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Receivables Transfer Agreement Dated 12/01/98

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EXHIBIT 10.9


RECEIVABLES TRANSFER AGREEMENT


Dated As Of December 1, 1998


Among


IKON FUNDING-1, LLC,


As Transferor,


IOS CAPITAL, INC.,


As Originator and Collection Agent,


MARKET STREET FUNDING CORPORATION,


As Issuer,


PNC BANK, NATIONAL ASSOCIATION


As Agent


TABLE OF CONTENTS
-----------------


Page ARTICLE I


AMOUNTS AND TERMS OF TRANSFER
SECTION 1.01. Facility 1
SECTION 1.02. Consideration and Terms 1
SECTION 1.03. Settlement Procedures 2
SECTION 1.04. Payment of Fees and Yield. 5
SECTION 1.05. Payments and Computations, Etc. 6
SECTION 1.06. Increased Costs 6
SECTION 1.07. Additional Yield on Receivables Bearing a Eurodollar Rate 7
SECTION 1.08. Requirements of Law 7
SECTION 1.09. Inability to Determine Eurodollar Rate 8
SECTION 1.10. Additional Yield for Liquidity and Credit Enhancement 8
SECTION 1.11. Breakage Costs 9
SECTION 1.12. Retransfer of Receivables 9
SECTION 1.13. Security Interest 10


ARTICLE II


REPRESENTATIONS AND WARRANTIES; COVENANTS; TRIGGER EVENTS 11
SECTION 2.01. Representations and Warranties; Covenants 11
SECTION 2.02. Trigger Events 11


ARTICLE III


INDEMNIFICATION, REPURCHASE, ETC. 11
SECTION 3.01. Indemnities by the Transferor 11
SECTION 3.02. Recourse for Yield 13
SECTION 3.03. Repurchase of Ineligible and Certain Other Receivables 13


ARTICLE IV


ADMINISTRATION AND COLLECTION
OF RECEIVABLES 14
SECTION 4.01. Designation of Collection Agent 14
SECTION 4.02. Duties of Collection Agent 14
SECTION 4.03. Certain Rights of the Agent 15
SECTION 4.04. Rights and Remedies 16


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SECTION 4.05. Further Actions Evidencing Transfers 16
SECTION 4.06. Covenants of the Collection Agent and the Originator 16
SECTION 4.07. Indemnities by the Collection Agent 17


ARTICLE V


MISCELLANEOUS 18
SECTION 5.01. Amendments, Etc. 18
SECTION 5.02. Notices, Etc 19
SECTION 5.03. Assignability 20
SECTION 5.04. Costs, Expenses and Taxes 21
SECTION 5.05. No Proceedings 21
SECTION 5.06. Confidentiality 22
SECTION 5.07. GOVERNING LAW 22
SECTION 5.08. Execution in Counterparts 22
SECTION 5.09. Termination 23
SECTION 5.10. Tax Treatment 23


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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 Marketplaces EXHIBIT VII -- Principal Place of Business and Location of Records


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||


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RECEIVABLES TRANSFER AGREEMENT


Dated as of December 1, 1998


IKON FUNDING-1, LLC, a Delaware limited liability company (the "Transferor"), IOS CAPITAL, INC., a Delaware corporation (the "Originator" and ---------- ---------- in its capacity as Collection Agent, the "Collection Agent"), MARKET STREET
---------------- FUNDING CORPORATION, a Delaware corporation (the "Issuer"), and PNC BANK,
------ NATIONAL ASSOCIATION ("PNC"), as agent (in such capacity, 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 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 TRANSFER


SECTION 1.01. Facility. (a) Upon the satisfaction of the terms and
-------- conditions hereinafter set forth, the Agent shall, 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.


(b) The Transferor may, upon at least 30 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 $10,000,000 or an integral multiple thereof and that, unless terminated in whole, the Transfer Limit shall in no event be reduced below $50,000,000.


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 Agent to the contrary not less than two Business Days prior to such Settlement Date (or, in the case of any notice to the contrary which


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would result in the excess of the Transfer Limit over the Capital on the applicable Settlement Date (after giving effect to all payments to be made on such date) exceeding $10,000,000, ten Business Days' notice), 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 - ---- detailed information regarding such Receivables, including an addendum to or revised version of Schedule II hereto.


(b) Promptly upon receipt of such notice, the Agent shall deliver a copy thereof to the Issuer. 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 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. 5603258724 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 in the Agent's Account on such date by the Collection Agent pursuant to Section 1.03 and (y) the Transferor does hereby (effective on the date of each Transfer automatically and without any further documentation) transfer to the Agent for the benefit of the Issuer and 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 last day of each Settlement Period, notify the Agent, and the Agent shall notify the Transferor, of the Yield accrued for such Settlement Period or portion thereof.


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,


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(i) on each Settlement Date, from such Collections, an amount equal
to accrued and unpaid Yield 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) on each Settlement Date, an amount equal to the Collection
Agent Fee accrued but unpaid during the preceding Settlement Period; and


(iii) 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)
and (ii); provided that prior to the Facility Termination Date, the amount
--------
to be deposited pursuant to this clause (iii) 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 (ii) of this paragraph (b) but may retain such fee from the Collections remaining after the deposits required pursuant to clause (i) 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 such Transferee and to the 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)(ii) 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.


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(iii) Upon receipt of funds deposited into the Agent's Account
pursuant to subsection (b)(iii) 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 current Settlement 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
Balance of such Contract plus Yield thereon to the end of the then current
Settlement 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 Collections 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.


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(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.


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 herewith (as amended, supplemented or otherwise modified, the "Fee Letter") between the Transferor and the Agent.
----------


(b) Yield. Yield for any Transferee for any Settlement Period (or portion
----- thereof) on that portion of the Capital which such Transferee will fund or maintain 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 Settlement Period. Yield for any Transferee for any Settlement Period (or portion thereof) on that portion of the Capital which such Transferee will not be funding or maintaining 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 Settlement Period, 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 Settlement Period.


(c) Collection Agent Fee The Collection Agent shall be entitled to receive
-------------------- a fee (the "Collection Agent Fee") of 1.50% per annum on the average daily
-------------------- Capital from the date of the first Transfer of Receivables until the date on which such Capital is reduced to zero, payable on each Settlement Date. With the prior written consent of 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, but in no event in excess of 110% of the reasonable costs and expenses of the Collection Agent in administering and collecting the Receivables. The Collection Agent Fee shall be payable solely 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


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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.


(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 PNC, 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 as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Transferor and the Agent by such Affected Person shall be conclusive and binding for all purposes, absent manifest error.


(b) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation or (ii) compliance with any guideline or request from any central bank or other


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governmental authority (whether or not having the force of law), there shall be any increase in the cost to a Transferee of agreeing to accept the Transfer of or accepting such Transfers, or maintaining the ownership of the Receivables or interests therein in respect of which Yield is computed by reference to the Eurodollar Rate, then upon demand by such Transferee (with a copy to the Agent), the Transferor shall immediately pay to the Agent, for the account of such Transferee (as a third-party beneficiary), from time to time as specified by such Transferee, additional amounts sufficient to compensate such Transferee for such increased costs. A certificate as to such amounts submitted to the Transferor and the Agent by a Transferee shall be conclusive and binding for all purposes, absent manifest error.


SECTION 1.07. Additional Yield on Receivables Bearing a Eurodollar Rate.
--------------------------------------------------------- The Transferor shall pay to each Transferee, so long as such Transferee shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional Yield on the unpaid Capital of such Transferee during each Settlement Period in respect of which Yield is computed by reference to the Eurodollar Rate, for such Settlement Period, at a rate per annum equal at all times during such Settlement Period to the remainder obtained by subtracting (i) the Eurodollar Rate for such Settlement Period from (ii) the rate obtained by dividing such Eurodollar Rate referred to in clause (i) above by that percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Transferee for such Settlement Period, payable on each date on which Yield is payable on such Receivables. Such additional Yield shall be determined by such Transferee and notice thereof given to the Transferor through the Agent within 60 days after any Yield payment is made with respect to which such additional Yield is requested. A certificate as to such additional Yield submi
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