indenture, the
Registration Statement, the Offering Document, the Swap Documents and this
Insurance Agreement.

      SECTION 3.02. Payment of Fees and Premium.
                    ---------------------------

      (a) Legal and Accounting Fees. IOS Capital shall pay or cause to be paid,
within 5 Business Days of receipt of the related invoice, reasonable legal fees,
auditors' fees in connection with the provision of information or any consent in
connection with the Offering Document and disbursements incurred by the Insurer
in connection with the issuance of the Policies. Any reasonable additional fees
of the Insurer's counsel or auditors payable in respect of any amendment or
supplement to the Offering Document, or in respect of the issuance of any
additional indebtedness by the Issuer, incurred after the Closing Date shall be
paid by IOS Capital on demand.

      (b) Rating Agency Fees. IOS Capital shall promptly pay the initial fees of
S&P and Moody's with respect to the Notes and the transactions contemplated
hereby following receipt of a statement with respect thereto. IOS Capital shall
pay any subsequent fees of S&P or Moody's with respect to, and directly
allocable to, the Notes to the extent that such fees and expenses result from
actions of S&P or Moody's that are requested by IOS Capital, including the
issuance of any additional indebtedness by the Issuer. The Insurer shall not be
responsible


                                      16
<PAGE>

for any fees or expenses of S&P or Moody's. The fees for any other rating agency
shall be paid by the party requesting such other agency's rating.

      (c) Premium.

            (i)  In consideration of the issuance by the Insurer of the
            Policies, the Insurer shall be entitled to receive the Premium as
            and when due in accordance with and from the funds specified by
            Section 3.03 of the Indenture.

            (ii) The Premium paid under the Indenture shall be nonrefundable
            without regard to whether any Notice for Payment is delivered to the
            Insurer requiring the Insurer to make any payment under either
            Policy or any other circumstances relating to the Notes or provision
            being made for payment of the Notes prior to maturity.


      SECTION 3.03. Reimbursement Obligation.
                    ------------------------

      (a) As and when due, from, and only from, the funds specified in Section
3.03 or Article VII of the Indenture, the Insurer shall be entitled to
reimbursement for any payment made by the Insurer under either Policy, which
reimbursement shall be due and payable on the date that any amount is paid
thereunder, in an amount equal to the amount so paid and all amounts previously
paid that remain unreimbursed, together with interest on any and all amounts
remaining unreimbursed (to the extent permitted by law, if in respect of any
unreimbursed amounts representing interest) from the date such amounts became
due until paid in full (after as well as before judgment), at a rate of interest
equal to the Late Payment Rate.

      (b) IOS Capital agrees to pay to the Insurer, within 5 Business Days of
receipt of an invoice, as follows: any and all charges, fees, costs and expenses
that the Insurer may reasonably pay or incur, including reasonable attorneys'
and accountants' fees and expenses, in connection with (i) the enforcement,
defense or preservation of any rights in respect of any of the Company
Documents, including defending, monitoring or participating in any litigation or
proceeding (including any insolvency proceeding in respect of any Transaction
participant or any affiliate thereof) relating to any of the Company Documents,
any party to any of the Company Documents (in its capacity as such a party) or
the Transaction, or (ii) any amendment, waiver or other action with respect to,
or related to, any Company Document (including, but not limited to, any action
in connection with the issuance of additional indebtedness by the Issuer),
whether or not executed or completed.

      (c) IOS Capital agrees to pay to the Insurer, within 5 Business Days of
receipt of an invoice, as follows: interest on any and all amounts described in
subclause (b) of this Section 3.03 from the date payable or paid by such party
until payment thereof in full, and interest on any and all amounts described in
Section 3.02 (a) from the date due until payment thereof in full and interest on
any and all amounts described in Section 3.04 from the date due until payment
thereof in full, in each case, payable to the Insurer at the Late Payment Rate.


                                      17
<PAGE>

      SECTION 3.04. Indemnification.
                    ---------------

      (a) In addition to any and all of the Insurer's rights of reimbursement,
indemnification, subrogation and to any other rights of the Insurer pursuant
hereto or under law or in equity, IOS Capital agrees to pay, and to protect,
indemnify and save harmless, the Insurer and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls the
Insurer within the meaning of either Section 15 of the Securities Act or Section
20 of the Securities Exchange Act from and against, any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any nature
arising out of or relating to the transactions contemplated by the Company
Documents by reason of:

            (i)   any omission or action (other than of or by the Insurer
            (including any Insurer Information, as defined below) or the
            Underwriters) by IOS Capital in connection with the offering,
            issuance, sale or delivery of any of the Notes prior to the
            completion of the initial offering and distribution of the Notes;

            (ii)  the negligence, bad faith, willful misconduct, misfeasance,
            malfeasance or theft committed by any director, officer, employee or
            agent of IOS Capital in connection with any Transaction arising from
            or relating to the Company Documents;

            (iii) the violation by IOS Capital of any domestic or foreign law,
            rule or regulation, or any judgment, order or decree applicable to
            it;

            (iv)  the breach by IOS Capital of any representation, warranty or
            covenant under any of the Company Documents or the occurrence, in
            respect of IOS Capital, under any of the Company Documents of any
            Event of Servicing Termination or any event which, with the giving
            of notice or the lapse of time or both, would constitute any Event
            of Servicing Termination (exclusive of clause (c) of Section 5.01
            hereof); or

            (v)   any untrue statement or alleged untrue statement of a material
            fact contained in any Offering Document or the Registration
            Statement or any omission or alleged omission to state therein a
            material fact required to be stated therein or necessary to make the
            statements therein, in light of the circumstances under which they
            were made, not misleading, except insofar as such claims, losses,
            liabilities (including penalties), actions, suits, judgments,
            demands, damages, costs or expenses (including reasonable fees and
            expenses of attorneys, consultants and auditors and reasonable costs
            of investigations) arise out of or are based upon any untrue
            statement or omission in the an Offering Document other than the
            Underwriters' Information and information furnished by the


                                      18
<PAGE>

            Insurer in writing expressly for use therein (all such information
            so furnished being referred to herein as "Insurer Information"), it
            being understood that, in respect of the initial Offering Document,
            the Insurer Information is limited to the information with respect
            to the Insurer included under the caption "THE INSURER AND THE
            POLICY."

      (b) The Insurer agrees to pay, and to protect, indemnify and save
harmless, IOS Capital and its respective officers, directors, shareholders,
employees, agents and each Person, if any, who controls IOS Capital within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act from and against, any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any nature
arising out of or by reason of any untrue statement or alleged untrue statement
of a material fact contained in the Insurer Information in any Offering Document
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or a breach of any of
the representations and warranties of the Insurer contained in Section 2.04.

      (c) If any action or proceeding (including any governmental investigation)
shall be brought or asserted against any Person (individually, an "Indemnified
Party" and, collectively, the "Indemnified Parties") in respect of which the
indemnity provided in Section 3.04(a) or (b) may be sought from IOS Capital, on
the one hand, or the Insurer, on the other (each, an "Indemnifying Party")
hereunder, each such Indemnified Party shall promptly notify the Indemnifying
Party in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel satisfactory to the Indemnified Party and
the payment of all expenses. The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof at the expense of the Indemnified Party; provided, however, that the
                                                 --------  -------
fees and expenses of such separate counsel shall be at the expense of the
Indemnifying Party if (i) the Indemnifying Party has agreed to pay such fees and
expenses, (ii) the Indemnifying Party shall have failed to assume the defense of
such action or proceeding and employ counsel reasonably satisfactory to the
Indemnified Party in any such action or proceeding or (iii) the named parties to
any such action or proceeding (including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party, and the Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Indemnifying Party (in which case, if the Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Party
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the Indemnified Parties, which firm shall be designated in writing by
the Indemnified Party). The Indemnifying Party shall not be liable for


                                      19
<PAGE>

any settlement of any such action or proceeding effected without its written
consent to the extent that any such settlement shall be prejudicial to the
Indemnifying Party, but, if settled with its written consent, or if there is a
final judgment for the plaintiff in any such action or proceeding with respect
to which the Indemnifying Party shall have received notice in accordance with
this subsection (c), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by reason of
such settlement or judgment.

      (d) To provide for just and equitable contribution if the indemnification
provided by the Indemnifying Party is determined to be unavailable or
insufficient to hold harmless any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
losses incurred by the Indemnified Party on the basis of the relative fault of
the Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand. The relative fault of each Indemnifying Party, on the one hand, and each
Indemnified Party, on the other, shall be determined by reference to, among
other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth are within the control of, the
Indemnifying Party or the Indemnified Party, and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.

      No Person guilty of fraudulent misrepresentation (within the meaning of
Section (11)f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.

      SECTION 3.02. Payment Procedure. In the event of any payment to the
                    -----------------
Insurer, the Indenture Trustee and IOS Capital agree to accept the voucher or
other evidence of payment as prima facie evidence of the propriety thereof and
the liability, if any, described in Section 3.03 therefor to the Insurer. All
payments to be made to the Insurer under this Insurance Agreement shall be made
to the Insurer in lawful currency of the United States of America in immediately
available funds at the notice address for the Insurer as specified in the
Indenture on the date when due or as the Insurer shall otherwise direct by
written notice to the other parties hereto. In the event that the date of any
payment to the Insurer or the expiration of any time period hereunder occurs on
a day that is not a Business Day, then such payment or expiration of time period
shall be made or occur on the next succeeding Business Day with the same force
and effect as if such payment was made or time period expired on the scheduled
date of payment or expiration date.

                                  ARTICLE IV
                              FURTHER AGREEMENTS

      SECTION 4.01. Effective Date; Term of the Insurance Agreement. This
                    -----------------------------------------------
Insurance Agreement shall take effect on the Closing Date and shall remain in
effect until the later of (a) such time as the Insurer is no longer subject to a
claim under either Policy and each Policy shall have been surrendered to the
Insurer for cancellation and (b) all amounts payable to the Insurer by IOS
Capital and the Issuer hereunder or from any other source hereunder or under the


                                      20
<PAGE>

Company Documents and all amounts payable under the Notes have been paid in
full; provided, however, that the provisions of Sections 3.02, 3.03 and 3.04
      --------  -------
hereof shall survive any termination of this Insurance Agreement.


      SECTION 4.02. Further Assurances and Corrective Instruments.
                    ---------------------------------------------

      (a) Except at such times as an Insurer Default (as defined in the
Indenture) shall exist or shall have occurred, neither IOS Capital nor the
Indenture Trustee shall grant any waiver of rights under any of the Company
Documents to which any of them is a party without the prior written consent of
the Insurer, which shall not be unreasonably withheld, conditioned or delayed
and any such waiver without prior written consent of the Insurer shall be null
and void and of no force or effect.

      (b) To the extent permitted by law, IOS Capital agrees that it will, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further instruments
as the Insurer may reasonably request and as may be required in the Insurer's
reasonable judgment to effectuate the intention of or facilitate the performance
of this Insurance Agreement.

      (c) IOS Capital will not cause or permit (i) the Seller to assign or
transfer any of its assets to any party, other than the transfers to the Issuer
in connection with the Transaction, or in connection with the issuance of
additional indebtedness by the Issuer permitted by the Indenture, or to issue
any notes or other evidences of indebtedness, or to otherwise incur any
indebtedness, or (ii) the Issuer to issue any notes or other evidences of
indebtedness, or to otherwise incur any indebtedness, other than the
indebtedness represented by the Notes, and the Issuer agrees that it will not
issue any notes or other evidences of indebtedness, or otherwise incur any
indebtedness, other than the indebtedness represented by the Notes, in any such
case, unless (1) the issuance or incurrence of such indebtedness is expressly
permitted by the Indenture, (2) there shall be a true sale and substantive
consolidation opinion and Delaware law opinions issued with respect to the
transactions in connection with and including the issuance of such additional
indebtedness, which opinions shall be reasonably acceptable to the Insurer and
on which the Insurer shall be entitled to rely.


      SECTION 4.03. Obligations Absolute.
                    --------------------

      (a) The obligations of IOS Capital, the Seller and the Issuer hereunder
shall be absolute and unconditional and shall be paid or performed strictly in
accordance with this Insurance Agreement under all circumstances irrespective
of:

            (i)  any lack of validity or enforceability of, or any amendment or
            other modifications of, or waiver, with respect to any of the
            Company Documents or the Notes;

            (ii) any exchange or release of any other obligations hereunder;


                                      21
<PAGE>

            (iii) the existence of any claim, setoff, defense, reduction,
            abatement or other right that IOS Capital may have at any time
            against the Insurer or any other Person;

            (iv)  any document presented in connection with either Policy
            proving to be forged, fraudulent, invalid or insufficient in any
            respect or any statement therein being untrue or inaccurate in any
            respect;

            (v)   any payment by the Insurer under either Policy against
            presentation of a certificate or other document that does not
            strictly comply with the terms of such Policy;

            (vi)  any failure of IOS Capital to receive the proceeds from the
            sale of the Notes; and

            (vii) any other circumstances, other than payment in full, that
            might otherwise constitute a defense available to, or discharge of,
            IOS Capital in respect of any Company Document.

      (b) IOS Capital, the Seller and the Issuer and any and all others who are
now or may become liable for all or any part of the obligations of IOS Capital,
the Seller and the Issuer under this Insurance Agreement (including any
successor to IOS Capital as Servicer) agree to be bound by this Insurance
Agreement and (i) to the extent permitted by law, waive and renounce any and all
redemption and exemption rights and the benefit of all valuation and
appraisement privileges against the indebtedness and obligations evidenced by
any Company Document or by any extension or renewal thereof; (ii) waive
presentment and demand for payment, notices of nonpayment and of dishonor,
protest of dishonor and notice of protest; (iii) waive all notices in connection
with the delivery and acceptance hereof and all other notices in connection with
the performance, default or enforcement of any payment hereunder, except as
required by the Company Documents; (iv) waive all rights of abatement,
diminution, postponement or deduction, or to any defense other than payment, or
to any right of setoff or recoupment arising out of any breach under any of the
Company Documents, by any party thereto or any beneficiary thereof, or out of
any obligation at any time owing to IOS Capital; (v) agree that its liabilities
hereunder shall, except as otherwise expressly provided in this Section 4.03, be
unconditional and without regard to any setoff, counterclaim or the liability of
any other Persons for the payment hereof; (vi) agree that any consent, waiver or
forbearance hereunder with respect to an event shall operate only for such event
and not for any subsequent event; (vii) consent to any and all extensions of
time that may be granted by the Insurer with respect to any payment hereunder or
other provisions hereof and to the release of any security at any time given for
any payment hereunder, or any part thereof, with or without substitution, and to
the release of any Person or entity liable for any such payment; and (viii)
consent to the addition of any and all other makers, endorsers, guarantors and
other obligors for any payment hereunder, and to the acceptance of any and all
other security for any payment hereunder, and agree that


                                      22
<PAGE>

the addition of any such obligors or security shall not affect the liability of
the parties hereto for any payment hereunder.

      (c) Nothing herein shall be construed as prohibiting IOS Capital or the
Indenture Trustee from pursuing any rights or remedies it may have against any
Person in a separate legal proceeding.


      SECTION 4.04. Assignments; Reinsurance; Third-Party Rights.
                    --------------------------------------------

      (a) This Insurance Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. None of IOS
Capital, the Seller or the Issuer may assign its rights under this Insurance
Agreement, or delegate any of its duties hereunder, without the prior written
consent of the Insurer. Any assignments made in violation of this Insurance
Agreement shall be null and void.

      (b) The Insurer shall have the right to give participations in its rights
under this Insurance Agreement and to enter into contracts of reinsurance with
respect to the Policy upon such terms and conditions as the Insurer may in its
discretion determine; provided, however, that no such participation or
                      --------  -------
reinsurance agreement or arrangement shall relieve the Insurer of any of its
obligations hereunder or under either Policy and provided further that any
reinsurer or participant will not have any rights against IOS Capital, the
Noteholders or the Indenture Trustee and that IOS Capital, the Noteholders and
the Indenture Trustee shall have no obligation to have any communication or
relationship with any reinsurer or participant in order to enforce the
obligations of the Insurer hereunder and under either Policy.

      (c) Except as provided herein with respect to participants and reinsurers,
nothing in this Insurance Agreement shall confer any right, remedy or claim,
express or implied, upon any Person, including, particularly, any Holder, other
than the Insurer against IOS Capital or IOS Capital against the Insurer and all
the terms, covenants, conditions, promises and agreements contained herein shall
be for the sole and exclusive benefit of the parties hereto and their successors
and permitted assigns. Neither the Indenture Trustee nor any Holder shall have
any right to payment from any Premiums paid or payable hereunder or under the
Indenture or from any amounts paid by IOS Capital pursuant to Sections 3.02 or
3.03 hereof.

      SECTION 4.02. Liability of the Insurer. Unless the Insurer shall have been
                    ------------------------
grossly negligent or guilty of wrongful misconduct, neither the Insurer nor any
of its officers, directors or employees shall be liable or responsible for: (a)
the use that may be made of the Policy by the Trust or for any acts or omissions
of the Trust in connection therewith; or (b) the validity, sufficiency, accuracy
or genuineness of documents delivered to the Insurer in connection with any
claim under either Policy, or of any signatures thereon, even if such documents
or signatures should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged (unless the Insurer shall have actual
knowledge thereof). In furtherance and not in


                                      23
<PAGE>

limitation of the foregoing, the Insurer may accept documents that appear on
their face to be in order, without responsibility for further investigation.


      SECTION 4.06. Annual Servicing Audit and Certification. The annual
                    ----------------------------------------
servicing audit required pursuant to Section 6.02 of the Servicing Agreement
shall be performed by an independent third party acceptable to the Insurer. Any
one of the five major nationally recognized firms of independent public
accountants is deemed to be acceptable.

                                   ARTICLE V
                             DEFAULTS AND REMEDIES

      SECTION 5.01. Defaults. The occurrence of any of the following events
                    --------
shall constitute an Event of Servicing Termination hereunder:

      (a) Any representation or warranty made by IOS Capital, the Seller or the
Issuer hereunder or under the Company Documents, or in any certificate furnished
hereunder or under the Company Documents, shall prove to be untrue or incomplete
in any material respect; provided, however, that if IOS Capital, the Seller or
                         --------  -------
the Issuer effectively cures any such defects in any representation or warranty
under any Transaction Document or certificate or report furnished under any
Company Document, within the time period specified in the related document as
the cure period therefor, such defect shall not in and of itself constitute an
Event of Servicing Termination;

      (b) (i) IOS Capital shall fail to pay when due any amount payable by IOS
Capital unless such amounts are paid in full within the cure period therefor,
respectively, hereunder or (ii) a legislative body has enacted any law that
declares or a court of competent jurisdiction shall find or rule that this
Insurance Agreement or the Indenture is not valid and binding on IOS Capital or
the Issuer;

      (c) The occurrence and continuance of a Servicer Event of Default under
the Assignment and Servicing Agreement;

      (d) Any failure on the part of IOS Capital, the Seller or the Issuer duly
to observe or perform in any material respect any other of the covenants or
agreements on the part of IOS Capital, the Seller or the Issuer contained in
this Insurance Agreement or in any other Company Document which continues
unremedied beyond any cure period provided therein, or, in the case of this
Insurance Agreement, for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to IOS Capital by the Insurer (with a copy to the Indenture Trustee) or by the
Indenture Trustee (with a copy to the Insurer); provided, further, that if such
                                                --------  -------
failure shall be of a nature that it cannot be cured within 30 days, such
failure shall not constitute an Event of Servicing Termination hereunder, if
within such 30-day period IOS Capital, the Seller or the Issuer, as the case may
be, shall have given written notice to the Insurer and the Indenture Trustee of
corrective action it proposes to take, which corrective action is agreed in
writing by the Insurer to be satisfactory and IOS Capital,


                                      24
<PAGE>

the Seller or the Issuer shall thereafter pursue such corrective action
diligently until such default is cured;

      (e) A decree or order of a court or agency or supervisory authority having
jurisdiction in the premises in an involuntary case under any present or future
federal or state insolvency or similar law or the appointment of a conservator
or receiver or liquidator or other similar official in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against IOS Capital, the Seller or the Issuer;

      (f) IOS Capital, the Seller or the Issuer shall consent to the appointment
of a conservator or receiver or liquidator or other similar official in any
involuntary insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to IOS Capital, the Seller or
the Issuer or of or relating to all or substantially all of their respective
property, or any such involuntary proceeding shall have been commenced against
IOS Capital, the Seller or the Issuer and such proceeding shall not have been
withdrawn or dismissed within 30 Business Days; or

      (g) IOS Capital, the Seller or the Issuer shall admit in writing its
inability to pay their debts generally as they become due, file a petition to
take advantage of or otherwise voluntarily commence a case or proceeding under
any applicable insolvency, reorganization or other similar statute, make an
assignment for the benefit of its creditors or voluntarily suspend payment of
its obligations.


      SECTION 5.02 Remedies; No Remedy Exclusive.
                   -----------------------------

      (a) Upon the occurrence of an Event of Servicing Termination, the Insurer
may take whatever action at law or in equity as may appear necessary or
desirable in its judgment to collect the amounts, if any, then due under this
Insurance Agreement, the Assignment and Servicing Agreement or the Indenture or
to enforce performance and observance of any obligation, agreement or covenant
of IOS Capital, the Seller or the Issuer under this Insurance Agreement, the
Assignment and Servicing Agreement or the Indenture.

      (b) Unless otherwise expressly provided, no remedy herein conferred or
reserved is intended to be exclusive of any other available remedy, but each
remedy shall be cumulative and shall be in addition to other remedies given
under this Insurance Agreement, the Assignment and Servicing Agreement the
Indenture or existing at law or in equity. No delay or omission to exercise any
right or power accruing under this Insurance Agreement, the Assignment and
Servicing Agreement or the Indenture upon the happening of any event set forth
in Section 5.01 shall impair any such right or power or shall be construed to be
a waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient. In order to entitle the Insurer to
exercise any remedy reserved to the Insurer in this Article, it shall not be
necessary to give any notice, other than such notice as may be required by this
Article.


                                      25
<PAGE>

      SECTION 5.03. Waivers.
                    -------

      (a) No failure by the Insurer to exercise, and no delay by the Insurer in
exercising, any right hereunder shall operate as a waiver thereof. The exercise
by the Insurer of any right hereunder shall not preclude the exercise of any
other right, and the remedies provided herein to the Insurer are declared in
every case to be cumulative and not exclusive of any remedies provided by law or
equity.

      (b) The Insurer shall have the right, to be exercised in its complete
discretion, to waive any Event of Servicing Termination hereunder, by a writing
setting forth the terms, conditions and extent of such waiver signed by the
Insurer and delivered to IOS Capital and the Indenture Trustee. Unless such
writing expressly provides to the contrary, any waiver so granted shall extend
only to the specific event or occurrence which gave rise to the Event of
Servicing Termination so waived and not to any other similar event or occurrence
which occurs subsequent to the date of such waiver.

                                  ARTICLE VI
                                 MISCELLANEOUS

      SECTION 6.01. Amendments, Etc. This Insurance Agreement may be amended,
                    ---------------
modified, supplemented or terminated only by written instrument or written
instruments signed by the parties hereto. No consent of any re-insurer or
participant contracted with by the Insurer pursuant to Section 4.04(b) hereof
shall be required for any amendment, modification, supplement or termination
hereof. IOS Capital agrees to provide a copy of any amendment to this Insurance
Agreement promptly to the Indenture Trustee and the rating agencies maintaining
a rating on any of the Notes at the request of IOS Capital. The Insurer agrees
to provide reasonable notice to the rating agencies maintaining a rating on any
of the Notes with respect to any proposed amendment. No act or course of dealing
shall be deemed to constitute an amendment, modification, supplement or
termination hereof.

      SECTION 6.01. Notices. All demands, notices and other communications to be
                    -------
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered and
telecopied to the recipient as follows:

      (a)      To the Insurer:

                           Ambac Assurance Corporation
                           One State Street Plaza
                           New York, New York 10004

                           Attention: Structured Finance Department - ABS
                           Telecopy No.: 212-208-3547
                           Confirmation: 212-668-0340

                                      26
<PAGE>

            (in each case in which notice or other communication to the Insurer
            refers to an Event of Servicing Termination, a claim on either
            Policy or with respect to which failure on the part of the Insurer
            to respond shall be deemed to constitute consent or acceptance, then
            a copy of such notice or other communication should also be sent to
            the attention of the general counsel of each of the Insurer and the
            Trustee and shall be marked to indicate "URGENT MATERIAL ENCLOSED.")

      (b) To IOS Capital:

                           IOS Capital, Inc.
                           1738 Bass Road
                           P.O. Box 9115
                           Macon, Georgia 31210

                           Attention:       Harry G. Kozee
                                            Vice President - Finance,
                                            with a copy to the General Counsel
                           Facsimile:       (912) 471-2375

                           with a copy to:

                           IOS Capital, Inc.
                           70 Valley Stream Road
                           Malvern, PA  19355

                           Attention:  Chief Counsel
                           Facsimile:       (610) 408-7264

      (c) To the Issuer:

                           IKON Receivables, LLC
                           1738 Bass Road
                           P.O. Box 9115
                           Macon, Georgia 31210

                           Attention:       Harry G. Kozee
                           Facsimile:       (912) 471-2375


                                      27
<PAGE>

                           with a copy to:

                           IOS Capital, Inc.
                           70 Valley Stream Road
                           Malvern, PA  19355

                           Attention:  Chief Counsel
                           Facsimile:       (610) 408-7264


         (d)      To the Seller:

                           IKON Receivables-I, LLC
                           1738 Bass Road
                           P.O. Box 9115
                           Macon, Georgia 31210

                           Attention:       Harry G. Kozee
                           Facsimile:       (912) 471-2375

                           with a copy to:

                           IOS Capital, Inc.
                           70 Valley Stream Road
                           Malvern, PA  19355

                           Attention:  Chief Counsel
                           Facsimile:       (610) 408-7264

         (e)      To the Indenture Trustee:

                           The Chase Manhattan Bank
                           450 West 33rd Street
                           New York, New York 10001-2697

                           Attention:       Capital Markets Fiduciary Services,
                                            Structured Finance Group
                           Facsimile:       (212) 946-8552

      A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.


      SECTION 6.03. Severability. In the event that any provision of this
                    ------------
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the


                                      28
<PAGE>

parties hereto agree that such holding shall not invalidate or render
unenforceable any other provision hereof. The parties hereto further agree that
the holding by any court of competent jurisdiction that any remedy pursued by
any party hereto is unavailable or unenforceable shall not affect in any way the
ability of such party to pursue any other remedy available to it.


      SECTION 6.04. Governing Law. This Insurance Agreement shall be governed by
                    -------------
and construed in accordance with the laws of the State of New York.


      SECTION 6.05. Consent to Jurisdiction.
                    -----------------------

      (a) The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of the United States District Court for the Southern District of
New York and any court in the State of New York located in the City and County
of New York, and any appellate court from any thereof, in any action, suit or
proceeding brought against it and to or in connection with any of the Company
Documents or the Transaction or for recognition or enforcement of any judgment,
and the parties hereto hereby irrevocably and unconditionally agree that all
claims in respect of any such action or proceeding may be heard or determined in
such New York state court or, to the extent permitted by law, in such federal
court. The parties hereto agree that a final unappealable judgment in any such
action, suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. To
the extent permitted by applicable law, the parties hereto hereby waive and
agree not to assert by way of motion, as a defense or otherwise in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such courts, that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that the related documents or the subject matter thereof may not be
litigated in or by such courts.

      (b) To the extent permitted by applicable law, the parties hereto shall
not seek and hereby waive the right to any review of the judgment of any such
court by any court of any other nation or jurisdiction which may be called upon
to grant an enforcement of such judgment.

      (c) Service on IOS Capital may be made by mailing or delivering copies of
the summons and complaint and other process which may be served in any suit,
action or proceeding to the Servicer at the related addresses listed in Section
6.02(b) and (c) herein. Such address may be changed by the applicable party or
parties, with the prior written consent of the Insurer, by written notice to the
other parties hereto.

      (d) Nothing contained in this Insurance Agreement shall limit or affect
any party's right to serve process in any other manner permitted by law or to
start legal proceedings relating to any of the Company Documents against any
other party or its properties in the courts of any jurisdiction.


                                      29
<PAGE>

      SECTION 6.06. Consent of the Insurer. In the event that the consent of the
                    ----------------------
Insurer is required under any of the Company Documents, the determination
whether to grant or withhold such consent shall be made by the Insurer in its
sole discretion without any implied duty towards any other Person, except as
otherwise expressly provided therein.


      SECTION 6.07. Counterparts. This Insurance Agreement may be executed in
                    ------------
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.


      SECTION 6.08. Headings. The headings of Articles and Sections and the
                    --------
Table of Contents contained in this Insurance Agreement are provided for
convenience only. They form no part of this Insurance Agreement and shall not
affect its construction or interpretation.


      SECTION 6.09. Trial by Jury Waived. Each party hereby waives, to the
                    --------------------
fullest extent permitted by law, any right to a trial by jury in respect of any
litigation arising directly or indirectly out of, under or in connection with
any of the Company Documents or any of the transactions contemplated thereunder.
Each party hereto (A) certifies that no representative, agent or attorney of any
party hereto has represented, expressly or otherwise, that it would not, in the
event of litigation, seek to enforce the foregoing waiver and (B) acknowledges
that it has been induced to enter into the Company Documents to which it is a
party by, among other things, this waiver.


      SECTION 6.10. Limited Liability. No recourse under any Company Document or
                    -----------------
the Underwriting Agreement shall be had against, and no personal liability shall
attach to, any officer, employee, director, affiliate or shareholder of any
party hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any of
the Company Documents or the Underwriting Agreement, the Notes or the Policies,
it being expressly agreed and understood that each Company Document or the
Underwriting Agreement is solely a corporate obligation of each party hereto,
and that any and all personal liability, either at common law or in equity, or
by statute or constitution, of every such officer, employee, director, affiliate
or shareholder for breaches of any party hereto of any obligations under any
Company Document or the Underwriting Agreement is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Insurance Agreement.


      SECTION 6.11. Entire Agreement. This Insurance Agreement and the Policies
                    ----------------
set forth the entire agreement between the parties with respect to the subject
matter hereof and thereof, and this Insurance Agreement supersedes and replaces
any agreement or understanding that may have existed between the parties prior
to the date hereof in respect of such subject matter.


                                      30
<PAGE>

      SECTION 6.12. Indenture Trustee. The Indenture Trustee hereby acknowledges
                    -----------------
and agrees to perform all its obligations and duties pursuant to the Company
Documents to which it is a party thereto.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                      31
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all
as of the day and year first above mentioned.

                                               Ambac Assurance Corporation,
                                                 as Insurer


                                               By: /s/ Barry Schofield
                                                   ------------------------
                                               Name:  Barry Schofield
                                               Title: Vice President


                                      S-1
<PAGE>

                                              IOS Capital, Inc.,
                                                as Originator and as Servicer

                                              By: /s/ JF Quinn
                                                  ------------
                                              Name:  JF Quinn
                                              Title: Treasurer

                                      S-2
<PAGE>

                                           IKON Receivables, LLC,
                                            as Issuer

                                           By:  IKON Receivables Funding, Inc.


                                           By: /s/ Russell Slack
                                              ------------------
                                            Name:  Russell Slack
                                            Title: President


                                           IKON Receivables-I, LLC,

                                           By:  IKON Receivables Funding, Inc.


                                           By: /s/ Russell Slack
                                              ------------------
                                             Name:  Russell Slack
                                             Title:  President



                                      S-3
<PAGE>

                                         The Chase Manhattan Bank, not in its
                                         individual capacity, but solely
                                           as Indenture Trustee

                                         By: /s/ Jennifer H. Baran
                                            ----------------------
                                         Name: Jennifer H. Baran
                                         Title: Assistant Vice President



                                      S-4