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Receivables Transfer Agreement

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Sectors: Computer Hardware
Governing Law: New York, View New York State Laws
Effective Date: September 30, 1996
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Exhibit 10.5


RECEIVABLES TRANSFER AGREEMENT


Dated As Of September 30, 1996


Among


IKON FUNDING INC.,


As Transferor,


IKON CAPITAL INC.,


As Originator and Collection Agent,


OLD LINE FUNDING CORP.,


As Issuer,


And


ROYAL BANK OF CANADA,


As Agent


TABLE OF CONTENTS


Page
---- PRELIMINARY STATEMENTS...................................................... 1


ARTICLE I


AMOUNTS AND TERMS OF THE TRANSFER.................................. 1
SECTION 1.01. Facility............................................ 1
SECTION 1.02. Consideration and Terms.......................... 2
SECTION 1.03. Settlement Procedures............................ 3
SECTION 1.04. Payment of Fees and Yield........................ 7
SECTION 1.05. Payments and Computations, Etc................... 8
SECTION 1.06. Increased Costs.................................. 9
SECTION 1.07. Additional Yield on Receivables Bearing a
Eurodollar Rate.................................. 10
SECTION 1.08. Requirements of Law.............................. 11
SECTION 1.09. Inability to Determine Eurodollar Rate........... 12
SECTION 1.10. Additional Yield for Liquidity and Credit
Enhancement...................................... 12
SECTION 1.11. Breakage Costs................................... 12
SECTION 1.12. Retransfer of Receivables........................ 13
SECTION 1.13. Security Interest................................ 14


ARTICLE II


REPRESENTATIONS AND WARRANTIES;
COVENANTS; TRIGGER EVENTS ......................................... 15
SECTION 2.01. Representations and Warranties; Covenants........ 15
SECTION 2.02. Trigger Events................................... 15


ARTICLE III


INDEMNIFICATION, REPURCHASE, ETC................................... 16


(i)


SECTION 3.01. Indemnities by the Transferor.................... 16
SECTION 3.02. Recourse for Yield............................... 18
SECTION 3.03. Repurchase of Ineligible and Certain Other
Receivables...................................... 19


ARTICLE IV


ADMINISTRATION AND COLLECTION
OF RECEIVABLES .................................................... 19
SECTION 4.01. Designation of Collection Agent..................... 19
SECTION 4.02. Duties of Collection Agent.......................... 20
SECTION 4.03. Certain Rights of the Agent......................... 21
SECTION 4.04. Rights and Remedies................................. 22
SECTION 4.05. Further Actions Evidencing Transfers................ 22
SECTION 4.06. Covenants of the Collection Agent and the
Originator.......................................... 23
SECTION 4.07. Indemnities by the Collection Agent................. 24


ARTICLE V


MISCELLANEOUS...................................................... 25
SECTION 5.01. Amendments, Etc..................................... 25
SECTION 5.02. Notices, Etc........................................ 25
SECTION 5.03. Assignability....................................... 27
SECTION 5.04. Costs, Expenses and Taxes........................... 28
SECTION 5.05. No Proceedings...................................... 29
SECTION 5.06. Confidentiality..................................... 29
SECTION 5.07. GOVERNING LAW....................................... 29
SECTION 5.08. Execution in Counterparts........................... 30
SECTION 5.09. Termination......................................... 30
SECTION 5.10. Tax Treatment....................................... 30


(ii)


EXHIBITS


EXHIBIT I -- Definitions EXHIBIT II -- Conditions of the Transfer EXHIBIT III -- Representations and Warranties EXHIBIT IV -- Covenants EXHIBIT V -- Trigger Events EXHIBIT VI -- List of Dealers EXHIBIT VII -- Principal Place of Business and Location of Records EXHIBIT VIII -- List of Designated States


ANNEXES


ANNEX A -- Form of Contract ANNEX B -- Form of Transferor Report ANNEX C -- Form of Opinion


SCHEDULES


SCHEDULE I -- Credit and Collection Policy


SCHEDULE II -- Receivables


(iii)


RECEIVABLES TRANSFER AGREEMENT


Dated as of September 30, 1996


IKON FUNDING INC., a Delaware corporation (the "Transferor"), IKON CAPITAL
---------- INC., a Delaware corporation (the "Originator" and in its capacity as Collection
---------- Agent, the "Collection Agent"), OLD LINE FUNDING CORP., a Delaware corporation
---------------- (the "Issuer"), and ROYAL BANK OF CANADA, a Canadian chartered bank acting
------ through its New York Branch, as agent (the "Agent") for the Transferees, agree
----- as follows:


PRELIMINARY STATEMENTS. Certain terms that are capitalized and used throughout this Agreement are defined in Exhibit I to this Agreement. References in the Exhibits to "the Agreement" refer to this Agreement, as amended, modified or supplemented from time to time.


The Transferor has Receivables and Related Security that it wishes to transfer to the Issuer, and the Issuer is prepared to accept such transfer of Receivables and Related Security on the terms set forth herein. Accordingly, the parties agree as follows:


ARTICLE I


AMOUNTS AND TERMS OF THE TRANSFER


SECTION 1.01. Facility. (a) Upon the satisfaction of the terms and
-------- conditions hereinafter set forth, the Agent may, on behalf of the Issuer, accept Receivables from time to time (each, a "Transfer") during the period from the
-------- date hereof to the Facility Termination Date. Each Transfer of Receivables shall include the transfer to the Agent of the Related Security and Collections with respect thereto. Under no circumstances shall the Agent accept any Transfer if, after giving effect to such Transfer, the aggregate outstanding Capital would exceed the Transfer Limit. Nothing in this Agreement shall be deemed to be or construed as a commitment by the Agent or the Issuer to accept any Receivable at any time.


(b) The Transferor may, upon at least five Business Days' notice to the Agent, terminate this facility in whole or, from time to time, reduce in part the unused portion of the Transfer Limit; provided that each partial reduction
-------- shall be in the amount of at least $1,000,000 or an integral multiple thereof.


SECTION 1.02. Consideration and Terms. (a) The initial Transfer shall be
----------------------- made on at least two Business Days' notice from the Transferor to the Agent in an amount equal to the Transfer Limit. On each Settlement Date thereafter occurring prior to the Facility Termination Date, unless the Transferor has given written notice to the contrary not less than two Business Days prior to such Settlement Date, the Transferor shall be deemed to have requested a Transfer in an amount equal to the excess of the Transfer Limit over the Capital as of such Settlement Date (after giving effect to all payments to be made on such date). The amount to be paid by the Issuer in respect of each Transfer shall be equal to the Aggregate Adjusted Outstanding Balance of the Related Contracts for the Receivables included in such Transfer (the "Consideration" for
------------- such Receivables); provided that with respect to each Transfer other than the
-------- Initial Transfer, such amount shall not exceed the amount of the Transfer requested in the preceding sentence. Not less than two Business Days prior to the date of each Transfer (each, a "Transfer Date"), the Transferor shall
------------- deliver to the Agent a written notice specifying (i) the date and duration of the initial Fixed Periods for the Receivables to be transferred, and (ii) detailed information regarding such Receivables.


(b) Promptly upon receipt of such notice, the Agent shall deliver a copy thereof to the Issuer. The Issuer shall promptly notify the Agent whether the Issuer has determined to direct the Agent to accept such Transfer. The Agent shall promptly thereafter notify the Transferor (i) whether the Issuer has determined to direct the Agent to accept such Transfer, and (ii) whether the desired duration of the initial Fixed Periods for the Receivables to be accepted is acceptable. Each Transfer other than the initial Transfer shall be made only on a Settlement Date or as otherwise mutually agreed by the Transferor and the Agent. On each Transfer Date, upon satisfaction of the applicable conditions set forth in Exhibit II hereto, (x) the Issuer shall make available to the Agent the Consideration in respect of such Transfer by deposit of such amount in same day


2


funds to the Agent's Account and, after the receipt by the Agent of such funds, the Agent will cause such Consideration to be paid to the Transferor in immediately available funds prior to 2:00 P.M. (New York City time) to the Transferor's account no. 56000209038 at PNC Bank, Delaware (ABA # 031100089); provided, however, that in the case of each Transfer other than the initial - -------- ------- Transfer, the applicable Consideration may be netted against amounts to be deposited to the Agent's Account on such date by the Collection Agent pursuant to Section 1.03 and (y) the Transferor shall (effective on the date of each Transfer automatically and without any further documentation) transfer to the Agent for the benefit of the Issuer and the other Transferees all of the related Receivables, the Related Contracts, the Related Security (other than the Equipment) and the Collections in respect thereof. The Issuer shall on the date of each Transfer and on the first day of each Fixed Period (other than the initial Fixed Period) for such Receivables, notify the Agent, and the Agent shall notify the Transferor, of the Transferee Rate for such Fixed Period.


SECTION 1.03. Settlement Procedures. (a) Collection of the Receivables
--------------------- shall be administered by the Collection Agent, in accordance with the terms of this Agreement. The Transferor shall provide to the Collection Agent on a timely basis all information needed for such administration.


(b) The Collection Agent shall, on each day on which Collections are received by it, set aside and hold in trust for the Transferees such Collections and shall deposit into the Agent's Account,


(i) on the last day of each Fixed Period, from such Collections, an
amount equal to accrued and unpaid Yield (and not previously deposited into
the Agent's Account pursuant to Section 1.03(b)(ii)) and any other amounts
then owed by the Transferor to any Transferee or the Agent hereunder
(including any fees owed to the Agent pursuant to Section 1.04(a) but
excluding any such amounts owed in respect of Capital);


(ii) if any Fixed Period in respect of which Yield is computed by
reference to the Assignee Rate has a duration of more than three months,


3


on the day that occurs three months after the first day of such Fixed Period,
from such Collections, an amount equal to the accrued and unpaid Yield
associated with such Fixed Period;


(iii) on each Settlement Date, an amount equal to the Collection Agent Fee
accrued but unpaid during the preceding Settlement Period; and


(iv) on each Settlement Date, from such Collections, an amount equal to
the portion of Collections received during the preceding Settlement Period
remaining after application pursuant to the preceding clauses (i) through
(iii); provided that prior to the Facility Termination Date, the amount to be
--------
deposited pursuant to this clause (iv) will not exceed the product of (A) a
fraction, the numerator of which is the Required Balance and the denominator
of which is the aggregate Outstanding Balance of the Related Contracts and
(B) the amount of such Collections;


provided, however, that the aggregate amount deposited pursuant to this - -------- ------- subsection (b) shall not exceed the sum of the Capital of, and accrued Yield and Collection Agent Fee on, the Receivables plus the aggregate of any other amounts then owed by the Transferor to any Transferee or the Agent hereunder.


Notwithstanding the foregoing, unless a Special Event has occurred, for so long as the Originator is the Collection Agent, the Collection Agent shall not be required to set aside Collections, but may commingle the Collections with its own funds and make the deposits required to the Agent's Account pursuant to this paragraph (b) on the dates required. For so long as the Originator is the Collection Agent, the Collection Agent shall not be required to deposit the Collection Agent Fee to the Agent's Account as required by clause (iii) of this paragraph (b) but may retain such fee from the Collections remaining after the deposits required pursuant to clauses (i) and (ii) of this paragraph (b).


(c) (i) Upon receipt of funds deposited into the Agent's Account
pursuant to subsection (b)(i) or (b)(ii) above, the Agent shall distribute
such funds as follows: first, pro rata to each Transferee in payment of
-----
accrued but unpaid Yield on the Capital of the relevant Receivables Pool
and to the


4


Agent in respect of any fees owed pursuant to Section 1.04(a), and second, to
------ the Agent for the account of the Transferees or the Agent in payment of any other amounts owed by the Transferor hereunder.


(ii) Upon receipt of funds deposited into the Agent's Account pursuant to subsection (b)(iii) above, the Agent shall distribute such funds, in an amount equal to the accrued but unpaid Collection Agent Fee, to the Collection Agent on account of the Collection Agent Fee.


(iii) Upon receipt of funds deposited into the Agent's Account pursuant to subsection (b)(iv) above, the Agent shall distribute such funds as follows: first, to the Agent for pro rata distribution to each Transferee in reduction to - ----- zero of all Capital, second, to the Agent for the account of the Transferees or
------ the Agent in payment of any other amounts owed by the Transferor hereunder, and third, to the Transferor for its own account. - -----


(d) For the purposes of this Section 1.03:


(i) if on any day the amount of any Receivable is reduced or adjusted as a result of (A) early termination of the related Contract, or (B) any defective, rejected, returned, or repossessed Equipment or services, or (C) any cash discount, customer concession, trade-in or other adjustment made by the Transferor or the Originator, or (D) any set-off, or (E) any loss or damage with respect to any Equipment, the Transferor shall be deemed to have received on such day a Collection in full of such Receivable and all other Receivables relating to the same Contract, in the amount of the Outstanding Balance of such Contract plus Yield thereon to the end of the then applicable Fixed Period, and the amount of each such Collection shall be applied as provided in this Section 1.03;


(ii) if on any day any of the representations or warranties in paragraph (h) of Exhibit III is no longer true with respect to any Receivable or the Related Security, the Transferor shall be deemed to have received on such day a Collection in full of such Receivable and all other Receivables relating to the same Contract, in the amount of the Outstanding


5


Balance of such Contract plus Yield thereon to the end of the then
applicable Fixed Period, and the amount of each such Collection shall be
applied as provided in this Section 1.03; and


(iii) if and to the extent the Agent or any Transferee shall be required
for any reason to pay over to an Obligor any amount received on its behalf
hereunder, such amount shall be deemed not to have been so received but
rather to have been retained by the Transferor and, accordingly, the Agent
or such Transferee, as the case may be, shall have a claim against the
Transferor for such amount, payable when and to the extent that any
distribution from or on behalf of such Obligor is made in respect thereof.


(e) Except as provided in paragraph (i) or (ii) of Section 1.03(d), or as otherwise required by applicable law or the relevant Contract, all Collec tions received from an Obligor of any Receivables shall be applied to the Receivables of such Obligor in the order of the age of the due but unpaid amounts with respect to such Receivables, starting with the oldest such due but unpaid amount, unless such Obligor designates its payment for application to specific Receivables.


(f) The Transferor shall forthwith deliver to the Collection Agent an amount equal to all Collections deemed received by the Transferor pursuant to Section 1.03(d)(i) or (ii) above and the Collection Agent shall hold or distribute such Collections in accordance with Section 1.03(b). If Collections are then being paid to the Agent, the Collection Agent shall forthwith cause such deemed Collections to be paid to the Agent. If a Special Event has occurred, so long as the Transferor shall hold any Collections or deemed Collections required to be paid to the Collection Agent or the Agent, it shall hold such Collections in trust and separate and apart from its own funds and shall clearly mark its records to reflect such trust.


(g) The Transferor may from time to time, on notice received by the Agent not later than 12:00 noon (New York City time) three Business Days before the last day of any Fixed Period for a Receivables Pool, allocate


6


Receivables for funding purposes to future Fixed Periods (each such pool of Receivables separately so allocated to any one Fixed Period being a "Receivables
----------- Pool" having such Fixed Period). Each Receivables Pool shall be deemed to have - ---- Capital equal to the total Capital multiplied by a fraction whose numerator is the Outstanding Balance of the Related Contracts giving rise to the Receivables in such Receivables Pool and whose denominator is the Outstanding Balance of all Related Contracts. Notwithstanding the foregoing, two or more Receivables Pools may not be combined unless they have Fixed Periods ending on the same day.


SECTION 1.04. Payment of Fees and Yield. (a) Fees. The Transferor shall
------------------------- ---- pay to the Agent certain fees in the amounts and on the dates set forth in a separate fee agreement of even date between the Transferor and the Agent.


(b) Yield. (i) Yield for any Transferee for any Fixed Period for any
----- Receivables Pool on the first day of which the Issuer will be funding the Transfer or the maintenance of its interest in such Receivables Pool through the issuance of commercial paper notes is calculated (pursuant to a formula set forth in the definition of "Yield") based on the Transferee Rate for such Fixed
----- Period for such Receivables Pool. Yield for any Transferee for any Fixed Period for any Receivables Pool on the first day of which such Transferee will not be funding the Transfer or the maintenance of its interest in such Receivables Pool through the issuance of commercial paper notes is calculated (pursuant to a formula set forth in the definition of "Yield") based on the Assignee Rate for
----- such Fixed Period for such Receivables Pool, which (subject to the provisos set forth in the definition of "Assignee Rate") is equal to 1.50% per annum plus the
------------- Eurodollar Rate for such Fixed Period for such Receivables Pool.


(ii) Without prejudice to the discretion of the Issuer to select the basis of funding or maintaining the Receivables for any Fixed Period, the Issuer may not on any date select or approve a commercial paper note basis unless on such date all of the long-term public senior debt securities of the Originator are rated at least Investment Grade. It is understood that no


7


Transferee (other than the Issuer) will intend to fund or maintain the Receivables for any Fixed Period by issuing commercial paper notes.


(c) Collection Agent Fee. Each Transferee shall pay to the Collection
-------------------- Agent a fee (the "Collection Agent Fee") of 1.50% per annum on the average daily
-------------------- Capital of each Receivables Pool owned by such Transferee, from the date of Transfer of the related Receivables until the date on which such Capital is reduced to zero, payable on the last day of each Settlement Period. Upon three Business Days' notice to the Agent, the Collection Agent (if not the Originator, the Transferor or its designee or an Affiliate of the Transferor) may elect to be paid, as such fee, another percentage per annum on the average daily Capital of such Receivables Pool, but in no event in excess for all Receivables relating to a single Receivables Pool of 110% of the reasonable costs and expenses of the Collection Agent in administering and collecting the Receivables in such Receivables Pool. The Collection Agent Fee shall be payable only from Collections pursuant to, and subject to the priority of payment set forth in, Section 1.03. So long as the Originator is acting as the Collection Agent hereunder, amounts paid as the Collection Agent Fee pursuant to this Section 1.04(c) shall reduce, on a dollar-for-dollar basis, the obligation of the Transferor to pay the "Collection Agent Fee" pursuant to Section 6.03 of the Transfer Agreement; provided that such obligation of the Transferor shall in no
-------- event be reduced below zero.


SECTION 1.05. Payments and Computations, Etc. (a) All amounts to be paid
------------------------------ or deposited by the Transferor or the Collection Agent hereunder to or for the account of the Agent, the Issuer or any other Transferee shall be paid or deposited no later than 11:00 A.M. (New York City time) on the day when due in same day funds to the Agent's Account. Upon receipt of funds deposited into the Agent's Account, the Agent shall distribute such funds to the Persons entitled thereto in accordance with the provisions of this Agreement or retain such funds for its own account, as appropriate. Where this Agreement provides for pro rata distribution of funds to the Transferees, the Agent shall make such distribution in accordance with each Transferee's percentage interest in the Receivables.


8


(b) The Transferor shall, to the extent permitted by law, pay interest on any amount not paid or deposited by the Transferor (whether as Collection Agent or otherwise) when due hereunder, at an interest rate per annum equal to 2% per annum above the Alternate Base Rate, payable on demand.


(c) All computations of interest under subsection (b) above and all computations of Yield, fees, and other amounts hereunder shall be made on the basis of a year of 360 days for the actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit.


SECTION 1.06. Increased Costs (a) If Royal Bank of Canada, the Agent, the
--------------- Issuer, a Transferee, any entity which enters into a commitment to acquire Receivables or interests therein, any entity which provides credit enhancement or any of their respective Affiliates (each an "Affected Person") determines
--------------- that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Affected Person and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to accept transfers of or otherwise to maintain the investment in Receivables or interests therein hereunder or under any commitments to a Transferee related to this Agreement or to the funding thereof or any related liquidity facility or credit enhancement facility (or any participation therein) and other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Agent), the Transferor shall immediately pay to the Agent, for the account of such Affected Person (as a third-party beneficiary), from time to time
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