Document:

<PAGE>
                                                                    Exhibit 10.3

                                                                  Execution Copy

                       INSURANCE AND INDEMNITY AGREEMENT

                          AMBAC ASSURANCE CORPORATION,

                                  as Insurer,

                             IKON RECEIVABLES, LLC,

                                   as Issuer,

                            IKON RECEIVABLES-1, LLC,

                                   as Seller,

                               IOS CAPITAL, INC.,

                         as Originator and as Servicer,

                                      and

                                 SUNTRUST BANK,

                              as Indenture Trustee

            IKON RECEIVABLES, LLC LEASE-BACKED NOTES, SERIES 2001-1

                           Dated as of June 28, 2001

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                               TABLE OF CONTENTS

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

ARTICLE II  REPRESENTATIONS, WARRANTIES AND COVENANTS ...................................4
        SECTION 2.01.  Representations and Warranties of IOS Capital ....................4
        SECTION 2.02.  Affirmative Covenants of IOS Capital .............................5
        SECTION 2.03.  Negative Covenants of IOS Capital ................................6
        SECTION 2.04.  Representations and Warranties of the Insurer ....................7
        SECTION 2.05.  Representations and Warranties and Covenants of the Seller .......9
        SECTION 2.06.  Representations and Warranties of the Issuer .....................9
        SECTION 2.07.  Affirmative Covenants of the Issuer .............................12
        SECTION 2.08.  Negative Covenants of the Issuer ................................13

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

ARTICLE IV  FURTHER AGREEMENTS .........................................................20
        SECTION 4.01.  Effective Date; Term of the Insurance Agreement .................20
        SECTION 4.02.  Further Assurances and Corrective Instruments ...................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
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                                TABLE OF CONTENTS
                                   (continued)
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        SECTION 6.11.  Entire Agreement ................................................30
        SECTION 6.12.  Indenture Trustee ...............................................31
</TABLE>

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<PAGE>

          INSURANCE AND INDEMNITY AGREEMENT (as it may be amended, modified or
supplemented from time to time, this "Insurance Agreement"), dated as of June
28, 2001, by and among IOS Capital, Inc., as Originator and as Servicer, Ambac
Assurance Corporation, as Insurer, IKON Receivables, LLC, as Issuer, IKON
Receivables-1, LLC, as Seller, and SunTrust Bank, as Indenture Trustee.

                             PRELIMINARY STATEMENTS

          A. The Indenture, dated as of June 1, 2001, relating to the IKON
Receivables, LLC Lease-Backed Notes, Series 2001-1, by and among the Issuer, the
Servicer and the Indenture Trustee (as it may be amended, modified or
supplemented from time to time as set forth therein) provides for, among other
things, the issuance of the Notes.

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

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

          D. IOS Capital, 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 June 28, 2001.

          "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 Deutsche Bank AG, New York Branch, 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.

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

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

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

          "Indemnification Agreement" means the Indemnification Agreement dated
as of June 28, 2001 among the Insurer and the Underwriters.

          "Indenture Trustee" means SunTrust 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.

          "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.

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          "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 filed with the Commission on June 20, 2001,
and the Prospectus Supplement dated June 20, 2001, 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, #AB0473BE, 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,
SF0458BE, and the financial guaranty insurance policy SF0460BE, each issued by
the Insurer to the Counterparty (the "Swap Policies"). "Policies" means,
collectively, the Note Policy and the Swap Policies.

          "Premium" means the premium payable in accordance with the Note
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 0.24% 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.

          "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.

                                        3

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          "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., J.P. Morgan
Securities Inc., Deutsche Banc Alex. Brown Inc., Banc of America Securities LLC
and PNC Capital Markets, Inc.

          "Underwriting Agreement" means the Underwriting Agreement dated June
20, 2001 among the Underwriters, the Issuer and IOS Capital with respect to the
offer and sale of the Notes, as amended, modified or supplemented from time to
time.

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

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

                                   ARTICLE II
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

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

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

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

                                        4

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          (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
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:

                                        5

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     (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.

     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:

                                        6

<PAGE>

     (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 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

                                       7

<PAGE>

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, 2000 and 1999, and for the three
years ended December 31, 2000, included in the Annual Report on Form 10-K of
Ambac Financial Group, Inc. (which was filed with the Commission on March 28,
2001, Commission File Number 1-10777), and the unaudited consolidated financial
statements of the Insurer and its subsidiaries as of March 31, 2001 and for the
periods ending March 31, 2001 and March 31, 2000, included in the Quarterly
Report on Form 10-Q of Ambac Financial Group, Inc. for the period ended March
31, 2001 (which was filed with the Commission on May 15, 2001), are hereby
incorporated by reference into the Prospectus Supplement dated June 20, 2001
relating to the Notes and shall be deemed to be a part hereof. Since March 31,
2001, 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 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,

                                        8

<PAGE>

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 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

                                        9

<PAGE>

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.

     (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

                                       10

<PAGE>

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.

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

                                       11

<PAGE>

     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:

          (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

                                       12

<PAGE>

          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.

     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:

                                       13

<PAGE>

     (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;

     (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;

                                       14

<PAGE>

     (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;

     (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;

                                       15

<PAGE>

     (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 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.

                                       16

<PAGE>

          (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.

     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

                                       17

<PAGE>

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 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

                                       18

<PAGE>

          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 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

                                       19

<PAGE>

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

                                   ARTICLE IV
                               FURTHER AGREEMENTS

     SECTION 4.01. Effective Date; Term of the Insurance Agreement. This
                   -----------------------------------------------
Insurance Agreement shall take effect on the Closing Date and shall remain in
effect until the later of (a) such time as the Insurer is no longer subject to a
claim under 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
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.

                                       20

<PAGE>

     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;

          (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;

                                       21

<PAGE>

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

                                       22

<PAGE>

     (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 4.05. Liability of the Insurer. Unless the Insurer shall have been
                   ------------------------
grossly negligent or guilty of wrongful misconduct, neither the Insurer nor any
of its officers, directors or employees shall be liable or responsible for: (a)
the use that may be made of the Policy by the 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 limitation of the foregoing, the
Insurer may accept documents that appear on their face to be in order, without
responsibility for further investigation.

                                       23

<PAGE>

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

                                   ARTICLE V
                              DEFAULTS AND REMEDIES

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

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

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

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

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

                                       24

<PAGE>

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

     (a) To the Insurer:

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

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

                                       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-1, 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:

               SunTrust Bank
               25 Park Place
               24th Floor
               Atlanta, Georgia  30303

               Attention:       Corporate Trust Division
               Facsimile:       (404) 588-7335

     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/ J.F. Quinn
                                              ----------------------------------
                                           Name: J.F. 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-1, LLC,

                                           By: IKON Receivables Funding, Inc.
                                           By: /s/ Russell Slack
                                              ----------------------------------
                                           Name: Russell Slack
                                                --------------------------------
                                           Title: President
                                                 -------------------------------

                                       S-3

<PAGE>

                                           SunTrust Bank, not in its individual
                                           capacity, but solely
                                            as Indenture Trustee

                                           By: /s/ Patricia Spruell
                                              ----------------------------------
                                           Name: Patricia Spruell
                                                --------------------------------
                                           Title: Trust Officer
                                                 -------------------------------

                                       S-4<PAGE>

                                                                    Exhibit 10.4

                                    Schedule
                                     to the
                                Master Agreement

                            dated as of June 28, 2001

                                     between

Deutsche Bank AG, New York Branch       and          IKON Receivables, LLC

          ("Party A")                                       ("Party B")

                                     Part 1
                             Termination Provisions

In this Agreement:

(a)  Specified Entity. "Specified Entity" is not applicable to Party A or Party
     B.

(b)  Specified Transactions. "Specified Transaction" has the meaning specified
     in Section 14.

(c)  Breach of Agreement. The "Breach of Agreement" provision of Section
     5(a)(ii) will not apply to either Party A or Party B.

(d)  Credit Support Default. The "Credit Support Default" provision of Section
     5(a)(iii) is hereby amended by adding, at the end thereof, the following:
     "provided that, not withstanding anything to the contrary contained in this
     Agreement or this Section 5, an Event of Default relative to the Credit
     Support Provider will not constitute an Event of Default with respect to
     Party B."

(e)  Misrepresentation. The "Misrepresentation" provision of Section 5(a)(iv)
     will not apply to either Party A or Party B.

(f)  Default under Specified Transaction. The "Default under Specified
     Transaction" provision of Section 5(a)(v) will not apply to either Party A
     or Party B.

(g)  Cross Default. The "Cross Default" provisions of Section 5(a)(vi) will not
     apply to either Party A or Party B.

(h)  Tax Event. The "Tax Event" provisions of Section 5(b)(ii) will not apply to
     either Party A or Party B.

(i)  Tax Event Upon Merger. The "Tax Event Upon Merger" provision of Section
     5(b)(iii) will not apply to either Party A or Party B.

(j)  Credit Event upon Merger. The "Credit Event Upon Merger" provision (Section
     5(b)(iv)) will not apply to Party A or Party B.

(k)  Automatic Early Termination. The "Automatic Early Termination" provision of
     Section 6(a) will not apply to Party A or Party B.

<PAGE>

(l)  Payments on Early Termination. For the purpose of Section 6(e) but subject
     to part 5 of this Schedule:

     (i)  Market Quotation will apply, other than for an Additional Termination
          Event.

     (ii) The Second Method will apply, other than for an Additional Termination
          Event.

(m)  Termination Currency. "Termination Currency" shall be United States
     Dollars.

(n)  Requirement to Post Collateral. In the event that the long term unsecured
     debt credit rating assigned to the Party A Guarantor is reduced below
     either "A+" by S&P or "A-1" by Moody's (such an occurrence, a Level I
     Downgrade"), Party A shall (I) promptly, but in any event not later than
     two (2) Local Business Days following the date of the Level I Downgrade,
     give Party B notice of the Level I Downgrade and (ii) provide, at its own
     cost, credit support ("Level I Collateral") in the manner and to the extent
     set forth in the Credit Support Annex (the "Credit Support Annex") between
     Party A and Party B attached as Exhibit A hereto, on or before the
     fifteenth business day after the date of the Level I Downgrade.

(o)  Additional Termination Event. Additional Termination Event will apply as
     follows. The occurrence of any of the following events (each such
     occurrence, a "Level II Downgrade") shall be an Additional Termination
     Event, with Party A as the sole Affected Party, and notwithstanding
     anything to the contrary in this Agreement, the provisions of Part 1(p) of
     this Schedule will apply if any Additional Termination Event occurs:

     (i)   Party A (including any successor to Party A under this Agreement as a
           result of any merger, consolidation or transfer of assets involving
           Party A) at any time is rated below the applicable Specified Rating
           (as so defined) by any of the Rating Agencies (as so defined);

     (ii)  any of the Rating Agencies withdraws its rating for the Specified
           Rating of Party A.

     (iii) Party A fails to take the actions set forth in Part 1(n) of this
           Schedule upon the occurrence of a Level I Downgrade within the time
           period set forth in Part 1(n) of this Schedule.

For purposes of this Agreement, "Rating Agency" means each of Standard & Poor's
Rating Services ("S&P"), and Moody's Investors Service, Inc. ("Moody's"), and
the "Specified Rating" of Party A and related "Specified Ratings" are as
follows:

<TABLE>
<CAPTION>
     Specified Rating                                     Specified Rating and Rating Agency
     ----------------                                     ----------------------------------
<S>                                                              <C>
     long-term senior unsecured debt credit rating                 "A-"-- S&P
                                                                 "A-3" -- Moody's
</TABLE>

(p)  Termination Rights and Consequences of an Additional Termination Event.
     Section 6(b) is hereby amended, at the end thereof, by the insertion of the
     following: "notwithstanding anything to the contrary in this Agreement or
     this Section 6(b), neither party may designate an Early Termination Date in
     connection with an Event of Default relating to the Credit Support
     Provider."

Notwithstanding Section 6(b)(iv) of this Agreement, upon the occurrence of any
of the Additional Termination Events listed in items (i) or (ii) of Part 1(o) of
this Schedule:

     (A) Party A shall promptly, but in any event, not later than two (2) Local
     Business Days following a Downgrade, give Party B notice of the
     circumstances constituting the relevant Downgrade.

     (B) In the event of a Level II Downgrade, Party A shall, at its own cost or
     benefit, either (x) on or before the 30th day after the date of such Level
     II Downgrade, cause a substitute swap

                                       2

<PAGE>

     counterparty ("X") that (i) is reasonably acceptable to Party B and the
     Credit Support Provider, (ii) has a long-term unsecured debt rating (or a
     counterparty or financial program rating, or the equivalent) sufficient to
     maintain the then-current ratings of the Notes as required by each of the
     Rating Agencies to assume the obligations of Party A under the Transaction
     or replace the Transaction with a transaction on identical terms, with X to
     be "Party A"; or (y) on or before the 15th business day after the date of
     such Level II Downgrade, deliver additional credit support ("Level II
     Additional Collateral") in addition to the Level I Collateral, in the
     manner set forth in the Credit Support Annex, in either case, in such
     manner (i) that is satisfactory to Party B and the Credit Support Provider
     and (ii) as is necessary for the Rating Agencies to confirm not later than
     that day that the arrangements and/or Level II Collateral delivered are
     sufficient to maintain or, if applicable, restore their respective ratings
     of the Notes to the ratings in effect immediately before the Level II
     Downgrade. For this purpose, "Notes" means the IKON Receivables, LLC
     Lease-Backed Notes, Series 2001-1.

     (C) If Party A shall fail to comply with the requirements of subparagraph
     (B) above and Party B designates an Early Termination Date as a result of
     the failure, Party B will calculate and certify to Party A the sum of the
     Loss, costs and expenses actually incurred by Party B as a result of the
     early termination.

                                     Part 2
                               Tax Representations

(a)  Payer Tax Representations. For the purpose of Section 3(e), Party A makes
     the following representation:

     It is not required by any applicable law, as modified by the practice of
     any relevant governmental revenue authority, of any Relevant Jurisdiction
     to make any deduction or withholding for or on account of any Tax from any
     payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) or
     amounts treated as interest under applicable tax laws) to be made by it to
     the other party under this Agreement. In making this representation, it may
     rely on:

     (i)   the accuracy of any representation made by the other party pursuant
           to Section 3(f);

     (ii)  the satisfaction of the agreement of the other party contained in
           Section 4(a)(i) or 4(a)(iii) and the accuracy and effectiveness of
           any document provided by the other party pursuant to Section 4(a)(i)
           or 4(a)(iii); and

     (iii) the satisfaction of the agreement of the other party contained in
           Section 4(d);

     provided that it shall not be a breach of this representation where
     reliance is placed on clause (ii), and the other party does not deliver a
     form or document under Section 4(a)(iii) by reason of material prejudice to
     its legal or commercial position.

(b)  Payee Tax Representations. For the purpose of Section 3(f), Party A and
     Party B each represent to the other that, in respect of each Transaction
     which it enters into through an Office or discretionary agent in the United
     States of America ("U.S."), each payment received or to be received by it
     under that Transaction will be effectively connected with its conduct of a
     trade or business in the U.S.

                                     Part 3
                         Agreement to Deliver Documents

For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable (and each party's
representation in Section 3(d) will apply to each document required from it as
provided below, other than any opinion of counsel):

(a)  Documents to be delivered by Party B: (1) the Indenture dated as of June 1,
     2001 among Party B, IOS Capital, Inc. ("IOS") and SunTrust Bank (the
     "Indenture") and (2) the Assignment and

                                       3

<PAGE>

     Servicing Agreement dated as of June 1, 2001 among Party B, IOS Capital,
     Inc. and IKON Receivables-1, LLC (the "Assignment and Servicing
     Agreement").

(b)  Other documents to be delivered by Party A and Party B: evidence reasonably
     satisfactory to the other party as to the authority, incumbency and
     specimen signature of each person executing any document on its behalf in
     connection with this Agreement, Confirmation of the Transaction and any
     Credit Support Document.

                                     Part 4
                                  Miscellaneous

(a)  Addresses for Notices. For the purpose of Section 12(a):

     (i)  Addresses for notices or communications to Party A:

                 Deutsche Bank AG, Head Office
                 Taunusanlage 12
                 60262 Frankfurt Germany
                 Attention:  Legal Department
                 Telex:  411836 or 416731 or 41233
                 Answerback:  DBF-D

          With a copy to:

                 Deutsche Bank AG, New York Branch
                 Attention Swap Group
                 31 West 52nd Street
                 New York, New York 10019
                 Telephone:  (212) 469-4338
                 Telex:  429166
                 Answerback:  DEUTNYK

     (ii) Address for notices or communications to Party B:

                 IKON Receivables, LLC
                 1738 Bass Road
                 P.O. Box 9115
                 Macon, Georgia  31208

          With a copy to:

                 General Counsel
                 IKON Office Solutions, Inc.
                 70 Valley Stream Parkway
                 Malvern, Pennsylvania 19355

          With a copy to the Credit Support Provider:

                 Ambac Assurance Corporation
                 One State Street Plaza
                 New York, New York 10004
                 Attention:  General Counsel

(b)  Process Agent. For the purpose of Section 13(c):

                                       4

<PAGE>

     Party A appoints as its Process Agent: None.

     Party B appoints as its Process Agent: None.

(c)  Offices. The provisions of Section 10(a) will apply to this Agreement.

(d)  Multibranch Party. For the purpose of Section 10(c):

     Party A is not a Multibranch Party.

     Party B is not a Multibranch Party.

(e)  Calculation Agent. The Calculation Agent is Party A unless Party A is a
     Defaulting Party, in which case SunTrust Bank or its designee will be the
     Calculation Agent.

(f)  Credit Support Document.

     With respect to Party A: the Credit Support Annex.

     With respect to Party B: that certain Financial Guaranty Insurance Policy
     issued by Ambac Assurance Corporation in favor of Party A dated as of June
     28, 2001 (the "Policy"), as the same may be amended from time to time.

(g)  Credit Support Provider.

     Credit Support Provider in relation to Party A: Not applicable.

     Credit Support Provider in relation to Party B: Ambac Assurance
     Corporation, a Wisconsin stock insurance corporation, pursuant to the
     Policy.

(h)  Governing Law. This Agreement will be governed by and construed in
     accordance with the law of the State of New York, without reference to
     choice of laws doctrine.

(i)  Netting of Payments. Sub-paragraph (ii) of Section 2(c) of this Agreement
     will apply.

(j)  Affiliate. Affiliate will have (i) with respect to Party A, the meaning
     specified in Section 14, and (ii) with respect to Party B, is not
     applicable.

                                     Part 5
                                Other Provisions

(a)  Set-off. The definition of "Set-off" is hereby amended to mean the set-off,
     offset, combination of accounts, right of retention or withholding or
     similar right or requirement to which the payer of an amount under Section
     6 is entitled or subject, arising under this Agreement that is exercised
     by, or imposed on, such payer. Neither Party A nor Party B may Set-off
     amounts which may arise under another contract or agreement between such
     parties against obligations under this Agreement.

(b)  Covenant Not to Institute Proceedings. Prior to the date that is one year
     and one day after the date on which all of the Notes (as defined in the
     Indenture) have been paid in full, Party A shall not acquiesce, petition or
     otherwise invoke or cause Party B to invoke the process of any bankruptcy
     court of other governmental authority for the purpose of commencing or
     sustaining a case against Party B under any federal or state bankruptcy,
     insolvency or similar law or appointing a receiver, liquidator, assignee,
     trustee, custodian, sequestrator or other similar official of Party B or
     any substantial part of their respective properties or the winding up or
     liquidation of affairs of Party B. Party A acknowledges that Party B is a
     legal entity separate from any other entity and that the holders of the
     Notes have relied on such separateness, and Party A agrees, which agreement
     shall be enforceable by such holders at law or through an action for
     specific performance, not to seek or support the substantive consolidation
     of Party B with any other entity

                                       5

<PAGE>

     as long as the Notes remain outstanding. The provisions of this clause (b)
     shall survive any termination of this Agreement.

(c)  Successors. Notwithstanding any limitation imposed by Section 7 of this
     Agreement or any other provision of this Agreement to the contrary, the
     term "Party B" shall include all successors in interest to Party B pursuant
     to its limited liability company agreement, and no consent of Party A shall
     be required for any transfer or assignment to such successor in interest.

(d)  Limited Recourse; No Petition for Bankruptcy. Notwithstanding the
     provisions of this Agreement which impose on Party B an obligation
     (including any indemnity given hereunder) at any time to make any payment
     to Party A, the rights of recourse of Party A for the obligations of Party
     B hereunder shall be limited to amounts available under the terms of the
     Indenture and Assignment and Servicing Agreement. Accordingly, Party A
     shall have no claim for recourse against Party B or any of its directors,
     officers, or affiliates, in respect of any amount which is or remains
     unsatisfied after the application of those funds and any obligations
     hereunder of Party B not so satisfied will automatically be extinguished.
     Party A, by entering into this Agreement, hereby covenants and agrees that,
     in connection with any obligations of Party B under this Agreement, Party A
     will not institute against Party B, or join in any institution against
     Party B of, any proceeding under any bankruptcy, insolvency or similar law
     until the Notes have been paid in full and the longest applicable
     preference period has lapsed. The provisions of this clause (e) shall
     survive any termination of this Agreement.

(e)  Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND
     ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDINGS ARISING UNDER OR IN
     CONNECTION WITH THIS AGREEMENT, ANY CREDIT SUPPORT DOCUMENT OR THE
     TRANSACTION.

(f)  Swap Exemption. Each party hereto represents to the other party on and as
     of the date hereof and on each date on which a Transaction is entered into
     between them hereunder, in connection with the negotiation of, the entering
     into, and the execution of this Agreement, any Credit Support Document to
     which it is a party, each Transaction and any other documentation relating
     to this Agreement to which it is a party, that:

     (i)   This Agreement and each Transaction constitute a "swap agreement"
           within the meaning of the United States Commodity Futures Trading
           Commission Regulations ("CFTC Regulations") Section 35.1(b)(1),
           Section 101(53)(B) of the U.S. Bankruptcy Code and the CFTC Policy
           Statement concerning Swap Transactions, 54 Fed. Reg. 30694 (July 21,
           1989) (the "CFTC Swap Policy Statement").

     (ii)  It is an "eligible swap participant" as defined in Section 35.1(b)(2)
           of the CFTC Regulations.

     (iii) Neither this Agreement nor any Transaction is one of a fungible class
           of agreements that are standardized as to their material economic
           terms, with the meaning of Section 35.2(b) of the CFTC Regulations.

     (iv)  The economic terms of this Agreement, any Credit Support Document to
           which it is a party and the Transaction have been individually
           tailored and negotiated by it, and the creditworthiness of the other
           party was a material consideration in its entering into or
           determining the terms of this Agreement, any such Credit Support
           Document and the Transaction (including, without limitation, pricing,
           cost and credit enhancement terms), within the meaning of Section
           35.2(c) of the CFTC Regulations.

     (v)   It has entered into this Agreement and the Transaction in conjunction
           with a line of its business (including financial intermediation
           services) or the financing of its business, within the meaning of the
           CFTC Swap Policy Statement.

(g)  Relationship between Parties. In connection with the negotiation of, the
     entering into, and the confirming of this Agreement, and any other
     documentation relating to this Agreement, including any Credit Support
     Document, to which it is a party or that it is required by this Agreement
     to

<PAGE>

     deliver, each party hereby represents and warrants, and, in connection with
     the negotiation of, the entering into and the confirming of the execution
     of the Transaction, each party will be deemed to represent, to the other
     party as of the date hereof (or in connection with the Transaction, as of
     the date which it entered into the Transaction) that (absent a written
     agreement between the parties that expressly imposes affirmative
     obligations to the contrary for the Transaction):

     (i)   Non Reliance. It is acting for its own account, and it has made its
           own independent decisions to enter into the Transaction and as to
           whether the Transaction is appropriate or proper for it based upon
           its own judgment and upon advice from such advisers as it has deemed
           necessary. It is not relying on any communication (written or oral)
           of the other party as investment advice or as a recommendation to
           enter into the Transaction; it being understood that information and
           explanations related to the terms and conditions of the Transaction
           shall not be considered investment advice or a recommendation to
           enter into the Transaction. No communications (written or oral)
           received from the other party shall be deemed to be an assurance or
           guarantee as to the expected results of the Transaction.

     (ii)  Assessment and Understanding. It is capable of assessing the merits
           of and understanding (on its own behalf or through independent
           professional advice), and understands and accepts, the terms,
           conditions and risks of the Transaction. It is also capable of
           assuming, and assumes, the risks of the Transaction. It has
           determined to its satisfaction whether or not the rates, prices or
           amounts and other economic terms of the Transaction and the
           indicative quotations (if any) provided by the other party reflect
           those in the relevant market for similar transactions, and all
           trading decisions have been the result of arm's length negotiations
           between the parties.

     (iii) Status of Parties. The other party is not acting as a fiduciary for
           or an adviser to it in respect of the Transaction.

(h)  Applicable Only to One Rate Swap Transaction. This Agreement shall be
     effective only for a single rate swap transaction between the parties
     hereto with a specified Effective Date identical to the issue date for the
     Notes (as defined in Part 1(p) of this Schedule) (the "Transaction"),
     except that, there shall be two separate confirmations relative to this
     Agreement, one such confirmation for the Class A-3 Notes and one such
     confirmation for the Class A-4 Notes.

(i)  Amendments/waivers. Section 9(b) of this Agreement is hereby amended by (i)
     adding the words "or any Credit Support Documents" after the word
     "Agreement" in the first line thereof and (ii) by adding the words "and the
     Credit Support Provider" after the word "parties" on the third line
     thereof.

(j)  Payments on Early Termination. Notwithstanding the printed provisions of
     this Agreement, Party B shall be under no obligation to make a payment to
     Party A pursuant to Section 6(e) of this Agreement as modified by this
     Schedule unless such termination is at the direction of the Credit Support
     Provider pursuant to Part 5(r)(i) of this Schedule, provided that, in the
     event that, as a result of a termination other than at the direction of the
     Credit Support Provider pursuant to Part 5(r)(i) of this Schedule, a
     qualifying substitute counterparty replaces Party A in accordance with this
     Agreement as modified by this Schedule, any payment made by such substitute
     counterparty in order to assume the position of substitute counterparty may
     be made to Party A to the extent of the amount that would have been payable
     by Party B to Party A pursuant to Section 6(e) of this Agreement except for
     this paragraph (j).

(k)  Confidential Information. Each party may share any information concerning
     the other party with any of its Affiliates.

(l)  Consent to Telephonic Recording. Each party consents to the monitoring or
     recording, at any time and from time to time and to the extent lawful, by
     the other party or its affiliates of the telephone conversations of trading
     and marketing personnel of the parties and their authorized representatives
     or its affiliates in connection with this Agreement or the Transaction; and
     the parties waive any further notice of such monitoring or recording and
     agree and to the extent lawful to give proper notice and obtain any
     necessary consent of such personnel for any such monitoring or recording,
     provided that, each party or its affiliates shall have the right to receive
     a copy of any

                                       7

<PAGE>

     such recording upon which the other party or its affiliates would seek to
     rely in the event of a dispute.

(m)  Change of Account. Section 2(b) of this Agreement is hereby amended by the
     addition of the following after the word "delivery" in the first line
     thereof:

     "to another account in the same legal and tax jurisdiction as the original
     account."

(n)  Information Relating to Assets. Party A may request Party B to obtain the
     Servicer Report (as defined in the Assignment and Servicing Agreement) and
     any other reasonably available reports, notices, financial statements or
     other information in respect of the assets of Party B that are to be
     amounts available under the Indenture for payments due to Party A under
     this Agreement.

(o)  Transfers/Assignments. Prior notice of any transfer of rights, obligations
     or interests under or in this Agreement must be given to the Rating
     Agencies and the Credit Support Provider.

(p)  Notwithstanding anything to the contrary in this Agreement, Party B will in
     no circumstances be required to make any payment of additional amounts of
     the kinds contemplated in Section 2(d) of this Agreement.

(q)  Amendments. (i) Notwithstanding anything to the contrary contained in the
     Agreement, Party A and Party B may not amend the terms of the Transaction
     in a material way without first obtaining written confirmation from each
     Rating Agency that such amendment will not result in a reduction, downgrade
     or withdrawal of the then current rating of the Notes by such Rating
     Agency.

     (ii) The Indenture shall not be modified in a way which could reasonably be
          expected to have a direct and material adverse effect on Party A with
          respect to the Transaction without the prior written consent of Party
          A, which consent shall not be unreasonably withheld.

(r)  Credit Support Provider.

     (i)   If any event which would have been an Event of Default under Section
           5(a) occurs with respect to Party B as the Defaulting Party, then the
           Credit Support Provider shall have the right (but not the obligation)
           upon notice to Party A, to designate an Early Termination Date with
           respect to Party B, with the same effect as if such designation were
           made by Party A.

     (ii)  Notwithstanding Section 2(e), the Credit Support Provider shall not
           have any obligation to pay any additional amount calculated by
           application of the Default Rate on any amount which accrued under
           this Agreement, provided that, the Credit Support Provider shall be
           obligated to pay interest following a payment default of the Credit
           Support Provider at the Default Rate minus 1.00%.

     (iii) Party A and Party B hereby acknowledge and agree that (a) the Credit
           Support Provider shall be a third party beneficiary under this
           Agreement and under the Confirmation, entitled to enforce its rights
           hereunder and thereunder and (b) the Credit Support Provider's
           obligations with respect to this Agreement and the Confirmation shall
           be limited to the terms of the Policy.

     (iv)  Party A and Party B hereby acknowledge that to the extent of payment
           made by the Credit Support Provider to Party A under the Policy, the
           Credit Support Provider shall be fully subrogated to the rights of
           Party A against Party B under the Transaction to which such payments
           relate, including, but not limited to, the right to receive payment
           from Party B and the enforcement of any remedies. Party A hereby
           agrees to assign to the Credit Support Provider its right to receive
           payment from Party B under the Transaction to the extent of any
           payment thereunder by the Credit Support Provider to Party A. Party B
           hereby acknowledges and consents to the assignment by Party A to the
           Credit Support Provider of any rights and remedies that Party A has
           under the Transaction or any other document executed in connection
           herewith.

                                       8

<PAGE>

     (v)   The representations of Section 3 made by each party to the other
           party shall also be deemed made to the Credit Support Provider as
           provided in Section 3.

     (vi)  Section 10 is hereby amended to add the following subsection:

           "(c) Any notice that is required to be given to any party shall also
           be given to the Credit Support Provider."

     (vii) Party A and Party B hereby confirm that in the event Party B fails to
           make a payment required by this Agreement or the Confirmation and the
           Credit Support Provider makes such payment on behalf of Party B
           pursuant to the Policy, such non-payment by Party B shall not
           constitute an Event of Default with respect to Party B under this
           Agreement or the Confirmation.

                                       9

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Schedule to be duly
executed by their officer, hereunto duly authorized, with effect from the date
specified on the first page of this Schedule.

                                        IKON RECEIVABLES, LLC, as Issuer

                                        By: IKON RECEIVABLES FUNDING, INC., its
                                        Manager

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

                                        DEUTSCHE BANK AG, NEW YORK BRANCH

                                        By /s/ Susan N. Isquith
                                          -------------------------------------
                                          Name: Susan N. Isquith
                                          Title: Director Credit Risk Managment

                                        By Paul B. McHugh
                                          -------------------------------------
                                          Name: Paul B. McHugh
                                          Title: Director Credit Risk Management

                                       10

<PAGE>

                                                              [Class A-3/Issuer]

                                                                   June 28, 2001

                              Rate Swap Transaction

IKON RECEIVABLES, LLC, a Delaware
Limited Liability Company (the
"Issuer"), formed pursuant to that
certain Limited Liability Company
Agreement dated as of January 20,
1999, as amended between IKON
Receivables Funding, Inc., as
Manager and IKON Receivables-1,
LLC.

Ladies and Gentlemen:

     The purpose of this letter agreement (this "Confirmation") is to confirm
the terms and conditions of the transaction entered into between us on the Trade
Date specified below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Master Agreement specified below.

     The definitions and provisions contained in the 1998 Supplement to the 1991
ISDA Definitions and the 1991 ISDA Definitions (each, as published by the
International Swaps and Derivatives Association, Inc.) are incorporated into
this Confirmation (referred to herein as the "1998 ISDA Definitions" and the
"1991 ISDA Definitions" respectively, or collectively referred to as the "ISDA
Definitions"). For these purposes, all references in those Definitions to a
"Swap Transaction" shall be deemed to apply to the Transaction referred to
herein. In the event of any inconsistency between the 1998 ISDA Definitions and
the 1991 ISDA Definitions, the 1998 ISDA Definitions shall prevail. In the event
of any inconsistency between the ISDA Definitions and this Confirmation, this
Confirmation will govern. Each party represents and warrants to the other that
(i) it is duly authorized to enter into the Transaction and to perform its
obligations hereunder and (ii) the person executing and delivering this
Confirmation on behalf of the party is duly authorized to execute and deliver
it.

     1. This Confirmation supplements, forms part of, and is subject to, the
Master Agreement dated as of June 28, 2001, as amended and supplemented from
time to time (the "Agreement"), between the Issuer and Deutsche Bank AG, New
York Branch ("DB"). All provisions contained in the Agreement govern this
Confirmation except as expressly modified below.

<PAGE>

     2. The terms of the particular Transaction to which this Confirmation
relates are as follows:

<TABLE>
<S>                                     <C>
Notional Amount:                        For each Calculation Period, the aggregate outstanding
                                        principal balance of the IKON Receivables LLC Lease-Backed
                                        Notes, Series 2001-1 Class A-3 Notes (the "Issuer
                                        Securities"), used as the basis for calculating the
                                        regularly scheduled Class A-3 Interest Payments thereunder
                                        for the interest period thereunder scheduled to begin and
                                        end on the first and last days, respectively, of that
                                        Calculation Period, as such Interest Payment amount is
                                        identified (subject to part 5 hereof) to DB by the entity
                                        acting at the relevant time as the servicer under the
                                        Assignment and Servicing Agreement (the "Servicer"). The
                                        Notional Amount for the initial Calculation Period is
                                        U.S.$260,000,000.

Trade Date:                             June 20, 2001.

Effective Date:                         June 28, 2001.

Termination Date:                       The earlier of the date on which the Notional Amount is
                                        reduced to zero, and January 16, 2006.

Fixed Amounts:
-------------

     Fixed Rate Payer:                  The Issuer.

     Fixed Rate:                        4.825% per annum.

     Fixed Rate Day Count Fraction:     30/360

     Fixed Rate Payer Period End
        Dates:                          The 15th calendar day of each month in each year prior to
                                        and including the Termination Date, commencing on July 15,
                                        2001, with No Adjustment.

     Fixed Rate Payer Payment
        Dates:                          Each Fixed Rate Payer Period End Date, subject to
                                        adjustment in accordance with the Following Business Day
                                        Convention.

     Fixed Rate Payer Initial           Accrues from and including June 28, 2001 to but excluding
        Calculation Period:             July 15, 2001, with No Adjustment of Period End Dates.
</TABLE>

                                       2

<PAGE>

<TABLE>
<CAPTION>
Floating Amounts:
----------------

<S>                                     <C>
Floating Rate Payer:                    DB.

Floating Rate Payer Period End
   Dates:                               The 15th calendar day of each month in each year prior to,
                                        and including, the Termination Date, commencing on
                                        July 15, 2001, subject to adjustment in accordance with
                                        the Following Business Day Convention.

Floating Rate Payer Payment Dates:      Each Floating Rate Payer Period End Date.

Floating Rate Payer Initial
   Calculation Period:                  Accrues from and including June 28, 2001, to but
                                        excluding, July 16, 2001, with Adjustment of Period End
                                        Dates.

Floating Rate Option                    USD-LIBOR-BBA

Designated Maturity                     One Month

Spread:                                 Plus 0.23%

Floating Rate Day Count
   Fraction:                            Actual /360

Reset Dates:                            The first day of each Calculation Period.

Designated Maturity For Initial
   Calculation Period:                  One-month

Business Days:                          New York.

Calculation Agent:                      DB, except as otherwise provided in the Agreement.
</TABLE>

   3.   Account Details

   Account for Payments to the Issuer:

        SunTrust Bank
        ABA# 061000104
        DDA# 9088000008
        Reference:  Collection Account; IKON Receivables, LLC Lease-Backed
           Notes, Series 2001-1

                                        3

<PAGE>

     Account for Payments to DB:

        Deutsche Bank, New York
        ABA Number: 026 003 780
        Account Number:  100440170004
        Reference: IKON Receivables, LLC Lease-Backed Notes, Series 2001-1

     4. Offices

     The Office of DB for the Transaction (and for purposes of notices) is at
the address specified for notices to it in the Schedule to the Agreement. The
Office of the Issuer for the Transaction (and for purposes of notices) is at the
address specified for notices to it in the Schedule to the Agreement.

     5. Other Terms

     The Assignment and Servicing Agreement dated as of June 28, 2001 (the
"Assignment and Servicing Agreement") by and among IKON Receivables, LLC, IOS
Capital, Inc., as originator and servicer, and IKON Receivables-1 LLC, as
seller, sets forth the agreement of IOS Capital, Inc., as Servicer, with respect
to its duties to communicate to the Issuer and DB information relating to the
interest scheduled to be paid by the Issuer from time to time under the Issuer
Securities. Neither party to the Transaction will have any responsibility to the
other in connection with any failure by the servicer to perform any of those
duties or any delay by it in doing so. Nothing in this provision shall affect
the rights of the parties hereto against the servicer for the failure by it to
perform its obligations under the Assignment and Servicing Agreement as set
forth herein.

     THE AGREEMENT AND THIS CONFIRMATION REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR CONTEMPORANEOUS
WRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

                                        4

<PAGE>

     Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates agreement to
those terms.

Yours sincerely,

DEUTSCHE BANK AG, NEW YORK BRANCH

By: /s/ Susan N. Isquith
   -------------------------
Name: Susan N. Isquith
Title: Director Credit Risk Management

By: /s/ Paul B. McHugh
   -------------------------
Name: Paul B. McHugh
Title: Director Credit Risk Management

Confirmed as of the date first
above written:

IKON RECEIVABLES, LLC, as Issuer

By: IKON RECEIVABLES FUNDING,
INC., its Manager

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

                [Signature Page to Class A-3/Issuer Confirmation]

                                        5

<PAGE>

                                                              [Class A-4/Issuer]

                                                                   June 28, 2001

                              Rate Swap Transaction

IKON RECEIVABLES, LLC, a
Delaware Limited Liability Company
(the "Issuer"), formed pursuant to
that certain Limited Liability
Company Agreement dated as of
January 20, 1999, as amended
between IKON Receivables Funding,
Inc., as Manager and IKON
Receivables-1, LLC.

Ladies and Gentlemen:

     The purpose of this letter agreement (this "Confirmation") is to confirm
the terms and conditions of the transaction entered into between us on the Trade
Date specified below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Master Agreement specified below.

     The definitions and provisions contained in the 1998 Supplement to the 1991
ISDA Definitions and the 1991 ISDA Definitions (each, as published by the
International Swaps and Derivatives Association, Inc.) are incorporated into
this Confirmation (referred to herein as the "1998 ISDA Definitions" and the
"1991 ISDA Definitions" respectively, or collectively referred to as the "ISDA
Definitions"). For these purposes, all references in those Definitions to a
"Swap Transaction" shall be deemed to apply to the Transaction referred to
herein. In the event of any inconsistency between the 1998 ISDA Definitions and
the 1991 ISDA Definitions, the 1998 ISDA Definitions shall prevail. In the event
of any inconsistency between the ISDA Definitions and this Confirmation, this
Confirmation will govern. Each party represents and warrants to the other that
(i) it is duly authorized to enter into the Transaction and to perform its
obligations hereunder and (ii) the person executing and delivering this
Confirmation on behalf of the party is duly authorized to execute and deliver
it.

     1. This Confirmation supplements, forms part of, and is subject to, the
Master Agreement dated as of June 28, 2001, as amended and supplemented from
time to time (the "Agreement"), between the Issuer and Deutsche Bank AG, New
York Branch ("DB"). All provisions contained in the Agreement govern this
Confirmation except as expressly modified below.

<PAGE>

     2. The terms of the particular Transaction to which this Confirmation
relates are as follows:

Notional Amount:    For each Calculation  Period, the aggregate outstanding
                    principal balance of the IKON Receivables LLC Lease-Backed
                    Notes, Series 2001-1 Class A-4 Notes (the "Issuer
                    Securities"), used as the basis for calculating the
                    regularly scheduled Class A-4 Interest Payments thereunder
                    for the interest period thereunder scheduled to begin and
                    end on the first and last days, respectively, of that
                    Calculation Period, as such Interest Payment amount is
                    identified (subject to part 5 hereof) to DB by the entity
                    acting at the relevant time as the servicer under the
                    Assignment and Servicing Agreement (the "Servicer"). The
                    Notional Amount for the initial Calculation Period is
                    U.S.$126,200,000.

Trade Date:         June 20, 2001.

Effective Date:     June 28, 2001.

Termination Date:   The earlier of the date on which the Notional Amount is
                    reduced to zero, and October 15, 2008.

Fixed Amounts:
-------------

Fixed Rate Payer:   The Issuer.

Fixed Rate:         5.435% per annum.

Fixed Rate          30/360
 Day Count
 Fraction:

Fixed Rate          The 15th calendar day of each month in each year prior to,
 Payer Period       and including, the Termination Date, commencing on July 15,
 End Dates:         2001, with No Adjustment.

Fixed Rate Payer
 Payment Dates:     Each Fixed Rate Payer Period End Date, subject to adjustment
                    in accordance with the Following Business Day Convention.

Fixed Rate Payer
 Initial
 Calculation        Accrues from and including June 28, 2001 to but excluding
 Period:            July 15, 2001, with No Adjustment of Period End Dates.

 2

<PAGE>

Floating Amounts:
----------------

Floating Rate       DB.
 Payer:

Floating Rate Payer The 15th calendar day of each month in each year prior to,
 Period End Dates:  and including, the Termination Date, commencing on July 15,
                    2001, subject to adjustment in accordance with the Following
                    Business Day Convention.

Floating Rate       Each Floating Rate Payer Period End Date.
 Payer Payment
 Dates:

Floating Rate       Accrues from and including  June 28,  2001, to but
 Payer Initial      excluding, July 16,  2001, with Adjustment of Period End
 Calculation        Dates.
 Period:

Floating Rate       USD-LIBOR-BBA
 Option

Designated          One Month
 Maturity

Spread:             Plus 0.26%

Floating Rate       Actual /360
 Day Count
 Fraction:

Reset Dates:        The first day of each Calculation Period.

Designated
 Maturity For
 Initial
 Calculation
 Period:            One-month

Business Days:      New York.

Calculation Agent:  DB, except as otherwise provided in the Agreement.

   3.       Account Details

   Account for Payments to the Issuer:

            SunTrust Bank
            ABA# 061000104
            DDA# 9088000008

                                       3

<PAGE>

          Reference:  Collection Account; IKON Receivables, LLC
             Lease-Backed Notes, Series 2001-1

     Account for Payments to DB:

          Deutsche Bank, New York
          ABA Number: 026 003 780
          Account Number:  100440170004
          Reference: IKON Receivables, LLC Lease-Backed Notes,
          Series 2001-1

     4.   Offices

     The Office of DB for the Transaction (and for purposes of notices) is at
the address specified for notices to it in the Schedule to the Agreement. The
Office of the Issuer for the Transaction (and for purposes of notices) is at the
address specified for notices to it in the Schedule to the Agreement.

     5.   Other Terms

     The Assignment and Servicing Agreement dated as of June 28, 2001 (the
"Assignment and Servicing Agreement") by and among IKON Receivables, LLC, IOS
Capital, Inc., as originator and servicer, and IKON Receivables-1 LLC, as
seller, sets forth the agreement of IOS Capital, Inc., as Servicer, with respect
to its duties to communicate to the Issuer and DB information relating to the
interest scheduled to be paid by the Issuer from time to time under the Issuer
Securities. Neither party to the Transaction will have any responsibility to the
other in connection with any failure by the servicer to perform any of those
duties or any delay by it in doing so. Nothing in this provision shall affect
the rights of the parties hereto against the servicer for the failure by it to
perform its obligations under the Assignment and Servicing Agreement as set
forth herein.

     THE AGREEMENT AND THIS CONFIRMATION REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR CONTEMPORANEOUS
WRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

                                       4

<PAGE>

     Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates agreement to
those terms.

Yours sincerely,

DEUTSCHE BANK AG, NEW YORK BRANCH

By: /s/ Susan N. Isquith
   --------------------------------
Name: Susan N. Isquith
Title: Director Credit Risk Management

By: /s/ Paul B. McHugh
   --------------------------------
Name: Paul B. McHugh
Title: Director Credit Risk Management

Confirmed as of the date first
above written:

IKON RECEIVABLES, LLC, as Issuer

By: IKON RECEIVABLES FUNDING,
INC., its Manager

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

                [Signature Page to Class A-4/Issuer Confirmation]

                                       5

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